Control Number: 34060

Item Number: 9

Addendum StartPage: 0 PROJECT NO. 34060

PUC RULEMAKING TO REVISE 0 PUBLIC UTILITY COMMISSION SUBSTANTIVE RULE 0 26.403 TEXAS 0 HIGH COST UNIVERSAL SERVICE tj OFTEXAS PLAN (THCUSP) 0

REPLY COMMENTS OF THE USF REFORM COALTION ON PROPOSED REVISIONS TO SUBSTANTIVE RULE 8 26.403

TO THE HONORABLE COMMISSION:

The Texas Cable & Telecommunications Association (“TCTA” ) and Time

Warner Telecom of Texas, L.P. (“TWTC”2) (collectively, “USF Reform Coalition” or

“Coalition”) file the following comments in response to the comments submitted by

AT&T Texas (“AT&T”) and Verizon Southwest (“Verizon”) on the Commission’s proposed changes to Subst. Rule 26.403.

In their respective comments, Verizon and AT&T express a similar - though not necessarily identical concern - about the impact of the proposed rule changes on the

“status quo” of their current and past receipt of USF support. Verizon requests that the

Commission clarify its intent that any new plans or changes to the TUSFHCF will be implemented only on a prospective basis. AT&T asks the Commission to clarify that

Eligible Telecommunications Providers (“ETPs”) are permitted to continue their monthly claims for reimbursement pursuant to the TUSF rules currently in effect until the

1 TCTA represents local cable operators who serve more than 4 million consumers in Texas. TCTA’s members include 21 cable operators across the state, including Time Warner Cable, Suddenlink Communications, Comcast Cable of Houston, Charter Communications, and Northland Communications, among others. 2 TWTC is a facilities-based CLEC providing managed network services, specializing in Ethernet and transport data networking, Internet access, local and long distance voice, VoIP and security, to enterprise organizations and communications services companies throughout the U.S. TWTC is not affiliated with a cable company or a member of TCTA.

1 Commission provides notice and opportunity on any possible changes to the “current

ru1es.993

The Coalition agrees with AT&T and Verizon that the Commission must provide

notice and an opportunity for a hearing prior to implementing any change in the TUSF

and that such changes must be prospective, not retroactive. Section 56.031 of PURA

provides that

The commission may revise the monthly per line support amounts to be made available from the Texas High Cost Universal Service Plan and from the Small and Rural Incumbent Local Exchange Company Universal Service Plan at any time after September 1. 2007, after notice and an opportunity for hearing.

Emphasis added. Importantly, the requirement for notice and hearing will be satisfied at

the conclusion of Phase I, at which time the Commission may make prospective changes

to the Large Carrier Fund. To the extent that AT&T is suggesting that the Commission

must wait until the conclusion of Phase I1 before it can implement any reforms to the

TUSF, AT&T is simply wrong. The Commission has the clear authority to implement

policy changes regarding the TUSF after the notice and hearing that will be provided in

Phase I of the contested case. There is no need to wait until the conclusion of Phase 11,

likely an additional 6-8 months after the conclusion of Phase I, to implement certain policy changes, particularly the types of lines that are eligible for TUSF support. Indeed, the Commission has previously implemented its rulings in contested cases in different phases, e.g., Docket 28821.

The Coalition supported, in its March 1,2007 comments, the staffs draft timeline for the USF proceedings on the condition that the Commission consider and implement

3 Project 34060, Comments of AT&T Texas, p. 1

2 certain important poZicy issues regarding the Large Carrier Fund in Phase I of the

contested case. In its discussion of the draft timeline, the Commission appeared to agree that TUSF changes should be made as expeditiously and aggressively as p~ssible.~

The Coalition premised its support of staffs proposed timeline for the TUSF review (longer than that suggested by at least one Commissioner) on the Commission’s willingness to address and implement policy changes regarding line eligibility in Phase I

of the contested case. The process supported by the Coalition not only provides “notice

and opportunity for hearing” required by PURA but permits the Commission to thoroughly consider the complex issues inherent to the TUSF Large Carrier Fund while

ensuring that the Commission’s examination is a “tenacious and structured regulatory hearing process” that is conducted “aggressively” and “expeditiously,” goals that are

consistent with both the statements of Chairman King at the Regulated Industries

Committee hearing on February 15,2007, and the Committee’s Interim Report?

Concern has arisen over continuation of the TUSF in its current form. With that in mind, in 2005, the Legislature gave the PUC authority to revise the monthly per line support beginning September 1, 2007, upon notice and opportunity for public hearing. This process is intended to address cost issues associated with the TUSF. Changes in demographics and technology alone suggest the need for a downward revision of the fee as does the advancement of deregulated markets. The Committee’s recommendation is to wait for the PUC to complete its study and implement revisions as warranted by its findings. The Committee encourages the PUC to expeditiously pursue this responsibility.

As long as critical policy changes can be implemented by the end of 2007, even though

new support levels for eligible lines won’t be established until the conclusion of Phase 11,

4 Project 32229, Joint Comments of the Texas Cable & Telecommunications Association and Time Warner Telecom, L.P., p. 2-3. 5 March 6,2007 Open Meeting TR at 11-1 2. 6 House Committee on Regulated Industries Interim Report to the 80* Legislature, p. 14.

3 the Coalition believes the Commission would meet these Legislative expectations. That

the Commission can establish policy through rulemakings or contested cases is

unquestioned. It is well-settled Texas law that, unless mandated by statute, the choice by

an agency to proceed by general rule or by ad hoc adjudication is one that lies primarily

in the informed discretion of the agen~y.~

To the extent that the “clarification” that AT&T seeks is the obvious point that the

Commission must notice changes in its rule, the Commission should make clear it has

done so. However, if the point of AT&T’s “clarification” is that no changes should be

made to the operation of TUSF this year - even though such changes would not be made

until after the notice and hearing that will be provided by Phase I of the contested case -

AT&T’s request should be denied.

Respectfully Submitted, CASEY, GENTZ, & MAGNESS, L.L.P. 98 San Jacinto Blvd., Suite 1400 Austin, Texas 78701 5 12/480-9900 5 12/480-9200 FAX

Robin A. Casey State Bar No. 03960300 a Email: [email protected]

ATTORNEYS FOR THE USF REFORM COALITION

7 State Bd. of Ins. v. Deffenbach, 63 1 S.W.2d 794 (Tex. App.-Austin 1982, writ ref d n.r.e.)(citing SEC v. Chenery Coup., 332 U.S. 194 (1947)).

4