An annual fee of $37 million that helps subsidize telephone service to rural areas could be paid by all customers if a number of telecom companies and regulators can convince the Oklahoma Corporation Commission to approve changes.
The commission will hear challenges by several wireless companies to a proposed settlement on the matter at 1:30 p.m. Tuesday in Oklahoma City.
On one side are companies that want to abolish the state's High Cost Fund and replace it with a new program that would pull money for the subsidy from Oklahoma Universal Service Fund fees. They include more than 35 rural telephone companies, AT&T Oklahoma, Cox Oklahoma Telecom, Logix Communications, Corporation Commission staff and the attorney general's office.
Wireless companies such as Verizon Communications Inc. and Sprint Nextel Corp. oppose the changes, largely because there has been no audit of the fund since it started in 1996. They said there's no point to continuing the subsidy until regulators can figure out if it's still needed.
Oklahoma's High Cost Fund uses fees tacked on to each minute of a long-distance call from a landline phone to help pay for service in rural areas. But with the rise of wireless phones, texting and calls over the Internet, customers are making fewer long-distance calls from traditional landlines.
Fees for the fund have more than doubled in the last few years to maintain the same level of subsidies, as fewer long-distance calls were being made from landlines. Oklahomans made 2.13 billion minutes of long-distance calls from landlines in 2005. That fell to 882 million minutes in 2012, a drop of nearly 60 percent, according to the fund's administrator.
In testimony filed in the case, Daniel Rhinehart, a witness for AT&T, said keeping the High Cost Fund wouldn't be in the public interest because “it imposes larger and larger burdens on a steadily decreasing set of Oklahoma ratepayers.”
An estimated 30 percent of Oklahoma adults live in households with only wireless phones in 2010, up from 21 percent in 2007, according to the National Center for Health Statistics. About 8 percent of adults were in households with only landline phones in 2010.
There were about 1.6 million landlines for business and residential customers in Oklahoma in 2010, according to the Corporation Commission. A breakdown of subscribers by company is not available under the commission's confidentiality rules.
In commission filings, rural telephone companies said it would be fairer to move funding to the Oklahoma Universal Service Fund.
“Likewise, we believe such a change would result in a smaller surcharge to a larger base of contributors that would include all customers (wireless and Voice over Internet Protocol) who have access to the rural company's networks to terminate calls,” said Craig Cook, who filed testimony on behalf of more than 35 rural telephone companies.
The High Cost Fund has paid about $37.1 million each year to rural telephone companies in Oklahoma since 1996, Verizon's Don Price said in his testimony. That funding has stayed the same even though the telecommunications market has changed drastically since then.
“Thus, in some cases, the surcharges may exceed the charges for the long-distance service itself,” Price said. “The fund, therefore, imposes a severe financial burden on Oklahoma's telecommunications consumers that is, to my knowledge, unprecedented among the states.”
Price said the High Cost Fund was intended to be temporary and to ease the transition to competition for rural phone companies when it was established.
The wireless companies also argued they weren't involved in negotiations on the proposed settlement, even though the Oklahoma Universal Service Fund is assessed on their customers.
Administrative Law Judge Jacqueline T. Miller recommended the three-person Corporation Commission approve the proposed settlement. She said regulators and an independent third-party would review disbursements to rural phone companies to make sure they're not receiving more money than they are entitled.