Regulatory Update January 2021

By: TTA Regulatory Committee

TTA Members Demonstrate Compliance with Texas High-Cost Rules

In response to discovery requests filed by the Public Utility Commission of Texas (Commission), TTA member companies filed tens of thousands of pages of information with the Commission in an effort to demonstrate that they are utilizing high-cost support in compliance with Texas law. As you may recall, during the July 30, 2020 open meeting, Chairman Walker expressed concern that TUSF high-cost support was being illegally misused to support broadband services and raised questions related to the recovery of costs associated with fiber deployment. This discussion led the Commission Staff to issue 55 questions to up to 79 providers, who are recipients of TUSF in Project No. 51433.

Within their filings, TTA members attempted to help the Commission better understand the complex regulatory accounting rules applicable to rate-of-return regulated providers. Member companies explained how, while there is a single, hybrid, network over which both voice and broadband Internet services are provided, there are long-standing regulatory accounting rules that ensure that TUSF is not utilized to subsidize broadband Internet services.

Based on publicly available data, TTA’s member companies operating under SB 586 reported having an average of 1.7 access lines per route mile of cable facilities and explained in their RFI responses how TUSF high-cost support assists in ensuring the availability of basic local telecommunications service to customers within high-cost rural areas of the state.

In response to questions from the Commission Staff alluding to an “imminent reduction in TUSF” support, many TTA member companies expressed concern that they had not received any information from the Commission related to any such reductions and asked a series of questions relating to the timing, severity, and duration of any imminent reductions. Without some details related to potential support reductions, TTA member companies indicated that they were unable to plan for how they will maintain and extend telecommunications services to customers, as required under the current Commission rules.

Responding to the Commission’s discovery was extremely time-consuming and expensive for TTA’s small-company members. However, it was a herculean effort on behalf of the industry and TTA appreciates its members’ efforts, as well as the tireless efforts of lawyers and consultants who worked on preparing these complex responses. While TTA’s members are committed to continuing transparency with the Commission, TTA is hopeful that these voluminous responses in Project No. 51433, as well as the wide-ranging company-specific data requests that all TTA members who opted into SB 586 have received, will assuage the Commission’s concerns and demonstrate that TTA’s members are utilizing TUSF high-cost support as intended by the Texas Legislature.

TUSF Funds Continue to Decline

As TTA and its members attempt to work with the Commission and its staff to explain the need for continued high-cost funding, particularly during the pandemic when children are attending school online and parents are working from home, the TUSF fund balance is dangerously low and it appears that reductions in high-cost funding are imminent. Public information from the last available quarter (ending August 31, 2020) indicates that the fund is losing approximately $25 million per quarter. With a fund balance of $51 million at the end of August 2020, it appears that reductions to support levels are likely to occur before the Texas Legislature has any reasonable opportunity to address TUSF. The following chart shows the decline in the TUSF balance since November 30, 2017:

Without ongoing support, it will be difficult for TTA’s members to meet their legal provider of last resort obligations, extending service to any new customers requesting service and maintaining adequate service to existing customers. While the Commission has the existing legal authority to address this crisis (it has previously adjusted the TUSF assessment rate at least seven times to ensure that it is able to meet statutory obligations), absent some change in direction, it appears that for the first time in history, the Commission will default on its obligations to fund TUSF at levels that it previously determined are appropriate and necessary.

Revised Intrastate Access Services Tariff

In Tariff Control No. 51363, TTA and other industry members jointly filed the new Texas Incumbent Local Exchange Carriers’ Intrastate Access Services Tariff in an effort to address concerns raised by the Commission’s Administrative Law Judge (ALJ). TTA originally filed its proposed intrastate access services tariff with the Commission in March of 2020 in Tariff Control No. 50667. Under normal circumstances, tariff revisions that have no impact on rates are administratively approved after the applicant works with the Commission’s tariff review staff to address any concerns. However, in this instance, the Commission ALJ raised concerns about an association’s ability to file a tariff on behalf of its members, despite the fact that telecommunications associations have filed, and the Commission has approved, tariffs for their members since at least 1993. The Commissioners addressed the proposed tariff in an Order on Certified Issues and determined that a tariff may not be issued in the name of a non-utility trade group, and that a utility must file its own tariff with the Commission.

In response to a new round of concerns from the Commission’s ALJ in Order No. 3, including concerns related to the fact that an association filed the tariff on behalf of individual companies. TTA worked with the rest of the industry and engaged a third party to retype hundreds of pages of the tariff in order to remove any association name from the legacy tariff pages. The new tariff is over a thousand pages long and was retyped at significant expense, though there is no practical impact on the access services or rates offered thereunder. TTA remains hopeful that the new tariff will address the ALJ’s concerns. Under the procedural schedule in the case, the deadline for intervention is set for January 6, 2021 and, if no party requests a hearing, parties have been ordered to submit a proposed order approving the generic tariff by January 20, 2020, nearly a year after this relatively simple process began.

If you have any comments or questions, please contact TTA.