Overview of the Kansas Universal Service Fund...Kansas Universal Service Fund High-Cost Support –ROR Carriers –Cost-based KUSF –Rate of Return Carriers Rate of Return (ROR) carriers’

Overview of the KansasUniversal Service Fund

Christine Aarnes

Before the House Rural Revitalization Committee

February 18, 2019

Universal Service

Both the Kansas Telecommunications Act of1996 and the Federal Telecommunications Actof 1996 contain provisions to develop universalservice funds to maintain and enhance universalservice.

• Federal Universal Service Fund (FUSF) - 47U.S.C. § 254

• Kansas Universal Service Fund (KUSF) – K.S.A.66-2008

Kansas Corporation Commission

2

Kansas Universal Service Fund

– KUSF was created by the KCC and implemented March 1, 1997, as required by K.S.A. 66-2008.

– Purpose of the KUSF is to assure quality services are made available to all Kansans at affordable rates.

– Pursuant to K.S.A. 66-2008(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.


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KUSF Assessment Rate


4

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

8.00%

9.00%

9.00%

6.83%

7.63%

4.92% 4.85%

3.70%

4.99% 4.87%4.32%

6.07%

4.35%4.65%

5.03%

6.06% 6.18% 6.13%6.42%

6.05%6.47% 6.53%

7.25% 7.50%6.88%

Ass

ess

me

nt

Rat

e

KUSF Fiscal Year

History of KUSF Assessment Rate

KUSF Fund Size


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Additional information available at: http://kcc.ks.gov/telecom/kusfhistory.pdf

$0

$20,000,000

$40,000,000

$60,000,000

$80,000,000

$100,000,000

$120,000,000

KU

SF F

un

d S

ize

KUSF Fiscal Year

History of Fund Size

http://kcc.ks.gov/telecom/kusfhistory.pdf


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)


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http://www.fcc.gov/wcb/tapd/universal_service/highcost.html

http://www.fcc.gov/encyclopedia/lifeline-program-low-income-consumers

http://www.fcc.gov/wcb/tapd/universal_service/schoolsandlibs.html

http://www.fcc.gov/wcb/tapd/universal_service/schoolsandlibs.html

http://www.fcc.gov/wcb/tapd/ruralhealth/welcome.html

Total KUSF Support by Program (March 1, 1997 – February 28, 2019)


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High-Cost KUSF, $1,024,022,216 , 86%

Lifeline, $32,852,945 , 3%

Kan-Ed, $90,750,000 , 7%

Relay Service, $32,015,820 , 3%

TAP, $11,799,496 , 1%

High-Cost KUSF

Lifeline

Kan-Ed

Relay Service

TAP

Expected KUSF Expenditures for KUSF Fiscal Year 23


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High-Cost Support , $36,782,512, 95%

Telecommunications Relay Service , $446,675, 1%

Telecommunications Access Program (TAP), $272,738, 1%

Lifeline, $832,171, 2%

KUSF Administration and Audits, $520,792, 1%

March 1, 2019-February 28, 2020

High-Cost Support

Telecommunications Relay Service

Telecommunications AccessProgram (TAP)

Lifeline

KUSF Administration and Audits


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. 66-2008(c) requires that the Commission periodically review the KUSF to determine if the cost to provide service justifies modification of support.


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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. 66-2008(c)(5)), AT&T ceased receiving KUSF support January 1, 2014.


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High-Cost Support for Carriers that Elected Price Cap Regulation (AT&T & CenturyLink)


11

* AT&T was under price cap regulation until 10/7/11 when it became an electing carrier.

-

1,000,000

2,000,000

3,000,000

4,000,000

5,000,000

6,000,000

7,000,000

8,000,000

9,000,000

Southwestern Belld/b/a AT&T

United of KS-CenturyLink

$0

$8,440,649

Annual High-Cost KUSF Disbursements Forecasted to be Provided to AT&T & CenturyLink During

KUSF Fiscal Year 23 (March 2019-February 2020)

$252,000,000

$254,000,000

$256,000,000

$258,000,000

$260,000,000

$262,000,000

$264,000,000

$266,000,000

Southwestern Belld/b/a AT&T


$265,567,575

$257,171,909

Total High-Cost KUSF Received by AT&T & CenturyLink March 1997-February 2019


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. 66-2008(e)).

Completed 55 ROR carrier audits, including 2nd

and 3rd audits of some carriers.


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Kansas Universal Service FundAudit Overview

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


13

Kansas Universal Service FundTotal High-Cost KUSF Received by ROR Carriers Since Inception


14

$1

,11

9,0

48

$1

6,6

73

,08

8

$7

73

,35

6

$1

6,8

54

,38

1

$3

8,0

23

,55

1

$1

6,0

10

,52

9

$3

,17

8,5

60

$4

51

,51

8

$0

$1

4,7

41

,11

7

$5

,98

4,1

53

$1

5,2

54

,01

2

$1

1,1

13

,51

4

$1

5,1

91

,23

7

$1

1,2

93

,26

6

$1

7,8

27

,31

8

$2

,53

3,2

26

$6

,56

6,3

63

$3

,52

9,4

50

$6

,64

3,7

32

$3

,57

0,9

47

$7

,33

7,2

87

$6

3,7

38

,59

8

$6

,68

1,0

82

$8

4,7

06

,88

3

$1

0,2

78

,64

4

$2

5,1

91

,17

0

$9

,45

1,7

45

$3

0,9

28

,31

5

$6

,72

2,9

98

$7

,02

2,1

56

$2

5,5

23

,69

1

$5

8,9

09

,88

0

$8

,89

0,7

72

$1

4,6

87

,85

3

$1

7,6

90

,64

7

$1

9,8

53

,32

3

$3

,75

5,9

87

Kansas Universal Service Fund Forecasted ROR Disbursements for KUSF Fiscal Year 23 (3/19-2/20)


15

0

62

3,2

17

0

97

5,5

13

2,3

19

,72

5

87

0,9

98

3,7

40

0

58

5,8

36

55

4,8

77

69

2,4

77

0

56

3,7

94

63

2,8

77

70

4,5

07

0

22

7,9

48

0 0

22

0,4

41

49

1,3

56

3,6

44

,47

6

79

8,6

06

2,7

04

,82

1

35

3,3

21

1,2

04

,78

8

23

3,3

87

1,2

03

,85

0

0

24

1,6

65

1,3

30

,15

2

3,6

19

,09

5

28

5,0

30

1,6

14

,81

2

61

5,0

90

73

6,3

53

30

0,1

78

Total High-Cost KUSF Disbursed to Competitive ETCs

Big River, $350,469

Epic Touch, $768,380

H&B Cable, $624,752

Nex-Tech, Inc. , $530,325

Nex-Tech Wireless, $49,200,729

Sage Telecom, $555,604

United Wireless Communications , $9,398,429

N. E. Colorado Cellular d/b/a Viaero, $778,938

Western Wireless, $1,116,992

WestLink, $4,862,121

Big River

Epic Touch

H&B Cable

Nex-Tech, Inc.

Nex-Tech Wireless

Sage Telecom

United Wireless Communications

N. E. Colorado Cellular d/b/a Viaero

Western Wireless

WestLink


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$0

$10,000,000

$20,000,000

$30,000,000

$40,000,000

$50,000,000

$60,000,000

$70,000,000

Year3

Year4

Year5

Year6

Year7

Year8

Year9

Year10

Year11

Year12

Year13

Year14

Year15

Year16

Year17

Year18

Year19

Year20

Year21

Year22

Rate of ReturnCarriers

CompetitiveETCs

SouthwesternBell d/b/aAT&T


KUSF High-Cost Support Received by Year

KUSF Fiscal Year (March – February)

Kansas Corporation Commission 17

Thank you. Questions?

Christine AarnesChief of Telecommunications & SPP Affairs

Kansas Corporation Commission1500 SW Arrowhead Rd.

Topeka, KS 66614785-271-3132

[email protected]

Documents

Overview of the Kansas Universal Service Fund...Kansas Universal Service Fund High-Cost Support –ROR Carriers –Cost-based KUSF –Rate of Return Carriers Rate of Return (ROR) carriers’