The state's biggest phone companies and their competitors are fighting over a fund that subsidizes companies that provide phone service where it would otherwise be unaffordable. AT&T, the biggest, says the Universal Service Fund doesn't cover its costs. Competitors say the company gets at least twice what it should.
And the Public Utility Commission is getting ready to referee, hoping to refresh the formulas for the USF before the Legislature comes back for a regular session in January 2009.
AT&T says it's not paid enough for high-cost services the state requires it to provide; the companies on the other side say their customers are being taxed to help Ma Bell remain in a dominant position.
There's a pile of money at stake: About $425 million was disbursed last year to the phone companies in the biggest program within the USF, according to a recent PUC report. The fund is financed with a fee on your phone bill, and all of the phone companies have to take part. The money is supposed to subsidize high-cost customers who otherwise wouldn't get phones. An easy example: It costs a fortune, on a per-customer basis, to build and operate phone service in those long mostly uninhabited parts of West Texas. But the big phone companies agreed to do it if they could use money from high-profit areas to cover the costs. With competition coming into play, that subsidy turned into the USF; the notion was that the profitable areas would have lots of companies competing, and their customers, the state decided, should pay into a kitty to keep the phones running in unprofitable areas.
The formulas were last set in 1999, based on numbers from 1997. The biggest recipient, AT&T (formerly SBC, formerly Southwestern Bell, etc.) serves the greatest number of high-cost areas. And they're paid based on what those ten-year-old financial models say they should get. But some areas that were rural ten years ago are suburban now, and profitable for the phone companies (three smaller companies also get USF money for high-cost areas they serve). And more companies are competing for various businesses, including old-fashioned land lines, wireless phones, television, and on and on and on.
A coalition of those competitors has been pressing for a change in the formulas for several years, and now hope the PUC will get something new in place by this time next year. That's a group that includes the Texas Cable and Telecommunications Association, Time Warner Telecom, and Sprint/Nextel, among others. They don't want to kill the USF, but they fear AT&T and others are getting more money than they need to serve those high-cost areas, and want to make sure the USF money going to those companies isn't being used to competitive advantage. The companies getting the money don't have to prove they spent it in high-cost areas and don't have to detail their expenses in order to get reimbursed. The opposition wants to make sure they get the money they need and no more, and that they use it for the purposes intended.
On the other side, AT&T, Verizon, Windstream, and Embarq, say they've got the disadvantage of being the "providers of last resort," and as such, have no choice but to make sure everyone in the state has access to phone service. AT&T — the 300-pound gorilla here — contends the USF reimbursements don't cover the costs of the services they provide. A spokesman says flatly that they're under-compensated for the services they're required to provide in high-cost areas. And they contend the cable companies and others want to hobble the phone company so it'll be a weaker competitor.
The PUC's been at this for a while, but the case is expected to really get going in September, and the agency could have a decision as early as next spring, according to their current timetables.
