A $37 million surcharge on long-distance calls from landlines that helps rural telephone companies provide service is outdated and should be abolished, Oklahoma Corporation Commissioners heard Tuesday.
Wireless companies, landline companies, rural telephone companies and several regulators all agreed the state's High Cost Fund should be eliminated. But they differed sharply on how to make up the difference for the subsidy during a two-hour hearing in Oklahoma City.
The three-person Corporation Commission took the matter under advisement and will issue a decision later. Commissioners were asked to approve a revised settlement agreement signed by more than 35 rural telephone companies, AT&T Oklahoma, Cox Oklahoma Telecom, Logix Communications, commission staff and the attorney general's office.
The settlement would abolish the High Cost Fund and set up a process for rural telephone companies to claim support from Oklahoma Universal Service Fund fees added to most landline and wireless customer bills.
The commission established the High Cost Fund in 1996 to ease the transition for rural phone companies amid greater competition in the telecommunications industry.
Money for the High Cost Fund comes from fees of between 3.1 cents and 4.7 cents added to each minute of a long-distance call made from landlines in Oklahoma. But customers are making fewer long-distance calls from landlines, choosing instead to use wireless phones, texts or calls over the Internet. Since the surcharge is set at $37 million each year, fewer customers are paying higher fees for the same level of support.
Bill Humes, who represented the attorney general's office on behalf of consumers, said the settlement wasn't perfect. It does abolish the High Cost Fund, which the attorney general's office has had concerns with for several years. He said the fund hasn't been fully audited since it started and it may be duplicating services supported by the Oklahoma Universal Service Fund.
“As with any settlement agreement, there are imperfections,” Humes said. “If everyone hates it, it must be some sort of good settlement.”
Wireless companies such as Verizon Communications Inc. and Sprint Nextel Corp. said they weren't involved in the settlement negotiations. Their attorneys questioned why rural telephone companies still needed support based on formulas that gave them an inflated rate of return.
The process rural phone companies could use to qualify for future support under the settlement was flawed, said Richard Severy, an attorney representing Verizon. The typical wireless customer could pay an extra $25 per year from Oklahoma Universal Service Fund fees, while landline customers could pay another $16 each year, he said.
“It is not reasonable, fair or sound policy to burden millions of wireless and wireline customers with surcharges of this magnitude in the absence of clear and succinct evidence that it is necessary to do so to subsidize service that is substantially below market rates to fewer than 200,000 wireline customers,” Severy said.
Ron Comingdeer, who represents rural telephone companies, said there was no evidence the companies would be getting the same level of support with the abolishment of the High Cost Fund.
“We don't know the cost studies yet,” Comingdeer said. “Any kind of implication or arguments about the impact on consumers is pure speculation at this point.”
AT&T Oklahoma's attorney, John Gray Jr., said the High Cost Fund is not just being transferred to the Oklahoma Universal Service Fund.
“Those funds are not going into the OUSF,” Gray said. “What's happening is all these RLECs (rural local exchange companies) will have to go up and prove how much money they need, not based on what they got from the High Cost Fund. They'll have to go through a revenue review to make that determination.”
Commissioner Bob Anthony asked rural telephone companies why they weren't willing to share information on how much each receives from the High Cost Fund. Wireless companies asked several times during the case to see confidential information from the rural providers to see if the funding was still needed. They were denied because the information is closed under terms of a protective order from the 1996 case establishing the High Cost Fund.
Comingdeer told Anthony the amounts for each company would reflect their market share and disclosing it could hinder their competitiveness.
“It is not reasonable, fair or sound policy to burden millions of wireless and wireline customers with surcharges of this magnitude in the absence of clear and succinct evidence that it is necessary to do so to subsidize service that is substantially below market rates to fewer than 200,000 wireline customers.”
An attorney representing Verizon