Little-known telephone service charge to go up 700%

As published in the Austin American Statesman on 7/26/22 and written by: John C. Moritz

Telephone customers will see an increase in monthly bills beginning Aug. 1 because of a court order that state regulators fully fund a long-standing program that ensures Texans in hard-to-reach places have access to phone service, which under law is a public necessity.

The action by the Public Utility Commission raises what is probably a little-noticed line item called the Universal Service Fund on monthly phone bills that’s calculated at 3.3% of the cost for intrastate voice service to 24%. That’s about a 700% boost. The 3.3% charge for many single-line cellular customers was as low as about 30 cents a month. For them, the cost will rise to about $2 a month.

However, for some landline customers with high long-distance bills, the increase could be considerably more.

The increase, adopted unanimously with little discussion July 14, came after the Texas 3rd Court of Appeals the previous week ruled in favor of several telephone companies that sued the PUC on grounds that it had shortchanged them to the tune of more than $200 million in legally required subsidies to offset the high cost of bringing phone service to some of Texas’ most desolate outposts.
Without that service, millions of rural Texas might not have access to 911 in the event of an emergency and might be hard-pressed to managed farming and ranching businesses. But the PUC’s action is a mixed blessing, said Mark Seale, executive director of the Texas Telephone Association.
“I need to be real clear that we didn’t ask for this. We certainly didn’t ask for an almost 700% increase,” said Seale, whose organization was part of the lawsuit decided by the 3rd Court. “We initially advocated for a much lower assessment and a much longer payout.”

The companies brought the court action after the PUC in 2020 rejected a modest increase in the Universal Service Fund, which would have brought the levy to 6.4%. And in 2021, Gov. Greg Abbott vetoed a measure aimed at addressing the decline in USF collections as more phone customers opt to disconnect from landlines and use only cell service.
In his veto message, Abbott said he killed the legislation because it would “expand the number of people paying fees.”

However, Lee Watkins, the chief operating office for a satellite phone company that serves Texans in the Big Bend region who not only have access to landlines but also almost zero access to reliable cell service, said his company was on the verge of closing its doors until the commission acted. Last month, the company, Dial Tone Services, notified customers they would have to look else where for phone service and would probably have to pay much steeper bills.

“It’s a big relief for our customers,” said Watkins, who noted that many first responders in the Big Bend rely on satellite phones to communicate with one another and with Texans in need of immediate emergency service. “We anticipate being able to stay in business.”

At a hearing of the Texas Senate Business and Commerce Committee this month, several lawmakers said changes were needed for the Universal Service Fund, which was established in 1987 in Texas and dates back to a New Deal-era federal program that aimed to make sure rural Americans could be connected. Among the problems in Texas, parts of the state that were considered rural in the 1980s are now part of Texas’ burgeoning network of suburbs, committee members noted.

Meanwhile, Seale said, phone companies that are part of his association are expecting some blowback when their customers see an unexpected jump in their next phone bill.

“We are still open to talking to the PUC and (lawmakers) about a longer, more affordable increase in the assessment to address this over a period of years, not over a period of months,” Seale said. “And we are all bracing for the rate shock that our customers are going to have. They will call us to ask, ‘Why did this happen?’ ”