Western Conference Do We Still Need State USF in Today s World?

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1 Western Conference 2017 Do We Still Need State USF in Today s World?

2 Do We Still Need State USF? If So, How Should It Be Directed? Jeffrey Ackermann, Chair Colorado Public Utilities Commission

3 Disclaimer The views expressed in this presentation are those of the presenter and do not necessarily reflect the views of the Colorado Public Utilities Commission or any other individual Commissioner. 3

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5 The Colorado High Cost Support Mechanism (CHCSM) HISTORY OF HIGH COST SUPPORT IN COLORADO: 1990: Adopted by the Commission; first explicit support mechanism. 1992: Legislation codified the Colorado High Cost Fund (CHCF); Commission provided statutory authority administer the Fund. 1995: Additional legislation Provided for local exchange service competition Renamed the CHCF to Colorado High Cost Support Mechanism (CHCSM) Ensures that universal basic service for all consumers at fair, just, and reasonable rates CHCSM DETAILS: Funding: Wireless and landline (ILEC, CLEC, IXC) providers Rate element (currently 2.6%) applied to end user retail revenues; line item on the monthly bill On an exchange basis Non-Rural ILEC - supported through a proxy cost model filed with the Commission Rural ILEC eligibility based on a showing of a revenue requirement; available for loop, switching and exchange trunk Competitive Telecommunications Carriers - receive Identical Support or the same per line support amount of the underlying provider that receives high cost support in that area 5

6 State Regulatory Reform & High Cost Support 2014: Telecom Dereg Legislation Enacted Impact Upon CHCSM: Empowers PUC to determine effective competition Determinations based on: Number of facilities-based providers offering of similar services Geographic area: Wire center serving area (point of contention) CHCSM is to support local exchange service providers only in areas without effective competition. 6

7 CHCSM and Broadband Deployment The Connect Colorado to Enhance Economic Development, Telehealth, Education, and Safety Act: Promotes the state policy of providing universal access to broadband service Provides financial assistance through additional support mechanisms if competition for local service fails to deliver broadband service throughout the state CHCSM now includes access to broadband service CHCSM funds no longer required for High Cost Support redirected to broadband service in unserved areas. Subsidizes broadband networks in unserved areas Reduces CHCSM surcharge consistent with the life of the Broadband Fund. 7

8 Implementation of CHCSM Transition to Broadband 2015: Commission approved a partial CHCSM settlement (excluding one competitive telecommunications carrier) that included ECA findings: Annual CHCSM Support for Voice Services (4 years total): RLECs - $1,384,031 Non-Rural ILEC - $30,250,000 Competitive Telecommunications Carriers (not in the settlement): ~$1.6 million Broadband Funding To Date 2016: $2,893,567 transferred to the Broadband fund. 56 Effective Competition Area (ECA) determinations made ( ) Round Two: 46 additional ECA determinations Currently being challenged in District Court by CHCSM recipient; no transfer yet. Future Broadband Funding Litigation increasing uncertainty regarding future transfers to the Broadband Fund. 8

9 WHAT HAVE WE LEARNED? The traditional need/motivation/purpose for state High Cost funding has changed. Challenges assessing residual need Imperfect (policy) transition to broadband Financially supporting broadband development dwarfs the High Cost funding capacity (state and federal). Be clear about expectations A cleaner break from High Cost to Broadband needed? Incumbency, $$ and change a difficult mix to navigate 9

10 QUESTIONS? www. colorado.gov/dora/puc

11 Western Conference 2017 Do We Still Need State USF in Today s World?

12 California Universal Service Programs FY Enacted Budget: $861.7 million California Advanced Services Fund $97.7 California High Cost Fund - A $43.1 California High Cost Fund - B $22.3 California Teleconnect Fund $147.5 California LifeLine Program $483.1 Deaf & Disabled Telecom Program $68.0 ($ in millions)

13 Western Conference 2017 Do We Still Need State USF in Today s World?

14 THE STATE OF STATE USF Tina Pidgeon

15 The Punch Line First State USF Matters Broadband depends on - Innovative operational experience - Economic opportunity - Enabling policies Enabling policies provide: - Stability - Predictability - Planning

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18 PUNCH LINE FIRST State USF matters Broadband investment requires: - Innovative operational experience - Economic opportunity - Enabling policies Enabling policies: - Predictable/reliable - Competitively neutral - Technologically neutral

19 ALASKA USF Over time: In-state access charges Carrier of last resort guarantees State lifeline Public payphones

20 Evolutions Services: wireless, VoIP/fading LD and local Markets: new entrants Revenues: decline of accessible in-state funding Review of existing models

21 ASSESSING OPTIONS Status quo Transition Elimination

22 FROM HERE TO THERE The network is the network Fact-based assessments of proposed changes Transitions matter Partnerships can yield optimal results more quickly Outcomes can be measured

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25 THANK YOU Tina Pidgeon