The New Mexico Rural Universal Service Fund

1. The New Mexico Rural Universal Service Fund Michael Ripperger Telecom Bureau Chief New Mexico Public Regulation Commission April 16, 2019 NTTA Tribal Engineering and Broadband Summit

2. New Mexico Rural Universal Service Fund (NMRUSF) History • Originally established prior to 2000 to assist Incumbent Local Exchange Carriers (ILECs) based on need during a period of regulatory transition. • NMRUSF is a non-public Fund run by an administrator hired on contract by the NMPRC. Fund is currently administered by GVNW consulting. • Legislation in 2004 revised the NMRUSF and created access reduction support for New Mexico ILECs for lost revenues as a result of those carriersreducing intrastate access rates to interstate levels. • Commission revised the NMRUSF rule in 2005 to comply with new NMRUSF statutory requirements, including a mechanism for access reduction payments to carriers. Some carrier rate rebalancing to make up for lost revenues. • $24 million in access reduction support to eligible ILECs. Remained steady for approximately ten years. • Funded through a revenue-based surcharge on customers bills for all intrastate telecommunications revenues. Paid by customers of wireline, wireless, and VoIP providers. Increased from under 3% to 6.06% over ten years due to continued decrease in assessable intrastate access revenues.

3. History • Other forms of support added to demands of the NMRUSF. • Commission approved of $3.50 additional per-customer per-month support in addition to federal $9.25 Lifeline support to Eligible Telecommunications Carriers (ETCs) from the NMRUSF in 2010. • Commission approved of $1.4 million support based on need for Sacred Wind Communications in 2015. • Shortfalls in support payments to carriers for support based on need and access reduction support created additional obligations on the fund to pay back those shortfalls. Insufficient NMRUSF surcharge required pro-rata reduction in support for all programs except LITAP payments to carriers.

4. Recent Changes to the NMRUSF • Passage of SB 308 in 2017 changed the purpose of the NMRUSF, and how it may be administered. • Allowed for use of the fund for broadband. • Mandated that at least 60% of access reduction and need based support must be used for deployment and maintenance of broadband facilities. • Established a minimum $5 million per-year Broadband Program to fund broadband deployment in rural areas. • Allowed for the NMRUSF to be funded through either a revenue based or per-connection based surcharge. • Changed the manner by which ILECs were paid access reduction support from a minutes-of-use based support to support based on access lines. Reduction in access lines equals less support. • Established a $30 Million per-year cap on the NMRUSF.

5. Current Demands on the NMRUSF • Commission changed to a per-connection surcharge late 2018; $1.17 per connection for wireline, wireless, and VoIP connections. Stabilizes revenue stream. Case No. 18-00202-UT. • Case No. 18-00252-UT changed surcharge to $1.24 per month to fund projected yearly demand on the fund of $29,211,663.36. Broken down by category is: • Access reduction support - $18,843,564 • Need-based support - $1,400,000 (expires Dec. 2020) • LITAP - $480,000 • Broadband Program - $5,000,000 • Broadband Deficit Recovery - $1,462,957 • True-ups (60 months) - $1,819,802 • Admin Fees - $130,340 • Legal Fees - $50,000

6. NMRUSF Broadband Program • 2018 first year of implementation for project deployment beginning in 2019. • Requirements found in NMAC 17.11.10.31 Broadband Program. • Like other NMRUSF programs, by statute a carrier must be an Eligible Telecommunications Carrier (ETC) to be eligible to access the fund. ETC designation must be granted through a proceeding a the NMPRC. • Broadband applications due between May 1 and June 1 every year. • Three month review period by Staff, report made to the Commission by September 1. Commission selects projects for award by October 1. One month protest period. Commission issues any modifications to its October 1 order by December 1. • There were a total of 26 proposed projects from four applicants – CenturyLink, Windstream, Smith Bagley, and Eastern New Mexico Rural Telephone Cooperative. The projected cost of the 26 proposed projects was $8,192,963.1.

7. NMRUSF Broadband Program • Since the commission provides a 75% match to 25% of carrier funding toward project costs, the total amount of monies requested from the Broadband Program was therefore $6,070,834. The applicants combined offered to contribute matching funds in a total amount of $2,122,630. • In 2018, NMPRC awarded $5,000,000 in support to the four ETC applicants for 24 individual broadband projects. Each of the applicants receive funding for some or all of their requested projects. • Projects are to be completed over a three year time span. The Commission issues 1/3rd of the award up front, 1/3rd at mid-point of project, and 1/3rd at completion. • Reporting requirements on project deployment at mid-point and completion of project to qualify for mid-point and final funding.

8. Looking Forward and Challenges • Commission accepting applications for NMRUSF Broadband Program for 2019. Applications due May 1 to June 1. • 2019 demand on the NMRUSF of $29,211,663.36 close to statutory cap of $30 million. • Other requests for funding – TracFone and Virgin Mobile request to receive LITAP funding. Case Nos. 17-00031-UT and 18-00159-UT. Will there be other unanticipated requests for funding? Additional requests for funding may be substantial. • NMRUSF per-connection funding methodology new; stable for now, but more work may need to be done by the Commission further define how providers pay the per-connection fee. • Report from the NMPRC due to the legislature December 2019 discussing how the NMRUSF is operating, and if the $30 million cap needs adjustment.

9. Close • Questions? Michael Ripperger Telecom Bureau Chief New Mexico Public Regulation Commission Mike.ripperger@state.nm.us 505-827-6902