The Benefits of Collecting Universal Service Fees Based on Working Telephone Numbers

1
The Benefits of Collecting Universal Service Fees
Based on Working Telephone Numbers

• Presentation to the NASUCA Mid-YearMeetingJune
  12, 2007John Windhausen, Jr.President,
  Telepoly Consulting

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The USF by the Numbers Coalition

• ATT
• CTIA The Wireless Association
• MegaPath (formerly DSL.Net)
• GCI

• IDT Corp.
• National Cable and Telecom Association
• USTelecom
• Verizon
• Von Coalition

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The Current Revenues-based System Does Not Work

• Current system was adopted over 10 years ago when
  the marketplace was very different. In 1997 --
• There were boundaries between local service and
  long distance service (and local and LD
  companies)
• Dial-up Internet just beginning, but there was
  virtually no broadband
• Very little bundling of services today bundling
  of three or four services is almost the norm.

4
The Current Revenues-based System Does Not Work

• Current system distorts the marketplace.
• Some firms pay into the fund and others do not,
  though providing comparable services.
• Some firms pay more than others, based on
  difficulties of identifying correctly what
  revenues should be assessed.
• Companies must make a good faith effort to fill
  out the USAC forms correctly.
• Arbitrary results are inescapable
• The current system depends on changing, and
  somewhat artificial, boundaries between different
  regulatory classifications. (i.e.
  telecommunications vs. information services).

5
Telephone Numbers Provide a Much More Stable
Source of Funding.

• The USF growth and the revenues growth are
  diverging.
• For this reason, the contribution factor has
  risen from 5.7 in 2000 to 11.7 today.
• In contrast, telephone numbers have grown about
  5 per year, about the same rate as the USF.
• A per-number fee today would be almost identical
  to what it would have been in 2000.

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The Impact of a Numbers-based System on
Residential Consumers.

• TODAY
• The average household pays about 1.32 in USF
  fees per month per telephone number.
• (0.69 on the SLC and 0.63 in LD surcharges)
• The customer who makes no long distance calls
  in a month pays about 0.69 on the SLC.
• Lifeline customers pay USF fees based on their
  LD calls.

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The Impact of a Numbers-based System on
Residential Consumers.

• Under a Numbers-based System
• Assuming a per-number fee of
• 1.00 and 1.20 per month.
• The average household will pay slightly less.
• - from 1.32 to 1 - 1.20
• A household that has no long distance charges
  would pay slightly more (30-50 cents), but even
  this slight increase will diminish as the
  contribution factor grows.
• Lifeline consumers would be completely exempt
  from any USF fee.

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Benefits of a Numbers-Based System

• Economy
• Industry
• Government
• Consumer
• Preservation of the USF

10
Economic Benefits

• The current system imposes a surcharge on long
  distance calling, which discourages usage.
• Eliminating the usage-based fee allows consumers
  to make more LD phone calls for the same amount
  of money, generating a net gain to the economy.

11
Government Benefits

• Once the reporting requirements are established,
  a numbers-based fee will be easier to administer.
• Reduces cost of collection reviewing companies
  filings, audits, compliance.
• Likely to reduce USACs administrative expenses.

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Industry Benefits

• Reduces marketplace distortions.
• Levels the playing field, eliminates competitive
  inequities.
• Reduces administrative burdens and uncertainty.
• Relatively easy to determine working numbers.
• Greater confidence that competitors are paying
  their fare share.

13
Consumer Benefits

• Average single-line households will save money
• Lifeline consumers would be exempt
• Per-number fee is easier to understand
• Allows consumers to make more educated choices
  among communications alternatives

14
Preservation of the Universal Service Fund

• Continued increase in the contribution factor
  jeopardizes support for the fund.
• At some point, will be a consumer backlash
  against increasing fees.
• Ability of some providers to avoid their USF
  payments raises concerns about the legitimacy of
  the program.
• A Numbers-based fee will provide a more stable
  funding source for many years to come.

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Thank you

• John Windhausen, Jr.
• President
• Telepoly Consulting
• [phone]
• jwindhausen_at_telepoly.com