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Rural telephone companies seek funding from Oklahoma's phone fee fund

A reduction in support from federal programs is leading rural phone companies to tap the Oklahoma Universal Service Fund to help pay for basic phone services. Several wireless companies oppose the reimbursements made under the state’s “make-whole” law.
by Paul Monies Published: July 25, 2014

Rural telephone companies that are seeing a decline in federal funding to help provide basic phone service want to tap a state fund that comes from surcharges on telephone customer bills.

More than a dozen cases are pending at the Oklahoma Corporation Commission under a section of the state’s telecom law that allows small telephone companies to seek reimbursement from the Oklahoma Universal Service Fund.

Attorneys for the rural phone companies and commission staff said the fund has to reimburse them for lost revenues or increased costs from a federal or state action under the “make-whole” provision. Several wireless companies oppose those efforts.

Corporation commissioners heard arguments Thursday in two cases that are testing the “make-whole” provision for decreases in federal funding. Attorneys for Sprint Communications Co. and Verizon Communications want the three-person commission to set aside recommendations from an administrative law judge to approve reimbursements for Terral Telephone Co. and Totah Telephone Co.

Jack Clark Jr., an attorney for Verizon, said since the Federal Communications Commission placed a cap on how much it was willing to reimburse phone companies for corporate operations expenses in 2011, there has been a “rash of cases” for funding from the Oklahoma Universal Service Fund.

“We do not believe it is equitable for consumers across the country to subsidize the cost of service for some consumers that pay local rates that are significantly lower than the national average,” Clark said.

Terral, which has seen its customer count drop from 215 in 2012 to about 160, offers basic landline service for $14 per month. The company serves many elderly and low-income customers in rural Jefferson County on the Oklahoma-Texas border, an area with spotty wireless service.

Clark said the national average for basic landline service in urban areas was about $20 per month. Terral should raise its rates to make up for the loss of some federal funding, he said.

“Verizon is not asserting that raising rates need entirely cover the funding requirement,” Clark said. “What Verizon is proposing is that Terral subscribers should have some skin in the game.”

Ron Comingdeer, an attorney for Terral, said the commission must approve the reimbursements under the law.

He distributed a list of cases where commissioners already approved reimbursements under the “make-whole” provision.

“The Oklahoma Universal Service Fund is designed to keep local rates reasonable and affordable,” he said.

Comingdeer said Terral lost 25 percent of its customers following rate increases in the last three years. If the company kept raising its rates to make up for the decrease in federal funding, it could enter a “proverbial death spiral.”

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by Paul Monies
Energy Reporter
Paul Monies is an energy reporter for The Oklahoman. He has worked at newspapers in Texas and Missouri and most recently was a data journalist for USA Today in the Washington D.C. area. Monies also spent nine years as a business reporter and...
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