ORDER NO. 97-491

ENTERED DEC 18 1997

This is an electronic copy. Appendices may not be included.

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 731

Phase II

DISPOSITION: OREGON TELEPHONE ASSISTANCE PROGRAM CONTRIBUTION AMOUNT DETERMINED

Currently, low-income residential telephone customers participating in the Oregon Telephone Assistance Program (OTAP) receive a reduction of $7.00 in their monthly telephone charges. The reduction is comprised of a waiver of the $3.50 monthly Subscriber Line Charge (SLC) under the federal Lifeline program established by the Federal Communications Commission (FCC), and a $3.50 monthly contribution from the Oregon Residential Service Protection Fund.

On May 8, 1997, in its Order No. 97-157, the FCC decided to expand the scope and amount of the federal Lifeline program as of January 1, 1998. The $3.50 monthly subsidy will increase to a minimum of $5.25. In addition, the federal Lifeline subsidy amount will increase beyond $5.25 by matching one-half of a state low-income subsidy amount, up to a maximum federal subsidy of $7.00 per month. For example, if a state contributes $3.50 per month to a low-income subsidy program, the federal Lifeline program amount would be $5.25, plus one-half of $3.50 ($1.75), for a total federal subsidy of $7.00. That, combined with the state subsidy of $3.50, would make the total subsidy to a low-income customer $10.50 per month.

A state is not required to contribute to a low-income subsidy program. Low-income telephone customers in states not contributing to a low-income subsidy program will receive a $5.25 monthly reduction in their telephone charges from the federal Lifeline program if their states simply consent to the subsidy. States may establish their own contribution amounts to a low-income subsidy program, but the federal one-half matching will not continue beyond a state amount of $3.50 per month.

We addressed basic universal service issues in phase I of this proceeding, and issued Order No. 95-1103 on October 17, 1995. We are continuing our consideration of universal service issues in phase II of this docket, and expect to issue an order early next year on the issues raised in this portion of the proceeding. However, the issue of the OTAP contribution amount should be resolved by the end of this year to coincide with the change in the federal Lifeline program. We are issuing this order now to resolve that one issue. In addition, we plan to address issues relating to a cost proxy model in phase III of this proceeding next year. Also, in Docket No. AR 335, we are amending our OTAP rules to accommodate recent developments.

The parties in this proceeding disagree about the appropriate OTAP amount to complement the federal Lifeline subsidy. Some parties contend that the current amount, $3.50 per month, should continue. That would make the combined state/federal subsidy total $10.50 per month. Others contend that the OTAP amount should be $2.33 per month, making the combined subsidy total $8.75 per month ($5.25, plus $2.33, plus $1.17).

Those who contend that the state subsidy should be $3.50 per month think it would be more consistent with federal universal service goals and would maximize benefits available to low-income consumers. USWC points out, however, that some local exchange companies may have rates lower than $10.50 per month. If they do, their customers should not get more than the monthly local exchange rate in a universal service subsidy.

Those who contend that the state subsidy should be $2.33 per month feel that it is more competitively neutral than if the state subsidy is $3.50 per month. Incumbent local exchange carriers, competitive local exchange carriers, and radio common carriers operate under different circumstances and rules that impact how low-income programs affect them. The $2.33 amount was arrived at after analyzing how the subscriber line charge and OTAP distributions impacted the carriers in different ways.

Resolution

Low-income Oregonians receiving public assistance currently receive a $7.00 per month reduction in their bill for core telephone service. Because of a change in the federal Lifeline program, we have the opportunity to increase that subsidy to $10.50 per month. We elect to take advantage of that opportunity, and set the monthly OTAP assistance amount at $3.50. It is the way to maximize the greatest benefit for the greatest number of low-income Oregonians. It enhances the goal of universal service by making basic telephone service more available to low-income consumers. In addition, setting the OTAP amount at $3.50 merely maintains the status quo for the state program. The current funding rate is set to collect sufficient revenues to provide a monthly OTAP benefit of $3.50, so the rate will not need to be increased.

The action we are taking this week in Docket No. AR 335 reinforces our decision to adopt the $3.50 per month OTAP amount. In that docket, we are adopting rules allowing subscribers of wireless services to be eligible for assistance under OTAP. There is no need, therefore, to set a different subsidy OTAP amount for them in this proceeding.

Setting the OTAP amount at $3.50 per month will not disadvantage customers of wireless telephone service, and no wireless carrier filed comments opposing an OTAP subsidy of $3.50. We will continue our efforts to treat wireline and wireless carriers in ways that do not unfairly advantage one technology over another.

ORDER

IT IS ORDERED that:

The Oregon Telephone Assistance Program amount is established at a flat rate of $3.50 per month, effective January 1, 1998;

The monthly Oregon Telephone Assistance Program amount shall be reduced in individual cases if required to keep the low-income assistance amount from exceeding a telephone customer’s monthly rate for core local exchange telephone service.

Made, entered, and effective ____________________________.

A party may request rehearing or reconsideration of this order pursuant to ORS 756.561. A request for rehearing or reconsideration must be filed with the Commission within 60 days of the date of service of this order. The request must comply with the requirements of OAR 860-014-0095. A copy of any such request must also be served on each party to the proceeding as provided by OAR 860-013-0070. A party may appeal this order to a court pursuant to ORS 756.580.