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Federal Universal Service Overview

NARUC Summer Meeting July 2007. Federal Universal Service Overview. Ray Baum Commissioner Oregon Public Utility Commission. Universal Service Principles 47 U.S.C. 254(b). Quality services at just, reasonable and affordable rates Access to advanced services in all regions

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Federal Universal Service Overview

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  1. NARUC Summer Meeting July 2007 Federal Universal Service Overview Ray BaumCommissioner Oregon Public Utility Commission

  2. Universal Service Principles 47 U.S.C. 254(b) • Quality services at just, reasonable and affordable rates • Access to advanced services in all regions • Access to services in rural, insular and high cost regions, and to low-income consumers, that are reasonably comparable to those in urban areas, at reasonably comparable rates • Equitable and nondiscriminatory contributions • Specific, predictable and sufficient support mechanisms • Access to advanced telecom services for schools, health care providers and libraries • Additional principles determined by Joint Board and FCC: competitive neutrality

  3. Four Federal Universal Service Fund (FUSF) Programs – 2006 Payments(in millions) • High-Cost$4,096 M Support to local service providers in high-cost rural & insular areas to keep rates affordable • Low-Income820 M Discounts on monthly service and installation charges for low-income consumers • Schools & Libraries1,669 M Discounts to eligible schools & libraries for telecom services and internet access • Rural Health Care41 M Discounts to rural health care providers for telecom services and monthly internet charges Total 2006 Payments$6,626 M

  4. FUSF Surcharge • Program costs recovered through surcharge on interstate and international end user telecommunications revenues • Surcharge reset every quarter based on forecast of payments and contribution base revenues • 3Q 2007 surcharge rate = 11.3% of revenues

  5. FUSF - Net Dollar Flows by State • Net FUSF dollar flows vary widely by state (Chart 1) and by year (NY -$190M, TX -$60M in S&L funds from 2005 to 2006) • Net dollar flow = payments to providers minus contributions from surcharge • Positive flow number indicates state is net receiver Mississippi: + $256 Million Oklahoma: + $123 Million Alaska: + $187 M Puerto Rico: + $109 M Kansas: + $146 M • Negative flow number indicates state is net payer Florida: - $330 Million Maryland: - $133 Million New York: - $210 M Massachusetts: - $119 M New Jersey: - $200 M Illinois: - $118 M Pennsylvania: - $138 M California: - $118 M

  6. High-Cost Fund • High-cost fund comprises nearly 2/3 of total FUSF dollars and has increased dramatically in recent years • Only eligible telecommunications carriers (ETCs) receive support • All ILECs are ETCs • States may designate non-ILEC carriers as competitive ETCs (CETCs) • CETCs receive support based on ILEC per-line support

  7. High-Cost Fund(continued) • High-cost fund grew from $2.6 billion in 2001 to $4.1 billion in 2006 • Increases since 2003 due largely to CETC payments(See Chart 2) • High-cost payments to CETCs grew from $0 in 2000 to nearly $1 billion in 2006 (See Chart 3) • Total high-cost support (ILEC+CETC) varies significantly by state (See Chart 4) • High-cost support to CETCs is skewed heavily toward a few states, e.g., Mississippi and Puerto Rico (See Chart 5)

  8. Chart 1 8

  9. (Chart 1 continued) 9

  10. Chart 2 10

  11. Chart 3 11

  12. Chart 4 12

  13. Chart 5 13

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