PUC STUDY INDICATES NEED TO REVAMP FUND THAT SUBSIDIZES LARGE PHONE Cos: TCTA supports reform to return millions to consumers, small businesses.

The Texas Cable and Telecommunications Association (TCTA) commended the Public Utility Commission (PUC) of Texas for adopting a report to the Legislature on Friday that supports reform of the Texas Universal Service Fund.

“This report is the first step toward meaningful and significant phone bill relief for millions of consumers and small businesses, who have pumped $4 billion into the fund since 1999,” said Ron McMillan, chairman of the TCTA Board of Directors and regional vice president of government relations for Time Warner. “While the Texas Universal Service Fund supports a number of worthwhile programs, it’s wrong to continue to funnel millions of taxpayer dollars a year into the pockets of larger telephone companies that are operating in deregulated markets.”

TCTA advocates, however, continued TUSF support for customers in rural high-cost areas and for programs such as Relay Texas for the hearing impaired and Lifeline that benefits low income consumers.

The PUC was directed by the Texas Legislature through Senate Bill 5 (passed in 2005) to study the Texas Universal Service Fund, created in 1999. The TUSF was established to aid local telephone companies in providing basic local telecommunications services at reasonable rates to customers in high-cost rural areas and to qualifying low-income consumers. Texas has the largest state USF fund in the nation and imposes on consumers and small businesses a 5 percent tax on Texans’ telecommunications bills.

According to the PUC report adopted Friday, “The Commission believes that the Large Company Area High-Cost Program is overdue for updating, and that the Commission should conduct a contested case and/or rulemaking under current law to consider, at a minimum, any appropriate resizing and retargeting of funding.”

“There is no justification for consumers and small businesses to subsidize – to the tune of hundreds of millions of dollars per year – multi-billion dollar corporations that compete in a deregulated marketplace,” said Joe Gillan, a consulting economist for TCTA. “This aspect of the fund’s current operation distorts competition and is little more than corporate welfare. However well intentioned it was when first created, the fund needs to be reformed in the context of a competitive marketplace.”

“We thank the Texas Legislature for realizing the Texas Universal Service Fund needs more transparency and accountability,” McMillan said. “We also recognize the Public Utility Commission for doing its duty and using its authority to make recommendations to the Legislature that will better allow the fund to serve the neediest Texans, not multi-billion dollar deregulated companies.”