Nebraska Targets January to Switch State USF Contribution to Hybrid Mechanism

The Nebraska PSC set a target implementation date of Jan. 1, with a workshop scheduled on Sept. 26 at 10 a.m. at the commission’s Lincoln headquarters. The revenue-based mechanism would continue to apply to business and government services, toll services, operator services, local private lines, special access, prepaid wireless and radio paging services, the PSC said. The commission will collect data for at least a year before deciding how to apply connections to those services, it said. The PSC set the target level of NUSF between $46 million and $54 million because it said NUSF averaged $56.6 million before Nebraska "began experiencing the precipitous decline in our remittances." The agency will use FCC Form 477 data to estimate the number of residential voice connections, it said.

"Adopting a hybrid mechanism would ... eliminate some of the complex issues raised relative to the counting of business connections and ensure all telecommunications providers appropriately continue to contribute to universal service even where service is not offered through a dedicated per line connection basis to an end user,” the order said. “Phasing in the connection-based contribution mechanism will allow the Commission to carefully evaluate business service revenues and determine the appropriate way to account for business services while stabilizing contributions in the residential market.”

Commissioner Tim Schram voted no because he opposes increasing the state USF surcharge to $1.75 from about 87 cents on a $70 phone bill, which combined with the recent federal surcharge increase would be a “double hit” on consumers, the Republican said in a Wednesday interview. Schram supports the current fund size of $41 million and wants to assess the impact of federal Connect America Fund II support before increasing state funding. Schram supports connections-based contributions as simpler than using a percentage of revenue and said it’s a good idea to take more time to explore application to business services.

The order "falls short" of comprehensive contribution overhaul but marks “one step closer to that goal,” said Commissioner Crystal Rhoades, in a statement concurring with the order. The PSC should have adopted connections for residential and business services, she said. “Business users consume a significant portion of network traffic,” Rhoades said. “I hope that our actions today do not send the message that we are giving them a pass. The Commission should not be complacent in its goal for overall reform if the hybrid mechanism adopted today appears to stabilize the fund in the near term.” Also, the fund level should be based on "empirical need" shown through data, not "historically accepted funding levels,” Rhoades said. The Democrat remains concerned about the “inequity" of Nebraska funding broadband without being able to assess those services, she added.

“CenturyLink supports this hybrid approach in Nebraska because it will broaden the base of USF contributors and more equitably collect USF contributions,” a spokesperson said. The order included several ideas supported by rural independent companies (RICs) in comments and testimony, emailed their attorney, Woods Aitken’s Paul Schudel. RICs appreciate the PSC’s “leadership in contributions mechanism reform regarding the Nebraska Universal Service Fund,” he said. Windstream supports Nebraska's decision to stabilize the state fund, a spokesperson said.

CTIA is "disappointed that the PSC has chosen to shift the burden from those most able to pay to those least able to pay," said Jamie Hastings, senior vice president-state affairs. "Applying state surcharges to revenues from interstate services conflicts with federal law." A Cox spokesperson also raised concerns: "Until consumers can be reassured that this fund is being used to truly help those who do not have access to services, we are discouraged by the vote of the commission to increase this surcharge on our customers.” Charter declined comment.

"Orders like this are why it’s so important to have the states as laboratories of democracy,” emailed Sherry Lichtenberg, National Regulatory Research Institute telecom principal. “We will probably see other ideas about how to move to a more inclusive USF contribution mechanism in the future.” A hybrid approach “would appear to account for the question of the number of connections that would be present on a business account” and if there should be an upper limit, “as well as the need to identify and track those connections,” she said. “It appears to be a good middle ground.”

CTIA sued the Nebraska USF over last year’s order to pursue a connections-based mechanism, but the wireless association was expected to drop its appeal after the PSC revised certain definitions (see 1807250053). An industry “stipulation to dismiss the CTIA appeal was filed with the Attorney General’s office on Monday, and they expect an order dismissing the appeal sometime next week,” a PSC spokesman emailed Wednesday.

Other States

State USF contribution will be a “huge issue going forward” in Alaska because the existing mechanism makes no sense, Commissioner Robert Pickett said Wednesday at a Regulatory Commission of Alaska meeting. Alaska commissioners started working through details of a proposed Alaska USF revamp -- based on a plan by the Alaska Telephone Association -- that would sunset the revised AUSF after June 30, 2023, with a comprehensive review to begin by June 30, 2021 (see 1805300054). The RCA may vote on the final proposal Thursday, said Pickett.

The New Mexico Public Regulation Commission may soon move to connections and plans a hearing Wednesday, said an Aug. 1 order in docket 17-00202-UT. “The Commission finds that the consideration of a per-connection charge should be expedited so that an increase in the percentage-of-revenue surcharge might be avoided,” the agency said. The Utah PSC in January became the first state to switch to connections from revenue (see 1807160062)

Comments are due Aug. 16 at the Oklahoma Corporation Commission on a June 28 notice of inquiry to identify and resolve state USF issues. Among other things, the OCC is mulling actions to be taken following abolishment of the state high-cost fund and on the agency’s authority to regulate VoIP and support broadband deployment.