PETITION OF THE NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS

Transcription

1 Before the Federal Communications Commission WASHINGTON, D.C ) In the Matter of ) ) WC Docket No The Connect America Fund ) ) WCB Announces Results of Urban ) DA Rate Survey for Voice Services; ) Seeks Comment on Petition for ) Extension of Time to Comply with ) New Rate Floor ) ) PETITION OF THE NATIONAL ASSOCIATION OF REGULATORY UTILITY COMMISSIONERS The National Association of Regulatory Utility Commissioners ( NARUC ) respectfully requests that the FCC freeze the current $14 rate urban rate floor pending (i) release of the Wireline Competition Bureau s (WCB) information underlying the FCC s calculations and methodology, including inputs and work sheets, and (ii) agency solicitation of comment on the released data/methodology. NARUC, a nonprofit organization founded in 1889, has members that include the government agencies in the fifty States, the District of Columbia, Puerto Rico, and the Virgin Islands charged with regulating the activities of telecommunications, 1 1 NARUC s member commissions have oversight over intrastate telecommunications services and particularly the local service supplied by incumbent and competing local exchange carriers (LECs). Many commissions are obligated to ensure that local phone service supplied by the incumbent LECs is provided universally at just and reasonable rates. They have a further interest to encourage unfettered competition in the intrastate telecommunications market as part of their responsibilities in implementing: (1) State law and (2) federal statutory provisions specifying LEC obligations to interconnect and provide nondiscriminatory access to competitors. See, e.g., 47 U.S.C. 252 (1996).

2 energy, and water utilities. Congress and the courts 2 have consistently recognized NARUC as a proper entity to represent the collective interests of the State public utility commissions. In the Federal Telecommunications Act, 3 Congress references NARUC as the national organization of the State commissions responsible for economic and safety regulation of the intrastate operation of carriers and utilities. 4 The interest of NARUC members in this process could not be more clear. The increases in the rate floor, whatever their legality, 5 effectively set intrastate rates and obviously impact universal service. In the November 2011 Transformational Order, 6 at 239, 592, the FCC set the rate floor at $10 for the year beginning July 1, 2012 and $14 for the year 2 See, United States v. Southern Motor Carrier Rate Conference, Inc., 467 F. Supp. 471 (N.D. Ga. 1979), aff d 672 F.2d 469 (5th Cir. 1982), aff d en banc on reh g, 702 F.2d 532 (5th Cir. 1983), rev'd on other grounds, 471 U.S. 48 (1985). See also Indianapolis Power and Light Co. v. ICC, 587 F.2d 1098 (7th Cir. 1982); Washington Utilities and Transportation Commission v. FCC, 513 F.2d 1142 (9th Cir. 1976). 3 Communications Act of 1934, as amended by the Telecommunications Act of 1996, 47 U.S.C. 151 et seq., Pub.L.No , 110 Stat. 56 (1996) (West Supp. 1998) ( Act or 1996 Act ). 4 See,47 U.S.C. 410(c) (1971) (NARUC nominates members to FCC Joint Federal-State Boards which consider universal service, separations, and related concerns and provide formal recommendations that the FCC must act upon.); Cf. 47 U.S.C. 254 (1996) (describing functions of the Joint Federal-State Board on Universal Service) Cf. NARUC, et al. v. ICC, 41 F.3d 721 (D.C. Cir 1994) (where the Court explains Carriers, to get the cards, applied to (NARUC), an interstate umbrella organization that, as envisioned by Congress, played a role in drafting the regulations that the ICC issued to create the "bingo card" system. ) 5 See, e.g., Hot Springs Telephone Company and Ronan Telephone Company Reply Comments, at pages 1-3, filed in CC and available online at: ( The FCC s rate floor requirement attempts to usurp State commission authority over local rates. Although the rate floor minimum is optional in theory, if ILECs do not comply they are faced with the loss of High Cost Loop support; 47 C.F.R (h). The FCC is therefore leveraging federal subsidies to extend its jurisdictional authority on a de facto basis. ) 6 See, Connect America Fund, WC Docket No et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd (2011) ( Transformation Order ); pets. for review pending sub nom. In re: FCC , No (10th Cir. filed Dec. 8, 2011). The text of the Transformational Order is available online at: 2

3 beginning July 1, The FCC set those benchmark rates by fiat as under the 2008 national average rate of $ Unlike the current circumstance, the data underlying the 2008 national average local rate, as well as the apparent methodology a simple average of rates from 95 urban areas - is easily accessible online. 8 The WCB, recognizing a simple average of 95 urban areas would not be appropriate for setting a benchmark, on July 12, 2012, sought comment on a new approach. 9 Less than a year later, on April 3, 2013, the Bureau adopted the form and content for a survey of urban rates for fixed voice and fixed broadband residential services. 10 That Order raises implementation questions to even the casual reader. For example, at 19, the Order simply states: [t]he Bureau will then determine which rates should be included in the survey in a manner that will avoid introducing a statistical bias. 7 Id. at See, Reference Book of Rates, Price Indices, and Household Expenditures for Telephone Service, (Industry Analysis & Technology Division, WCB 2008), at page I-1, Table 1.1, Residential Rates for Local Service in Urban Areas (As of 10/15/07), showing an average monthly charge for Flat-Rate Service of $15.62 and the Median rate of $14.77, at: See also, the Raw Data from the Industry Analysis Division s Urban Rates Survey, Data for , online at: 9 Wireline Competition Bureau Seeks Comment on Proposed Urban Rate Survey and Issues Relating to Reasonable Comparability Benchmarks and the Local Rate Floor Public Notice (DA ) (rel. July 26, 2012), available online at: 10 Order, In the proceeding captioned: In the Matter of Connect America Fund, WC Docket No , (DA ), online at: 3

4 The obvious and unanswered questions: how? 11 On March 20, 2014, WCB issued DA , which, in part, set a new national rate floor for local (intrastate) retail voice service of $20.46 per month, and requires ETC/ILECs to increase their rates to this new floor no later than June 1, 2014; or otherwise face a reduction in High Cost Loop Support; 47 C.F.R (h). 12 In the same notice, the FCC sought comment on a petition filed by the Eastern Rural Telecom Association, the Independent Telephone & Telecommunications Alliance, NTCA - The Rural Broadband Association, The National Exchange Carrier Association, the United States Telecom Association and WTA-Advocates for Rural Broadband (the "Joint Petition"). The Joint Petition seeks to have the date for compliance for the urban rate floor modified from the current "snapshot" date of June 1, 2014, to January 2, 2015, and to make January 2 the annual compliance date going forward. 11 See also id. at 9, raising similar questions: We will select urban providers using FCC Form 477 data so as to create a statistically valid sample that is representative of the relative proportion of fixed terrestrial providers for the purpose of setting a reasonable comparability benchmark for fixed voice and fixed broadband services and a rate floor for fixed voice service. (How was this actually done?) Separate, independent samples will be chosen for the fixed voice and fixed broadband sections of the survey. (How was this actually done?) C.F.R High-cost support; limitations on high-cost support (d) For purposes of this section, high-cost support is defined as the support available pursuant to of this chapter and support provided to carriers that formerly received support pursuant to

5 The day DA was released; Commissioner Pai also released a statement calling into question whether the rate floor should continue. 13 He pointed out the increase in rates from the current $14 rate floor to the new $20.46 average urban rate is more than a forty-six percent rate hike. Significantly, he also called for a freeze to the current rate floor and an examination of the policy behind it. One thing is clear Commissioner Pai is not alone in raising issues about the methodology used 14 or wanting to see the agency further examine the methodology and inputs that resulted in the $20.46 rate floor. A significant number of commenters have raised numerous issues 15 about the level and timing of the rate floor. 13 See, Commissioner Pai Statement on FCC-Initiated Increase in Phone Bills (March 20, 2014), available online at: 14 See Commissioner Pai Remarks at 2014 WTA Spring Meeting (April 9, 2014), at 2, available online at: ( I m glad that I m not the only one skeptical of the rate floor. WTA, along with NTCA The Rural Broadband Association, the National Exchange Carrier Association, and the Eastern Rural Telecom Association, has called on the FCC to delay any increases so the Commission can revisit the fundamental operation of the rate floor. Montana s independent LECs want a freeze, and the associations representing independent LECs in Colorado, Idaho, Nevada, Oregon, and Washington have called for a moratorium and a re-examination of the public policy issues surrounding the urban rate floor concept. The Washington Utilities and Transportation Commission points out that a national rate floor means that rates in rural areas will leapfrog the prevailing local telephone rates in the more urban areas of the state. And the National Tribal Telecommunications Association sums up the problem: [A]sking... consumers to pay more for nothing in return is counterproductive to universal voice and broadband service goals. ); See also, April 11, 2014 Ex Parte Comments of the Maine Office of the Public Advocate, at 1, available online at: ( [W]e recommend first that, when a carrier determines the average rate paid by customers, the carrier should not include lifeline customers and the rates that those4 customers pay in the calculation of that average. ) 15 See, e.g., March 31, 2014, Reply Comments Submitted on Behalf of the Public Utilities Commission of Ohio, at page 6, available online at: ( [T]he Ohio Commission respectfully requests that the FCC take a more measured approach that phases the benchmark rate in over time, to enable affected carriers adequate opportunity to adjust to the new rate floor while maintaining the same level of services that their customers expect. ) 5

6 Indeed, currently pending before the FCC are requests to freeze the rate floor, 16 impose caps on rate floor increases, shift the implementation date to January 2015 or later, 17 assess the impact of the higher benchmark on consumers and rural carriers, and release the data and details on the methodology used to calculate the $20.46 average. 18 Even the FCC Chairman has recognized that, at a minimum, delay and perhaps a phasing in of the new floor is warranted See, e.g., March 31, 2014, Reply Comments of Frontier Communications, filed in CC and available online at: ( The FCC Should Freeze the Rate Floor at $14 dollars. ) 17 See, e.g., March 31, 2014, Reply Comments Submitted on behalf of the Public Utilities Commission of Ohio, filed in CC and available online at: at page 5 ( Ergo, the Ohio Commission respectfully requests that the FCC take a more measured approach that phases the benchmark rate in over time. ); See, also, March 31, 2014, Reply Comments by NTCA The Rural Broadband Association; The National Exchange Carrier Association, Inc.; The Eastern Rural Telecom Association; and WTA Advocates For Rural Broadband on the Petition for Extension of Time to Comply with the New Rate Floor, filed in CC and online at: at page 2 ( The Petition requested a delay in implementation of the 2014 local service rate floor from July 1, 2014 to January 2, ) 18 See, e.g., March 31, 2014, Comments Of The Colorado Telecommunications Association Idaho Telecom Alliance Nevada Telecommunications Association Oregon Telecommunications Association and Washington Independent Telecommunications Association, filed in CC 90-10, and available online at: at page 3 ( The commission should revisit the public policy issues surrounding the urban rate floor. ) 19 See, Comments of Chairman Wheeler in response to a question from Representative Amodei (R-NV) at a March 25, 2014 Federal Communications Commission Fiscal Year 2015 Appropriation House hearing on the FCC s proposed 2015 budget about postponement of the rural benchmark rate hike that would otherwise go into effect June 1 as a result of one of the provisions in the USF Transformation Order: I am going to be proposing that we - a - do a couple of things. First that we move the effective date to give people more time to get ready; and two, we need to be thinking about how we can phase it in to avoid sticker shock. The Chairman s remarks are towards the end of this three minute clip from the hearing online here: Chairman Wheeler also mentions in this clip the FCC s work with Joint Boards to examine similar issues. 6

7 Although NARUC does not have a resolution on point, because of these concerns, and the fact that the process of calculating the actual rate has not been transparent, i.e., unlike prior surveys, there is no public access to the underlying data/methodology, 20 there was sufficient unanimity among both members and leadership that, using our inter-meeting decision making process, the Association determined to make this filing. Under these circumstances, at a minimum, the FCC should (i) maintain the current $14 benchmark pending full Commission investigation of the methodology used to calculate the current benchmark, (ii) release the inputs and detailed methodology/workpapers that produced the $20.46 rate, and (iii) seek comment on how the benchmark should be calculated. 20 The recent April 2, 2014 WCB Submission for the Record from Michael J. Jacobs, Legal Advisor to the Chief, WCB, available online at: providing aggregate data on number of lines, study areas, and States, does not provide sufficient information to confirm the statistical validity of any methodology used. 7

8 CONCLUSION NARUC respectfully requests that the FCC: (i) maintain the current $14 benchmark pending full Commission investigation of the methodology used to calculate the current benchmark, (ii) release the inputs and detailed methodology that resulted in the $20.46 rate, (ii) seek comment on how the benchmark should be calculated. Respectfully Submitted, James Bradford Ramsay GENERAL COUNSEL National Association of Regulatory Utility Commissioners 1101 Vermont Ave, NW Suite 200 Washington, DC April 15,