NOTICES
Order
[39 Pa.B. 4992]
[Saturday, August 15, 2009]Public Meeting held
July 23, 2009Commissioners Present: James H. Cawley, Chairperson; Tyrone J. Christy, Vice Chairperson; Kim Pizzingrilli; Wayne E. Gardner; Robert F. Powelson
Investigation Regarding Intrastate Access Charges and IntraLATA Toll Rates of Rural Carriers and The Pennsylvania Universal Service Fund;
Doc. No. I-00040105
Order By the Commission:
Presently before this Commission for consideration is the Joint Motion of The Pennsylvania Telephone Association1 (PTA), Office of Consumer Advocate (OCA), and The United Telephone Company of Pennsylvania, d/b/a Embarq Pennsylvania (''Embarq PA''), (collectively ''Joint Movants''). The Joint Motion concerns the PTA/OCA/Embarq PA's request that the Commission grant a further stay of the above-captioned investigation at I-00040105. Several parties support the Joint Motion and other parties object to a further stay of the investigation.
By Order entered April 24, 2008, the stayed investigation was opened for the limited purpose of addressing the $18.00 cap on R-1 benchmark/caps and any equivalent B-1 benchmark/cap. This limited investigation is intended to determine whether there is a need to increase the rate caps and/or funding for the Pennsylvania Universal Service Fund (''PaUSF'') in order to accommodate the revenue increases authorized for rural ILECs that are now resulting in increased local service rates beyond benchmark rate caps. If it is determined that the $18.00 cap should be increased, the investigation should also determine whether the size of the fund should be increased, decreased or remain the same. Further, the current investigation is examining whether a needs based test should be used to determine whether rural ILECs qualify for PaUSF funding. On July 23, 2009, Administrative Law Judge Susan D. Colwell issued a Recommended Decision regarding the limited investigation.
Procedural History
Intrastate Access Charge Investigation Procedural History
Our Global Order2 of September 30, 1999 reduced access charges of all local incumbent exchange carriers operating in Pennsylvania. That order established the PaUSF to enable the rural ILECs and Sprint/United3 to reduce access charges and intraLATA toll rates while, at the same time, ensuring that residential basic local service rates did not exceed the designated price cap of $16.00 per month. The Global Order also called for an investigation to be initiated in January 2001 to further refine a solution to the question of how the carrier charge (CC) pool could be reduced and to consider the appropriateness of a toll line charge to recover any resulting revenue reductions.
On July 15, 2003, at Docket Nos. M-00021596, P-00991648, P-00991649, M-00031694, M-00031694C0001, and P-00930715, this Commission entered an order granting a Joint Procedural Stipulation filed on June 5, 2003, by the RTCC, Sprint/United, OTS, OCA, OSBA, AT&T Communications of Pennsylvania, Inc., Verizon and MCI WorldCom Network Services, Inc. The July 15, 2003 order further reduced intrastate access charges for the rural telephone companies operating within the Commonwealth and increased the cap on basic residential local service rates from $16.00 to $18.00 per month. The size of the PaUSF was not changed. No regulations were promulgated to alter the regulations4 governing the PaUSF or to terminate the fund. The PaUSF continues until a further rulemaking is completed.
On December 20, 2004, the Commission entered an order in the above-captioned case instituting an investigation into whether there should be further intrastate access charge reductions and intraLATA toll rate reductions in the service territories of rural incumbent local exchange carriers. This investigation was instituted as a result of the Commission's prior order of July 15, 2003, which discussed implementing continuing access charge reform in Pennsylvania. The July 15, 2003, order also provided that a rulemaking proceeding would be initiated no later than December 31, 2004, to address possible modifications to the PaUSF regulations and the simultaneous institution of a proceeding to address all resulting rate issues should disbursements from the PaUSF be reduced in the future.
The December 20, 2004, order directed the Office of Administrative Law Judge (OALJ) to conduct the appropriate proceedings including, but not limited to, a fully developed analysis and recommendation on the following questions:
a) Whether intrastate access charges and intraLATA toll rates should be further reduced or rate structures modified in the rural ILECs' territories.b) What rates are influenced by contributors to and/or disbursements from the PaUSF?c) Should disbursements from the PaUSF be reduced and/or eliminated as a matter of policy and/or law?d) Assuming the PaUSF expires on or about December 31, 2006, what action should the Commission take to advance the policies of this Commonwealth?e) If the PaUSF continues beyond December 31, 2006, should wireless carriers be included in the definition of contributors to the Fund? If included, how will the Commission know which wireless carriers to assess? Will the Commission need to require wireless carriers to register with the Commission? What would a wireless carrier's contribution be based upon? Do wireless companies split their revenue bases by intrastate, and if not, will this be a problem?f) What regulatory changes are necessary to 52 Pa. Code §§ 63.161--63.171 given the complex issues involved as well as recent legislative developments?Following the institution of this investigation, the Federal Communications Commission (FCC), on March 3, 2005, entered a further order addressing its intercarrier compensation proceeding at CC Docket No. 01-92 (FNPRM). The FCC is comprehensively examining the intercarrier compensation regime including interstate and intrastate access, reciprocal compensation and universal service. The FCC stated that one of the main reasons reform is needed is because the current intercarrier compensation system is based on jurisdictional and regulatory distinctions that are no longer linked to technological or economic differences. FNPRM at par. 15. The FCC also established goals for intercarrier compensation reform including the preservation of universal service and the promotion of economic efficiency (FNPRM at par. 33).
By order entered August 30, 2005, this Commission stayed the instant investigation for a period not to exceed 12 months unless extended by Commission order, or until the FCC issued its ruling in its Unified Intercarrier Compensation proceeding. We further ordered that upon the expiration of the 12-month stay of the investigation or the issuance of a FCC ruling in the Unified Intercarrier Compensation proceeding, whichever occurred earlier, the parties to the proceeding should submit status reports to the Commission pertaining to common or related matters in the instant investigation and the FCC's Unified Intercarrier Compensation proceeding and the need for any coordination of those matters or any new matters that may arise once the instant investigation is reinstituted. We also stated that we would entertain future requests for further stays of this investigation for good cause shown and for the purpose of coordinating this Commission's action with the FCC's ruling in its Unified Intercarrier Compensation proceeding. Our order stated that upon receipt of the status reports, Commission Staff should prepare a recommendation regarding the reinstitution of this investigation and taking of any other appropriate action.
In July, 2006, the so-called Missoula Plan5 was submitted to the FCC. Generally, the Missoula Plan sought to unify intercarrier charges for all traffic over a 4-year time period, reduce intercarrier compensation rates, provide an ability to recover those reduced rates through explicit means, move rates for all traffic closer together, and establish uniform default interconnection rules. By notice issued July 25, 2006, the FCC requested parties submit comments on the Missoula Plan by September 25, 2006, and reply comments by November 9, 2006.
On August 17, 2006, this Commission adopted a motion of Vice Chairman James H. Cawley convening a workshop and facilitated discussion of interested participants, to facilitate the development of comments to the FCC. The workshop was conducted and Commission comments were submitted to the FCC on October 25, 2006. The Missoula Plan and other intercarrier compensation reform proposals are currently pending before the FCC for consideration. This FCC proceeding continues to have significant potential to directly impact the issues in the instant proceeding.
On or about August 30, 2006, status reports were submitted to the Commission by the RTCC, OTS, OCA, Embarq,6 Verizon, Sprint/Nextel Corp.,7 the Wireless Carriers, and Qwest Communications. Additionally, the RTCC, OTS, OCA and Embarq filed a Joint Motion for further stay of investigation to which the other parties filed status reports in objection. That Joint Motion was granted by order dated November 15, 2006, which again stayed the investigation pending the outcome of the FCC's Unified Intercarrier Compensation proceeding at CC Docket No. 01-92, or until November 15, 2007, whichever was earlier. The order further directed that upon expiration of the 12-month stay, the parties should again submit status reports to the Commission pertaining to common or related matters in the investigation and the FCC's proceeding and the need for any coordination of those matters or any new matters that may arise once the Investigation is reinstituted. Ordering Paragraph No. 4. Status reports were due 30 days prior to the expiration of the 12-month stay or 30 days following the FCC decision, whichever occurred earlier. The Commission granted the stay but allowed for a limited investigation into the rate caps on residential and business rates, as well as the PaUSF. A recommended decision regarding the limited investigation is expected on July 27, 2009, by ALJ Susan Colwell.
The FCC has not made a decision to date regarding its intercarrier compensation proceeding. On March 25, 2009, PTA, OCA, and Embarq PA filed a Joint Motion for further stay of our investigation. Verizon, Sprint, Qwest, and AT&T filed Answers to the Motion. Said motion for a fourth stay is ripe for a decision.
Background of the PaUSF from the Global Order
We established the PaUSF through our Global Order wherein we stated:The USF is a means to reduce access and toll rates for the ultimate benefit of the end-user and to encourage greater toll competition, while enabling carriers to continue to preserve the affordability of local service rates. Although it is referred to as a fund, it is actually a pass-through mechanism to facilitate the transition from a monopoly environment to a competitive environment--an exchange of revenue between telephone companies which attempts to equalize the revenue deficits occasioned by mandated decreases in their toll and access charges.Global Order, page 142.The establishment of the PaUSF was carried out on a revenue-neutral basis and included the rebalancing of intrastate access charges, toll rates, and local rates by the rural local exchange carriers. The PaUSF was a modified version of a settlement plan submitted by the RTCC and Bell Atlantic-Pennsylvania, Inc. (Bell is now Verizon-PA).
The components of the PaUSF, from the standpoint of the RTCC members, are briefly summarized below:
1. All small incumbent local exchange carriers, which included all ILECs other than Bell and GTE North (GTE North is now Verizon-North), were directed to be recipients of the PaUSF. The PaUSF was established for the purpose of the rate rebalancing needs of the rural local exchange carriers including reductions in their intrastate access and toll rates. All Pennsylvania telecommunications service providers (excluding wireless carriers) were directed to contribute to the PaUSF based upon their intrastate end-user revenues.
2. The RTCC members were permitted to restructure, modify and reduce their access, toll and local rates, as follows:
a) Intrastate traffic sensitive switched access rates and structure (including local transport restructure) were converted to mirror interstate switched access rates and structure in effect on July 1, 1998.b) The Common Carrier Line Charge (''CCLC'') was restructured as a flat-rate Carrier Charge (''CC'') and reduced to an intrastate rate not exceeding $7.00 per line and allocated to intrastate toll providers based on their relative minutes of use.c) The RTCC members were given the opportunity to reduce their intrastate toll rates to an average rate not lower than $.09 per minute.d) The RTCC members with low local exchange rates were permitted to increase their residential one-party basic, local rates to an average monthly charge of at least $10.83, to the extent necessary to offset the reduced toll rates.e) Those RTCC members with an average monthly R-1 rate above $16.00 (inclusive of touch-tone) were directed to provide their customers with a Universal Service credit to effectively reduce the rate to $16.00 with the difference coming out of the PaUSF.See Global Order at pp. 151-152. Sprint/United (now known as Embarq PA) was not an original participant in the RTCC plan in the Global proceeding, but after pleading its inclusion in the PaUSF at the Global Order hearings, the Commission ordered that Sprint/United be included as a recipient carrier and in exchange for access charge reductions, it be allowed to draw $9,000,000 from the PaUSF annually.
We also stated in our Global Order:[W]e shall initiate an investigation on or about January 2, 2001, to further refine a solution to the question of how the Carrier Charge (CC) pool can be reduced. At its conclusion, but no later than December 31, 2001, the pool will be reduced. In addition, we shall consider the appropriateness of a Toll Line Charge (TLC)[or an intrastate Subscriber Line Charge] to recover any resulting reductions.Global Order at 60.
Further Access Charge/Federal USF Reform History
In addition to the Commission's competitive undertakings on the intrastate side, the FCC instituted numerous proceedings aimed at further addressing an orderly transition from monopoly to a more competitive environment.
Pursuant to TA-96, the FCC undertook reform of both interstate access charges and federal universal service support mechanisms. Beginning in 1997, the FCC adopted several measures to move interstate access charges for price cap carriers toward lower, cost-based levels by revising the recovery of loop and other non-traffic sensitive costs from per-minute charges to flat per line charges thereby aligning rates more closely with the way the costs are incurred.
For example, in order to phase out interstate carrier common line (''CCL'') charges, the per-minute charges assessed on interexchange (''IXC'') carriers through which ILECs recover their residual non-traffic sensitive interstate loop costs that are not recovered through their capped federal subscriber line charges (''SLCs''), the FCC created the presubscribed interexchange carrier charge (''PICC''), a flat, per line monthly charge imposed on IXCs. The FCC also shifted the non-traffic sensitive costs of the line ports from per-minute local switching charges to the common line category and established a mechanism to phase out the per-minute transport interconnection charge (TIC). The FCC held that more rate structure modifications would be required to create a system that accurately reflects the true cost of service in all respects.
In its Interstate Access Support Order8 the FCC continued the process of access charge and universal service reform for price cap local exchange carriers. That order prescribed a more straightforward, and purportedly economically rational, common line rate structure by increasing the caps on the SLC, a flat monthly charge assessed directly on end-users to recover interstate loop costs, and phasing out the PICC, which the FCC viewed as economically inefficient due to the indirect flow of loop costs to end-users through IXCs. The FCC also revisited the controversial ''X-factor,'' in the federal price cap mechanism changing its function from a productivity offset to a tool for reducing per-minute access charges to target levels proposed by parties participating before the federal agency.
The FCC also established a new interstate access support mechanism, capped at $650 million annually, to replace what the FCC deemed implicit support included in the interstate access charges of price cap carriers, finding $650 million to be a reasonable amount that would provide sufficient, but not excessive, support. In this regard, the FCC observed that a range of funding levels might be deemed ''sufficient'' for purposes of TA-96, and that ''identifying an amount of implicit support in our interstate access charge system to make explicit is an imprecise exercise.''9
In recognition of the need for a more comprehensive review of the issues of access charge and universal service reform for the remaining 1,300 or so rural local exchange carriers serving less than 2% of the nation's access lines, the FCC placed such reforms for the nonprice cap carriers on a separate track. As documented in a series of white papers prepared by the Rural Task Force, an ad hoc stakeholder group constituted by the FCC to study the differences between the provision of telecommunications services in rural and non-rural areas, rural carriers generally have higher operating and facilities costs due to lower subscriber population density, smaller exchanges and limited economies of scale.10 Significantly, rural carriers rely more heavily on revenues from access charges and universal service support in order to provide ubiquitous and affordable local service. On May 23, 2001, the FCC released its Fourteenth Report and Order and Twenty-Second Order on Reconsideration, and Further Notice of Proposed Rulemaking, Multi-Association Group (MAG) Plan for Regulation of Interstate Services of Non-Price Cap Incumbent Local Exchange Carriers and Interexchange Carriers, CC Docket No. 00-256, Report and Order, 16 FCC RCD 11244 (released May 23, 2001) (''Rural Task Force Order'').
The Rural Task Force Order changed the manner in which rural interstate universal service support is currently calculated and applied. Among other things, the Rural Task Force Order endorsed use of a modified embedded cost mechanism for rural carriers, as opposed to a forward-looking cost mechanism required for price cap carriers, to determine rural carrier support, and included implementation of a rural growth factor (the sum of annual line growth and a general inflation factor) and a ''safety net'' additive and ''safety valve'' to provide support for new investment and growth above stated thresholds. While created as an interim plan, the FCC also made clear its intention to develop ''a long-term plan that better targets support to carriers serving high-cost areas, while at the same time recognizing the significant differences among rural carriers, and between rural and non-rural carriers.''11
The FCC also took major steps in beginning to reform interstate high-cost support, interstate access charges and universal service support systems for non-rural carriers through a series of reports and orders in the matter of Federal-State Joint Board on Universal Service, CC Docket No. 96-45 and the Interstate Access Support Order, and the interstate high-cost support for rural carriers through the Rural Task Force Order, the FCC began to address the matter of interstate access charge and universal service support reforms for the rural carriers. On November 8, 2001, the FCC issued its Second Report and Order at CC Docket Nos. 01-304, 00-256 (MAG Plan), 96-45 (USF), 98-77 (Access Charge Reform) and 98-166 (Authorized ROR), in what is referred to as the MAG Order. In the MAG Order, the FCC stated its intent to align the interstate access rate structure with a lower, more cost-based level, remove what the FCC deemed to be implicit support for universal service and replace it with explicit, portable and competitively neutral support. Specifically, the MAG Order lowered interstate access charges from approximately $0.046 per minute to possibly as low as $0.022 per minute, increased the interstate SLC over a period of time, and phased out the CCL by July 1, 2003, replacing it with a portable interstate common line support (''ICLS'') universal service mechanism. In addition, SLC caps were increased effective January 1, 2002, raising monthly per line SLC rates from a range of $3.50--$5.00 for residence and single line business to a range of $6.00--$6.50. These interstate changes have resulted in significant increases to most Pennsylvania consumers, which are in addition to the intrastate increases in local service rates under Pennsylvania's intrastate access charge reforms and the rate effects of Chapter 30.
On March 12, 2009, the House Subcommittee on Communications, Technology and the Internet held hearings on a bill to reform the Federal Universal Service Fund (''USF''). Called the Universal Service Reform Act of 2007, the bill proposed to cap the growth of the Federal USF, in part, by limiting the number of eligible carriers and also by compensating them based upon their actual costs. This proposed legislation also sought to allow disbursements to be used for broadband deployment. Chairman Boucher has indicated he is in the process of revising the legislation.
On November 5, 2008, at CC Docket No. 01-92, the FCC issued a pending Intercarrier Compensation Notice of Proposed Rulemaking (''ICC NOPR'') which considers a radical restructuring of the intercarrier compensation system and federal USF as proposed by former FCC Chairman Martin. The plan includes the concept of subjecting all traffic to a new reciprocal compensation methodology designed to drive down interstate and intrastate access rates and to be implemented by state regulators. The plan further proposes to raise the cap on the national subscriber line charge up to $8.00--$8.50 per month from the current $6.50 level. Chairman Martin's draft was released at CC Docket No. 01-92 as a Notice of Proposed Rulemaking and appeared in the Federal Register on November 10, 2008.
There are also pending state matters before this Commission. In January 2007, this Commission entered an order staying a pending investigation involving the Verizon companies pending the outcome of the FCC's Intercarrier Compensation proceeding or for a period of one year until January 8, 2008, whichever is less. The Commission granted Verizon a further one-year stay by order entered September 11, 2008.
Currently, pending before the Commonwealth Court are two appeals that could affect the PaUSF.12 Briefs have been filed and the parties are awaiting the scheduling of oral argument.
Finally, there exist 96 complaints requesting further intrastate access charge reductions pending before the Commission In re: AT&T Communications of Pennsylvania, LLC v. Armstrong Telephone Company--Pennsylvania, et al.; Docket No. C-2009-2098380, et al.; TCG New Jersey, Inc. v. Armstrong Telephone Company--Pennsylvania, et al.; Docket No. C-2009-2099805, et al.; and TCG Pittsburgh, Inc. v. Armstrong Telephone Company--Pennsylvania, et al., Docket No. C-2009-2098735, et al. On June 26, 2009, the Pennsylvania Telephone Association (PTA) and Embarq PA submitted a Petition Requesting Interlocutory Review and Answer to Material Questions to this Commission regarding issues arising from these complaints. These material questions for review includes question of whether the ALJ erred in denying the Preliminary Objections filed by the PTA and Embarq PA seeking to dismiss the complaints and whether the Commission should grant the Motion for Stay or Consolidation seeking to stay or consolidate AT&T's complaint with the pending PUC investigation at Docket No. I-00040105. These material questions are being addressed in a separate Commission Order.
Discussion
In the instant proceeding, the Joint Movants request that the Commission issue an order staying the above-captioned investigation for at least one year after the Commission enters an order acting on this Joint Motion, or until the FCC rules on its Unified Intercarrier Compensation proceeding at CC Docket No. 01-92, whichever is earlier. This would be the fourth such 12-month stay. The parties in opposition to the Joint Motion request the Commission resume a full investigation of all issues.
The Joint Movants claim that because the FCC's Unified Intercarrier Compensation proceeding at CC Docket No. 01-92 and pending federal legislation may substantially alter the law governing intrastate universal service programs, these continuing federal administrative and legislative activities present a ''moving target'' of uncertain result with respect to the parameters and outcomes of any further investigation undertaken in this docket at this time. Joint Movants argue that the federal proposals and the pending state level litigation could have a significant impact on rural access reform. The federal proposals cover both interstate and intrastate access charge reform and affect both the federal and Pennsylvania USFs. Accordingly, Joint Movants claim it would be unreasonable, unproductive and impractical for this Commission to act further on rural access reform in advance of the FCC. Therefore, a further stay of the full-blown access charge investigation regarding the lowering of intrastate access charges is warranted.
Verizon13 responded to the Joint Motion on April 17, 2009, opposing continuation of a stay of the investigation. Instead, Verizon requested the Commission act to reduce the gap between the highest rural local exchange carrier's access rates and the rates Verizon and other carriers are permitted to charge for the same services. Verizon requests the Commission require the rural ILECs to make substantial progress towards reducing their access rates and to disclose their intrastate switched access rate elements and average rate per minute of use for the years 2006 and 2007. Verizon claims that it charges on average about $0.017 per minute for intrastate switched access service in Pennsylvania, a rate below the national average, while most of the rural ILECs' switched access rates average over $0.04 per minute, and some are as high as $0.09 or $0.11 per minute.
Verizon contends that consumers in the RLECs' territories suffer as their choices of competitive providers are limited. Additionally, Verizon claims its customers suffer because Verizon has to pay high intrastate access charges to support the RLECs, and this money could be used to provide better and less expensive services and products to its own customers.
Verizon contends that the limited investigation has shown that the RLECs are not little ''Mom and Pop'' companies. In fact, a number of RLECs are affiliated with large, sophisticated national carriers yet they still charge high access rates. Verizon contends Frontier/Commonwealth averages among the highest of the RLECs at over $0.07 per minute for intrastate switched access, Embarq charges almost $0.05 per minute, and Windstream, Consolidated/North Pittsburgh and the D&E Companies charge around $0.04 per minute. Verizon avers that if the rural ILEC rates were lower and the disparity between their rates and those of other carriers were reduced, then the balance might tilt in favor of waiting for the FCC to decide its intercarrier compensation regime. However, Verizon argues the Commission should uphold its duty to investigate the intrastate access rates, regardless of any pending action at the FCC. Verizon admits that it would be good for a state to coordinate its requirements with the federal government's, but because there is no imminent FCC action in intercarrier compensation, there is no basis to postpone the proceeding and delay further access charge reductions.
Verizon points to Virginia as a state moving forward with access charge reform for Embarq as a result of a Sprint petition. Other access charge reform is being considered in Kentucky, Washington, and Kansas. Therefore, Verizon contends that Pennsylvania ought to be reconsidering its access charge reform.
AT&T Communications of Pennsylvania, LLC (''AT&T'') filed an Answer on April 17, 2009, requesting the Commission resume this proceeding with the objective of removing implicit subsidies by reducing intrastate access rates to appropriate levels and rebalancing reduced ILEC revenues through increases to retail rates and a state universal service funding mechanism that would result in more economically rational prices for all rural incumbent local exchange carriers (''rural ILECs'') services.
Primarily, AT&T argues it has been 4 years since access charge reform in Pennsylvania, and it is time for Pennsylvania to fulfill its promise to complete the access charge investigation and decide three issues. AT&T requests the Commission decide whether the RLECs' intrastate access charges should be reduced to mirror the interstate access charges.
AT&T claims that the rural carriers in Pennsylvania are not so rural or small in that more than a million of the 1.1 million lines served by the Rural ILECs are provided by just five companies, all large national carriers which, with one exception, are headquartered outside of Pennsylvania. Embarq recently merged with Century Tel to form an even larger national carrier, headquartered in Louisiana. Embarq serves approximately 300,000 lines as does Frontier. Windstream serves nearly 200,000, and the D&E Companies serve more than 100,000. The fifth largest carrier, North Pittsburgh, part of Consolidated Communications based in Mattoon, Illinois, serves some 50,000 lines in Pittsburgh's suburbs.
AT&T asserts these 5 largest national carriers should be the central focus of the Commission's access reform effort. Of the 19 other RLECs, none serve more than 12,000 lines and collectively, they serve fewer than 100,000 lines.
AT&T avers that the Commission should resume the proceeding and remove implicit subsidies by reducing intrastate access charges to appropriate levels and rebalance revenues through increases to retail rates and the PaUSF. AT&T believes the more states that engage in intrastate access reform, the less likely it will be that the FCC would take any action that could be construed as punitive towards those states. AT&T encourages this Commission to join West Virginia, Virginia, and New Jersey who have recently opened full intrastate access charge investigations. AT&T does not believe the FCC or the federal government will act quickly with regard to intercarrier compensation and intrastate access charges ''given the laser focus on the nation's economic woes.'' AT&T Answer p. 9.
Qwest Communications Corporation (''Qwest'') filed a status report on March 25, 2009, requesting the Commission reinstitute its investigation of rural intrastate access charges because it is unlikely the federal government will issue a ruling soon on intercarrier compensation. Qwest argues that ''traffic pumping'' of IXC traffic to rural carriers with high access charges is occurring by third parties. The profitable access charge revenues are then being shared by the rural carrier and the third party. Qwest argues this is a nationwide problem.
Sprint Communications Company, L.P., Sprint Spectrum, L.P., Nextel Communications of the Mid-Atlantic, Inc. and NPCR, Inc., (collectively ''Sprint'') submitted an Answer to the Joint Motion requesting the Commission resume the investigation because no federal action directly impacting rural local exchange company intrastate access charges is imminent and further delay prevents the Commission from making progress on the important access charge and universal service issues we identified as the focus of this investigation in December, 2004. Sprint asserts that unless the Commission loses or cedes its jurisdiction over intrastate traffic, neither of which Sprint sees as a likely outcome of the Unified Intercarrier Compensation proceeding, action by the Commission will be required to effectuate any solution to Pennsylvania's inflated access rates announced by the FCC. Therefore, Sprint urges this Commission to deny the Joint Motion on the grounds that intrastate access reform, particularly for the rural carriers, is urgently needed.
Resolution
The Commission has repeatedly stayed the examination of the intrastate carrier access charges of rural incumbent local exchange carriers (RLECs) in the context of its Intrastate Access Charge Investigation for valid reasons.14 These reasons were partially based on the parallel initiatives of the FCC on intercarrier compensation reform at the national level, and their potential interaction with intrastate carrier access charges and basic telephone service retail rates under Chapter 30 of the Public Utility Code.15 With its April 24, 2008 Order in the Intrastate Access Charge Investigation the Commission directed the limited reopening of that proceeding and referred the examination of certain issues to the Office of Administrative Law Judge (OALJ).16
During the intervening time frame, we have not seen any substantial resolution of intercarrier compensation issues by the FCC on the national level. The latest FCC proposals on national intercarrier compensation and federal universal service fund (USF) reform were put forward in November 2008.17 However, the FCC still must take substantive action, and it is unclear whether the FCC will appropriately prioritize the area of intercarrier compensation and federal USF reform for ultimate resolution any time soon.
This Commission, unlike what has occurred in many other states, has proceeded with numerous intrastate carrier access charge reforms and the institution of a Pennsylvania-specific USF. However, ongoing proceedings both before the Commission and the Pennsylvania Commonwealth Court18 have provided serious indications that, in the absence of substantive FCC actions in the areas of national intercarrier compensation reform and the federal USF, this Commission may need to again undertake the initiative of reexamining the area of intrastate carrier access charges for the RLECs. The AT&T complaint underlines the need for such action.
Therefore, based upon these circumstances and our review of the parties' positions, we are persuaded that the access charge investigation should be resumed at this time. The pending proposals that are before the FCC to impose a $0.0007 rate to interstate and intrastate access charges alike nationwide and of pending federal legislation do not alone warrant a fourth one-year stay of the investigation as FCC action does not appear to be imminent.19
The Recommended Decision by ALJ Susan Colwell entered on July 23, 2009, as well as the evidentiary record in that limited investigation will assist us in resolving the full investigation, and the issues already adjudicated before Administrative Law Judge Susan Colwell during the limited reopening of the investigation shall not be relitigated absent extraordinary circumstances.
In the event that the FCC makes a final determination regarding intercarrier compensation regimes during our full investigations, the impact of said determination should be addressed by all interested parties as part of the proceeding. We acknowledge that former Chairman Martin's proposal as well as other proposals before the FCC in the Unified Intercarrier Compensation proceeding could have a significant impact on rural access reform as many of these proposals advocate interstate and intrastate access charge reform as well as federal and state universal service funds. Most of the proposals suggest that rural carriers should continue to receive funding of their networks to foster universal service and in many cases create supplemental rural universal service funding or access charge replacement funding to compensate rural carriers for additional required access reform.
We submitted comments to the FCC on November 26, 2008, to the ICC NOPR declaring Pennsylvania to be one of several states that have undertaken extensive reform of our intercarrier compensation rates and have established a state universal service fund in connection with intrastate access charge reductions. This Commission already has affected in excess of $1 billion in intercarrier compensation reform in Pennsylvania broken down into $605.9 million on Verizon's access rate reductions, $189.4 million on rural carrier access rate reductions, and $218.3 million from the PaUSF to support access rate reform since 2000.
Although the Joint Motion does not expressly state whether the Joint Movants advocate a continuation of the current PaUSF under the existing regulations codified at 52 Pa. Code §§ 63.161--63.171, it can be inferred that it is the position of the Joint Movants that the status quo be maintained until there is a resolution after an investigation and until a future rulemaking determines otherwise consistent with the eventual rulings of this Commission at the limited reopened stage of this Investigation. We are of the opinion that maintaining the status quo will also ensure that the current levels of intrastate access charges will not be increased during the stay. It has been, and continues to be the intention of this Commission, since the Global Order of 1999, to gradually lower intrastate access charges so as to allow for greater competition in the intrastate and interexchange toll markets. At the same time we recognize the mandates of Chapter 30 require that local service rates be reasonable and affordable in all areas of this Commonwealth.
Accordingly, for these above-stated reasons, the Joint Motion will be denied. Until there is a resolution to access charge reform, the status quo stays in place, and the PaUSF shall continue under the existing regulations codified at 52 Pa. Code §§ 63.161--63.171 until such time as new regulations are promulgated eliminating or modifying the Fund; therefore,
It Is Ordered That:
1. The Joint Motion of The Pennsylvania Telephone Association, Office of Consumer Advocate, and The United Telephone Company of Pennsylvania, d/b/a Embarq Pennsylvania is hereby denied.
2. The stay of the intrastate access charges portion of this investigation is hereby lifted.
3. This investigation at Docket No. I-00040105 consolidated with the 96 complaints at Docket Nos. C-2009-2098380 et al., In Re: AT&T Communications of Pennsylvania, LLC et al. v. Armstrong Telephone Company-Pennsylvania, et al. are hereby assigned to the Office of Administrative Law Judge for the development of the appropriate evidentiary record and the issuance of a Recommended Decision within twelve (12) months from the date of entry of this Order.
4. The participating parties shall be afforded due process opportunities to supplement the evidentiary record; however, in the interest of judicial efficiency, the issues already adjudicated before Administrative Law Judge Susan Colwell during the limited reopening of the Intrastate Access Charge Investigation at Docket No. I-00040105 shall not be relitigated absent extraordinary circumstances.
5. The participating parties shall address and provide record evidence on the legal, ratemaking and regulatory accounting linkages between: a) any Federal Communications Commission's ruling in its Unified Intercarrier Compensation proceeding; b) the intrastate access charge reform for rural ILECs in view of the new Chapter 30 law and its relevant provisions at 66 Pa.C.S. §§ 3015 and 3017; c) the Pennsylvania Universal Service Fund; and d) the potential effects on rates for the basic local exchange services of the rural ILECs to the extent this is consistent with the Commission's determinations in the limited investigation.
6. The Commission Staff from the Office of Special Assistants and the Law Bureau is hereby directed to continue monitoring the Federal Communications Commission's Unified Intercarrier Compensation proceeding.
7. The Pennsylvania Universal Service Fund shall continue under the existing regulations codified at 52 Pa. Code §§ 63.161--63.171 until such time as new regulations are promulgated eliminating or modifying the Fund.
8. Absent extraordinary circumstances, intrastate access charges of the rural incumbent local exchange carriers including Embarq shall not increase during the investigation.
9. The current average benchmark caps on residential R-1 rates and corresponding business rate caps shall remain in effect unless modified by future Commission Order.
10. That a copy of this order be delivered to all telecommunications carriers operating in Pennsylvania, the Office of Consumer Advocate, Office of Small Business Advocate, and to Solix, Inc., the current Administrator of the Pennsylvania Universal Service Fund.
11. That a copy of this order be delivered for publication to the Pennsylvania Bulletin.
JAMES J. MCNULTY,
Secretary
[Pa.B. Doc. No. 09-1540. Filed for public inspection August 14, 2009, 9:00 a.m.] _______
1 The PTA consists of the following rural incumbent local exchange carriers: Armstrong Telephone Company--Pennsylvania, Armstrong Telephone Company--North, Bentleyville Telephone Company, Buffalo Valley Telephone Company, Citizens Telephone Company of Kecksburg, Citizens Telecommunications Company of New York, Frontier Communications Commonwealth Telephone Company, LLC (d/b/a Frontier Commonwealth), Frontier Communications of Breezewood, LLC, Frontier Communications of Canton, LLC, Frontier Communications of Canton, LLC, Frontier Communications--Lakewood, LLC, Frontier Communications -Oswayo River, LLC, Frontier Communications of PA, LLC, Conestoga Telephone & Telegraph Company, D&E Telephone Company, Hickory Telephone Company, Ironton Telephone Company, Lackawaxen Telecommunications Services, Laurel Highland Telephone Company, Mahanoy & Mahantango Telephone Company, Marianna & Scenery Hill Telephone Company, The North-Eastern Pennsylvania Telephone Company, North Penn Telephone Company, Consolidated Communications of Pennsylvania Company (f/k/a North Pittsburgh Telephone Company), Palmerton Telephone Company, Pennsylvania Telephone Company, Pymatuning Independent Telephone Company, South Canaan Telephone Company, Sugar Valley Telephone Company, Venus Telephone Corporation, Windstream Pennsylvania, LLC f/k/a ALLTEL Pennsylvania, Inc., and Yukon-Waltz Telephone Company.
2 Re Nextlink Pennsylvania, Inc., Docket No. P-00991648; P-00991649, 93 PaPUC 172 (September 30, 1999) (Global Order); 196 P.U.R. 4th 172, aff'd sub nom. Bell Atlantic-Pennsylvania, Inc. v. Pennsylvania Public Utility Commission, 763 A.2d 440 (Pa.Cmwlth. 2000), alloc. granted, 844 A.2d 1239 (Pa. 2004).
3 Sprint/United later divested its landline operations. The United Telephone Company of Pennsylvania, d/b/a Embarq Pennsylvania is the local landline telephone company.
4 The regulations governing the PaUSF are found at 52 Pa. Code §§ 63.161--63.171. There is no sunset provision in the regulations; however, in December, 2004, the Commission was contemplating whether it should begin the legal process of rulemaking to terminate the fund on December 31, 2006.
5 The Missoula Plan was filed on July 24, 2006, by the National Association of Regulatory Utility Commissioners (NARUC) in recognition of one meeting site where the proposal was considered. It was not endorsed by NARUC, but the filing is one in a series of intercarrier compensation proposals in the FCC's CC Docket No. CC 01-92.
6 The RTCC, OTS, OCA and Embarq filed a joint status report.
7 Sprint Nextel Corp. filed on behalf of Sprint Communications Company L.P., its interexchange and competitive local exchange carrier entity, and its wireless entities operating in the Commonwealth: Sprint Spectrum, L.P. d/b/a Sprint PCS and Nextel Communications, Inc., and NPCR, Inc. d/b/a Nextel Partners.
8 Access Charge Reform, Price Cap Performance Review for Local Exchange Carriers, Transport Rate Structure and Pricing, End User Common Line Charges, CC Docket Nos. 96-262, 94-1, 91-213, 95-72, First Report and Order, 12 FCC Rcd 15982, May 31, 2000, (Access Charge Reform Order) at 15998 par. 35.
9 Interstate Access Support Order at 13046 par. 201.
10 See Federal-State Joint Board on Universal Service, CC Docket No. 96-45, Report and Order, 12 FCC Rcd 8776, 9164-65 (1977) (Universal Service First Report and Order) at 8917 par. 253 (subsequent history omitted); Rural Task Force Order.
11 Id. at 11249 par. 8.
12 Buffalo Valley Telephone Company, Conestoga Telephone and Telegraph Company, and Denver and Ephrata Telephone and Telegraph Company v. Pennsylvania Public Utility Commission, No. 847 C.D. 2008 and Irwin A. Popowsky, Consumer Advocate v. Pennsylvania Public Utility Commission, No. 940 C.D. 2008.
13 Verizon filed on behalf of the Verizon ILECs, Verizon Pennsylvania, Inc. and Verizon North, Inc. as well as Verizon's CLEC, MCImetro Access Transmission Services, LLC, d/b/a Verizon Access Transmission Services, (collectively referred to as ''Verizon'').
14 See generally Investigation Regarding Intrastate Access Charges and IntraLATA Toll Rates of Rural Carriers, and the Pennsylvania Universal Service Fund, Docket No. I-00040105, Order entered August 30, 2005, Order entered November 16, 2006.
15 In re Developing a Unified Intercarrier Compensation Regime (FCC March 3, 2005), CC Docket No. 01-92, Further Notice of Proposed Rulemaking, FCC 05-33 (Unified Intercarrier Compensation). See also 66 Pa. C.S. § 3017(a).
16 Investigation Regarding Intrastate Access Charges and IntraLATA Toll Rates of Rural Carriers, and the Pennsylvania Universal Service Fund et al., Docket No. I-00040105 et al., Order entered April 24, 2008, Order entered September 25, 2008, and Recommended Decision by ALJ Susan Colwell entered July 23, 2009.
17 In re High-Cost Universal Service Support et al., (FCC November 5, 2008), WC Docket No. 05-337 et al., Order on Remand and Report and Order and Further Notice of Proposed Rulemaking, FCC 08-262.
18 Buffalo Valley Tel. Co. et al. v. Pa. Pub. Util. Comm'n, No. 847 C.D. 2008 (Pa.Cmwlth.) case pending; Popowsky v. Pa. Pub. Util. Comm'n., No. 940 C.D. 2008 (Pa. Cmwlth.) case pending.
19 Federal Communication Commission's Public Notice of Proposed Rulemaking on Intercarrier Compensation (Docket No. 01-92) at FCC 08-262 published in the Federal Register on November 10, 2008 (the ICC NOPR). The Intercarrier Compensation proposals establish an interim reciprocal compensation rate of $0.0007 per Minute of Use (MOU). Id. The proposals uniformly require state commissions to conduct a series of cost-study proceedings to arrive at a reciprocal compensation rate that does not exceed the transitional rate. The cost studies are to replace total element long-run incremental cost (TELRIC) rates, which contained cost allocations for non-traffic sensitive and traffic sensitive costs, with a new incremental cost model that allocates only traffic sensitive costs to access termination rates. The states would have a 10-year period to transition from current rates to the uniform rate. The imposition of the uniform rate is essentially constructive preemption of the PaPUC's right and jurisdictional duty to set intrastate access charge rates. The PaPUC has traditionally implemented the TELRIC standard in numerous proceedings for the establishment of cost-based rates in interconnection agreements and related exchange and termination of traffic.
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