CONSUMERS WIN VICTORY WITH LOWER PHONE TAXES STARTING IN 2009

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CONSUMERS WIN VICTORY WITH LOWER PHONE TAXES STARTING IN 2009

Posted on: 04-9-2008 Posted in: Press Releases - TCA

FOR IMMEDIATE RELEASE
April 9, 2008
CONTACT:
Christine DeLoma, (512) 474-2082, or cdeloma@txcable.com

CONSUMERS WIN VICTORY WITH LOWER PHONE TAXES STARTING IN 2009
 USF Coalition applauds agreement to reduce Large Carrier Universal Service Fund by $144 million

AUSTIN – The USF Reform Coalition today announced a settlement agreement reached by the Public Utility Commission (PUC) staff, the Office of Public Utility Council, Verizon, Windstream, Embarq, AT&T, several rural ILECs and the Coalition to reduce one of Texans’ largest telephone taxes, the Texas Universal Service Fund. According to the Proposed Final Order, money collected from consumers through the tax and distributed as a subsidy to the phone companies will be reduced by $144 million by Jan. 1, 2012. Although PUC staff has signed the settlement agreement, it still must be formally approved by PUC commissioners.

“We’re very pleased an agreement was reached on USF reform,” said Kristie Ince, Vice President of Regulatory Affairs for Time Warner Telecom of Texas and a spokesperson for the USF Reform Coalition. “While the reduction in the fund is not as much as we would have hoped for, the agreement ultimately means reduced subsidies to large phone companies and lower fees for everyone with a home phone, cell phone or business line.”

Texas consumers pay the third highest telecommunications taxes and fees in the nation, Ince added.

Texas Universal Service programs are funded by a 4.4 percent tax charged to customers on every phone bill, including residential and business landlines and cellular service. The Large Carrier portion of the Texas USF fund receives approximately $395 million each year, which is distributed to AT&T, Verizon, Embarq and Windstream and other eligible providers.

The original purpose of the fee, established in 1999, was to ensure basic local phone service could be provided at reasonable rates to customers in high-cost rural areas.

The settlement agreement stems from the PUC’s review of the Large Carrier portion of the Universal Service Fund. The Legislature directed the agency in 2005, as part of SB 5 to review and revise the amount of subsidies distributed to the biggest telephone companies, some of which are in large part deregulated.

“These reforms will help continue to foster fair and equal competition in Texas’ telecommunications market by eliminating unwarranted subsidies to the largest phone companies,” Ince said.

Key terms of the Settlement Agreement include:

• USF payments to AT&T, Verizon, Windstream and Embarq would be reduced in stages, from 2009 to 2012. By 2012, payments would be $144 million below the actual 2007 calendar year level of $395 million. According to the agreement, “Such reductions will result in a lower TUSF surcharge on customers’ bills.”

• The four telephone companies will be allowed (but not required) to recoup at least a portion of their USF reductions through residential basic rate increases implemented over four years (three years for Windstream).

• As of January 1, 2009, exchanges with populations greater than or equal to 30,000 will no longer be eligible to receive USF support if they are deregulated pursuant to PURA Chapter 65.

• As part of the settlement agreement, the Parties committed to support an increase in the Lifeline program which benefits low-income Texans, in regulated exchanges. PUC staff will initiate a separate rulemaking process within 30 days to consider increasing support amounts in the program.

• Additional reporting requirements to make the Texas USF fund more transparent to the public will be addressed in a subsequent rulemaking by the Commission.

Ince noted that the Small and Rural Carrier Fund is not affected by the settlement, nor are any other USF programs such as Lifeline and Relay Texas, which assists the hearing impaired.

The PUC is scheduled to address the USF reform agreement at its next meeting, April 25.

The USF Reform Coalition is committed to revising the Texas Universal Service Fund so that it meets its goal of providing basic, local telecommunications services at reasonable rates to customers in high cost rural areas, while not unfairly taxing customers and lining the pockets of highly profitable incumbent phone companies. Coalition members are Sprint Nextel Corporation, Time Warner Telecom of Texas LLC, Time Warner Cable Information Services (Texas), LLC, and TWC Digital Phone LLC.

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