ORDER NO. 98-022

ENTERED JAN 09 1998

BEFORE THE PUBLIC UTILITY COMMISSION

OF OREGON

UM 838

DISPOSITION: UNIVERSAL SERVICE POLICIES ADOPTED FOR RURAL HEALTH CARE PROVIDERS.

BACKGROUND

On February 8, 1996, the federal Telecommunications Act of 1996 (Telco Act) became effective, amending the Communications Act of 1934. The Telco Act, in Section 254(h)(1)(A), mandates that telecommunications carriers furnish necessary telecommunications services to those who provide health care services to persons residing in rural areas of a state at rates comparable to rates charged for similar services in urban areas of that state. The telecommunications carriers are entitled to reimbursement for the discounts given to equalize rural and urban rates. The reimbursement will be implemented by having the discounts count as part of the telecommunications carriers’ contributions to universal service obligations.

On May 7, 1997, the Federal Communications Commission (FCC) issued Order No. 97-157 addressing universal service issues. Among other things, Order No. 97-157 established policies implementing Section 254(h)(1)(A) of the Telco Act. The policies limit the rural health care rate so that it will be no higher than the highest tariffed or publicly available rate charged to a commercial customer for similar service in the state’s closest city with a population of at least 50,000, taking distance charges into account. In addition, where a health care provider does not have toll-free access to an Internet service provider, universal service support will be available for limited Internet access. There will be an annual cap of $400 million for the universal service program for rural health care. The program became effective January 1, 1998.

At its February 18, 1997, public meeting, the Commission opened an investigation into universal service requirements for rural health care providers. The Commission issued Order No. 97-102 memorializing its decision.

Lowell Bergen, an Administrative Law Judge for the Commission, presided over a procedural conference on May 22, 1997. After receiving comments on a schedule proposed at the conference, he issued a memorandum establishing the schedule for the processing of this case. On August 25, 1997, he established an issues list for comment by the parties. The parties exchanged ideas at a workshop and filed rounds of comments addressing issues pertinent to universal telecommunications services for rural health care providers. In this order, we address those issues in the format established by the Administrative Law Judge.

DISCUSSION OF ISSUES

ISSUE 1: Does the PUC need to establish rules, or are there existing rules to resolve intrastate rate disputes between rural health care providers and service providers?

Parties’ Positions

MCI contends that ORS 756.500, the statute allowing the filing of a complaint with the Commission, and ORS 756.450, the statute authorizing the Commission to issue a declaratory ruling, are adequate to resolve any disputes that may arise. GTE and USWC also contend that no additional rules are necessary. Staff and Sprint agree that the Commission has dispute resolution procedures, but think the rule establishing those procedures may not be broad enough to include all possible disputes. For example, Staff questions whether the Commission has jurisdiction to resolve disputes rural health care providers may have with Internet service providers or certain telecommunications service providers, such as radio common carriers. Staff therefore recommends that the Commission’s dispute resolution rule, OAR 860-021-0015, be broadened to the extent possible to include more telecommunications service providers than just those who qualify as public utilities.

Resolution

ORS 756.500 authorizes "any person" to file a complaint with the Commission "against any person whose business or activities are regulated by some one or more of the statutes, jurisdiction for the enforcement or regulation of which is conferred upon the commission." OAR 860-021-0015 discusses procedures when there is a "dispute between a consumer and a utility." We have authority to resolve most disputes involving those we regulate. However, an issue has been raised as to whether our rule is sufficient to include all entities that may be involved in providing and receiving universal support. The Commission will initiate an investigation to determine if the rule can be broadened under the statutes giving the Commission authority to resolve disputes.

ISSUE 2: Should service providers be required to file revised tariffs to reflect the discounts available to rural health care providers?

Parties’ Positions

MCI argues that telecommunications providers should be required to file tariffs reflecting the discounted rates available to rural health care providers because that would prevent the charging of "different rates to different rural health care providers." It also believes the filing of tariffs would assist the Commission in resolving any rate disputes that might arise. MCI argues that the Commission should review the filed rates.

USWC disagrees with the idea that tariffs reflecting discounts should be filed. USWC points out that the rural health care universal service program "does not provide for discounts of any type to be granted to rural healthcare providers. Rather, the [program] provides for credits to eligible carriers against their annual USF [Universal Service Fund] obligation for the delivery of qualifying services to eligible recipients. The amounts of the credits are formulaic, and provide for differential subsidies to equalize existing tariffed and other publicly available urban and rural rates for eligible services." However, USWC recommends that the Commission, or an administrative body identified by the Commission, undertake the effort to gather, organize, and update information from all carriers about the rates and discounts. USWC suggests that a periodic publication of appropriate rates would be helpful.

GTE, Sprint, and Staff take the position that the Commission should not require carriers to file revised tariffs reflecting discounts. They point out that the credit amount will be company-specific and be determined by several factors, such as the rural rate, the comparable urban rate, and the distance between the rural and urban areas. They note that the FCC requires service providers to certify the urban rate, the rural rate, and the difference that is eligible for universal service support. The federal administrator, called the Rural Health Care Corporation, will approve any discounts to be applied. The discounts may or may not be available to a particular customer in any year depending on the availability of universal service funds. They contend it would be inappropriate and very cumbersome for the Commission to perform the information-managing function.

Resolution

We believe the discount system established by the FCC is workable and reasonable. It calls for each telecommunications carrier to determine the rural rate and the urban rate applicable to it, and to apply to the federal administrator for a credit for the difference between the two rates. The carriers are required to keep detailed records to support their claim for credits. We see no benefit to assuming the time-consuming task of keeping track of the information necessary to establish the credit amount. The obligation to support credit requests with detailed records is on the carriers, and the obligation to decide the amount of any credits is on the federal administrative body. We decline to assume record-keeping functions that belong to others. Of course, incumbent local exchange carriers subject to rate regulation still will be required to file pre-discount rates with us.

ISSUE 3: Does the PUC need to adopt standard mileage rates to apply the distance-based support mechanism prescribed by the FCC for rural health care providers?

Parties’ Positions

MCI contends that standard mileage rates "will prevent discriminatory pricing and minimize the administrative burden on the Administrator and telecommunications providers while establishing a reasonable estimation of the charges that a health care provider might incur." The other parties recommend that the Commission not adopt standard mileage rates.

Resolution

This issue addresses whether the Commission should adopt standard mileage rates. Some parties addressed whether the Commission should adopt standard mileage distances between rural and urban areas. On that issue, the FCC has established a reasonable formula as part of the mechanism to subsidize rural health care providers. The Commission sees no need to do anything more concerning standard mileage distances.

On the issue of standard mileage rates, each telecommunications provider, depending on whether and to what degree it is regulated by the Commission, has tariffs or service prices designed to recover its particular cost of service. It would not enhance competition if the Commission adopted standard mileage rates in the place of cost-based individual rates for the telecommunications providers. Therefore, the Commission declines to adopt standard mileage rates.

ISSUE 4: How and by whom should the rural rate, urban rate, and standard mileage rates for intrastate services for rural health care providers be determined?

Parties’ Positions

MCI recommends that the Commission determine all rates which are established for rural health care providers. It suggests the Commission use the methodology established by the FCC, but also take additional steps to ensure that the rates are based only on properly imputed total service long run incremental costs. USWC recommends that the Commission create a task force to determine what the urban, rural, and standard mileage rates should be for rural health care providers.

Staff recommends that the Commission not take on the task of gathering the information necessary to determine the subject rates. Staff feels that the FCC's plan, which includes detailed instructions about how to calculate the rates and which directs the carriers to certify the rates applicable to them, is sufficient. Sprint and GTE agree with Staff.

Resolution

The FCC, in its Order No. 97-157, establishes a formula to determine the rural, urban, and distance mileage rates. It specifically defines rural and urban rates, and states that universal support for rural health care providers shall be calculated according to its definitions. It carefully defines rural and urban areas and directs how to factor distances between rural areas and urban centers into rates. The order directs each carrier providing services to rural health care providers to certify to the federal administrator the urban and rural rates applicable to it. That certification accompanies the carrier’s request for an offset against its universal service obligation.

We are comfortable with the definitions and formulas for the subject rates established by the FCC. Its plan of administration under which carriers determine the rural, urban, and distance issues according to the directives established in that order, and then certify the specific amounts when seeking reimbursement, is efficient and reasonable. We are not convinced that the resulting rates would be significantly more accurate if we undertook the responsibility to set them. We therefore leave the establishment of rural, urban, and standard distance mileage rates to the FCC and the federal administrator chosen by it. We, of course, will continue to review all tariffs and contracts filed by incumbent local exchange carriers subject to our rate regulation.

ISSUE 5: How will rural health care consortia be managed? Does the PUC have the authority to require consortia to designate a lead member for all communications and interactions with carriers and the PUC? Should this lead consortia member have the responsibility to manage the tracking of discounts among eligible consortia members?

Parties’ Positions

USWC would like to see each consortium designate a lead member to keep records, be responsible for communications and interactions with the Commission and providers, and to respond to audits. It also recommends that a collaboration be formed to handle consortia certification, management, and universal service fund pass-through issues. The collaboration would consist of the consortia, OPUC, and the federal universal service fund administrator.

MCI recommends that the Commission get involved in the management of consortia only if a consortium fails to designate its own administrator and convey its identity to the Commission. Staff does not believe the Commission should regulate purchasing consortia.

Several parties mentioned the duty of telecommunications carriers to keep careful records, and the authority of the federal administrator to audit the operations of consortia.

Resolution

We are confident that consortia will be able to manage themselves. It will be in their interest to efficiently manage their operations and cooperate with the federal administrator. The federal administrator has authority to audit their operations. We are not opposed to a collaboration among consortia, the federal administrator, and the Commission. However, at this point we do not see a need to create a collaboration, especially since there is no indication the federal administrator will have the time and resources to participate. We therefore decline to actively manage consortia.

ISSUE 6: What is the best communication channel to keep eligible rural health care providers informed of the federal rural health care program?

Parties’ Positions

Staff and Sprint believe that the Commission should not take a lead role in providing information to the public about the rural health care universal service program. They believe that other entities have the responsibility and incentive to perform that task. GTE suggests that the Commission might want to explore avenues of information distribution, but does not suggest any specific steps. MCI suggests that the Commission might want to issue an information notice to the state medical association or licensing board, which could relay that information to health care providers.

Resolution

The FCC created the Rural Health Care Corporation to administer the rural health care program. Its responsibilities include performing outreach and public education functions. It will be in regular contact with participants of the program, and will be in the best position to inform health care providers of the existence of the program and how to participate in it. Also, the FCC has publicly announced that it has an Internet web site devoted to the subject. The address is http://www.fcc.gov/healthnet. We will assist in the dissemination of information about the federal rural health care program, but will not assume the lead role in publicizing it.

CONCLUSIONS

We have adopted policies to facilitate participation by Oregon rural health care providers in the federal rural health care discount program. These policies comport with the Telco Act, applicable federal rules, and FCC Order No. 97-157.

ORDER

IT IS ORDERED that the policies and decisions announced above are adopted.

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.