State Universal Service Fund Will Not Cover Access to Broadband in Oregon

Last week, the Oregon Public Utility Commission (“Commission”) denied a petition filed by rural incumbent local exchange carriers (“RLECs”) to expand the Oregon Universal Service Fund (“OUSF”) to cover broadband (“RLEC Petition”). The RLEC Petition asked the Commission to open a rulemaking to consider including the term “access to broadband” in the definition of “basic telephone service.”  To date, the OUSF has ostensibly been restricted to plain old telephone service (“POTS”). The proposed rule change would have explicitly allowed the OUSF to support both POTS and access to broadband, which the RLEC Petition described as a shared network capable of providing customers with a connection to broadband services.

The timing of the filing of the RLEC Petition was not coincidental. Pursuant to a stipulation adopted by the Commission in an earlier phase of its pending OUSF investigation, the parties in that docket were poised to establish a schedule for further proceedings to develop a network cost allocation methodology to back out costs not attributable to POTS. This allocation is necessary under existing POTS-only rules because the current OUSF support levels are calculated based on the entire intrastate loop costs, including the costs associated with providing broadband. This means the existing OUSF calculation unintentionally supports access to broadband already. Backing out broadband-related costs would invariably reduce existing OUSF support levels. The RLEC Petition was filed on the eve of the prehearing conference at which the schedule for the broadband allocation phase of the OUSF investigation docket would have been established. Adoption of the proposed rule change would have rendered moot the need to back out broadband related costs from the OUSF support calculation, thus preserving existing support levels.

The Commission determined that the structure of the statute governing the OUSF would not permit expansion of the fund to cover access to broadband because it would require the Commission to regulate rates for access to broadband, which goes beyond its authority. The Commission agreed with its Staff and other commenters (including the Oregon Cable Telecommunications Association, Verizon, AT&T and other competitive providers) that any decision to expand the OUSF to cover broadband should be made by the Oregon Legislature. Accordingly, the Commission has directed Staff to investigate the status of broadband availability in rural areas in preparation for any potential legislative proposals that may arise during the 2015 session of the Oregon Legislature.If you have questions, please contact Mark Trinchero at marktrinchero@dwt.com.