Rural Telcos Suing Texas PUC Face Revenue Cuts
Court relief probably won’t come soon enough for rural Texas telcos facing large reductions in state USF support, but it may be their last option, said telecom association leaders in interviews. The Texas Statewide Telephone Cooperative Inc. (TSTCI) and Texas Telephone Association (TTA) sued the Texas Public Utility Commission last week at Travis County District Court in Austin. About 50 small rural telcos are losing 60-70% of their Texas USF high-cost funding because commissioners refused last year to adopt a staff plan to double the contribution rate to 6.4%, they said.
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It's “a financial catastrophe for the small and rural companies,” said TSTCI CEO Weldon Gray. “This can only be sustained for a few months,” and it's already affected operations, with many stopping “any construction work to expand or improve facilities” and imposing freezes on hiring, he said.
The small telcos want expedited relief, including compelling the PUC to fund the USF enough to meet current obligations and to make up for lost support. The lawsuit raises process concerns about how the regulator distributed reduced funding. “This unilateral and massive policy reversal was carried out in direct contravention to the plain wording of the statute behind closed doors through a contract amendment between the PUC’s Executive Director and the TUSF administrator. This amendment is the first time TUSF recipients were provided any notice of exactly what was going to happen to their TUSF disbursements,” it said: The commission “arbitrarily created an artificial hierarchy among TUSF programs that does not exist in rule or statute.”
A PUC spokesperson declined to comment on litigation. The commission asked the legislature to revamp USF, but a top lawmaker warned this month that quick legislative action is unlikely (see 2101080024). State lawmakers, small telcos and rural educators sounded the alarm last fall about TUSF imminent insolvency (see 2010160052).
Suing “is not something that we do lightly,” and courts probably aren’t “going to be fast enough,” said TTA Executive Director Mark Seale. "We have almost 1.5 million households … that we’ve got to try to protect, and we felt like we didn’t have any [other] recourse.” Telcos learned about the support reduction 72 hours in advance, Seale said. “How long can you survive with 60% of your paycheck taken away from you?” TTA members are making tough choices, he said. “Network outages that are prolonged because we can’t pay people to go fix them … are going to have dramatic effect on all things that are carried by the network.”
Judicial process isn’t quick even under expedited procedure, and the pandemic slowed Texas courts more, said TSTCI attorney Don Richards on our call with Gray. It could take two to four weeks until parties can even appear before the court for the first time, he said.
It’s probably faster than waiting for the legislature, said Gray. Even if there's agreement to pass a bill on an expedited basis, the law wouldn’t take effect until April or May, and the last time the PUC had to implement USF changes, it took nearly two years, he said. Existing law gives the PUC authority to fully fund USF, and the quickest fix would be for the agency to increase the surcharge temporarily until more comprehensive changes can be made, he said. Doubling the fee would mean consumers pay up to $1 monthly rather than 50 cents, which isn’t an “economic hardship on anyone, even in times of pandemic,” Gray said: Punishing companies that rely on TUSF support does “disproportionate harm” to the most rural parts of Texas.
"Closing the digital divide remains one of my top priorities and the stark disconnect we've seen for rural Texans during COVID-19 further elevates this issue," said Texas state Sen. Drew Springer (R) in a statement. "We must be actively finding modern day solutions to close this outdated gap."
TTA is ready to debate universal service in the legislature, said Seale. “The problem is your patient isn’t going to survive long enough to operate on them.”