Overview of the Kansas Universal Service Fund. Christine Aarnes Before the House Rural Revitalization Committee February 18, 2019
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1 Overview of the Kansas Universal Service Fund Christine Aarnes Before the House Rural Revitalization Committee February 18, 2019
2 2 Universal Service Both the Kansas Telecommunications Act of 1996 and the Federal Telecommunications Act of 1996 contain provisions to develop universal service funds to maintain and enhance universal service. Federal Universal Service Fund (FUSF) - 47 U.S.C. 254 Kansas Universal Service Fund (KUSF) K.S.A
3 3 Kansas Universal Service Fund KUSF was created by the KCC and implemented March 1, 1997, as required by K.S.A Purpose of the KUSF is to assure quality services are made available to all Kansans at affordable rates. Pursuant to K.S.A (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. Current KUSF assessment rate is 7.5% on intrastate revenues. The rate will decrease to 6.88% on March 1, 2019.
4 Assessment Rate 4 KUSF Assessment Rate History of KUSF Assessment Rate 9.00% 8.00% 7.00% 6.00% 5.00% 4.00% 3.00% 2.00% 1.00% 0.00% 9.00% 7.63% 7.25% 7.50% 6.83% 6.07% 6.06% 6.18% 6.13% 6.42% 6.05% 6.47% 6.88% 6.53% 4.92% 4.85% 4.99% 4.87% 5.03% 4.65% 4.32% 4.35% 3.70% KUSF Fiscal
5 KUSF Fund Size KUSF Fund Size 5 $120,000,000 History of Fund Size $100,000,000 $80,000,000 $60,000,000 $40,000,000 $20,000,000 $0 KUSF Fiscal Additional information available at:
6 6 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)
7 Total KUSF Support by Program (March 1, 1997 February 28, 2019) 7 Kan-Ed, $90,750,000, 7% Lifeline, $32,852,945, 3% Relay Service, $32,015,820, 3% TAP, $11,799,496, 1% High-Cost KUSF Lifeline High-Cost KUSF, $1,024,022,216, 86% Kan-Ed Relay Service TAP
8 Expected KUSF Expenditures for 8 KUSF Fiscal 23 March 1, 2019-February 28, 2020 Lifeline, $832,171, 2% Telecommunications Access Program (TAP), $272,738, 1% Telecommunications Relay Service, $446,675, 1% KUSF Administration and Audits, $520,792, 1% High-Cost Support Telecommunications Relay Service High-Cost Support, $36,782,512, 95% Telecommunications Access Program (TAP) Lifeline KUSF Administration and Audits
9 9 Kansas Universal Service Fund High-Cost Support Initial KUSF high-cost support amount available for incumbent local exchange carriers was equal to the revenue lost when access charge reductions were implemented pursuant to state statute. While the initial amount of KUSF support was set to replace lost access revenues, which was revenue neutral and not necessarily cost based, K.S.A (c) requires that the Commission periodically review the KUSF to determine if the cost to provide service justifies modification of support.
10 10 Kansas Universal Service Fund High-Cost Support Price Cap Carriers Implementing a cost-based KUSF Price Cap Carriers FCC determined that support for price cap carriers, such as AT&T & CenturyLink, should be based on the cost to provide service if the network were being built given current technology rather than based on historical costs. The FCC developed a model to determine the forward looking costs of providing service and support. The KCC followed suit with the KUSF high-cost model for AT&T & CenturyLink. Pursuant to HB 2201 (K.S.A (c)(5)), AT&T ceased receiving KUSF support January 1, 2014.
11 High-Cost Support for Carriers that Elected Price Cap Regulation (AT&T & CenturyLink) 11 Total High-Cost KUSF Received by AT&T & CenturyLink March 1997-February 2019 Annual High-Cost KUSF Disbursements Forecasted to be Provided to AT&T & CenturyLink During KUSF Fiscal 23 (March 2019-February 2020) $265,567,575 $266,000,000 $264,000,000 $262,000,000 $260,000,000 $258,000,000 $256,000,000 $254,000,000 $252,000,000 Southwestern Bell d/b/a AT&T $257,171,909 United of KS- CenturyLink 9,000,000 8,000,000 7,000,000 6,000,000 5,000,000 4,000,000 3,000,000 2,000,000 1,000,000 - $0 Southwestern Bell d/b/a AT&T $8,440,649 United of KS- CenturyLink * AT&T was under price cap regulation until 10/7/11 when it became an electing carrier.
12 12 Kansas Universal Service Fund High-Cost Support ROR Carriers Cost-based KUSF Rate of Return Carriers Rate of Return (ROR) carriers support based on embedded costs (K.S.A (e)). Completed 55 ROR carrier audits, including 2 nd and 3 rd audits of some carriers.
13 Kansas Universal Service Fund Audit Overview 13 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
14 $1,119,048 $773,356 $3,178,560 $451,518 $0 $5,984,153 $2,533,226 $16,673,088 $16,854,381 $16,010,529 $14,741,117 $15,254,012 $11,113,514 $15,191,237 $11,293,266 $6,566,363 $3,529,450 $6,643,732 $3,570,947 $7,337,287 $6,681,082 $10,278,644 $9,451,745 $6,722,998 $7,022,156 $8,890,772 $3,755,987 $17,827,318 $14,687,853 $17,690,647 $25,191,170 $38,023,551 $30,928,315 $25,523,691 $19,853,323 $63,738,598 $58,909,880 $84,706,883 Kansas Universal Service Fund Total High-Cost KUSF Received by ROR Carriers Since Inception 14
15 , , , , , , , , , , , , , , , , , , , , ,353 1,204,788 1,203,850 1,330,152 1,614,812 2,319,725 2,704,821 3,644,476 3,619,095 Kansas Universal Service Fund Forecasted ROR Disbursements for KUSF Fiscal 23 (3/19-2/20) 15
16 Total High-Cost KUSF Disbursed to 16 Competitive ETCs WestLink, $4,862,121 N. E. Colorado Cellular d/b/a Viaero, $778,938 Western Wireless, $1,116,992 Big River, $350,469 Epic Touch, $768,380 H&B Cable, $624,752 Big River Sage Telecom, $555,604 Nex-Tech, Inc., $530,325 Epic Touch United Wireless Communications, $9,398,429 H&B Cable Nex-Tech, Inc. Nex-Tech Wireless Sage Telecom Nex-Tech Wireless, $49,200,729 United Wireless Communications N. E. Colorado Cellular d/b/a Viaero Western Wireless WestLink
17 Kansas Universal Service Fund KUSF High-Cost Support Received by $70,000,000 $60,000,000 $50,000,000 Rate of Return Carriers $40,000,000 $30,000,000 $20,000,000 $10,000,000 Competitive ETCs Southwestern Bell d/b/a AT&T United of KS- CenturyLink $ KUSF Fiscal (March February) 17
18 Thank you. Questions? Christine Aarnes Chief of Telecommunications & SPP Affairs 1500 SW Arrowhead Rd. Topeka, KS
Grand Total $ 41,116,764 $ 38,182,548 $ 36,793,579 $ 116,092,891 $ 1,235,771,217
Kansas Universal Service Fund (KUSF) Annual Support and Grand Total (3/2017-2/2020) Year 21 Year 22 Year 23 [1] Total Grand Total Carrier (3/17-2/18) (3/18-2/19) (3/19-2/20) (Yrs 21-23) (3/97-2/20) Bluestem
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