Some State Officials Still Concerned About USF Contribution Rate Despite 'Respite'
State regulators welcomed news the USF contribution factor may not change in Q3, but some voiced continued concern about the long-term trend toward rising assessments on telecom carriers. "Fortunately, the USF assessment factor won't be increasing this quarter due to lower than anticipated demand on the E-rate program," emailed South Dakota Public Utilities Commissioner Chris Nelson Friday.
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The contribution factor next quarter could stay at 17.4 percent of carriers' U.S. interstate and international (long-distance) telecom end-user revenue, said industry consultant Billy Jack Gregg Wednesday, based on Universal Service Administrative Co.'s latest estimate of USF subsidy demand (see 1705240058). Based on a previous estimate, Gregg projected the Q3 contribution could spike to 19.6 percent (see 1705030049), sparking state concerns, including from Nelson (see 1705040059). USAC last week revised its estimate of annual E-rate demand for school and library subsidy support down to $3.2 billion, well under the FCC $3.99 billion cap.
"My concern for an increasing factor percentage remains as we go forward and anticipate increased demand for all of the USF programs,” said Nelson, who has been informally acting as state chairman of a federal-state joint board reviewing the contribution system. FCC Commissioner Mike O'Rielly is the federal chairman of the joint board. He didn't comment.
“It’s more like a brief respite than a reprieve," emailed Cary Hinton, a state joint board staffer and policy adviser to the chairman of the Public Service Commission of the District of Columbia. "It still doesn't lessen the need for a reformed contribution base that reduces inequitable assessments on wireline and wireless service customers.”
The Oregon Public Utility Commission "generally believes that lower rates are beneficial for customers and this is a positive development," said Commissioner Stephen Bloom, another joint board member: "I am looking forward to the first Joint Board meeting with Commissioner O’Rielly this summer at NARUC’s meeting in San Diego, where I anticipate robust discussions on the USF contribution rate."
Gregg said timing accounted for the "big disparity" between USAC's projections of E-rate demand. Since the school and library fund (SLF) application window "didn’t close until after USAC was required to file its projections with the FCC, it had no choice but to make the most conservative projection possible, and that was that SLF demand for FY2017 would equal the cap, $3.99 billion," he emailed Friday. "When the actual demand from all applications came in about $800 million less than the cap, that required USAC to adjust the projections to incorporate this lower figure."
"The problem I found with the original filing was the explanation for the derivation of the SLF demand was unclear," the consultant said: USAC "should have just explained that because total FY2017 SLF demand was unknown at the time of the filing, they were assuming that demand would equal the cap. If actual SLF demand exceeded the cap, then demand projections would still be based on the cap; if actual demand ended up being less than the cap, then a subsequent revision would be made."