Overview of the Kansas Universal Service Fund...Jul 17, 2019 · Sandy Reams. Before the Statewide...

Overview of the KansasUniversal Service Fund

Sandy ReamsBefore the Statewide Broadband Task Force, Subcommittee 3July 17, 2019

Universal Service

Both the Kansas Telecommunications Act of1996 and the Federal Telecommunications Actof 1996 contain provisions to develop universalservice funds to maintain and enhance universalservice.• Federal Universal Service Fund (FUSF) supports

voice and broadband (12/2016).• Kansas Universal Service Fund (KUSF) supports

voice only.

Kansas Corporation Commission

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Kansas Universal Service Fund– KUSF was created by the KCC and implemented March 1, 1997, as

required by K.S.A. 66-2008. – Purpose of the KUSF is to assure quality services are made available

to all Kansans at affordable rates. – Pursuant to K.S.A. 66-2008(a), every telecommunications carrier,

telecommunications public utility, wireless telecommunications service provider and interconnected Voice over Internet Protocol (VoIP) provider that provides intrastate telecommunications services must contribute to the KUSF. The assessment may be passed through to customers, but carriers are not required to do so. Any contributions in excess of distributions collected in any reporting year shall be applied to reduce the estimated contribution that would otherwise be necessary for the following year.

– Current KUSF assessment rate is 6.88% on intrastate telecommunications revenues (March 2019 – Feb. 2020).

– The legislature did not establish an “end date” for the KUSF.


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KUSF Assessment Rate


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0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%9.00%

6.83%

7.63%

4.92% 4.85%

3.70%

4.99% 4.87%4.32%

6.07%

4.35% 4.65%5.03%

6.06% 6.18% 6.13% 6.42%6.05%

6.47% 6.53%7.25% 7.50%

6.88%

Asse

ssm

ent R

ate

KUSF Fiscal Year

History of KUSF Assessment Rate

Assessment Rates – Federal USF Assessment Rate – 24.4% (3rd Quarter) – KUSF Assessment Rate – 6.88% of net retail revenue– States with similar USF rates:

• Nebraska - 6.95% for business, residential $1.75 per connection• New Mexico - $1.24 per residential & business connection• Oklahoma – 6.28% of total intrastate retail revenue (7/1/2019) • Oregon - 8.50% of gross retail revenue


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KUSF Fund Size


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Additional information available at: http://kcc.ks.gov/telecom/kusfhistory.pdf

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

KUSF

Fun

d Si

ze

KUSF Fiscal Year

History of Fund Size

http://kcc.ks.gov/telecom/kusfhistory.pdf

Kansas Universal Service Fund

The KUSF has funded five programs, which are:

• High-Cost• Lifeline (low income)• Telecommunications Relay Service• Telecommunications Access Program

(TAP)• Kan-Ed (No Longer Funded)


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http://www.fcc.gov/wcb/tapd/universal_service/highcost.html

http://www.fcc.gov/encyclopedia/lifeline-program-low-income-consumers

http://www.fcc.gov/wcb/tapd/universal_service/schoolsandlibs.html

http://www.fcc.gov/wcb/tapd/universal_service/schoolsandlibs.html

http://www.fcc.gov/wcb/tapd/ruralhealth/welcome.html

Total KUSF Support by Program (March 1, 1997 – February 28, 2019)


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High-Cost KUSF, $1,024,022,216 , 86%

Lifeline, $32,852,945 , 3%

Kan-Ed, $90,750,000 , 7%

Relay Service, $32,015,820 , 3% TAP, $11,799,496 , 1%

High-Cost KUSF

Lifeline

Kan-Ed

Relay Service

TAP

Expected KUSF Expenditures for KUSF Fiscal Year 23


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High-Cost Support , $36,782,512, 95%

Telecommunications Relay Service , $446,675, 1%

Telecommunications Access Program (TAP), $272,738, 1%

Lifeline, $832,171, 2%

KUSF Administration and Audits, $520,792, 1%

March 1, 2019-February 28, 2020

High-Cost Support

Telecommunications Relay Service

Telecommunications AccessProgram (TAP)

Lifeline

KUSF Administration and Audits


High-Cost Support– Initial KUSF high-cost support amount available for

incumbent local exchange carriers (LECs) was equal to the revenue lost when access rates were reduced to match interstate rates, were implemented pursuant to state statute (K.S.A. 66-2005). (Access charges are payments made between carriers to complete calls.)

– While the initial amount of KUSF support was set to replace lost access revenues, on a revenue-neutral basis and not necessarily cost based, K.S.A. 66-2008(c) requires that the Commission periodically review the KUSF to determine if the cost to provide service justifies modification of support.


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High-Cost Support – Price Cap Carriers – Implementing a cost-based KUSF – Price Cap CarriersFCC determined that Federal USF support for price cap

carriers, such as AT&T & CenturyLink, should be based on the cost to provide service if the network were built using current technology rather than based on a company’s historical costs. The FCC developed a model to determine the forward looking costs of providing service and Federal USF support. The KCC followed suit and adopted a KUSF high-cost model

for AT&T & CenturyLink. Pursuant to HB 2201 (K.S.A. 66-2008(c)(5)), AT&T ceased

receiving KUSF support January 1, 2014.CenturyLink continues to receive model-based support.


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High-Cost Support – ROR Carriers– Cost-based KUSF – Rate of Return CarriersRate of Return (ROR) carriers’ support is based on each

company’s embedded (historical) costs (K.S.A. 66-2008(e)). ROR carriers’ support capped at $30 million (K.S.A. 66-

2008(e)(3)).Completed 55 ROR carrier audits, including 2nd and 3rd

audits of some carriers. Golden Belt Telephone filed a request for an increase of

approximately $2.6 million in its KUSF support on June 5, 2019. KCC Order due by Jan. 31, 2020). Full request = over $30 million cap.


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Kansas Universal Service FundROR Audit Overview

Timeline of audits• 240 day timeframe under which Commission makes its

determination• Based on a filed Procedural Schedule

Staff and consultants sponsor testimony over various topics

• Separations (Interstate vs. Intrastate)• Regulated and non-regulated allocations• Affiliate transactions• Rate base and income statement adjustments• Capital Structure, cost of long-term debt, and return on

equity


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• All KUSF Eligible Telecommunications Carriers (ETCs) are eligible to receive support from the KUSF. This includes 37 incumbent carriers and 8 competitive ETCs.

• Pursuant to the Identical Support Rule, the competitive ETCs received the same amount of per-line support as the incumbent local exchange carrier.

• Pursuant to HB 2201 (K.S.A. 66-2008(c)(4)):– the KCC capped all competitive ETC high-cost support and

discontinued the use of the identical support rule as of March 1, 2013; and

– Competitive ETC support was phased-out in annual equal increments over 5 years, beginning March 1, 2014. Competitive ETC support eliminated March 1, 2018.

14Kansas Corporation Commission


$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

Year3

Year4

Year5

Year6

Year7

Year8

Year9

Year10

Year11

Year12

Year13

Year14

Year15

Year16

Year17

Year18

Year19

Year20

Year21

Year22

Rate of ReturnCarriers

CompetitiveETCs

SouthwesternBell d/b/aAT&TUnited of KS-CenturyLink

KUSF High-Cost Support Received by Year

KUSF Fiscal Year (March – February)

Kansas Corporation Commission 15

Kansas Universal Service FundComplexities/Considerations

Interstate vs. Intrastate Recovery

Structure of Fund Funding level New audits of all ROR Carriers?CenturyLink’s support is currently model-based Funding mechanism for competitive ETCs?


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Thank you. Questions?

Sandy ReamsAsst. Chief of TelecommunicationsKansas Corporation Commission

1500 SW Arrowhead Rd.Topeka, KS 66614

[email protected]

Overview of the Kansas Universal Service Fund...Jul 17, 2019 · Sandy Reams. Before the Statewide...

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