1 1
2 COMMONWEALTH OF PENNSYLVANIA HOUSE OF REPRESENTATIVES 3 CONSUMER AFFAIRS COMMITTEE
4 MAIN CAPITOL BUILDING 5 ROOM 140 HARRISBURG, PENNSYLVANIA 6
7 PUBLIC HEARING HOUSE BILL 1417 8
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10 MONDAY, AUGUST 24, 2015 1:00 P.M. 11
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13 BEFORE:
14 HONORABLE ROBERT GODSHALL, MAJORITY CHAIRMAN HONORABLE GENE DIGIROLAMO 15 HONORABLE ELI EVANKOVICH HONORABLE THOMAS H. KILLION 16 HONORABLE TINA PICKETT HONORABLE THOMAS QUIGLEY 17 HONORABLE MARCY TOEPEL HONORABLE ROBERT MATZIE, 18 ACTING MINORITY CHAIRMAN HONORABLE RYAN BIZZARRO 19 HONORABLE TINA DAVIS HONORABLE MARTY FLYNN 20 HONORABLE MARK A. LONGIETTI HONORABLE BRANDON NEUMAN 21 HONORABLE PETER SCHWEYER HONORABLE PAM SNYDER 22
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25 2 1 ALSO PRESENT:
2 HONORABLE SANDRA MAJOR
3 AMANDA RUMSEY, COUNSEL, EXECUTIVE DIRECTOR (R) STEPHEN BALDWIN, RESEARCH ANALYST (R) 4 JANE HUGENDUBLER, LEGISLATIVE ADMINISTRATIVE ASSISTANT (R) 5 ELIZABETH ROSENTEL, EXECUTIVE DIRECTOR (D) JAMIE MACON, LEGISLATIVE ASSISTANT (D) 6 JERRY LIVINGSTON, RESEARCH ANALYST (D) BRETT BIGGICA, RESEARCH ANALYST (D) 7
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14 BRENDA J. PARDUN, RPR 15 REPORTER - NOTARY PUBLIC
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25 3 1 INDEX
2 NAME PAGE
3 OPENING COMMENTS AND INTRODUCTIONS 5
4 STEVEN TOURJE, PRESIDENT AND CEO 9 NORTHEASTERN TELEPHONE COMPANY 5 TOM BAILEY, DIRECTOR 17 6 STATE REGULATORY AND LEGISLATIVE AFFAIRS CENTURYLINK 7 GARY ZINGARETTI, SENIOR VICE PRESIDENT 20 8 ICORE CONSULTING, LLC
9 GLADYS M. BROWN, CHAIRMAN 32 PA PUBLIC UTILITY COMMISSION 10 FRANK BUZYDLOWSKI, DIRECTOR 41 11 STATE GOVERNMENT RELATIONS, VERIZON
12 CARL ERHART, VICE PRESIDENT 51 STATE GOVERNMENT AFFAIRS, VERIZON 13 DAVID KERR, REGIONAL VICE PRESIDENT 58 14 EXTERNAL AFFAIRS, AT&T
15 RAY LANDIS, ADVOCACY MANAGER 67 AARP PENNSYLVANIA 16 GERARD KEEGAN, SENIOR DIRECTOR 73 17 STATE LEGISLATIVE AFFAIRS CTIA, THE WIRELESS ASSOCIATION 18 JAMES M. D ’INNOCENZO, VICE PRESIDENT 86 19 STATE GOVERNMENT, LEGISLATIVE, AND REGULATORY AFFAIRS, PA/OH, COMCAST 20 BETH CHOROSER, EXECUTIVE DIRECTOR 90 21 REGULATORY AFFAIRS, LEGAL REGULATORY DEPARTMENT, COMCAST 22 TANYA MCCLOSKEY 102 23 ACTING CONSUMER ADVOCATE PA OFFICE OF CONSUMER ADVOCATE 24 CLOSING REMARKS 112 25 4 1 SUBMITTED WRITTEN TESTIMONY
2 WINDSTREAM 3 FRONTIER COMMUNICATIONS 4 CONSOLIDATED COMMUNICATIONS 5 T-MOBILE 6 BROADBAND CABLE ASSOCIATION OF PENNSYLVANIA 7 PENNSYLVANIA COALITION AGAINST DOMESTIC 8 VIOLENCE
9 (See submitted written testimony 10 and handouts online.) 11
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25 5 1 P R O C E E D I N G S
2 MAJORITY CHAIRMAN GODSHALL: Good
3 afternoon. The hour of 1 o ’clock having
4 arrived, I’d like to call the meeting to
5 order. This is a hearing on House Bill 1417.
6 The hearing is being recorded.
7 And I’d like to get started by
8 having the members introduce themselves very
9 quickly. Formal roll call is not necessary.
10 We will start over here on the far side.
11 REPRESENTATIVE NEUMAN:
12 Representative Brandon Neuman, from Washington
13 County.
14 REPRESENTATIVE BIZZARRO:
15 Representative Ryan Bizzarro, 3rd District,
16 Erie County.
17 REPRESENTATIVE FLYNN:
18 Representative Marty Flynn, 113th District,
19 Lackawanna County.
20 REPRESENTATIVE SCHWEYER:
21 Representative Peter Schweyer, 22nd District,
22 Lehigh County.
23 REPRESENTATIVE SNYDER:
24 Representative Pam Snyder, 50th District,
25 Greene County. 6 1 REPRESENTATIVE LONGIETTI:
2 Representative Mark Longietti, 7th District,
3 from Mercer County.
4 REPRESENTATIVE PICKETT:
5 Representative Tina Pickett, Bradford,
6 Sullivan, and Susquehanna County.
7 REPRESENTATIVE QUIGLEY:
8 Representative Tom Quigley, 146th District, in
9 Montgomery County.
10 REPRESENTATIVE EVANKOVICH: Eli
11 Evankovich, representing the best parts of
12 Westmoreland and Allegheny counties.
13 REPRESENTATIVE TOEPEL: Marcy
14 Toepel, 147th District, Montgomery County.
15 REPRESENTATIVE DIGIROLAMO: Gene
16 DiGirolamo, 18th, Bucks County.
17 REPRESENTATIVE KILLION: Tom
18 Killion, Delaware County, 168th District.
19 REPRESENTATIVE DAVIS: Afternoon.
20 Tina Davis, Bucks County.
21 REPRESENTATIVE MAJOR: State
22 Representative Sandy Major, Susquehanna and
23 Wayne County, and one of the prime sponsors of
24 the legislation. Thank you.
25 MAJORITY CHAIRMAN GODSHALL: Bob 7 1 Godshall, Montgomery County.
2 REPRESENTATIVE MATZIE: Rob
3 Matzie, Beaver and Allegheny County.
4 MAJORITY CHAIRMAN GODSHALL: Want
5 to thank you for your attendance. We have a
6 real good attendance with the legislators here
7 today.
8 House Bill 1417 requires the PUC
9 to undertake a full investigation of the
10 Pennsylvania Universal Service Fund and
11 maintains the fund in its current form until
12 January 1st, 2022.
13 The Pennsylvania Universal Service
14 Fund provides support to rural incumbent
15 telecommunications carriers with the intent of
16 keeping basic telephone service affordable to
17 consumers in high-cost-of-service areas.
18 We have a very full agenda today,
19 and I ask the presenters to keep their
20 comments within the fifteen-minute time limit
21 provided. We will be holding up signs,
22 verifying when you have five minutes and one
23 minute time remaining when time will be up.
24 I also ask the members to be aware
25 of the full agenda and our time constraints 8 1 when asking questions. If you have questions
2 that we don’t get to today, please contact my
3 staff and they will be happy to contact the
4 presenters with additional questions and
5 provide responses to the committee.
6 I’d like to -- my co-chairman
7 today is Representative Matzie. I’d like to
8 offer him time at this point.
9 ACTING MINORITY CHAIRMAN MATZIE:
10 Considering your time restraints, I’ll keep my
11 comments very brief.
12 Thank you, Mr. Chairman, for the
13 opportunity. Look forward to a learning
14 experience here today with this full agenda.
15 But, real quickly, just want to
16 publicly welcome back our executive director,
17 Beth Rosentel, who was out on maternity leave,
18 after giving birth to a beautiful, little baby
19 girl. So, we’re happy she’s back in the fold
20 with us over here on the Consumer Affairs
21 Committee.
22 So, welcome back, Beth.
23 MAJORITY CHAIRMAN GODSHALL: At
24 this time, I’d like to -- there’s going to be
25 a small change, a minor change in the agenda. 9 1 BCAP is unable to testify today, but its
2 comments will be entered into the record.
3 Comcast’s presentation will be moved into the
4 agenda time slot reserved for BCAP, and the
5 remainder of the agenda is unchanged.
6 At this time, we have the first
7 presenter, the Rural Local Exchange Company
8 panel, Tom Bailey, from CenturyLink; Steven
9 Tourje, from Northeastern Telephone Company;
10 and Gary Zingaretti, ICORE Consulting, LLC.
11 And they have been granted a little bit of
12 extra time because they have three -- there’s
13 three companies, and they have requested
14 individual time slots. We combined that into
15 one, so we’re going to be allowing you the
16 extra time over the fifteen minutes but about
17 five minutes extra. So, that will be up to
18 you.
19 Gentlemen, it’s up to you,
20 whenever you’re ready. Please identify
21 yourself when you start.
22 MR. TOURJE: Good afternoon,
23 Chairman Godshall and members of the House
24 Consumer Affairs Committee.
25 My name is Steven Tourje, and I am 10 1 president and chief executive officer of the
2 Northeastern Pennsylvania Telephone Company, a
3 small, rural, local exchange carrier
4 headquartered in Forest City, Pennsylvania.
5 Our company was founded in 1900 and currently
6 offers landline phone, television, Internet,
7 and wireless services to residential and
8 business customers in a 520-square-mile
9 service territory, covering parts of
10 Susquehanna, Wayne, and Lackawanna counties.
11 We currently serve 8,620 landline phone
12 customers.
13 House Bill 1417 is not about rural
14 telephone companies. It’s all about rural
15 telephone customers. NEP and the other
16 Pennsylvania Telephone Association member
17 companies are good at serving rural customers.
18 We've been doing it for more than a century.
19 But times are changing, and we've had to
20 change with them in order to ensure that our
21 customers will continue to receive affordable
22 landline service.
23 Just like my colleagues in the
24 PTA, we are the carriers of last resort, which
25 means that anyone, anywhere in our service 11 1 territory who requests landline service from
2 us is delivered service. We are the only
3 segment of the telecommunications industry
4 which is bound by that contract, and House
5 Bill 1417 statutorily binds us to that
6 commitment going forward.
7 While some carriers enjoy an
8 unregulated or lesser-regulated environment
9 and are free to serve customers where it makes
10 economic sense, NEP and the rest of the RLECs
11 serve rural, high-cost, uneconomic areas in
12 the commonwealth. And those areas are
13 becoming more uneconomic and higher cost even
14 as we speak.
15 With all of the changes occurring
16 at the federal level with regard to access
17 charge reform and re-tasking the federal
18 Universal Service Fund away from traditional
19 landline service, the carrier-of-last-resort
20 commitment contained in Representative Major’s
21 and Representative Hanna’s bill is only
22 possible if the Pennsylvania Universal Service
23 Fund is maintained in its current form. If
24 the PA USF decreases or is eliminated
25 altogether, Pennsylvania’s RLECs face the 12 1 unevitable proposition of having to move basic
2 rates closer to costs or making other cost-
3 saving changes which we fear will negatively
4 impact rural customers. In fact, it is very
5 possible that some RLECs could find themselves
6 in an unsustainable financial predicament,
7 which could ultimately negatively impact the
8 quality and attractiveness of living in a
9 rural areas.
10 You will undoubtedly hear that
11 House Bill 1417's extension of the PA USF is
12 unwarranted because the RLECs have fewer
13 landline customers than they did when the fund
14 was created and are losing landline customers
15 every year. Both statements are true.
16 What you may not hear is that NEP
17 and our RLEC colleagues continue to be
18 responsible for maintaining our entire
19 network, regardless of whether there is a
20 customer at the end of the line or not.
21 One logical response to that last
22 statement is, Why don't we just get rid of the
23 PA USF, absolve you of your carrier-of-last-
24 resort responsibilities, and let the chips
25 fall where they may? From a public policy 13 1 perspective, I could caution that such a move
2 in our very rural state would put numerous
3 rural customers at risk.
4 We have universal, affordable
5 landline service, thanks to the PA USF. We
6 have universal broadband, thanks to Act 183.
7 The university ends there. We may get there
8 at some point with wireless service or some
9 other technology, but, today, landline service
10 is crucial not only to Pennsylvania’s rural
11 residents but to the operation of other
12 networks as well. For example, you need my
13 network to complete wireless calls. The
14 backbone infrastructure of today’s
15 telecommunications network relies, to one
16 degree or another, on the traditional landline
17 network. And that network is reasonably
18 priced because of support mechanism like the
19 PA USF.
20 Let’s talk a little bit about what
21 House Bill 1417 does and what it doesn’t do.
22 I mentioned that House Bill 1417 binds the
23 RLECs. That is an accurate term, which
24 provides a favorable environment for
25 customers, in that customer complaint 14 1 provisions currently in place remain. I would
2 also note that the Pennsylvania Public Utility
3 Commission recently improved its website to
4 make it easier for consumers to review
5 complaints against all regulated utilities,
6 including rural telephone companies.
7 In addition to preserving the
8 customer’s complaint provisions currently in
9 the Public Utility Code, all current filings
10 and reporting requirements in regulation
11 remain in place. Reports addressing universal
12 service, network modernization, and customer
13 service reports must all continue to be filed
14 by RLECs, as they are today, under the
15 provisions of HB 1417.
16 With regard to carrier-of-last-
17 resort obligations, House Bill 1417 institutes
18 a definition of "basic calling service,” which
19 specifically excludes wireless service. In
20 order for a rural telco to receive PA USF
21 proceeds, it must provide basic calling
22 service throughout its service territory,
23 pursuant to the Public Utility Code.
24 Additionally, any RLECs receiving
25 PA USF proceeds is prohibited from declaring 15 1 any portion of its service territory as
2 competitive and consequently subject to lesser
3 regulations by the commission.
4 From a transparency perspective,
5 the legislation makes the names of both
6 recipients from and contributors to the fund
7 subject to the provisions of Pennsylvania’s
8 Right-to-Know Law.
9 I have talked about the importance
10 of the PA USF to Pennsylvania rural customers,
11 but what do we do with the fund going forward?
12 No one testifying here today, nor anyone who
13 pays close attention to the telecommunications
14 world, believes that this is a static
15 environment.
16 House Bill 1417 charges the PUC
17 with undertaking a formal investigation, where
18 all parties are welcome to make their
19 perspectives known.
20 The first directive of the
21 investigation is a determination of whether
22 continuation of the fund is necessary to
23 maintain reasonable RLEC rates for customers.
24 If the commission determines that the fund is
25 necessary, it is directed to examine the 16 1 appropriate base of fund contributors -
2 MAJORITY CHAIRMAN GODSHALL:
3 Excuse me. You're going to have to sum up.
4 MR. TOURJE: Okay.
5 MAJORITY CHAIRMAN GODSHALL:
6 Because you've got two more people to come on,
7 and you've got a time limit.
8 MR. TOURJE: Will do.
9 The FCC recognizes this fact in a
10 recent order on the matter, saying that states
11 have an important role to play in advancing
12 universal service goals. We welcome and
13 encourage states to supplement our federal
14 funding, whether through state Universal
15 Service Funds or other mechanisms.
16 In summary, the passage of House
17 Bill 1417 is critical to Pennsylvania rural
18 telephone customers that continue to enjoy the
19 benefits of reasonable priced basic landline
20 service, and all Pennsylvanians are to benefit
21 from a reliable landline infrastructure in the
22 coming years.
23 Chairman Godshall and committee
24 members, thank you for this opportunity, and
25 we'd be welcome to answer any questions you 17 1 may have.
2 MAJORITY CHAIRMAN GODSHALL: We
3 all have your full statements, all the
4 members. So -- but we’re going to have to
5 hold to the time limits. Thank you.
6 Go ahead.
7 MR. BAILEY: Good afternoon,
8 Chairman Godshall.
9 Am I on?
10 Good afternoon, Chairman Godshall,
11 Chairman Matzie, and members of the House
12 Consumer Affairs Committee.
13 My name is Tom Bailey. I work
14 with CenturyLink, one of the rural telephone
15 companies in Pennsylvania. Thank you for the
16 opportunity to testify on behalf of
17 CenturyLink and the other rural Pennsylvania
18 telephone companies in support of House Bill
19 14 17.
20 In the interest of time, I will
21 summarize the major points I want to make.
22 First, I would like to say again
23 that this bill is not about rural telephone
24 companies but about the public policy of
25 providing a basic calling service at 18 1 reasonable rates in rural, high-cost areas of
2 Pennsylvania. All rural telephone companies
3 serve these areas today. Larger, rural
4 telephone companies just have more of these
5 areas to serve.
6 Rural, high-cost customers have
7 never had to pay the full cost to providing
8 service to their area. They typically paid an
9 average cost that was supported by funding
10 from other sources, such as the Pennsylvania
11 Universal Service Fund. The cost of providing
12 reasonable -- the cost is the primary reason
13 that competitors have not chosen to offer
14 service in most of the rural areas. Landline
15 competitors have an economic business decision
16 to make to determine where they offer their
17 service. Low customer density areas are the
18 most costly areas to serve.
19 That being said, I’d just like to
20 state a few facts here. In CenturyLink’s
21 service area, we have about 53 housing units
22 per square mile. In our service territory,
23 landline competitors serve a specific area,
24 and in their area, they serve about 88
25 households per square mile. The telling issue 19 1 is that in the areas that they don't serve,
2 there are only about 15 households per square
3 mile. So, there's an area in all the rural
4 telephone companies that most competitors have
5 chosen not to serve because it's uneconomical.
6 Basically, the landline competitors cherry
7 pick the most densely populated areas, while
8 leaving the rural areas to be included in the
9 local telephone company's 100 percent service
10 coverage.
11 Simply stated, while CenturyLink
12 serves 5,741 square miles, our landline
13 competitors serve just over 50 percent of our
14 landline service area.
15 It should be also noted that where
16 our competitors do serve, provide service,
17 most of them use our infrastructure to provide
18 service to their customers.
19 The Pennsylvania Universal Service
20 Fund is critical to the customers in the many
21 rural areas of Pennsylvania, because many of
22 these customers have no or limited competitive
23 choice. A reduction of the PA Universal
24 Service Fund for any of the rural telephone
25 companies will have a direct impact on that 20 1 company’s rural customer rates and/or
2 s ervices.
3 In summary, the bill would continue
4 the basic local service provided today in all
5 the rural telephone company’s areas at
6 reasonable rates for the duration of the bill,
7 which would be 2021. During that time, the
8 Public Utility Commission would still have
9 oversight over both basic local service rates
10 and the PA Universal Service Fund. And during
11 that time, the Pennsylvania Universal Service
12 Fund would be reviewed by the Public Utility
13 Commission, in an on-the-record hearing, to
14 determine what the future of the Pennsylvania
15 service fund would be after December 31st,
16 2021.
17 Again, Chairman Godshall, Chairman
18 Matzie, and the Consumer Affairs Committee,
19 thank you very much for allowing me to provide
20 this testimony.
21 MR. ZINGARETTI: First, I’d like
22 to thank Chairman Godshall, Chairman Matzie,
23 and the members of the House Consumer Affairs
24 Committee for the opportunity to speak today.
25 My name is Gary Zingaretti. I’m 21 1 senior vice president of ICORE Consulting,
2 headquartered here in Pennsylvania. We are a
3 regulatory consulting firm specializing in
4 rural LEC issues.
5 I've got 29 years experience doing
6 this, which, unfortunately, means I was part
7 of the global proceeding that the Pennsylvania
8 USF began from. But I'm also an elected
9 supervisor in a municipality of 30 people per
10 square mile, so I understand why the fund's in
11 place, and I understand why it's important to
12 rural customers.
13 The purpose of my testimony is to
14 provide an overview of the recent FCC action
15 and hopefully illustrate that, because of
16 those actions, passing of House Bill 1417 is
17 crucial for rural consumers.
18 November 2011, the FCC really
19 changed the communications landscape.
20 Intercarrier compensation charges, which made
21 up a significant portion of LEC revenues, are
22 migrating to what they call "bill and keep”
23 scenario. "Bill and keep" is just a nice name
24 for: You're not allowed to charged anything
25 to terminate those calls. 22 1 Intercarrier compensation and
2 settlements, which typically made up 60 to 70
3 percent of the RLECs revenues, are under
4 mandatory annual reductions. For the largest
5 companies, they reduce 10 percent per year;
6 for the smallest, they reduce 5 percent per
7 year. And that’s regardless of the levels of
8 demand for their services. It’s an automatic
9 reduction regardless.
10 So, a hundred dollars of 2011
11 revenue for the smallest companies, by the
12 time we get to 2020, is only 63 dollars. A
13 hundred dollars for the larger companies is
14 only 39 dollars under those reductions.
15 At the same time, the FCC called
16 for additional broadband deployment in the
17 order. So, we kind of summarized that as, you
18 know, having to do more with less, which was
19 part of what the FCC has done through this
20 moving broadband target. I call it a moving
21 target because it started out as 4-megabits-
22 per-second download, 1-megabit-per-second
23 upload, upstream. And within a year, it was
24 updated to be 10:1 rather than 4:1. And there
25 are other FCC documents already referencing 25 23 1 down, 3 meg up.
2 All this moving target means is
3 there’s going to be additional investment
4 required by the RLECs. To fund this, the FCC
5 is looking at their version of a model-based
6 support, even for the smallest of the RLECs.
7 And surely there’s going to be winners and
8 losers within that. But the small LEC -
9 small RLEC average reduction in revenues is 60
10 percent from where they started. So, you’re
11 ending up with lack of resources to provide
12 broadband and still satisfy the voice caller
13 obligation.
14 So, how do we do this? How do we
15 provide broadband? Pennsylvania USF is a
16 critical component. USF, in general, is a
17 good public policy to ensure affordable rates.
18 If it wasn’t a good public policy, there’s 4.5
19 billion dollars in federal support that could
20 be reallocated to other initiatives.
21 If the PA USF were eliminated or
22 reduced, the RLECs would face difficult
23 choices. Obviously, decreasing expenses is
24 one. Many have already gone through that, if
25 not all. Raising rates is a complex issue in 24 1 an environment where some of your territory is
2 monopoly and some of it is subject to
3 competition. The end result of all this,
4 though, is that you end up with -- the term
5 that I'm using is an "unhealthy incumbent."
6 And while some may say, "That's okay. That's
7 just a function of competition. You're going
8 to have companies that survive and those that
9 don't," but it's not necessarily just the
10 competition. It's the regulatory issues that
11 are in play and driving that competition.
12 From a wholesale perspective, it's
13 important to note that all of our competitors
14 use our infrastructure in one way, shape, or
15 form, whether it's Voice over IP or whether
16 it's connected to telephone poles, they use
17 our network. And if an unhealthy incumbent
18 would not have the availability of funds to
19 increase and improve that infrastructure,
20 you're going to end up with unhealthy
21 competition.
22 The other important thing to note
23 is that the build-out of broadband is
24 something that's in the rural company's DNA.
25 They accept the support. They build out the 25 1 network. And they provide the services that
2 they’re required to provide.
3 There are other here
4 today who would take part of that 4.5 billion
5 dollar fund who may be opposed to extending
6 the Pennsylvania Universal Service Fund.
7 Again, I would point out, Pennsylvania RLECs
8 walk the walk and talk the talk. They take
9 the money, and they build the network. And
10 their message is consistent. They do have
11 significant at-risk revenues, the access -
12 the federal USF, the state USF.
13 So, I guess, in conclusion, I’d
14 kind of say that if we move to a scenario
15 where there is a financially impaired RLEC who
16 has questionable long-term survivability and a
17 continued carrier-of-last-resort obligation,
18 and, even worse, large portions of their
19 community where there is no competition, what
20 happens to those rural customers in that
21 scenario? And we hope that the passage of
22 House Bill 1417 would solidify one area where
23 the RLECs are otherwise at risk.
24 I’d like to thank the committee
25 for the opportunity to speak today, and if you 26 1 have any questions, we’d be glad to take them.
2 MAJORITY CHAIRMAN GODSHALL:
3 Chairman Matzie.
4 ACTING MINORITY CHAIRMAN MATZIE:
5 I don’t have a question.
6 MAJORITY CHAIRMAN GODSHALL:
7 Representative Pickett.
8 REPRESENTATIVE PICKETT: I’m
9 sorry. I didn’t catch that.
10 This sound to me a little bit like
11 the PREA stories from many years, the rural
12 electric stories of if there’s any population
13 at all, in moves a company that will service
14 it, but it’s not going to be the areas that
15 have very small population.
16 So, I just want everybody to know
17 that I can still travel a good 20 minutes in
18 any direction in my district and have
19 absolutely no cell service. I have one small
20 bar at my house. I do kind of live around
21 several other homes in a small populated
22 areas.
23 When I hear from people and this
24 discussion comes up, I hear from people who
25 are very concerned about the quality of the 27 1 medical services. We're doing a lot of
2 medical services in homes these days. Keeps
3 people from having to travel to facilities for
4 a routine check on what's going on with their
5 health and so forth. That's very important.
6 Can't do that without good, consistent,
7 quality service from the phone.
8 I question what this does to a lot
9 of the small businesses that are tucked back
10 in the rural areas that do a lot of -- a lot
11 of business over the Internet, students who
12 need the Internet, homes that need those
13 landline phones as their only resort for any
14 kind of phone service at all, and, of course,
15 our farms. We have a lot of farms. We're,
16 depending on who you talk to, number two or
17 number three in agriculture up in the north in
18 my main county of Bradford.
19 So, this is really a concern to a
20 lot of people in my area.
21 So, I've made a statement about
22 all of that, but one question, Mr. Chairman,
23 if I may, goes to, you made a statement about
24 15 per square mile is kind of the smallest
25 territory that's going to be covered but has 28 1 to be covered as a last resort territory;
2 nobody else is coming there.
3 So, let’s just say that drops to
4 ten phones per that square mile. Do your
5 costs go down? And how much do they go down?
6 MR. BAILEY: Well, there are areas
7 where we have ten and under per square mile.
8 We continue to serve those areas, and we
9 charge the same rates to those customers that
10 we do the other customers. We charge average
11 rates today. We don’t charge the customer
12 based on cost.
13 REPRESENTATIVE PICKETT: And
14 that’s the cost to the customer. How about
15 the cost to you?
16 MR. BAILEY: The less dense areas
17 have the higher cost, because it costs a
18 certain amount to get to the customer. If you
19 only have five customers or six customers in a
20 mile of service, it’s more expensive. If you
21 had 20 customers, you can divide and average
22 the cost.
23 So, yes, the less customers, the
24 higher the cost of service.
25 REPRESENTATIVE PICKETT: Thank you 29 1 so much.
2 And we have a lot of those rolling
3 mountains in my area. Another one of the
4 issues.
5 So, thank you so much.
6 I appreciate the chance to ask a
7 question, Mr. Chairman.
8 MAJORITY CHAIRMAN GODSHALL:
9 Representative Major.
10 REPRESENTATIVE MAJOR: Thank you,
11 Mr. Chairman.
12 And good afternoon. I thank you
13 gentlemen for being here today to testify on
14 the legislation.
15 I think Representative Pickett was
16 hitting home pretty close to the discussion
17 that I wanted to have today, too. And, you
18 know, actually the cost that you see as you,
19 as rural providers, as you’ve been there for
20 generations, providing that service, going out
21 to those rural customers, can you give us a
22 breakdown? What is the actual cost for you to
23 provide the service as opposed to what you
24 charge your customer? Because I know you’re
25 not really making up what you’re, in fact -- 30 1 or what your customer's actually paying.
2 MR. BAILEY: That could be a very
3 difficult question, depending on what area
4 you're servicing.
5 The point we really didn't talk
6 about either is the fact that we serve 100
7 percent of the network. We have a network
8 that serves all of our customers. We have
9 approximately 30 percent of our customers
10 today that we still serve. The competitors
11 have taken about 70 percent. And those 30
12 percent are typically in those long -- those
13 far, end-of-the-line rural areas that are
14 uneconomic to serve.
15 So, I don't have a number per se,
16 depending on what area you might be in, but
17 the averages continue to go up. Our average
18 cost per customer increases every time we lose
19 customers, because the cost to keep that
20 network going is spread across a smaller
21 number.
22 And so, that's why it's so
23 significant that the Universal Service Fund
24 continue for an interim period here, with
25 competition and things in a flux. And 31 1 technology’s in a flux as well.
2 So, I -- but I don’t have a cost.
3 I can get you some kind of costing, if
4 you’d -
5 REPRESENTATIVE MAJOR: I’d
6 appreciate that.
7 I just want to say, it’s
8 interesting. Just last week I had a
9 constituent who was new to the Wayne County
10 part of my district and had contact -- I guess
11 this individual works from home and does a lot
12 of Internet work from home. And as people are
13 moving into our rural areas, they certainly
14 appreciate the ruralness of the area. They
15 neglect to realize that the services, the
16 services that they take for granted in those
17 urban areas, might not be readily available.
18 So, I want to say thank you and
19 applaud you for the job that you’re doing to
20 try to get those services out to those folks
21 in the rural areas. Because I hear about it.
22 They see all the advertising but yet they
23 don’t realize they might not be able to access
24 it in those rural areas.
25 So, thank you for your testimony 32 1 today.
2 MAJORITY CHAIRMAN GODSHALL: Thank
3 you, gentlemen. Appreciate your attendance.
4 We may have more questions coming later on,
5 which we’ll ask you to answer by e-mail or
6 whatever.
7 So, thank you very much for your
8 testimony.
9 At this time, I’ d like to call the
10 esteemed chairman of the Pennsylvania Public
11 Utility Commission, Gladys Brown.
12 CHAIRMAN BROWN: Thank you,
13 Chairman Godshall.
14 Greetings to members of the House
15 Consumer Affairs Committee.
16 It is truly a pleasure to be able
17 to come before you today to testify on behalf
18 of the commission about House Bill 1417.
19 Universal service is an important
20 consumer issue and very important to us. We
21 take it very seriously.
22 At the core, universal service is
23 about helping more people afford basic
24 telephone service, especially in high-cost,
25 rural areas. Without our state funds, service 33 1 might be unavailable to some consumers or
2 rates could be even far higher.
3 Pennsylvania's Universal Service
4 Fund was created by the commission in 1999.
5 And this legislation codifies what the
6 commission first established. So, we are very
7 appreciative of that and the fact that the
8 legislation is reaffirming the efforts of the
9 commission.
10 So, I'm assuming it would not be a
11 surprise to you if I came out and said that we
12 are supportive of this legislation.
13 I would like to just point out
14 some of the specific reasons as to why we are
15 supportive of this legislation.
16 First, it provides stability and
17 certainty to consumers and telecommunications
18 companies, preserving our Universal Service
19 Fund through January 1st, 2020.
20 Second, it continues to focus
21 support on the state's carriers of last
22 resort, the 32 carriers across the state
23 required to provide service to all consumers
24 in their service territory at just and
25 reasonable rates. 34 1 Third, the scope of the carriers
2 who contribute to this fund will not change.
3 And I think you heard that before in the
4 previous testifiers. The fund will continue
5 to be supported by contributions from Verizon
6 and about 245 other carriers.
7 Fourth, the service supported by
8 the fund remains the same -- it’s voice
9 service -- while also directing the commission
10 to conduct an investigation into future needs.
11 Fifth, the legislation provides
12 certainty to rural local exchange carriers, or
13 RLECs, at a time of uncertainty in the
14 industry and rapidly changing technology,
15 underscoring the importance of continuing
16 these services while also encouraging the
17 investments needed to move forward.
18 Lastly, the legislation looks to
19 the future. It directs the commission to
20 initiate an investigation to address changes
21 that will occur over the next five years and
22 to whether the fund and -- whether to continue
23 the fund, and if so, how to accomplish that.
24 So, those are the reasons why we
25 support it. But I know, putting on my old 35 1 legislative hat, our staff also looked at the
2 legislation in its entirety and looked at some
3 things that maybe you want to consider. We
4 are very respectful of the legislative
5 process, but we just want to serve as a
6 resource to you and point out some things in
7 terms of suggestions.
8 So, there are a few suggestions
9 that we wanted to point out to the committee
10 maybe when they’re looking at the legislation
11 they want to examine, primarily in the areas
12 where federal policy regarding voice and
13 broadband affects our rural carriers. This is
14 very important because our rural carriers must
15 comply with these federal mandates on voice,
16 broadband speeds, service quality, and
17 customer -- and customer requests for
18 broadband or lose that support.
19 So, in looking at the scope and
20 the purpose of the legislation, the limited
21 focus on basic voice service in this
22 legislation contrasts with the federal law and
23 policy, which quickly is moving toward a
24 life-line program for broadband for low income
25 customers. By limiting our law to basic voice 36 1 alone and then only in rural carrier areas, we
2 deny support for low income customers in all
3 regions of Pennsylvania even as we pay to
4 support those services in other states.
5 A revision instructing the
6 commission to investigate to address how to
7 implement a state fund consistent with federal
8 law would resolve this, ensuring availability
9 in rural Pennsylvania, as well as all regions
10 of Pennsylvania, including a broadband life
11 line when that occurs under federal law.
12 Secondly, we wanted to look at -
13 looking at the consistency between federal law
14 and policy, the scope of the federal fund is
15 growing to support not only basic voice, as
16 the legislation proposes, but also broadband
17 services. So, we must keep in mind the
18 following two points.
19 Pennsylvania's rural carriers are
20 net recipients to the federal fund, meaning
21 they get back more than what they pay in.
22 Equally important, Pennsylvania's overall a
23 net contributor to the federal fund, meaning
24 they pay in more to it than we get back.
25 A reduction in federal support 37 1 because our state law does not expect carriers
2 to comply with federal law and policy will
3 increase our net contributions to the federal
4 fund, benefiting other states, while we get
5 limited support for basic service and nothing
6 for broadband service.
7 The legislation can avoid this
8 imbalance by expressly mentioning support for
9 broadband and directing the commission to
10 address it during the investigation.
11 The third area is the contribution
12 base. The higher requirement for broadband
13 speed means that more network investment will
14 be required in the coming years, something
15 which can be challenging for Pennsylvania’s
16 rural carriers . More support may be needed
17 for the rural carrier fund either in the near
18 future or after 2021.
19 The Pennsylvania law can preserve
20 the basic voice-only service, along with the
21 current funding limits of the rural fund, from
22 now through 2021, but this runs the risk that
23 rural carriers lose federal support.
24 Alternatively, the legislation
25 could direct the commission to consider 38 1 whether to expand the base of contributions to
2 include all providers of telecommunications or
3 service equivalent to telecommunications,
4 including mobile service and all VoIP
5
6 federal law while ensuring that there is
7 adequate revenue to sustain the state fund.
8 Looking at the issue of auditing,
9 the current life-line program for low income
10 consumers to purchase voice service has been
11 tallied as a model of success but has also
12 been because of concerns about
13 waste and abuse. The Pennsylvania universal
14 service could be strengthened by adding a
15 provision giving the commission the authority
16 to conduct audits of contributors, recipients,
17 and carriers involved in the state’s Universal
18 Service Fund.
19 The commission staff has years of
20 experience and expertise conducting audits in
21 the energy, electric, transportation, and
22 water industries, and that expertise could be
23 put to use to further the purpose of the state
24 Universal Service Fund under this bill.
25 Finally, I just wanted to point 39 1 out that it would be helpful if this
2 legislation directed the commission's
3 investigation to include, but not limited to,
4 a number of key issues which I've already
5 stated, but the one thing that I have not
6 stated was the issue of the sunset provision.
7 The proposed sunset provision is
8 probably unnecessary, as our staff looks at
9 it, and it could undermine some final order or
10 future rule making because of the fact that
11 the legislation directs us to have an
12 investigation, looking into what we would do
13 after 2021. So, with that, with the
14 recommendations and to implement that, it may
15 go past the sunset period. So, that was some
16 of the concerns that our staff looked at.
17 So, as I stated before, the
18 commission is supportive of this legislation.
19 And I am here to answer any questions that you
20 may have.
21 MAJORITY CHAIRMAN GODSHALL:
22 Representative Pickett.
23 REPRESENTATIVE PICKETT: I may
24 have missed this, Commissioner, in your
25 testimony, but the date that you would start 40 1 that study, is it -- if this were to be
2 passed, is that immediate?
3 CHAIRMAN BROWN: I don’t know that
4 it sets a specific date, but it says, you
5 know, we would start an investigation and
6 have, I guess, recommendations by a certain
7 date, which is, I think, January 1st, 2021,
8 has to be completed by that date.
9 REPRESENTATIVE PICKETT: Okay.
10 Thank you.
11 MAJORITY CHAIRMAN GODSHALL: No
12 further questions.
13 I do want to thank you for your
14 testimony, and I know you summarized.
15 CHAIRMAN BROWN: I stayed within
16 the time period.
17 MAJORITY CHAIRMAN GODSHALL: I
18 read this yesterday, so -- when everybody else
19 was watching the baseball game, you know, I
20 went through this. And, you know, it was
21 thorough, and I do appreciate your remarks.
22 Thank you very much.
23 CHAIRMAN BROWN: Thank you.
24 MAJORITY CHAIRMAN GODSHALL: Next
25 we have Frank Buzydlowski, from Verizon. 41 1 MR. BUZYDLOWSKI: Good afternoon,
2 Chairman Godshall and Chairman Matzie and
3 members of the committee.
4 On behalf of Verizon, I thank you
5 for the opportunity to present our views on
6 House Bill 1417.
7 Verizon believes that this bill,
8 as currently drafted, is not in the best
9 interest of all Pennsylvania consumers. This
10 legislation removes discretion from the Public
11 Utility Commission over its existing universal
12 service regulations and guarantees to the
13 RLECs millions of dollars in yearly payments
14 for at least the next six and half years.
15 It is important to note at the
16 outset that this is not free money. This
17 money comes from your constituents who pay a
18 Verizon landline bill and from your
19 constituents who have a landline from any
20 other telephone service provider, such as our
21 competitor Comcast and many others. And some
22 of them will be testifying this afternoon.
23 Essentially, this bill has three
24 parts. First, it freezes in place, until
25 January of 2022, an existing PUC-created 42 1 mechanism under which regulated wireline
2 companies transfer about 34 million dollars a
3 year to the RLECs. This mechanism has already
4 been in place much longer than the PUC
5 originally intended. The practical effect of
6 this proposed legislated extension is to take
7 away the power of the PUC to review and
8 modernize this funding system that the
9 commission has already recognized as being
10 flawed.
11 House Bill 1417 would force other
12 carriers' customers — as I mentioned Verizon,
13 Comcast, and others — to pay the RLECs over
14 200 million dollars over the next
15 six-and-a-half-year proposed extension period,
16 with no requirement that any recipient of
17 these funds demonstrate a need for the money
18 or show that it is used to benefit consumers.
19 Second, House Bill 1417 requires
20 the PUC to open an investigation to decide
21 whether to continue this annual revenue
22 transfer in 2022 and beyond and possibly to
23 increase it by taxing new taxes, that is, your
24 constituents' cell phones and other new and
25 emergency technologies that the PUC does not 43 1 regulate.
2 Third, this bill clarifies that
3 the RLECs will not pay the 5 percent state
4 gross receipts tax on the revenue they receive
5 from the fund. The bill assumes that these
6 revenues are needed to enable every RLEC to
7 continue to provide landline telephone service
8 and would lock in a revenue transfer mechanism
9 for a total of over 22 years without any
10 review demonstration of need by the individual
11 company -- recipient companies or a showing of
12 how the moneys are spent.
13 To put this proposal in context,
14 it is important to understand the history of
15 the fund that House Bill 1417 seeks to keep in
16 place until 2022 and beyond.
17 In 1999, the PUC required all
18 ILECs to reduce rates for switched access.
19 Those are the charges that long distance
20 companies pay the local exchange carriers.
21 But rather than require the RLECs to offset
22 the revenue loss through increased retail
23 rates or other price cap plan adjustments, as
24 it did with Verizon, the PUC, instead, created
25 a mechanism for the RLECs to collect money 44 1 directly from other regulated telephone
2 companies.
3 The PUC described the process as
4 follows, and I quote: Although it is referred
5 to as a fund, it is actually a pass-through
6 mechanism to facilitate the transition from a
7 monopoly environment to a competitive
8 environment, an exchange of revenue between
9 telephone companies, which attempts to
10 equalize the revenue deficits occasioned by
11 mandated decreases in their toll and access
12 charges. Closed quote.
13 The revenue transfer was supposed
14 to be only an interim transition mechanism to
15 allow the RLECs more time to alter their
16 business plans to meet increasingly
17 competitive conditions. And it was set to end
18 after three years. But the PUC has allowed it
19 to continue and never materially altered it.
20 Over the past 15 years, the RLECs
21 have collected 32 to 34 million dollars every
22 year through this tax on other telephone
23 companies. Since this, quote, temporary
24 revenue transfer began, companies such as
25 Verizon have paid the RLECs about a half 45 1 billion dollars, while the RLECs have not been
2 required to demonstrate a need for the money
3 or even to report on how the funding was being
4 spent to ensure universal service.
5 And considering this proposal to
6 keep the existing fund in place without the
7 ability to change it for more than six years,
8 the committee should be aware of the flaws in
9 the present funding mechanism.
10 The fund has outlived its
11 reasonableness as a simple revenue replacement
12 and is now providing a large subsidy to the
13 RLECs. And because it was never intended to
14 last as long as it has, this funding mechanism
15 does not account for the effect over time on
16 this guaranteed revenue stream. For example,
17 retail landlines for incumbent carriers in the
18 commonwealth has shrunk approximately 65
19 percent since 2000, and most of you in this
20 room can evidence that by those who dropped
21 their landlines and replaced it with wireless.
22 So, a 32-million-dollar retail rate increase
23 in 2000 would likely be yielding only 11
24 million dollars, not 32 million, a number that
25 would continue to shrink as more people 46 1 abandon their landlines.
2 Access rates and volumes have,
3 likewise, declined over the years, with the
4 FCC currently in the process of moving those
5 rates down to zero. Simply put, much of the
6 revenues the fund is, quote, replacing is
7 money the RLECs would not have earned under
8 normal circumstances.
9 Another flaw with what was
10 supposed to have been a temporary funding
11 mechanism is that the need for this funding
12 and how the money is being used have never
13 been thoroughly examined. The formula is
14 distributed in proportion to the specific rate
15 decreases from 15 years ago, not because an
16 individual RLECs has shown that its costs are
17 higher or that any of its customers lack
18 competitive options. Thus, no one knows how
19 much funding is actually needed or if the
20 companies receiving the money are the ones
21 that need it.
22 And, finally, excessive and
23 unexamined universal service funding can harm
24 consumers and competition. Customers of the
25 contributing carriers are harmed to the extent 47 1 that their providers must divert revenue away
2 from their own operations to fund the RLECs
3 operations, thus depriving those carriers of
4 revenues that could be used to improve
5 products or services or networks or to reduce
6 rates.
7 And the committee should not lose
8 sight of the fact that the Pennsylvania RLECs
9 already receive millions of dollars in funding
10 from the federal Universal Service Fund.
11 Consumers fund these federal payments with a
12 fee on their monthly wireline and wireless
13 bills. The average residential household
14 already pays approximately three dollars per
15 month in federal USF fees. Any addition of
16 state funding would increase the burden on
17 citizens who already contribute revenue to the
18 RLECs through the federal USF.
19 For the reasons I’ve presented and
20 that are set forth in more detail in our
21 written testimony, Verizon cannot support this
22 bill in its current form. So, we ask you to
23 remedy the following problems if you move
24 forward.
25 The proposed extension of the 48 1 current fund is too long. Given the long
2 history of what was supposed to be a temporary
3 fund, any extension should not run past
4 January of 2017. Any continuation beyond that
5 date should require a PUC finding of public
6 need.
7 If the PUC is directed to
8 investigate the future of the fund, then it
9 should be required to finish its investigation
10 no later than January 2017, and firm dates
11 should be required for sunset of the existing
12 fund mechanism and implementation of any
13 changes.
14 The PUC should not be permitted to
15 expand the contributing base or size of the
16 fund. In other words, the PUC should not be
17 empowered to tax your constituents cell phones
18 and iPads or any other wireless service or new
19 and emergency -- emerging services and
20 technologies that it does not regulate. And
21 the funding should be limited to supporting
22 the provision of basic voice services for
23 consumers who do not have competitive
24 alternatives.
25 If it renews the fund beyond 49 1 January 1 of 2017, the PUC should be required
2 to renew the continued need for the fund in
3 general and specifically for each individual
4 RLEC at least every three years. The PUC
5 should also be required to incorporate some
6 form of accountability measures to ensure that
7 the funding is used for its intended purpose.
8 In its initial investigation and
9 in each subsequent review, the PUC must have
10 discretion to eliminate or to reduce any
11 carrier’s receipts. The commission should
12 specifically be required to review funding to
13 the larger RLECs.
14 In reviewing each RLEC’s need for
15 support, the PUC should not be limited to
16 revenue received from services regulated by
17 the PUC. The investigation should include a
18 review by the PUC of whether rural
19 telecommunications carriers have reviewed the
20 measures they could take to achieve or
21 maintain financial health while assuring that
22 basic calling service will continue to be
23 available.
24 All contributing carriers should
25 have the option to implement a recovery 50 1 mechanism. The PUC should be required to
2 waive its prohibition on contributing
3 carriers recovering their assessments through
4 customer surcharges.
5 The bill also proposes tax savings
6 for the RLECs by exempting the money they
7 receive from the state USF fund from the state
8 gross receipts tax. Contributing carriers’
9 customers, like those from Verizon, should
10 also be relieved of the double taxation burden
11 relating to the funding mechanism.
12 Given the rapid changes occurring
13 with technology and consumer preferences,
14 there should be a sunset date, at least for
15 the largest RLECs, beyond which the fund
16 cannot continue without reauthorization by the
17 legislature.
18 Thank you for this opportunity to
19 appear before you.
20 Carl Erhart, our VP for this
21 region, is here with me, and he’ll join me to
22 answer any questions that you may have for us.
23 Thank you, Mr. Chairman, members
24 of the committee.
25 MAJORITY CHAIRMAN GODSHALL: I 51 1 have a question.
2 As you mentioned, the federal
3 moneys also that are available to these
4 providers, are there any restrictions on the
5 federal money coming through on how it's used,
6 when it's used, if it's used? You know, what
7 are the restrictions on the federal fund?
8 MR. ERHART: The FCC -
9 MAJORITY CHAIRMAN GODSHALL: Could
10 you identify yourself?
11 MR. ERHART: I'm sorry,
12 Mr. Chairman. Thank you.
13 I'm Carl Erhart, with Verizon.
14 The FCC is in the process of
15 reviewing the federal fund today. Some of
16 that's been implemented for some of the larger
17 of the RLECs, which is referred to as price
18 cap carriers.
19 MAJORITY CHAIRMAN GODSHALL: Pull
20 the mic.
21 MR. ERHART: And generally the
22 reforms, at least with respect to high-cost
23 support for voice, are really two-fold. One
24 is that the moneys are targeted generally to
25 areas where an alternative voice service 52 1 provider is not available today, and, also,
2 there is a demonstration of need for the
3 money.
4 And it’s -- and may be just to
5 expand on your question, I would say it’s
6 consistent with what we’re seeing around the
7 country. There are several states that have
8 funds similar to Pennsylvania that were
9 designed to support high cost. Some of those
10 funds were temporary in nature, some were
11 ongoing, like Pennsylvania’s, which was
12 originally designed to be a temporary fund.
13 Many of those states have reviewed those funds
14 over the last couple of years and begun to
15 reform or update those funds.
16 And I would say the changes are in
17 a couple categories. Generally, there have
18 been caps placed on the funding, at least for
19 companies of certain size. Funding’s been
20 limited, again, to areas that voice service
21 wouldn’t otherwise be available.
22 So, when markets -- as the
23 gentleman from CenturyLink testified earlier,
24 roughly 70 percent of their market is
25 competitive. They’ve lost 70 percent of the 53 1 lines. So, in areas that are competitive, the
2 universal high-cost funding is no longer
3 provided in many of the other states.
4 I would say one of the other
5 common modifications to the fund is, again, an
6 establishment of some type of needs test. As
7 folks have already testified, this fund was
8 put in place in 1999, was originally intended
9 to be a four-year transition fund to allow
10 companies, the RLECs primarily, the
11 opportunity to transition their business
12 models to the competitive market. The fund
13 was again extended for another four-year
14 period and has since been left in place. And
15 so, has been in place for 15 years without
16 modification.
17 So, as you look around the states,
18 other states have begun to phase out support,
19 again, for companies of certain size. And the
20 state in particular that probably has the
21 largest high-cost fund in the nation has
22 implemented many of these reforms. They
23 phased out support for the largest ILECs in
24 the state. For the next tier of providers,
25 companies over, say, 30 thousand lines, their 54 1 support is eliminated after 2016, unless they
2 demonstrate need, and, again, can target that
3 to the markets that wouldn't otherwise be
4 s erved.
5 So, that's really the point of, I
6 guess, what we're recommending as improvements
7 to the bill.
8 MAJORITY CHAIRMAN GODSHALL: Thank
9 you.
10 Representative Killion.
11 REPRESENTATIVE KILLION: Thank
12 you. I think you just answered my question.
13 I was curious about what other
14 states are doing when it comes to these funds.
15 I don't know if you can add anything, but I'm
16 interested in those, state by state, if you
17 can provide to us what's going on in the rest
18 of the county and getting service to their
19 rural areas.
20 MR. ERHART: Sure. We'd be happy
21 to .
22 MAJORITY CHAIRMAN GODSHALL:
23 Representative Pickett.
24 REPRESENTATIVE PICKETT: Thank
25 you, Mr. Chairman. 55 1 On page two, you do state at the
2 top of that that some -- this is -- the bill
3 assumes that payments are going to be made to
4 RLECs that are continuing landline service,
5 something consumers are increasingly
6 abandoning in the face of expanding
7 competition.
8 I have to say, again, I will grant
9 you, a lot of my constituents would probably
10 do just that, but it’s simply not available to
11 them. The service is just not there. And it
12 does sound to me that the study is pretty
13 important. We’re hearing, you know, different
14 sides of the story here.
15 We really do need to know exactly
16 what is this money doing and who needs it and
17 how it’s going to happen. And, you know, I
18 have to put a little levity on this, because
19 I’m a great proponent of grandchildren not
20 moving away from their grandparents. I speak
21 about this from personal experience. I would
22 put a law against that, if I could. But,
23 really, you know, when you’re contributing
24 some money in another part of the state, you
25 want to be able to call your grandmother out 56 1 in those rural areas, and she may well be out
2 there. So, you know, that's a little bit of
3 what we need to make sure that we're allowing
4 to happen.
5 On page one also, in the first
6 bullet point, it states that HB1417 would
7 force the PUC to require other carriers'
8 customers to pay the RLECs over 200 million
9 dollars over the six years' extension period.
10 We're discussing dates here. And I think
11 that's a fair thing to talk about.
12 But that 200 million dollars, how
13 does it compare to what has happened in the
14 previous six years? Is it about the same? Is
15 it more? What is it?
16 MR. ERHART: To answer your first
17 question first, the answer is yes. The fund
18 today -- or since 1999 -- really, I guess,
19 2000, has paid the RLECs between 32 and 34
20 million. The bill, as it's currently drafted,
21 would lock in that same payment until at least
22 2022. It requires the PUC to complete their
23 contested proceeding and initiate a rule
24 making, but the rule making could even
25 continue beyond 2022. So, the fund could 57 1 continue well beyond that.
2 And so, I guess the point is, the
3 fund, at that point, would have existed for
4 some 22, 23 years. And, again, no one has
5 looked at the individual need for the money
6 or, again, the markets that the money should
7 be targeted to.
8 That gets me back to your first
9 question. I think we don’t disagree. There
10 are portions of the state that are high cost
11 and have limited competition. And there may
12 be a need for high-cost funding for some
13 period of time. We don’t know what that time
14 is. But the point is and what we’re
15 recommending is that no one has looked at
16 those areas and looked at what the need is for
17 the carriers that serve those areas.
18 The carriers that are receiving
19 the money today continue to receive that money
20 without demonstrating any need for the money,
21 and, for that matter, how the money’s used
22 today. So, that’s our point, because it is
23 primarily our customers that are subject to
24 what is effectively a hidden tax. Right?
25 Verizon, as one of the largest providers in 58 1 the state, is the largest contributor into the
2 fund. Our companies contribute something half
3 or more of the money that goes into the fund.
4 REPRESENTATIVE PICKETT: And it
5 would be reasonable to expect the PUC study to
6 be able to define all of those things you just
7 mentioned; correct?
8 MR. ERHART: Agreed. Our point is
9 that locking it in for another seven years for
10 a fund -- for a total period of some 23 years
11 is just too long. We think that -- the time
12 for that review has come. And some of these
13 modifications could be implemented while a
14 review is ongoing. I mean, we could put in
15 place a needs test today to address some of
16 these issues, and that could be done through a
17 rule making.
18 MAJORITY CHAIRMAN GODSHALL: Thank
19 you very much for your testimony. Appreciate
20 it.
21 And at this point, we would like
22 go next with Dave Kerr, from AT and T.
23 MR. KERR: Good morning, Chairman
24 Godshall, Chairman Matzie, members of the
25 committee. Thank you for the opportunity to 59 1 address you and to appear before you again.
2 My name is David Kerr, regional
3 vice president for external affairs for
4 AT and T here in Pennsylvania.
5 I first want to commend
6 Representative Major and other members who
7 have co-sponsored House Bill 1417. It’s the
8 start of a discussion on the Rural Telephone
9 Access and Availability Act. AT and T
10 understands and supports the concept of
11 universal service and the role that the
12 availability of telecommunications service
13 plays in rural communities. In fact, AT and T
14 is one of the largest providers of service to
15 rural America. We serve as the incumbent
16 local carrier, ILEC -- there we go again with
17 the abbreviations, Chairman Godshall -- in
18 parts of 21 states throughout the country,
19 many with areas more rural and remote than the
20 northern tier of Pennsylvania.
21 Here in Pennsylvania, AT and T
22 contributes to the Pennsylvania Universal
23 Service Fund, but we do not collect from it,
24 based on the fact that we are not an incumbent
25 local exchange carrier here in Pennsylvania, 60 1 and our contributions are based on the
2 intrastate revenues for our wireline side of
3 the business.
4 As many of your know, AT and T has
5 been investing heavily to build out our
6 wireless broadband network nationwide, now
7 reaching over 300 million America. Of course,
8 there is always more to do, and all this takes
9 significant commitment. So, AT and T is
10 consistently among the largest capital
11 investors in the United States. And with our
12 recent acquisition of DirecTV, which we're
13 very proud of, which closed about a month ago,
14 AT and T has even more of a presence in the
15 rural areas of Pennsylvania and other states.
16 House Bill 1417, as I mentioned,
17 begins the long overdue discussion in the
18 legislative arena about the future of
19 telecommunication service in rural
20 Pennsylvania and the appropriate role the
21 government, in what today is a much more
22 competitive marketplace compared to 15 years
23 ago, when the USF was created. The proposed
24 bill deals primarily with the administration
25 and future of the USF and presents an 61 1 opportunity for us.
2 As you’ve heard already, the USF
3 was created in 1999 as an interim transitional
4 mechanism that was never intended to live on,
5 unreformed, for 16 years. The approximately
6 32- to 3 4-million-dollar USF was interim and
7 replaced the loss of wholesale access revenue,
8 wholesale moneys that flowed between local
9 phone and local long distance companies, as
10 the market was opening to greater long
11 distance competition at the time.
12 You may chuckle at the mention of
13 long distance companies, but that speaks to
14 how outdated the USF actually is. It’s
15 remained roughly at the same level over the
16 past 16 years. And even though the PUC has
17 fully litigated cases on the subject over the
18 past decade, it has not made substantive
19 changes to the USF, despite these changing
20
21 It’s important to note that since
22 1999, the total number of landlines has
23 decreased from almost 8.5 million to fewer
24 than 3 million. I know CTIA is going to
25 discuss some of these wireless figures in more 62 1 detail, so I will skip over that part of my
2 testimony.
3 This discussion of the Universal
4 Service Fund has also played out for a number
5 of years at the federal level, as you heard.
6 The FCC has undertaken a series of reforms
7 de s i gned to reduce waste, fraud, and abuse,
8 make the support system more transparent,
9 target funding in a manner that does not
10 undermine competition, and ensure universal
11 service in areas that may lack that private
12 sector business case. And as Carl mentioned
13 just before me, a number of states have also
14 reformed their state Universal Service Funds
15 as well.
16 While House Bill 1417 begins the
17 discussion, AT and T has some concerns with
18 some of the specifics of the bill, so we've
19 actually proposed an amendment that we think
20 improves the overall bill. We put this in
21 writing and put it out there for comments.
22 Our proposal does a number of
23 things. First, it clarifies the definition of
24 "rural telecommunications carrier" to protect
25 the small, Pennsylvania-based, rural 63 1 telecommunications company and to ensure they
2 receive all the benefits of the legislation.
3 Our amendment does not touch the rural, small,
4 Pennsylvania-based carriers at all.
5 Our amendment continues the
6 administration of the PA USF in the
7 current manner, while reforming it for the
8 larger, out-of-state-based companies on a
9 revenue-neutral basis, aligning the USF size
10 to the overall decline in landline
11 subscriptions over the past sixteen years.
12 And as I mentioned, it allows these companies
13 the opportunity to recoup these amounts
14 directly from their customers in the
15 marketplace.
16 And, thirdly, it allows for the
17 disclosure of USF support on customer bills,
18 providing a transparent and more accurate
19 reflection of the remaining support. Truly
20 full disclosure.
21 I want to talk for a minute about
22 rural carriers. We've defined them in the
23 bill in our amendment as price-cap and rate-
24 of-return companies. Generally speaking,
25 price cap are larger companies, subjected to 64 1 federal price-cap regulation, and the price
2 cap’s based mainly on inflation, whereas rate-
3 of-return carriers, generally the smaller
4 companies, are regulated differently. Total
5 revenue and total costs are part of the
6 structure.
7 These are common terms in utility
8 regulation. And I will say, we’ve attempted
9 to define this, and if there’s other ways to
10 define the truly rural companies, whether it’s
11 access lines or something along those lines,
12 we’re certainly willing to discuss that.
13 Again, our goal is to protect the truly
14 Pennsylvania -- truly rural,
15 Pennsylvania-based companies.
16 Our amendment rebalances the USF
17 contributions received by the larger carriers,
18 those under the price-cap regulation, by
19 reducing their funding level by 82 percent,
20 beginning in 2016. This 82 percent wasn’t a
21 number we picked out of the air. This
22 represents the decline in the total number of
23 intrastate switched access minutes, minutes of
24 use, if you will, since 1999. This more
25 accurately reflects the original intent of the 65 1 USF. Put another way, it simply reflects the
2 reduction and switched access revenues these
3 carriers would have otherwise experienced.
4 Our proposal is on a going-forward
5 basis. So, for the year 2017 and after, for
6 the price-cap companies, the remaining
7 distribution from the fund will be reduced by
8 10 percent annually. That is, based on the
9 declining trend, 10 percent, year over year,
10 for FCC figures.
11 The amendment allows for
12 restructuring of the USF for the four large
13 price-cap companies to be revenue neutral, as
14 I mentioned.
15 So, in conclusion, Chairman
16 Godshall, we believe the current language in
17 House Bill 1417 is a good way to start a
18 conversation about the competitive landscape
19 here, the shared objective of keeping our
20 rural communities connected, and the role that
21 each sector -- companies, legislature, and the
22 PUC -- can play in a balanced modernization of
23 a program that was written during and for a
24 much different era and expressly created to be
25 an interim step 16 years ago. So, we believe 66 1 it’s fair and reasonable.
2 And we’re certainly willing to
3 take any questions on our testimony.
4 Thank you.
5 MAJORITY CHAIRMAN GODSHALL: Thank
6 you.
7 And at this point, we have a
8 question from Representative Major.
9 REPRESENTATIVE MAJOR: Thank you,
10 Mr. Chairman.
11 And good afternoon. Thank you for
12 your testimony today. I found it very
13 interesting. And thank you for providing your
14 amendment to me earlier and looked it over.
15 I guess one concern I have is why
16 would a company choose to move the
17 rate-of-return to price-cap carrier
18 regulation? What would be the benefits to
19 that company for doing so or not doing so?
20 MR. KERR: The benefits of it are
21 just a different type of regulation. These
22 are federal designations. So, I have heard
23 that some companies believe they’re already
24 price capped in theory, so it gives them the
25 opportunity to just basically change their 67 1 form of regulation.
2 And, again, we're -- we've used
3 this in terms of definition for our amendment.
4 I know there's been some discussion out there
5 about perhaps moving to access lines or some
6 other way to define, and we're certainly open
7 to having those discussions.
8 REPRESENTATIVE MAJOR: So, are you
9 thinking this would be a wise move for the
10 rural -- the small, rural companies that are
11 benefiting now -- are utilizing USF?
12 MR. KERR: AT and T is a price-cap
13 carrier at the federal level. Again, we're
14 generally a larger -- obviously in multiple
15 states. So, we found it beneficial to be a
16 price capper. You'll have to ask them about
17 their intents.
18 REPRESENTATIVE MAJOR: Okay.
19 Thank you.
20 MAJORITY CHAIRMAN GODSHALL: Thank
21 you very much for your testimony.
22 And we move right along with Ray
23 Landis, from AARP. He's testified before this
24 committee on numerous occasions.
25 MR. LANDIS: Good afternoon, 68 1 Chairman Godshall, Chairman Matzie, members of
2 the committee, and appreciate the opportunity
3 to be here again.
4 I’m Ray Landis. I’m the advocacy
5 manager for the AARP in Pennsylvania. AARP
6 has about 1.8 million members over the age of
7 50 in Pennsylvania, and we take a great
8 interest in consumer and utility issues, and
9 we’re pleased to be able to comment on House
10 Bill 1417.
11 When we first had an opportunity
12 to look at the legislation, the first thing
13 that jumped out at us was the declaration of
14 policy that was stated at the beginning of the
15 legislation. And I’ll take just a second to
16 read that, because it really emphasizes our
17 support for this bill and why we support the
18 bill.
19 And the declaration of policy
20 states: It’s the policy of the commonwealth
21 to maintain provision of the landline
22 telephone service to residents of this
23 commonwealth by supporting federal and state
24 universal service objectives, which provide
25 the telecommunication services, should be 69 1 available to all consumers at reasonable
2 rates.
3 And that really sums up our
4 support of the legislation, because our 1.8
5 million members, and, in fact, all
6 Pennsylvanians over the age of 50, are
7 scattered throughout the state. They live in
8 urban, suburban, and very rural communities.
9 And it’s -- AARP members are not ignorant or
10 opposed to the changes that are going on in
11 the telecommunications industry and the
12 choices that are available. In fact, many
13 AARP members and older Pennsylvanians are
14 choosing to utilize different mechanisms for
15 their telephone services.
16 But as we talked to our members,
17 there are so many members who look at their
18 telephone service almost exclusively for two
19 main purposes: as a way to maintain contact
20 with relatives and neighbors, and as their
21 source of assistance in emergencies. And to
22 these individuals, the availability of high-
23 quality, basic, affordable telephone service
24 is essential. And we believe that it’s
25 essential to Pennsylvania consumers in all 70 1 areas of Pennsylvania. And the Universal
2 Service Fund, we believe, has made that
3 service available to all Pennsylvanians at
4 reasonable rates.
5 We think the Universal Service
6 Fund has helped to guarantee a level playing
7 field for telephone consumers in Pennsylvania,
8 and we think it's provided modest, necessary
9 support for those in hard-to-serve areas.
10 Now, some will ask, and we heard
11 in earlier testimony, why all telephone
12 consumers across the state should contribute
13 to maintain this fund, but we know that
14 Pennsylvania families, as Representative
15 Pickett mentioned, have relatives all over the
16 state. And they're scattered across the
17 commonwealth. And we believe it takes away
18 the value of telephone service for every
19 citizen of Pennsylvania if someone in a more
20 populated area, where it's less expensive to
21 provide the service, can't call their relative
22 that lives in a rural area because the service
23 is too expensive there. And we believe that
24 the Universal Service Fund has kept that
25 service at reasonable rates, as stated in the 71 1 declaration of policy in the legislation.
2 Now, the other point I think it's
3 important to make is that there are changes
4 going on in telephone service for consumers in
5 Pennsylvania. We did a survey of our
6 membership in 2013. And one of the questions
7 we asked was whether the individual surveyed
8 had a cell phone, and about 80 percent
9 answered, yes, they do have a cell phone,
10 although that percentage dropped to around 75
11 percent in rural areas.
12 But we then followed up with that
13 question and asked what folks are using their
14 cell phones for. And in rural areas, 44
15 percent of the folks who had a cell phone
16 reported that they received very few calls on
17 their cell phones. We felt it was fairly
18 obvious that folks had cell phones and were
19 using them for emergency purposes, but they
20 still relied very heavily on their landlines
21 in those rural areas, to -- as their main
22 method of communication by telephone.
23 And, consequently, we think that
24 it is critical that we ensure that reliable
25 landline telephone services must be continued 72 1 to be available in Pennsylvania at an
2 affordable price.
3 So, this change is going on, and
4 we know that those percentages are going to
5 increase of people using cell phones and
6 people that are dropping landline service over
7 the next few years, but we really aren’t at a
8 point yet where landline telephone service is
9 an anomaly, especially in rural areas of the
10 state.
11 We look at this legislation, and
12 we see it extends the Universal Service Fund
13 until the end of 2021 and requires that
14 investigation by the PUC of how the fund
15 should function in the future. We think this
16 is the right mix for consumers and providers
17 of the basic landline telephone service. It’s
18 a guarantee that that landline service that
19 many people in rural areas are relying on is
20 still going to be there for the next few
21 years. But it also studies -- conducts the
22 study that we need to see what changes we need
23 to make in the fund over the next few years
24 and in -- by the expiration of -- or the time
25 that the study will be completed in 2021, to 73 1 see, at that point in time, what we need to do
2 to ensure that individuals still have the
3 telephone service that they need all across
4 the state and at reasonable rates.
5 S o , wi th that, I'd like to
6 reiterate that AARP does support House Bill
7 1417, and we would urge the committee to
8 consider this bill and move it forward in the
9 legislative process.
10 So, again, appreciate the
11 opportunity to be here and certainly glad to
12 answer any questions that any members may
13 have.
14 MAJORITY CHAIRMAN GODSHALL: Thank
15 you very much for your testimony. Appreciate
16 it.
17 And at this point, I don't believe
18 there's any questions for you.
19 Thank you, sir.
20 Our next presenter is Gerard
21 Keegan, CTIA, the Wireless Association.
22 MR. KEEGAN: Chairman, members of
23 the committee, I'm Gerry Keegan, with CTIA,
24 Wireless Association. CTIA is the trade
25 association for the wireless communications 74 1 industry, representing wireless carriers,
2 device manufacturers, and Internet service
3 providers, here in opposition to this bill as
4 currently drafted.
5 This legislation unnecessarily
6 attempts to risk expansion of the PA USF to
7 wireless carriers and their customers. It
8 also extends the current state USF funding, as
9 well as contemplates significant expansion of
10 funding, without evidence that current funding
11 is appropriate.
12 U.S. wireless industry is one of
13 the most competitive sectors in our economy
14 today, and the competition is alive and well
15 here in Pennsylvania. You have national
16 carriers, such as AT and T, Sprint, T-Mobile,
17 Verizon Wireless, competing for customers
18 every day here. You also have regional
19 carriers such as U.S. Cellular, and prepaid
20 providers, such a TracFone, competing for
21 customers every day.
22 In fact, over 95 percent of
23 Pennsylvania’s population has a choice of at
24 least three or more wireless providers; 94
25 percent has a choice of four or more 75 1 providers.
2 Wireless competition has delivered
3 consumer benefits. There are more than 12.3
4 million wireless subscriber connections here
5 in Pennsylvania, representing a wireless
6 penetration rate of 96 percent.
7 Over 26 percent of the
8 Pennsylvania's population has cut the cord,
9 meaning that they rely exclusively on wireless
10 voice service for their telephone needs.
11 This competition has not only
12 spurred consumer adoption of wireless voice
13 service but also of mobile broadband services.
14 Ninety-nine percent of Pennsylvania consumers
15 have access to mobile broadband.
16 Additionally, wireless providers served 5.1
17 million out of 8.6 million high-speed
18 broadband customer connections in the
19 commonwealth.
20 As more and more consumers choose
21 mobile services for their voice and broadband
22 needs, HB1417, as currently drafted, should
23 not attempt to risk extending USF contribution
24 obligations to wireless carriers and their
25 customers to subsidize the business of certain 76 1 telephone companies. To do so could deter
2 investment in wireless networks and
3 infrastructure, the very networks and
4 infrastructure that are delivering more
5 services to consumers and that consumers are
6 demanding.
7 It's important to note that
8 Pennsylvania wireless carriers build out their
9 networks, maintain their networks and site
10 infrastructure without a single dollar of
11 state USF funding support.
12 This legislature adopted a
13 deregulatory framework for the wireless
14 industry, which has allowed carriers to
15 compete based on price, service quality,
16 service offerings, and customer service. This
17 framework has been successful and has advanced
18 ubiquitous and affordable wireless
19 alternatives to local wireline service. That
20 ubiquity and affordability should not be
21 threatened by attempts to expand USF
22 contribution obligations to wireless carriers.
23 Forcing wireless carrier and their customers
24 to subsidize the business operations of
25 certain telephone companies is neither 77 1 necessary nor fair.
2 As you heard, the PA USF was
3 established in 1999 and was supposed to sunset
4 in 2003. The telecommunications market that
5 the PA USF was create to address in 1999 no
6 longer exists. Consumers have competitive and
7 affordable alternatives to locate wireline
8 service. The current market structure clearly
9 demonstrates there is no need to broaden
10 subsidy funding to wireless or expand PA USF
11 to wireline broadband.
12 As noted by an PUC administrative
13 law judge in 2010, quote: It is unreasonable
14 to expect other carriers and their customers
15 to fund the RLECs’ operations throughout
16 expanded PA USF in today’s competitive
17 environment. It’s, after all, a zero sum
18 game. And support which is provided to a
19 competitor is money that is not available to
20 that supporting carrier or its customers.
21 Unquote.
22 That same ALJ also noted, quote:
23 Expansion of the PA USF would require
24 companies that pay in to the PA USF to divert
25 additional revenue each year to support RLECs’ 78 1 operations. Their customers would be denied
2 the benefits of that revenue, which otherwise
3 could have been used to improve the company's
4 products, services, or networks, or even
5 reduce rates. Unquote.
6 Accordingly, extending the PA USF
7 to wireless carriers is grossly unfair.
8 Pennsylvania wireless consumers already pay in
9 to the federal USF. In addition, wireless
10 consumers who also have wireline service in
11 Pennsylvania pay the PA USF through their
12 wireline rates.
13 Furthermore, Pennsylvania wireless
14 consumers already have one of the highest tax
15 and fee burdens in the nation. Before
16 factoring in the recent 911 fee increase,
17 Pennsylvania wireless consumers paid, on
18 average, 20.6 percent in federal, state, and
19 l o cal taxes and fees, the ninth highest in the
20 nation. When you factor in the recent 911 fee
21 increase, that tax and fee rate rises to 22
22 percent, and makes Pennsylvania the fifth
23 highest in the nation.
24 Wireless consumers, therefore,
25 should not be burdened with any possible tax 79 1 and fee increases. And they shouldn't be
2 negatively impacted by having their carriers
3 divert resources from network upgrades and
4 infrastructure investments to subsidize the
5 business operations of telephone companies.
6 If state universal service
7 programs are necessary, they should be
8 targeted to areas where there is no
9 competitive choice. Doing otherwise distorts
10 the competitive market. Pennsylvania USF is
11 currently not targeted, and there's nothing in
12 this bill to fix that problem.
13 Recipients of state universal
14 service programs should also demonstrate a
15 need for such funding. There is no
16 demonstration of need required in this
17 legislation. In fact, HB1417 assumes
18 Pennsylvania USF recipients are entitled to
19 funding at its current level.
20 Another PUC ALJ noted in 2009,
21 quote: The PA USF is a fund which exists
22 because the ratepayers of other
23 telecommunications providers have paid the
24 money unwittingly as a hidden tax. It is not
25 free money to be plundered at will and without 80 1 concern for its origins or for whether it is
2 the best use of that money. Unquote.
3 In closing, the bill should not
4 consider extending or broadening the USF
5 funding to wireless carriers and their
6 customers, and it should examine whether
7 current funding is appropriate.
8 Thank you for your consideration.
9 MAJORITY CHAIRMAN GODSHALL:
10 Representative Pickett.
11 REPRESENTATIVE PICKETT: Thank
12 you, Mr. Chairman.
13 At the risk of sounding repetitive
14 here, on page one, paragraph two, it says:
15 You just need to go on online, open a
16 newspaper, or switch on your cable box to see
17 the daily competition in this industry.
18 And, you know, we do see it all
19 the time in our area. Can’t get it, though.
20 You know, it’s coming in from some further
21 away area. And I hear this comment to me a
22 lot from people on the street and in meetings
23 and so forth that, Why can’t we get that? Or,
24 Why can’t we have that bundled service, or the
25 thing that looks so enticing to them? 81 1 And then the next line further
2 down says: Over 95 percent of Pennsylvania’s
3 population has a choice of at least three or
4 more wireless providers. Close to 94 percent
5 have a choice of four or more providers.
6 That’s kind of social party talk
7 in our area. Who’s carrier do you have? Can
8 you get it over here? Can you get a call
9 here? Can you get a call there? So, it’s
10 kind of a constant, ongoing thing of who
11 covers what and where can we possibly piece
12 this together to be able to travel comfortably
13 around the area or visit someone’s house or
14 whatever and still have coverage.
15 Now, I don’t pretend to know what
16 I’m talking about here, but when you say that
17 it should not go out to cover the expansion of
18 wireless, my question is this -- and I don’t
19 know if I’m making any sense at all -- but
20 could the USF fund be impartial or in some way
21 diverted to expand the wireless and broadband
22 in rural areas if, in fact, the long term goal
23 is to say, We’re not going to have any more
24 landline service? Is that something that
25 would be part of this study, you think, to go 82 1 that way?
2 MR. KEEGAN: The FCC has created
3 mobility funds to get at the issue of serving
4 unserved areas. So, I would be very hesitant
5 to support such a notion with the FCC already
6 having undertaken a mobility fund to serve
7 areas of this state and other states that
8 don't have mobile providers. So, I would be
9 hesitant in reaching that conclusion until we
10 see how the FCC's process is working out.
11 And to the earlier comment, the
12 mobility fund is being used in Pennsylvania,
13 the FCC mobility fund, to serve and bring
14 infrastructure to underserved areas. So, we
15 hope that we would be able to provide coverage
16 in areas that don't have service right now.
17 REPRESENTATIVE PICKETT: Thank
18 you, Mr. Chairman.
19 MAJORITY CHAIRMAN GODSHALL:
20 Representative Major.
21 REPRESENTATIVE MAJOR: Thank you,
22 Mr. Chairman.
23 And thank you for your testimony
24 today. I was, I guess, concerned about your
25 opposition. I do -- and as I heard your 83 1 testimony, read through your testimony, I
2 guess my concern with that said would be that
3 I think you're overlooking the fact that this
4 is about rural areas, and I think
5 Representative Picket articulated it very well
6 earlier, that as we move through our
7 mountainous regions and, certainly, I think
8 many of my -- majority of my constituents are
9 wireless consumers. I mean, they certainly
10 have cell phones, that type of thing. But
11 just my own experience, today as I drove from
12 -- drove to Harrisburg from Susquehanna
13 County, was on the phone making some calls to
14 constituents, and, you know, "I can't" -- "I
15 can’t hear you.” "What?" And have to -- the
16 call would drop, have to re-call.
17 So, the frustration of my
18 constituents having wireless in a rural area,
19 they need to maintain their landlines. And
20 Representative Pickett identified many of the
21 reasons, whether their in the agriculture,
22 they're farmers, whether they have medical
23 needs. There's a variety of reasons. And
24 these small, rural phone companies, you heard
25 testimony from one before, Steven Tourje, who 84 1 his family has provided a service through
2 their northeast PA telephone system for
3 generations, for as long as I can remember.
4 I remember growing up back in the
5 day, and I hate to say it was that long ago,
6 but it was, that we had a party line at our
7 home, whereby numerous neighbors were on and,
8 of course, you never know who it was, but
9 numerous neighbors. So, we progressed in many
10 ways. Certainly technology has advanced us in
11 so many ways.
12 But the point that I want to make
13 and the point that I want you to understand
14 about House Bill 1417, it is about continuing
15 a service of landlines to those rural folks in
16 those rural areas to make sure that they have
17 the needs that they and -- whether it’s an
18 emergency or whatever it might be, business or
19 whatever, that they continue to have that
20 service.
21 So, I would like to work with you
22 to address some of the concerns that you’ve
23 raised, and I think you’ve heard from other
24 groups today who have testified here that they
25 do have -- they move forward with some ideas 85 1 about amendments, and certainly we'll be
2 looking at those concerns.
3 So, I thank you for your
4 testimony.
5 MR. KEEGAN: And thank you for the
6 opportunity and the willingness to work with
7 us, and, again, please understand -
8 understand completely that in areas that would
9 not have service but for USF, that those
10 funds, if they're necessary, should be
11 targeted, and that there should be some
12 accountability and demonstration of need, so
13 that we're not distorting competitors, we
14 don't have one set of customers having to
15 s ubs i di ze unnecessarily another set of
16 customers. But be happy to work with you.
17 REPRESENTATIVE MAJOR: Thank you.
18 I do understand that's some of the concerns
19 that have been raised. Thank you.
20 MAJORITY CHAIRMAN GODSHALL: Thank
21 you very much for your testimony.
22 And I'd just like to say, you
23 know, what you said in the end there, I agree
24 with. A lot of it, discussion today, it seems
25 we are gearing at companies rather than the 86 1 people that are involved. And it's the people
2 that are involved, the constituents in those
3 areas that are of a concern and that we've got
4 to make sure that they're -- that they somehow
5 have communication with the rest of the world.
6 So, appreciate your testimony and
7 say thank you.
8 MR. KEEGAN: Thank you,
9 Mr. Chairman.
10 MAJORITY CHAIRMAN GODSHALL: Next
11 presenter is Comcast James D'Innocenzo, Beth
12 Choroser, and Elizabeth Murray.
13 MR. D'INNOCENZO: Good afternoon,
14 Chairman, members of the House Consumer
15 Affairs Committee. Thank you for the
16 opportunity to be here today with you.
17 Today with me is Beth Choroser.
18 She's from our legal regulatory department.
19 And many of you know Liz Murray, who is with
20 our regularly affairs for the northeast
21 division of Comcast.
22 So, this past February, Chairman
23 Powelson and Vice Chairman Coleman said: The
24 communications options for today's consumers
25 have expanded beyond traditional voice-only 87 1 service offered by incumbent carriers to
2 include a variety of new services and options
3 and providers. Consumers now have an array of
4 options to meet their communications needs.
5 So, the success of both the
6 wireless phone market and the broadband market
7 has come, of course, in large part, at the
8 expense of the landline phone market.
9 In 1999, Pennsylvania had eight
10 and a half million landlines, and today we
11 have a lot less than half that number.
12 Consumers replaced landlines with mobile
13 phones and dial-up Internet and broadband and
14 wifi. It’s actually an impressive example of
15 how free markets work.
16 While there’s no question there
17 are rural telephone companies where there are
18 no competitors that may require a subsidy
19 because of their density results in high costs
20 and there are rural customers who need support
21 based on income, these are limited
22 circumstances, and due to the confidential
23 treatment accorded to USF records, not only
24 don’t we know which companies are receiving
25 funds, but we don’t have the metrics in place 88 1 to determine whether they’re even justified.
2 To the best of my knowledge, the
3 legislature does not readily provide subsidy
4 without metrics in place to determine need.
5 That’s why we believe the public dissemination
6 about how and to whom subsidies are
7 distributed is compulsory for this committee
8 to make informed decisions and put forth
9 legislative proposals that are based on facts,
10 not exaggeration. There is no question that
11 our customers are paying direct subsidies for
12 universal service that merely enhances the
13 revenue streams of some larger rural carriers.
14 It’s absurd that working-class
15 residents of this commonwealth are forced to
16 subsidize phone and broadband service at the
17 lake vacation homes of executives from New
18 York and New Jersey. This wealth transfer is
19 a hidden tax on your constituents, adds costs
20 to our products, and discourages recipients
21 from being efficient and containing costs.
22 Earlier this week, FCC
23 Commissioners Clyburn and O ’Rielly offered
24 bipartisan support for ensuring that universal
25 service high-cost support does not subsidize 89 1 service to multi-million-dollar vacation
2 homes. Commissioner O'Rielly called for means
3 testing for the USF, and Commissioner Clyburn
4 said that the FCC is currently working on a
5 list of exclusions that can't be paid for with
6 USF moneys and said, quote: I recognize fraud
7 and abuse when I see it. End quote.
8 House Bill 1417 does not
9 adequately address any of the aforementioned
10 abuses. It simply perpetuates a system that,
11 in 2000, the PUC said: Although it is
12 referred to as a fund, it's actually a
13 pass-through mechanism to the
14 transition from a monopoly environment to a
15 competitive environment.
16 That was 16 years ago. I'm pretty
17 sure that the transition is complete.
18 In a world marked by robust
19 competition, prudent public policy dictates
20 the removal of regulatory obstacles for all,
21 instead of creating marketplace disparities
22 that would provide largess for some national
23 companies that have multiple profitable
24 revenue streams and who have been increasing
25 in size via significant acquisitions. 90 1 In 1999, the fund collected 29
2 million dollars to support the commonwealth's
3 8.5 million landlines. That equals about
4 $3.41 per line. Today, although there are
5 less than half as many lines, the fund is 34
6 million dollars, which equals more than 8, $9
7 a line.
8 In the PUC's proposed order
9 entered in April of 2000, the commission
10 ordered that the size of the fund will
11 increase each year at the rate at which the
12 number of access lines owned by the 31
13 recipient carriers increases. Dare I ask that
14 if the size of fund grows based on increased
15 number of lines, yet landlines have decreased
16 by more than half, why's the fund 5 million
17 dollars more today instead of being half of
18 what it was in 1999?
19 MS. CHOROSER: First, let me thank
20 you for the opportunity to be here today,
21 along with my colleagues.
22 My colleagues spoke about the
23 array of options that consumers now have to
24 satisfy their communications needs. Much of
25 the innovation that has occurred, including by 91 1 incumbents, has been in response to
2 competitive pressure provided by cable
3 companies like Comcast. That competition is
4 the result of private investment, and any
5 state universal service laws codified by the
6 legislature should provide incentives for
7 companies like Comcast to continue to make
8 those investments in Pennsylvania. And those
9 laws should consider the impact on all
10 consumers, including those who ultimately
11 shoulder the burden of supporting a high-cost
12 fund.
13 We at Comcast recognize that some
14 high-cost areas continue to exist and that
15 affordable service is important. But the goal
16 of any state high-cost fund should be consumer
17 welfare rather than corporate welfare. To
18 that end, Comcast believes that any state USF
19 high-cost fund should have the following
20 attributes.
21 First, it should not provide
22 support where there is unsubsidized
23 competition. That is a disincentive to
24 private investment and an unnecessary burden
25 for consumers. Perpetuating this practice 92 1 distorts competitive markets and slows the
2 expansion of more efficient services to
3 high-cost areas.
4 Second, there must be proof of
5 need and accountability for how funds are
6 spent. Funds should only be used in areas
7 with demonstrated higher costs. Financial
8 audits must be required to ensure that funds
9 are used for their intended purpose.
10 Ratepayers have a right to know how their
11 money is being spent.
12 Third, fund recipients should be
13 required to demonstrate that all revenues
14 earned from services that utilize the local
15 loop are insufficient to cover the cost of the
16 loop. The totality of revenue received from a
17 customer for regulated and unregulated
18 services should be compared to the cost of
19 providing those services. And if the networks
20 have already been paid for, that might be
21 incremental costs only.
22 Fourth, large providers with
23 diverse service offerings and revenue streams
24 from broadband Internet access, video
25 services, and special access services, 93 1 including carrier services like cellular
2 backhaul should not receive high-cost funding.
3 Some of these companies with large
4 multi-state footprints have made significant
5 acquisitions in the past several years and
6 purportedly achieved great financial
7 synergies. These are hardly companies that
8 need subsidies in order to provide affordable
9 s ervice.
10 Fifth, USF funds should be used to
11 support primary residential lines only.
12 Consumers should not have to subsidize rates
13 for business customers. And if they do, it
14 should certainly be for no more than a single
15 line.
16 Sixth, U.S. fees should be
17 transparent. Consumers are entitled to know
18 what they are paying for. Pennsylvania is the
19 only state in Comcast's footprint that I'm
20 aware of where state USF cannot be itemized on
21 consumer's invoices.
22 Finally, USF assessments should be
23 technology neutral.
24 Every point, every point that I
25 just enumerated is contrary to the provisions 94 1 of House Bill 1417, which is why Comcast
2 cannot support the bill without modification.
3 It would continue to provide subsidies to
4 large corporations in areas where unsubsidized
5 competitors invest private capital. Instead
6 of holding fund recipients accountable for
7 their spending, it would make public the
8 amounts contributed by supporters of the fund,
9 indirectly making public their revenues.
10 It would not consider revenue
11 sources such as broadband Internet access or
12 video service which utilize the same local
13 loop as voice services.
14 It ignores carrier size, including
15 the existence of profitable affiliates. It
16 would define basic calling to include up to
17 three business lines. It would continue to
18 obscure from consumers the existence of the
19 fund that they support through their phone
20 bills.
21 It would provide a tax break to
22 carriers receiving subsidy, and it would
23 perpetuate, until January of 2022, the
24 substantial ills of the current funding
25 mechanism. 95 1 Comcast has contributed to both
2 federal and state USF funding mechanisms since
3 we first launched our Voice over IP services,
4 well before any federal or state requirements
5 were mandated for Voice over Internet Protocol
6 services, because we recognize that there are
7 some areas where high-cost funds are truly
8 needed. But greater competition from
9 providers like Comcast has spurred incumbent
10 providers to innovate as well.
11 In recognition of the changing
12 nature of communication services and the
13 diversity of consumer options, certain other
14 states are eliminating or phasing out
15 subsidies for larger providers, particularly
16 where there’s unsubsidized competition. This
17 is in line with what the FCC has been doing in
18 the Collect America fund as well. This
19 objective ensures that competitors like
20 Comcast continue to receive the right economic
21 signals for investment, and it ensures that
22 consumers are not footing the bill for
23 unwarranted subsidies.
24 Thank you.
25 MR. D ’INNOCENZO: So, 96 1 Mr. Chairman, while we pledge our support to
2 work with the committee and all the
3 stakeholders to develop sound public policy
4 based on facts, not hyperbole, we just can't
5 support the bill in its current form.
6 We'll take any questions.
7 MAJORITY CHAIRMAN GODSHALL: Thank
8 you for your testimony.
9 And I'd like to ask
10 Ms. Choroser -- and apologize if I'm
11 mispronouncing -- but your comments, are they
12 included in the testimony? We were looking
13 for them, and we haven't -- we haven't found
14 them.
15 MR. D'INNOCENZO: What we did,
16 Mr. Chairman, since our testimony is quite
17 lengthy, we pulled out excerpts from the
18 testimony and we just used them to put
19 together.
20 MAJORITY CHAIRMAN GODSHALL: Okay.
21 That's what we were looking for, and we were
22 wondering if they were there.
23 MR. D'INNOCENZO: We'll make sure
24 you get a copy of these written comments.
25 MS. RUMSEY: Because I'm just not 97 1 seeing the points you made about where the
2 bill is contrary to the policy points you were
3 intending to make. I'm not —
4 MR. D'INNOCENZO: Yeah. We just
5 developed that after that testimony was
6 submitted on Friday. I'll give you a copy of
7 that.
8 MS. RUMSEY: Thank you.
9 MAJORITY CHAIRMAN GODSHALL:
10 There's one person that I know that lives in
11 an area where -- has a lot of constituents
12 that are underserved presently, and that is
13 Representative Pickett. She has something to
14 say at this point.
15 REPRESENTATIVE PICKETT: Couldn't
16 leave Comcast out of it. Actually, believe it
17 or not, Comcast is available in my area.
18 But I was just sitting here
19 thinking, I don't think I'd be too far wrong
20 if I said about I think of cable when I think
21 of Comcast in our area. I don't think you
22 offer any phone service anywhere in my area.
23 If I'm wrong, you can correct me on that, but
24 I don't think you do.
25 MR. D'INNOCENZO: I do not believe 98 1 we do. We only compete in -- we only compete
2 in certain markets. One of the problems is
3 that the price of interconnection agreement in
4 those other markets would be so exorbitant,
5 we’d never get a return on our investment.
6 REPRESENTATIVE PICKETT: Right.
7 Kind of the theme of the day.
8 So, I would say -- I don’t think
9 I’d be too far wrong if said that probably
10 only 35 to 40 percent of my constituents even
11 have cable service of any type, yours or any
12 other. So, my thought on that was, is
13 anything going to be changing in that way in
14 the near future for those customers that are
15 cable customers? And as it stands today
16 maybe, what percentage of your business is
17 phone/Internet business as compared to the
18 television market?
19 MR. D ’INNOCENZO: With regard to
20 the first question, Dan Tunnell, from the -
21 with regard to the first question, Dan
22 Tunnell, from BCAP, would have to answer that.
23 I’m not even sure who the providers in your
24 district are other than Comcast about whether
25 or not any of those providers have any 99 1 intention of expanding their plant there.
2 REPRESENTATIVE PICKETT: Very few
3 of the boroughs, it's in a very few boroughs
4 and that's it.
5 MR. D'INNOCENZO: Yeah. I'm just
6 not that familiar with it. I'm only familiar
7 with, you know, we have Towanda and a little
8 outlying area in your district that I'm
9 f amiliar with.
10 With regard to the other question,
11 your question was -
12 REPRESENTATIVE PICKETT: What
13 percentage of your business today overall is
14 phone/Internet versus your cable business?
15 MR. D'INNOCENZO: I mean, are you
16 asking about customers, dollars, country, the
17 state?
18 REPRESENTATIVE PICKETT: Whatever.
19 Pick one.
20 MR. D'INNOCENZO: Well, I believe
21 that now we actually have more Internet
22 customers than we do video customers.
23 REPRESENTATIVE PICKETT: Do you?
24 Overall.
25 MR. D'INNOCENZO: Yeah. 100 1 REPRESENTATIVE PICKETT: So, you
2 have some highly populated areas then that
3 you're able to -
4 MR. D'INNOCENZO: Yeah. We're in
5 39 states and the District of Columbia.
6 REPRESENTATIVE PICKETT: You're
7 saying nationally then. That's a national
8 statement.
9 MR. D'INNOCENZO: Yes.
10 REPRESENTATIVE PICKETT: Thank
11 you.
12 Thank you, Mr. Chairman.
13 MAJORITY CHAIRMAN GODSHALL: Jim,
14 I have one other question that was mentioned
15 in your testimony. It says Comcast, for the
16 most part, pays in to the USF on a voluntary
17 basis. You're still paying on a voluntary
18 basis? And is that completely up to the
19 company or -- you know, I didn't quite
20 understand your statement.
21 MS. CHOROSER: It depends on -
22 MAJORITY CHAIRMAN GODSHALL: Could
23 you talk -
24 MS. CHOROSER: It depends on the
25 state. From the federal perspective, it's now 101 1 required that Voice over IP providers pay in
2 to the federal USF. Comcast did pay in to the
3 federal USF well before it was required by the
4 FCC order that we pay in.
5 On a state-by-state basis, we pay
6 in on every state where we operate our Voice
7 over IP business, irrespective of whether or
8 not it’s been mandated for a Voice over IP
9 provider to pay in. So, in some states, it’s
10 been mandated. We obviously pay in in those
11 states. But in those states where it’s not
12 been mandated for a Voice over IP provider to
13 pay in, we pay in on a voluntary basis.
14 MAJORITY CHAIRMAN GODSHALL: Okay.
15 I didn’t understand that statement where it
16 said "for the most part,” you know, "we pay in
17 on a voluntary basis.
18 MS. CHOROSER: We’ve always paid
19 in.
20 MR. D ’INNOCENZO: "For the most
21 part" meaning some state we’re required to,
22 but, in Pennsylvania, we’re not required to,
23 however, we do make the payments.
24 MAJORITY CHAIRMAN GODSHALL: Okay.
25 Thank you. 102 1 Thank you very much. And
2 appreciate your attendance here today. And
3 thank you.
4 And our last presenter is Tanya
5 McCloskey, Pennsylvania Office of Consumer
6 Advocate, also a frequent testifier before the
7 committee.
8 ACTING CONSUMER ADVOCATE
9 MCCLOSKEY: Good afternoon, Chairman Godshall,
10 Chairman Matzie, and members of the committee.
11 MAJORITY CHAIRMAN GODSHALL: Talk
12 right into it.
13 ACTING CONSUMER ADVOCATE
14 MCCLOSKEY: Close enough?
15 Okay. My name is Tanya McCloskey.
16 And I’m the Acting Consumer Advocate for the
17 Office of Consumer Advocate.
18 Thank you for inviting me to give
19 comments before this committee regarding House
20 Bill 1417.
21 In February of this year, I
22 appeared before this committee to provide a
23 general overview of the regulated utility
24 industry in Pennsylvania and to identify
25 legislative priorities. In the portion of 103 1 that testimony regarding telecommunications
2 service, I testified about the significant
3 changes in the regulatory framework that have
4 occurred since the initial passage of Chapter
5 30 of the Public Utility Code in 1993 and its
6 reenactment in 2004.
7 As I discussed in that testimony,
8 it was my view that competition in the
9 telecommunications industry, facilitated by
10 Chapter 30, has benefited many Pennsylvania
11 consumers, particularly those who can afford
12 to buy bundled packages of services. It was
13 the combination of competition and limited
14 regulation in Chapter 30, including the
15 carefully drawn category of protected
16 services, that has enabled Pennsylvania to
17 maintain universal telecommunications service
18 at affordable rates.
19 But as I pointed out, even with
20 the advances in telecommunications service in
21 recent decades, there are still some parts of
22 Pennsylvania where consumers have little
23 choice but to rely on the basic telephone
24 service provided by their local telephone
25 company. Also, parts of Pennsylvania depend 104 1 on this legislatively mandated broadband
2 requirements that are part of Chapter 30.
3 My primary concern for consumers
4 regarding telecommunications service in
5 Pennsylvania remains the assurance of
6 universal service at reasonable and affordable
7 rates for every Pennsylvanian who wishes to
8 have such service.
9 Universal service is not just
10 important so that the residents in Elk County
11 can call their family and businesses in
12 Pittsburgh. It is equally important so that
13 people and businesses in Pittsburgh can
14 connect with the residents of Elk County.
15 Universal telephone service enables
16 Pennsylvania residents, businesses, schools,
17 health care facilities, governments, and
18 public safety providers to be interconnected,
19 even if one end of the call is wireless or
20 digital voice.
21 Universal service has been
22 particularly important in ensuring access to
23 affordable telecommunications service in our
24 most rural and sparsely populated communities
25 where the cost of providing service to each 105 1 individual is the highest.
2 The Pennsylvania Universal Service
3 Fund helps to ensure that the public switched
4 telephone network is extended and maintained
5 throughout each rural company’s service
6 territory to meet the needs of all customers
7 for telecommunications service at affordable
8 rates.
9 House Bill 1417 recognizes in its
10 declaration of policy, and further, through
11 its provisions, the commonwealth’s policy of
12 ensuring affordable, universal
13 telecommunications service throughout
14 Pennsylvania. Particularly important for
15 rural areas of Pennsylvania, HB 1417
16 establishes the means to continue the
17 provision of reliable, affordable landline
18 service in high-cost areas of Pennsylvania
19 through continuation of the Pennsylvania
20 Universal Service Fund and continuation of the
21 obligation to provide landline carrier-of-
22 last-resort service under Section 1501 of the
23 Public Utility Code.
24 A strong and sustainable
25 Pennsylvania Universal Service Fund is even 106 1 more important today for rural Pennsylvania as
2 the Federal Communications Commission devotes
3 more resources to promote broadband deployment
4 while reducing the support for landline
5 telephone networks.
6 I would also note, though, that
7 the landline telephone network has been an
8 essential component of providing broadband
9 service to many of our rural communities.
10 Chapter 30 also envisioned that
11 every telephone customer in Pennsylvania would
12 have at least one option to obtain broadband
13 service, as made available by Pennsylvania's
14 incumbent local exchange carriers. This was
15 to occur by 2015. Pennsylvania's rural
16 carriers accepted the option provided in
17 Chapter 30 of accelerating the universal
18 deployment of broadband service from 2015 to
19 2008 in exchange for the ability to increase
20 non-competitive service revenues. This means
21 that, by the end of 2008, all of our smallest
22 and most rural telephone companies provided
23 their customers with the ability to purchase
24 some form of high-speed Internet service,
25 typically through digital subscriber line 107 1 service at a speed of at least 1.544 megabits
2 per second. CenturyLink and Windstream, the
3 other companies serving predominantly rural
4 areas, completed their broadband deployment by
5 2013.
6 Pennsylvania's support for
7 affordable landline service through Chapter 30
8 and the Pennsylvania Universal Service Fund
9 has provided rural telephone customers with
10 this continuing opportunity to connect to the
11 Internet at a reasonable price.
12 House Bill 1417 also provides the
13 mechanism for the Public Utility Commission to
14 review the Pennsylvania Universal Service Fund
15 over the next few years.
16 While the Pennsylvania Universal
17 Service Fund is vital to maintaining
18 affordable telecommunications service for
19 rural Pennsylvanians in my view, a
20 comprehensive review of the fund, in light of
21 changes made by the Federal Communications
22 Commission and changes in the
23 telecommunications industry, will be useful in
24 determining the best way to ensure that the
25 fund is adequately supported and to ensure 108 1 universal service in all parts of Pennsylvania
2 in the future.
3 In my view, House Bill 1417
4 identifies many of the key concerns that need
5 to be reviewed, including the appropriate base
6 of fund contributors and the appropriate
7 funding level. The legislation will ensure
8 that a thorough review of the needs of rural
9 consumers is considered when examining the
10 future of the Pennsylvania Universal Service
11 Fund.
12 The continuation of the landline
13 carrier-of-last-resort obligation fulfilled by
14 the rural telecommunications companies is
15 critical to rural consumers and the economic
16 vitality of rural Pennsylvania. No other
17 provider has an obligation to serve these
18 high-cost areas. Cable and wireless companies
19 can choose to serve the areas that best meet
20 their business plans, leaving some high-cost
21 areas unserved.
22 Maintaining the Pennsylvania
23 Universal Service Fund and the carrier-of-
24 last-resort obligation, as contemplated by
25 House Bill 1417, will benefit the consumers of 109 1 rural telecommunications companies in
2 Pennsylvania as well as all telecommunications
3 customers in Pennsylvania.
4 For these reasons, I lend my
5 support to House Bill 1417.
6 Thank you for allowing me to
7 testify, and I look forward to any questions
8 you may have.
9 MAJORITY CHAIRMAN GODSHALL:
10 Representative Major.
11 REPRESENTATIVE MAJOR: Thank you,
12 Mr. Chairman.
13 And thank you for your testimony.
14 I sincerely appreciate the comments you made,
15 because I really think you did hit the nail
16 right on the head as to what the original
17 intent of the legislation is. It is to not
18 only provide — continue to provide telephone
19 service to the rural areas, but also
20 recognizing that those companies that do
21 provide that service, those small, rural
22 companies that have provided that service for
23 generations, are doing so at extremely high
24 cost.
25 So, I thank you for your testimony 110 1 here today. And thank you for your support of
2 the legislation.
3 ACTING CONSUMER ADVOCATE
4 MCCLOSKEY: Thank you.
5 MAJORITY CHAIRMAN GODSHALL:
6 Representative Matzie.
7 ACTING MINORITY CHAIRMAN MATZIE:
8 Thank you, Mr. Chairman.
9 MAJORITY CHAIRMAN GODSHALL:
10 Chairman Matzie. I apologize.
11 ACTING MINORITY CHAIRMAN MATZIE:
12 Chairman, Rob, Robert, whatever, I'll answer.
13 Right, Mr. Chairman?
14 Acting Consumer Advocate
15 McCloskey, thank you for your testimony.
16 I think it's more comment than
17 anything else, but just listening to all the
18 testimony here today and just following along
19 with some of the other testimony we've had on
20 some other things, I think consumers have a
21 level of expectation. And that level of
22 expectation is no different for picking up a
23 telephone than it is for really virtually
24 anything else. You know, having a teenager,
25 believe me, I understand when she uses her 111 1 cellular phone, she expects it to work. And
2 obviously vice versa, I expect it to work, for
3 her to answer when her father calls.
4 But turning back the clock, when
5 you look at technology, with the telephone
6 company, I mean, from the party line to
7 calling and asking an operator to connect you,
8 there is a fast-moving technology track that
9 we're on. I mean, that's just reality. I
10 mean, to see from dialing up for Internet
11 service and waiting five or six minutes for it
12 to finally start working and thinking it was
13 the greatest thing since sliced bread, to now
14 turning your computer on, whether it's DSL or
15 it's through high-speed Internet, that it's
16 going to pop, you're going to have instant
17 access.
18 So, I think there are obviously -
19 I think there's still some work maybe to be
20 done on some parts of the language in this
21 bill, but I think, for the most part, the
22 level of expectation from a consumer's
23 perspective -- we can talk about business as
24 well -- but from a consumer's perspective is
25 that the technology that they're utilizing, 112 1 whether it’s to dial 911 or whether it’s to
2 call their doctor, will work, or for public
3 safety, for that matter, will work when they
4 pick it up.
5 So, we appreciate your comments
6 here today, and I just felt it was necessary
7 to share that.
8 Thank you.
9 ACTING CONSUMER ADVOCATE
10 MCCLOSKEY: Yeah. Thank you for your
11 comments. And I do agree, and I think it is
12 critical that we meet those consumer
13 expectations with the service. And I think
14 the fund is an important component of that.
15 MAJORITY CHAIRMAN GODSHALL: I
16 have some closing remarks.
17 Comments have been submitted for
18 inclusion in the record by the following:
19 Windstream, Frontier Communication,
20 Consolidated Communication, T-Mobile, the
21 Broadband Cable Association of Pennsylvania,
22 and the Pennsylvania Coalition Against
23 Domestic Violence, which submitted a letter, a
24 very passionate letter, pertaining to the
25 bill. 113
1 And I'd like to extend my thanks to the
2 presenters we had here today, the people, the
3 observers, and also the committee members, and say
4 thank you very much for your attendance.
5 And with that, the meeting is
6 adjourned.
7 Thank you.
8 (Whereupon, the hearing concluded at
9 2: 54 p.m. )
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