Oregon Universal Service Fund

1. Brant Wolf, EVP Oregon Telecommunications Association Oregon Universal Service Fund

2. Basic Overview of the OUSF Passed by the 1999 Legislative Assembly as SB 622 (ORS 759.425) “The statute requires the Commission to establish and implement a competitively neutral and nondiscriminatory OUSF to ensure that basic telephone service is available at reasonable and affordable rates.” (OPUC order 03-082) For the non-rural carriers, implemented by OPUC in 2000 (00-312) For the rural carriers, implemented by OPUC in 2003 (03-312) and subsequent MOU

3. OUSF Basics Who Contributes? – customers of wireline telecommunications companies, ILEC & CLEC (Comcast contributes but claims they are not obligated to do so) 290 certified Telecom. Service Providers (TSPs) Current Surcharge Rate – 6.55% of intrastate retail services

4. OUSF Basics Who does not contribute? – everyone else: wireless, MagicJack, etc. • “The natural tendency of new carriers is to provide service only for the most profitable services, leaving high-cost services to be provided by incumbent carriers.” (03-082)

5. OUSF Basics Who receives OUSF support? 25 Eligible Telecommunications Carriers: Non-rural; Rural and CLEC. Not all RLECs receive OUSF support Per line, per month support amount

6. Who Receives, cont. Support amount varies from pretty moderate to pretty high on a per line basis Support is calculated according to OPUC rule and is designed specifically to avoid any windfall.

7. OUSF Basics OUSF Support is to be used to: Provide single party, voice grade service that provides access to long distance, TRS, directory assistance, 9-1-1, etc. Does not include call waiting, caller ID, high speed internet access. (OAR 860-032-0190)

8. UM 1481 Proceeding • Began over three years ago at OPUC Staff request. • Workshops to discuss if OUSF was doing what it was supposed to do. • Broken into different phases to discuss different issues.

9. UM 1481 cont. In 2012 parties agreed to investigate the following issues: what changes should be made related to calculation, collection and distribution what changes should be made related to how funds are used what changes should be made related to transparency and accountability

10. UM 1481 cont. In early 2013 the parties agreed to stop the madness. Sort of. Interested parties agreed to the following stipulation: OUSF Support to Decrease Over Staggered 3-Year Terms.

11. UM 1481 cont. Non Rural (CTL, FTR) Non-Rural Companies' Support to Decline on a Specific Phase-Down Schedule Frontier Northwest: reduced from 9.8 to 7.0 million. CenturyLink: reduced from 13.2 to 10.5 million. Total Reduction: 5.5 million

12. UM 1481 cont. The rural telecommunications companies agreed to a one time, one million dollar reduction. The 3-year period for Rural Companies begins on July 1, 2013. Rural Companies will see a single-funding step decrease taking effect on July 1, 2015 and ending June 30, 2016, subject to the normal two-month OUSF lag.

13. The Editorial Portion of the PowerPoint Who will this impact? Rural: Helix, Monroe, Scio, etc. Non Rural: Nyssa, Veneta, Oakridge, etc. Coquille, Enterprise, Amity, etc.

14. CLEC ETCs • Any CLEC ETC will receive the ILEC support amount in its service area • Warm Springs Telecommunications support capped at 1.5 million.

15. UM 1481 yes, there is more Current Phase: non rural accountability and transparency Next Phase: Consideration of a methodology to allocate Incumbent Local Exchange Carriers (ILEC) network costs between basic telephone and other services, including a review of the cost models used to calculate OUSF support. Apply the methodology to the support calculation for all companies receiving OUSF support.

16. UM 1481 still more Final Phase: Consideration of a methodology, applicable to all current OUSF recipients, for identifying areas of unsubsidized competition and determine if OUSF support should continue to be provided there.