Local Law Blogs

Louisiana State Universal Service Fund - "The More Things Change, The More They Stay the Same" [1]

by Gordon D. Polozola

The Louisiana Public Service Commission has issued a General Order, dated February 9, 2009, once again adopting a new basis for its state Universal Service Fund or 'state USF.' In short, the revised state USF effectively maintains the subsidies that have been provided to Louisiana's rural incumbent local exchange carriers or 'rural ILECs' under previous Commission mechanisms.

The state USF has been through several iterations. The state USF was originally created to make up for the loss of revenues the rural ILECs stated they would experience due to the introduction of 1+ presubscription (i.e., the ability of a customer to choose his or her local toll provider). The amount of the fund, then called the Interim Local Optional Service (LOS) Preservation Plan, was based on this potential loss to the rural ILECs, and was designed to subsidize the rural ILECs in the amount of that potential loss. See Order No. U-23267, dated December 3, 1998, adopting the Interim LOS Preservation Plan. Only the rural ILECs were eligible to draw from the fund. As for its funding, the Order provided, '[t]he plan is funded by BellSouth Telecommunications, Inc. and IXCs [long distance companies] and includes access reductions from BellSouth Telecommunications, Inc. to each IXC equivalent to the IXC's contribution.' Under Section 101(B)(1) of the Order, no competitive local exchange carrier or 'CLEC', wireless carrier, or rural ILEC was required to contribute to the Plan.

The LPSC modified the LOS Preservation Plan into a form of state USF in its General Order, dated April 29, 2005. While the underlying basis for the subsidy changed (the level of LOS services provided by the rural ILECs' to their customers), the rural ILECs would continue to receive same subsidy provided to them under the Interim LOS Preservation Plan. Again, only the rural ILECs were eligible to draw from the fund. The difference between the Interim LOS Preservation Plan and the new state USF was that all telecommunications service providers or 'TSPs', including CLECs and wireless carriers, were required to contribute to the state USF. TSPs were permitted to recover such contribution from their customers.

Shortly after its adoption, the Commission amended the state USF requiring the rural ILECs to report their level of LOS services. These reports were to enable the Commission to assess the continued need for the LOS subsidies being provided to the rural ILECs.

The state USF was subject to a legal challenge, but the Louisiana Supreme Court upheld the Commission's General Order.

Finally, because the level of LOS being provided by the rural ILECs was declining, and faced with the issue of whether the subsidy of ILECs' LOS should be reduced, the LPSC once again changed the underlying basis for the state USF. Under the revised state USF, as adopted by the LPSC in its February 9, 2009 General Order, the underlying basis for the fund was changed to the rural ILECs' loop costs as submitted to the National Exchange Carrier Association and the federal Universal Service Administration Company. The General Order also restricted disbursements from the state USF to a single facilities-based provider that is also the state-designated carrier of last resort in each of Louisiana's rural study areas, effectively limiting disbursements to the rural ILECs only. Like in the last iteration of the state USF, the LPSC also expanded the category of carriers obligated to contribute to the fund, this time including VoIP providers and other carriers using IP technologies that meet the Federal Communications Commission's definition of interconnected VoIP services as found in 47 CFR §9.3.

In summary, while the underlying basis for the subsidies provided to the rural ILECs through various state funds has changed, along with the scope of carriers required to contribute to the fund, the subsidies being provided to the rural ILECs operating in Louisiana have generally remained the same. 
 

[1]Jean-Baptiste Alphonse Karr, Les Guêpes, January 1849
 

Full post as published by Louisiana Law Blog on March 11, 2009 (boomark / email).