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Overview of the KansasUniversal Service Fund
Sandy ReamsBefore the Statewide Broadband Task Force, Subcommittee 3July 17, 2019
Universal Service
Both the Kansas Telecommunications Act of1996 and the Federal Telecommunications Actof 1996 contain provisions to develop universalservice funds to maintain and enhance universalservice.• Federal Universal Service Fund (FUSF) supports
voice and broadband (12/2016).• Kansas Universal Service Fund (KUSF) supports
voice only.
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Kansas Universal Service Fund– KUSF was created by the KCC and implemented March 1, 1997, as
required by K.S.A. 66-2008. – Purpose of the KUSF is to assure quality services are made available
to all Kansans at affordable rates. – Pursuant to K.S.A. 66-2008(a), every telecommunications carrier,
telecommunications public utility, wireless telecommunications service provider and interconnected Voice over Internet Protocol (VoIP) provider that provides intrastate telecommunications services must contribute to the KUSF. The assessment may be passed through to customers, but carriers are not required to do so. Any contributions in excess of distributions collected in any reporting year shall be applied to reduce the estimated contribution that would otherwise be necessary for the following year.
– Current KUSF assessment rate is 6.88% on intrastate telecommunications revenues (March 2019 – Feb. 2020).
– The legislature did not establish an “end date” for the KUSF.
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KUSF Assessment Rate
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0.00%
1.00%
2.00%
3.00%
4.00%
5.00%
6.00%
7.00%
8.00%
9.00%9.00%
6.83%
7.63%
4.92% 4.85%
3.70%
4.99% 4.87%4.32%
6.07%
4.35% 4.65%5.03%
6.06% 6.18% 6.13% 6.42%6.05%
6.47% 6.53%7.25% 7.50%
6.88%
Asse
ssm
ent R
ate
KUSF Fiscal Year
History of KUSF Assessment Rate
Assessment Rates – Federal USF Assessment Rate – 24.4% (3rd Quarter) – KUSF Assessment Rate – 6.88% of net retail revenue– States with similar USF rates:
• Nebraska - 6.95% for business, residential $1.75 per connection• New Mexico - $1.24 per residential & business connection• Oklahoma – 6.28% of total intrastate retail revenue (7/1/2019) • Oregon - 8.50% of gross retail revenue
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KUSF Fund Size
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Additional information available at: http://kcc.ks.gov/telecom/kusfhistory.pdf
$0
$20,000,000
$40,000,000
$60,000,000
$80,000,000
$100,000,000
$120,000,000
KUSF
Fun
d Si
ze
KUSF Fiscal Year
History of Fund Size
Kansas Universal Service Fund
The KUSF has funded five programs, which are:
• High-Cost• Lifeline (low income)• Telecommunications Relay Service• Telecommunications Access Program
(TAP)• Kan-Ed (No Longer Funded)
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Total KUSF Support by Program (March 1, 1997 – February 28, 2019)
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High-Cost KUSF, $1,024,022,216 , 86%
Lifeline, $32,852,945 , 3%
Kan-Ed, $90,750,000 , 7%
Relay Service, $32,015,820 , 3% TAP, $11,799,496 , 1%
High-Cost KUSF
Lifeline
Kan-Ed
Relay Service
TAP
Expected KUSF Expenditures for KUSF Fiscal Year 23
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High-Cost Support , $36,782,512, 95%
Telecommunications Relay Service , $446,675, 1%
Telecommunications Access Program (TAP), $272,738, 1%
Lifeline, $832,171, 2%
KUSF Administration and Audits, $520,792, 1%
March 1, 2019-February 28, 2020
High-Cost Support
Telecommunications Relay Service
Telecommunications AccessProgram (TAP)
Lifeline
KUSF Administration and Audits
Kansas Universal Service Fund
High-Cost Support– Initial KUSF high-cost support amount available for
incumbent local exchange carriers (LECs) was equal to the revenue lost when access rates were reduced to match interstate rates, were implemented pursuant to state statute (K.S.A. 66-2005). (Access charges are payments made between carriers to complete calls.)
– While the initial amount of KUSF support was set to replace lost access revenues, on a revenue-neutral basis and not necessarily cost based, K.S.A. 66-2008(c) requires that the Commission periodically review the KUSF to determine if the cost to provide service justifies modification of support.
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Kansas Universal Service Fund
High-Cost Support – Price Cap Carriers – Implementing a cost-based KUSF – Price Cap CarriersFCC determined that Federal USF support for price cap
carriers, such as AT&T & CenturyLink, should be based on the cost to provide service if the network were built using current technology rather than based on a company’s historical costs. The FCC developed a model to determine the forward looking costs of providing service and Federal USF support. The KCC followed suit and adopted a KUSF high-cost model
for AT&T & CenturyLink. Pursuant to HB 2201 (K.S.A. 66-2008(c)(5)), AT&T ceased
receiving KUSF support January 1, 2014.CenturyLink continues to receive model-based support.
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Kansas Universal Service Fund
High-Cost Support – ROR Carriers– Cost-based KUSF – Rate of Return CarriersRate of Return (ROR) carriers’ support is based on each
company’s embedded (historical) costs (K.S.A. 66-2008(e)). ROR carriers’ support capped at $30 million (K.S.A. 66-
2008(e)(3)).Completed 55 ROR carrier audits, including 2nd and 3rd
audits of some carriers. Golden Belt Telephone filed a request for an increase of
approximately $2.6 million in its KUSF support on June 5, 2019. KCC Order due by Jan. 31, 2020). Full request = over $30 million cap.
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Kansas Universal Service FundROR Audit Overview
Timeline of audits• 240 day timeframe under which Commission makes its
determination• Based on a filed Procedural Schedule
Staff and consultants sponsor testimony over various topics
• Separations (Interstate vs. Intrastate)• Regulated and non-regulated allocations• Affiliate transactions• Rate base and income statement adjustments• Capital Structure, cost of long-term debt, and return on
equity
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Kansas Universal Service Fund
• All KUSF Eligible Telecommunications Carriers (ETCs) are eligible to receive support from the KUSF. This includes 37 incumbent carriers and 8 competitive ETCs.
• Pursuant to the Identical Support Rule, the competitive ETCs received the same amount of per-line support as the incumbent local exchange carrier.
• Pursuant to HB 2201 (K.S.A. 66-2008(c)(4)):– the KCC capped all competitive ETC high-cost support and
discontinued the use of the identical support rule as of March 1, 2013; and
– Competitive ETC support was phased-out in annual equal increments over 5 years, beginning March 1, 2014. Competitive ETC support eliminated March 1, 2018.
14Kansas Corporation Commission
Kansas Universal Service Fund
$0
$10,000,000
$20,000,000
$30,000,000
$40,000,000
$50,000,000
$60,000,000
$70,000,000
Year3
Year4
Year5
Year6
Year7
Year8
Year9
Year10
Year11
Year12
Year13
Year14
Year15
Year16
Year17
Year18
Year19
Year20
Year21
Year22
Rate of ReturnCarriers
CompetitiveETCs
SouthwesternBell d/b/aAT&TUnited of KS-CenturyLink
KUSF High-Cost Support Received by Year
KUSF Fiscal Year (March – February)
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Kansas Universal Service FundComplexities/Considerations
Interstate vs. Intrastate Recovery
Structure of Fund Funding level New audits of all ROR Carriers?CenturyLink’s support is currently model-based Funding mechanism for competitive ETCs?
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Thank you. Questions?
Sandy ReamsAsst. Chief of TelecommunicationsKansas Corporation Commission
1500 SW Arrowhead Rd.Topeka, KS 66614