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Commission Approves Universal Service Fund
June 16, 2000 (2000-031)
Contacts: Ron Eachus, Chairman, 503 378-6611; Roger Hamilton, Commissioner, 503 378-6611; Joan H. Smith, Commissioner, 503 378-6611; Bob Valdez, Public Information Officer, 503 378-8962
Salem, OR - In a step toward a more competitive market, the Oregon Public Utility Commission approved an order today to create the Oregon Universal Service Fund (OUSF) designed to provide comparable rates for basic telephone service in rural areas through a surcharge on customers' bills.
The surcharge will range from 2 to 2.5 percent on customers' total bill and will bring in approximately $43 million in its first year.
The basic concept of the fund is to ensure every Oregonian has access to affordable telephone service, regardless of where they live.
The Oregon Universal Service Fund is designed to support carriers that provide basic telephone service in high-cost areas. Ensuring access to basic telephone service at an affordable rate has long been a national policy. Traditionally, charging substantially more than cost for some services in urban areas has ensured such access.
The 1999 Oregon legislature, through Senate Bill 622, directed the PUC to create and implement the fund.
"For a long time we've assured affordable access to basic telephone service by building in subsidies to high cost areas in rates," Chairman Ron Eachus said. "But to have greater competition the subsidies have to be more explicit and the fairest way to do that is this kind of fund."
Removing the implicit subsidies puts competition at parity. Neither incumbent nor competing carriers will have an advantage. Creating a state OUSF fund allows the industry to move to cost-based rates without adversely affecting rates in rural areas.
Because the surcharge will be levied against a customer's total bill, the larger your bill, the larger your surcharge. It will be identified as a Universal Service Surcharge. The cost for a customer with an average monthly phone bill of $20 will be between 40 to 50 cents. For a customer with a monthly total bill of $80 the charge will be between to $1.60 to $2. In July the Commission will set the final surcharge rate.
The Universal Service Charge (USC) will likely appear on customers' bills beginning in September. The surcharge will not be levied on wireless (cell) phone bills or charges for internet services. Qualified wireless companies could opt in at a later date.
The Commission order concluded the USF fund must be large enough to provide meaningful support, yet not so large that it makes basic telephone service unaffordable. In keeping with that goal, the Commission accepted staff's benchmark of $21 per phone line. Companies will receive money from the fund to provide service to areas of the state that exceed the benchmark.
For companies that receive support, the program will not bring in an additional source of income to increase company profits. These companies must file revenue-neutral tariffs with the Commission no later than September 1, 2000.
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