Nothing like a proposal to cut $262.8 million from a state program to get negotiations going.
The Public Utility Commission staff recommended that 66 percent cut to the state's Universal Service Fund (we first wrote about the case last summer [1]), which was set up ten years ago to subsidize phone service in high cost areas of the state (like rural areas were customers are far apart and expensive to reach with wire lines).
The USF has a couple of parts; the staff would cut the fund used to reimburse four large companies for their costs in those areas, to $132.1 million annually from $394.9 million. The money comes from a 4.4 percent tax on every phone bill in the state. The biggest beneficiary — AT&T — has been the loudest advocate for leaving the fund alone. The amount each company gets now is a trade secret redacted from the PUC's public filings. The staff recommendation would pay them only $3.3 million a year, and a spokesman for the company referred to that as a 98 percent cut (do the math, and they're getting about $165 million a year now). In the staff proposal, AT&T would go from being the biggest beneficiary of the fund to the smallest. The PUC's been hearing from a handful of lawmakers, too, who take the phone company's side and say they don't want the fund cut.
AT&T's competitors — the loudest are cable and telecom affiliates of Time Warner — say the USF provides AT&T in particular with more money than it needs to serve those high-cost areas. AT&T's starting position was that it actually needed more than it was getting and that the high-cost areas were financial losers for the company.
The three-member PUC is scheduled to hear the case next month. But the staff recommendation — issued while we and maybe you were distracted by the elections — prompted a round of negotiations that could change what goes to the commission. As we went to press, everyone involved in the case — with the exception of AT&T — was working feverishly on a settlement that would lower the amounts paid each year to the four big companies (the others are Verizon, Windstream Valor, and Embarq). AT&T is asking the commission to throw the talks to a mediator.
The question now — we're reading between the lines — is how much will be cut from the fund overall, and how much will be cut from whatever is paid to each of those four companies to provide service in high-cost areas. The staff proposal that whacks AT&T's annual cut would give Verizon $15.4 million, Windstream $100.2 million, and Embarq $13.1 million.
The commission could look at that request for a mediator within the week. And next month (assuming there's no delay), the commissioners will take a crack at the whole case, or whatever is left to decide after the current negotiations end.