Proposed fee change could alter your phone bill
Ever looked at the fine print of the bill you pay for mobile or home phone services?
Depending on your provider, you might see fees for for two items known as the Federal Universal Service Fund and the Oklahoma Universal Service Fund (OUSF). Those monthly fees can range from less than a dollar to more than $10 and are intended to promote universal access to telecommunications services.
Even if your provider doesn’t list those fees separately, you are still paying those assessments. But change is being sought that could turn the Oklahoma fee into a flat rate.
Oklahoma Universal Service Fund Administrator Brandy Wreath proposes charging telecommunications companies a flat, monthly fee of $1.14 per connection for most phone services. The proposition is outlined in a case that needs to be approved by the Oklahoma Corporation Commission before that can change.
Wreath estimates the assessment would raise nearly $65 million to support the fund in fiscal year 2021, which started July 1, and he believes it would eliminate customer confusion about how the fee is calculated.
A customer who only uses phone service currently pays a larger monthly fee than one who bundles that service with others, such as the internet and digitally streamed television.
“All Oklahomans are getting benefits through the dollars the fund provides to support eligible services, but not all Oklahomans are paying the same monthly amount to support the fund,” Wreath said this week.
History and purpose of the funds
The federal fund, created by Congress’ Telecommunications Act of 1996, requires telecommunications providers to assess, collect and submit revenues to the U.S. Federal Communications Commission.
Rates vary from year to year, and they are assessed on revenues for “interstate” and “international” telecommunications services. The rate for the federal fund was 24.4% of a telecom company's interstate and international end-user revenues in 2019, which generated about $8.4 billion.
The Oklahoma Universal Service Fund, created by Oklahoma’s Legislature in 1997, performs similarly, collecting an assessment on revenues phone companies are paid for “intrastate” telecommunications services provided to Oklahoma customers.
The intent is to provide a source of revenue to help provide internet services to schools, libraries and nonprofit hospitals across Oklahoma and to help provide eligible phone services in rural parts of the state.
The state fund brought in assessments of about $32.3 million on a 6.28% rate in the fiscal year 2020.
Since 1998, the fund has brought in about $400.2 million, and paid out about $400.4 million to telecommunications and internet service providers.
Support and opposition to the proposed plan
Discussions about the OUSF’s funding requirements were restarted by Wreath in late 2019 when he filed a request to seek an additional 3% increase beyond the current 6.28% assessment to ensure the fund would be solvent during FY 2021 (currently, it is operating at a deficit).
Wreath, who also is director of the commission's Public Utility Division, modified his proposal to use the per-connection fee earlier this year.
He also submitted a jointly-stipulated agreement supported by dozens of rural phone service providers across the state, including Windstream, CenturyLink and Cox Communications.
But a representative of the CTIA, a trade association representing large wireless communications companies (like AT&T and others) opposes Wreath’s plan.
Don Price, a telecommunications industry consultant with decades of experience, argues in submitted testimony the corporation commission should instead seek general revenue funds from Oklahoma’s legislature to support the state program’s goals, since the law’s intent is to benefit all Oklahomans.
He said the current assessment system works well, given the fund historically remained adequately funded for all years (except 2019) since its creation two decades earlier.
An administrative law judge heard arguments and counter arguments on Wreath's request and is expected to make a recommendation to elected commissioners sometime soon.
Once it gets there, discussions will likely continue.
Commissioner Bob Anthony and Commission Chairman Todd Hiett argued in past cases related to the fee the public should have a fuller accounting of how revenues are collected and spent.
They expressed concerns the OUSF bears an increasing share of the burden to keep rural phone services affordable while the Federal Communications Commission continues to shift dollars collected through its much-more-expensive program to support rural broadband expansions.
Both have called for the legislature to address those issues and others.
Wreath stated numerous factors contributed to last year's percentage increase request, including lower-than-projected revenues being collected through the current formula while the number of companies seeking reimbursements from the fund continues to climb.
The fund delivers significant benefits to Oklahomans, Wreath said, noting internet costs for state schools and libraries has been reduced by 61%, telemedicine costs are down and 1,248 Oklahoma schools now are equipped with fiber internet infrastructure.
If Wreath’s proposal is approved, Oklahoma would join numerous other states in using a connection-based calculation to raise the needed funds, officials said.