Testimony of Jeanne Shearer, Regional Vice President of State Government Affairs Windstream Communications, Inc.

Transcription

1 Testimony of Jeanne Shearer, Regional Vice President of State Government Affairs Windstream Communications, Inc. Before the House Consumer Affairs Committee Regarding HB 1417 August 24, 2015 Chairman Godshall, Chairman Daley, and members of the House Consumer Affairs Committee: My name is Jeanne Shearer and I am the Regional Vice President of State Government Affairs for Windstream Communications. Thank you for the opportunity to provide written testimony and offer Windstream's perspective on HB Windstream offers broadband, phone and digital TV services to homes, businesses and government offices primarily in rural areas of Pennsylvania. Windstream employs more than 450 telecommunications professionals dedicated to serving 102 rural communities and approximately 147,500 access lines in the Commonwealth. When enacting Chapter 30, the General Assembly declared it a policy of this Commonwealth to maintain universal telecommunications service at affordable rates. It is the incumbent local exchange carriers, like Windstream, that have a carrier-of-last-resort obligation and deliver on that promise. Windstream and other local exchange carriers receive support for rural, high-cost areas from the Pennsylvania Universal Service Fund (PaUSF). Windstream supports HB 1417 because it properly leaves future reform of the PaUSF to the Pennsylvania Public Utllity Commission (PUC), the expert agency with explicit regulatory authority to adopt appropriate measures to maintain universal service at affordable rates. Recognizing that interacting market realities - inclusive of intermodal wireline and wireless 1

2 competition in some, but not, all areas in the Commonwealth - as well as changing goals at the national and Commonwealth levels, affect the purpose, existence and operation of the PaUSF, the PUC determined a re-examination of the PaUSF through a rulemaking proceeding would allow both the PUC and interested parties to address reform. Windstream agrees with this approach. It would be irresponsible for Pennsylvania to implement reforms, as some parties will urge, without first conducting a careful assessment of, among other factors, the changes in Federal law, the impact on consumers and network investments, the changing concepts and definitions of universal service, and how the PaUSF can and should continue to maintain affordable, universal access to telecommunications services. HB 1417 will ensure that the PUC has sufficient time to conduct a thoughtful and thorough rulemaking proceeding. Specifically the legislation requires the PUC's rulemaking be completed by January 1, 2021, and that any new reforms be implemented no earlier than January 1, And, most importantly, customers served by Windstream and other local exchange carriers will continue to benefit from critical PaUSF support during the pendency of the proceeding. Rural Customers Continue to Need Universal Service Support Windstream has a long history of serving all customers in its service territory, including those in very high-cost communities. We have invested untold hours of labor and millions of dollars in capital over the years to build the network and keep it running smoothly and efficiently. A reduction in PaUSF will undoubtedly result in higher rates for urban and rural consumers alike, pushing more consumers off the wireline network and increasing the percustomer costs of serving as a carrier of last resort. 2

3 Windstream's service footprint covers more than 6,000 square miles of this Commonwealth, and as a carrier-of-last resort, Windstream has to be prepared to furnish reliable and affordable local exchange service everywhere. The PaUSF supports consumers by enabling companies like Windstream to carry out Pennsylvania's universal service policy - maintaining universal telecommunications service at affordable rates. Opponents of the PaUSF, most of whom lack carrier-of-last resort obligations or commitments to serving the highest-cost and most sparsely populated areas of the Commonwealth, conveniently point to substitute service for some consumers in rural areas to suggest that all rural consumers have adequate alternatives. But the committee should not mistake, for example, availability of wireless service along a major road or in the center of a rural town as meaning such service is available to the farmer or family home in a remote area. Opponents' claims also do not take account of the need for a robust and healthy rural wireline network to support access for wireless towers. The obligation to maintain the entire network of lines and switches is a daunting challenge. The majority of Windstream's customers live in low-density areas where costs very quickly swamp revenues when a network operator is contemplating any type of maintenance or investment project. Any company operating in this environment, regardless of company size, confronts the same fundamental challenges - outsized costs and limited revenue potential. Statutorily prescribing arbitrary criteria, chosen purposely to reduce support, must be avoided. For example, the total number of access lines a company serves is not an indication of lack of need. Windstream's high-cost areas should not be penalized with insufficiently supported service simply by virtue of the fact that they are served by a large company that 3

4 addresses many high-cost areas, rather than a few. This would be nothing more than a policy shortcut designed to achieve a cost-savings target and could prove disastrous. Continued support from the PaUSF is more important now than ever before. As competition has flourished in the easier-to-serve, more dense areas that have cable and wireless coverage, the local exchange carrier remains the sole provider in the most low-density, high-cost areas, but without the implicit support from rates and access charges that were once available for those otherwise uneconomic service areas. Moreover, the universal service support currently designated by the Federal reforms will not address the needs of some of the highest-cost locations in the Commonwealth. Serving as the sole provider in the most lowdensity, high-cost areas is not a workable economic model in the absence of explicit PaUSF. The Wirellne Network Should Not Be Taken for Granted Universal service and funding for rural consumers is critical. Rural consumers on average tend to be people of more modest means than non-rural consumers. And, many rural consumers live in places where there is no competitor because the cost of serving such areas is so high. If service is available from a competitor, it is often only in the most densely populated portion of the area (i.e., the town) and may be unreliable or bundled and unaffordable. Therefore, the wired network remains the primary and often the sole means by which rural residents are guaranteed a way to access emergency services and stay in touch with family, friends and business interests around Pennsylvania, the country and the world. Without the universal service policy in Pennsylvania and support through the PaUSF, many consumers in rural areas would lack affordable land line connections. Furthermore, as the Internet becomes 4

5 more vital to business, education and health care, the same wired network serves as the foundation for broadband connections in these rural areas. Wireline networks are essential for all communications and the benefits of maintaining universal service and support through the PaUSF reach beyond rural Pennsylvania. Indeed, the benefits extend to urban areas and impact jobs, economic development and basic communications. They provide the connectivity for wireline, wireless, and Voice over Internet Protocol (VoIP} services. Wireless towers and antennas connect to wireline networks. Cable companies rely on the physical infrastructure - the poles and conduits - built and maintained by incumbent carriers, to connect their customers. The wireline network in rural areas would be hobbled without ongoing financial support provided through the PaUSF that turns what would be otherwise uneconomic services into economically viable endeavors. As noted before, the Federal reforms established to date have not designated funding for some of the highest-cost locations in the Commonwealth, so it is critical that Pennsylvania continues to support state universal service to ensure continuing affordable telecommunications access for all rural Pennsylvanians. And policymakers should not lose sight of the fact that the consequences of rural areas losing access to service would be felt throughout the Commonwealth.... In conclusion, Windstream and its rural customers are already faclng financial pressure from sweeping, ongoing reforms of the federal and state intercarrier compensation system and federal universal service program. As the Federal Communications Commission establishes and 5

6 implements these reforms over the next few years, billions of dollars in rural support will be cut from the intercarrier compensation system and universal service support will be redirected to different areas and for different services. We currently do not know the full impact of these reforms on consumers or providers. There are still a lot of moving parts at the Federal level with reforms. It therefore makes sense that HB 1417 establishes a January 1, 2022 date for implementation of any new reforms. This will enable the PUC to evaluate and understand the impact of major Federal changes now underway, and eliminate much of the guesswork when making very important policy decisions for the future of universal service in Pennsylvania. In addition, it also will afford time for the FCC to provide clarity on the direction of decisions currently pending, such as the competitive bidding process that will occur as part of the Connect America Fund Phase II. Finally, by continuing PaUSF support while the PUC conducts its investigation, rural consumers are protected and the vital link for all communications - the wire line network - continues to receive the support necessary to keep traffic flowing at affordable rates. Mr. Chairman, committee members, I ask for your support of HB Thank you for this opportunity to address the committee. 6