December 2018
News and Updates
Here are some updates from the Texas Telephone Association. View as Webpage
Update from Executive Director Lyn Kamerman
Looking back at 2018 and telecommunications in Texas
As we move toward the holidays and the end of 2018, we are wrapping up some issues impacting the telecommunications industry in Texas.

While we have made great strides this year, our industry must remain ever vigilant and advance policies to make sure rural Texans will continue to reap the benefits of high-quality communications to support schools, hospitals, businesses and consumers. Rural networks are vital to our great state and provide a backbone for landline, broadband and wireless services statewide.

With all that is going on related to the state universal service fund, it’s easy to lose sight of the fact that there is much more going on in telecommunications in Texas. Scott Stringer of CenturyLink and Texas Telephone Association board chairman along with Dee Dee Longenecker and Wes Robinson of Eastex and I met with the staff of the Public Utility Commission of Texas this month to raise awareness on a variety of issues impacting the telecommunications industry in Texas. Issues discussed included the need for continuous network upgrades, cybersecurity, economic development efforts in local communities as well as potential competition from Voice over Internet Protocol, overbuild incentives in schools and non-regulated electric providers offering broadband service.

As 2018 winds to a close, there remain several policy issues pending at the PUC impacting our industry.

Virgin Mobile Lifeline-only proceeding moving forward at Texas PUC

Virgin Mobile’s proposal to expand its Lifeline-only designation into additional rural areas in Texas is inching along at the Texas PUC.

Virgin Mobile has been designated as both an Eligible Telecommunications Carrier (ETC) and an Eligible Telecommunications Provider (ETP) in certain non-rural service areas of Texas – including AT&T Texas, Verizon Southwest and Frontier – for the purpose of offering Lifeline services. Virgin Mobile’s has applied to expand the area covered by those designations to include territory served by additional local phone companies across Texas.

If granted, the proposal would allow Virgin Mobile to receive state support for Lifeline customers only in designated areas. 

The PUC staff on November 30 filed testimony from James Kelsaw who echoed many of the arguments advanced by TTA to deny Virgin Mobile’s request. These include:
  • Virgin Mobile’s unwillingness to commit to offering service to any customer within its proposed service area
  • Virgin Mobile’s failure to demonstrate that its designation will be of material benefit
  • Virgin Mobile’s wireless network doesn’t cover the entire proposed service area.

Kelsaw also identified deficiencies in Virgin Mobile’s application as the company does not offer  required services such as operator services and primary directory listings. He recommended Virgin Mobile be required to redraw its maps to be consistent with the Federal Communications Commission boundary maps for Texas.

PUC staff noted Virgin Mobile has failed to meet its public interest obligations in rural service areas because there are already wireless competitors in many of the markets. Staff also expressed concerns that the case could set a precedent and impact the Texas universal service program.

Virgin Mobile’s rebuttal testimony is due December 19. TTA is attempting to work toward settlement with Virgin Mobile that would result in Virgin Mobile withdrawing its request. While the PUC staff is one of the parties to this case, its opposition to Virgin Mobile’s designation is a significant step in the right direction.

Virgin Mobile on November 29 issued a request for information to TTA and the Texas Statewide Telephone Cooperative Inc. While TTA’s legal team is prepared to file responses, it is working with Virgin Mobile to extend the deadline for objections and responses to the new discovery request in the hope that a settlement is can be reached.

TTA, TSTCI developing supporting materials for new PUC universal service rules

Although the Texas PUC approved new rules to implement universal service fund reforms under Senate Bill 586 approved by the Texas Legislature in 2017, our work continues.

The next step is to develop a set of documents so Texas telecommunications companies can make the appropriate filings under the new rules.

The new PUC rule requires electing members to file revised versions of the Earnings Monitoring Reports (EMR) calculating intrastate earnings along with “all detail and supporting documentation necessary to support each of the items” in the report. A team led by TTA and TSTCI on December 10 presented the PUC staff a proposed SB 586 industry-standard filing package that includes the necessary supporting documentation that would enable an efficient review. Once the reports are filed, the commission staff has 90 days to review the reports and make any adjustments and submit a memorandum to the commission reporting any revised earnings for each electing member.

TTA members and associated associate members from JSI, Moss Adams, Curtis Blakely and Company and Eastex walked the PUC staff through the proposed filing package and how earnings for small ILEC members are calculated. Staff members questioned issues such as separations, executive compensation, and affiliate transactions.

TTA encourages telecommunications companies opting into the new SB 586 high cost support mechanism to make sure to include the necessary supporting documentation in filings. Once a company files a SB 586 report, PUC staff may issue requests for information. Companies will have ten days to respond to any requests for supporting documentation related or risk being classified as a Category 3 provider and deemed to be over earning.

We anticipate affiliate activities are likely to be more scrutinized than they have been in recent years. We recommend members review affiliate contracts and transactions to make sure they are up-to-date before their SB 586 filings are made.

TTA’s legal team met with PUC staff in early December on creating an opt-in affidavit for electing members would file if they choose to opt into the new SB 586 Texas Universal Service Fund high-cost support mechanism. A copy of the affidavit can be found here . A draft election cover letter can be found here . 

All companies are encouraged to use these standardized forms to ensure consistency throughout the industry. All notices of opting in to the new universal service fund mechanism must be filed by December 14.
 
Alternatively, companies not opting into the new mechanism will not need to file an affidavit, but will need to prepare and file the standard 2017 Earnings Monitoring Report in docket No. 48519 no later than December 15. 

If you have any questions related to SB 586, please contact me.

Finally, the PUC at its November 29 open meeting set the interest rates for calendar year 2019 in project 45319. Annually the PUC sets interest rates for customer deposits and under-charges or over-charges for the coming year. For 2019, customers who are over billed will be paid 1.99 percent interest and will receive 1.92 percent interest on utility deposits. 
Around the Texas Capitol – John Hubbard and Ian Randolph
Texas Legislature set to convene January 8
Well, we are now just under a month away from the start of the 2019 session of the Texas Legislature on January 8.

After an initial flurry, the flow of newly filed bills has slowed somewhat and legislators are turning their attention to getting their businesses and personal lives ready for the next five months in Austin — not to mention the holidays.

Fortunately for Texas legislators, once the pomp and circumstance of the first few days of session is over, the session begins at a slow pace. This is done by design. The Texas Constitution prohibits any legislation from passing either chamber within the first 60 days of a session unless the bill addresses an issue identified by the governor as an emergency item. This year the 60th day of the session is March 8. Governors typically label items as emergencies to signal which issues they see as priorities. Gov. Greg Abbott hasn’t identified which, if any, items he will label as emergencies yet, but it would not be surprising if Hurricane Harvey relief and public school finance receive emergency status. Still, bills not labeled emergencies can still receive committee hearings before the 60th day, but they won’t leave committee until after the 60th day.

The start of the legislative session also holds special significance for the state budget. On the opening day, Texas Comptroller Glenn Hegar will deliver the official biennial revenue estimate to the Legislature. This estimate tells state lawmakers how much revenue will be available to spend over the next two years and is critical in helping to set budgetary priorities. Tax revenue has been consistently growing over the last two years. However, the state has several high-dollar items on the table such as Hurricane Harvey relief, public school finance and transportation projects. As a result, no one would be surprised if revenue increases will not be considered this session.

The start of session will include the formal election of Rep. Dennis Bonnen, R-Angleton, as speaker of the House of Representatives. Bonnen recently announced he has enough votes to be elected speaker of the Texas House and succeed outgoing House Speaker Joe Straus, R-San Antonio. Bonnen already has begun appointing staff to his transition team. Of note, Bonnen has appointed to former state Rep. Brian McCall, R-Plano, to the transition team. McCall was one of the 11 Republicans that spearheaded the ousting of former House Speaker Tom Craddick, R-Midland, and ushered in Straus as speaker. The appointment of McCall to head-up the transition signals to many Capitol observers that Bonnen intends his speakership to hold the course on how Speaker Straus ran the chamber.

Bonnen also has appointed Sharon Carter and Hugh Brady to be the chamber’s parliamentarians. Carter was the parliamentarian for the last Democratic speaker – former Rep. Pete Laney, D-Hale Center, and has advised many Republican and Democratic clients while in private practice. Brady is a long-time House historian and rules expert and last held a legislative position as an advisor to former Democrat Caucus Chair and former state Rep. Jim Dunnam, D-Waco. Brady also served in the Obama administration as a White House attorney. The appointment of Carter and Brady could indicate Bonnen is going to take the approach of encouraging an environment of expecting House members to represent their districts and not political party interests — approaches both Laney and Dunnam advocated.

As we move into session, if you have any questions or need anything from us please don’t hesitate to get in touch. We’re here to serve you.

Have a very happy holiday season and a wonderful and prosperous new year.
Association News
TTA Foundation accepting applications for scholarships for 2019-2020
The Texas Telephone Association Foundation is now accepting applications for scholarships for the 2019-2020 school year.

“Education is an important issue in the communities we serve across Texas,” said Bill Colston, Jr., vice president of Riviera Telephone Company Inc. and chairman of the TTA Foundation. “As families struggle with the ever-rising cost of attending state universities, Texas telecommunications companies are investing in our students to help develop our future leaders.’’
TTA.org has a new look
The TTA team is proud to announce the launch of the new TTA.org website.

The newly redesigned website has a modern look and feel and reflects the changing telecommunications industry of today. With the new website, we have launched a new online newsroom with important news about the industry as well as profiles of some of our member companies that are investing in Texas.

Check it out. Also, please make sure to follow us on Facebook and Twitter.
In the State and Around the Nation
Texas PUC finalizing Scope of Competition report
The Texas PUC is putting the finishing touches on its “Report on the Scope of Competition in Telecommunications Markets” to submit to the 2019 Texas Legislature when it convenes in January.

The draft report, which is not final, does not include any legislative recommendations. However, the draft report highlights a few important trends in the industry such as increasing rates for basic local service, reductions in high-cost demand related to large and mid-sized Incumbent Local Exchange Carriers and significant decreases in state Lifeline enrollment. The draft report can be found here .
FCC expands Universal Service Fund support to promote rural broadband deployment
In an effort to close the digital divide, the Federal Communications Commission on December 12 took several steps to “significantly improve the quality and expand the availability of high-speed Internet service in rural America,’’ according to an FCC news release .

The FCC provided additional funding for the Connect America Fund, the FCC’s program that helps expand broadband deployment and make broadband service more affordable in rural areas. In return for increased funding, the FCC will require telecommunications providers to expand the availability of faster Internet service for consumers and businesses.

“Closing the digital divide is the FCC’s top priority,’’ the FCC in a news release. (LINK) “The Connect America Fund is key to this effort, providing funding in sparsely populated rural areas where the cost of providing and deploying service can be high.”

The FCC updated the Connect America Fund programs providing support for small, rural rate-of-return carriers to deliver faster broadband speeds and expanded coverage in rural areas. In return for additional funding, the FCC will require providers to expand availability of service offering downloads of at least 25/3 Mbps service, compared to the current 10/1 Mbps standard. Some updates include:
  • Offering up to $67 million a year in additional support for carriers receiving funding through the Connect America Fund’s Alternative Connect America Cost Model, or ACAM. The FCC said this move could increase by 100,000 the number of rural homes and businesses with access to higher Internet speeds.
  • Opening a new window for carriers to receive support under A-CAM II, which incentivizes deployment while reducing regulatory burdens. In return, these carriers would be required to provide 25/3 Mbps service to all homes and businesses.
  • Increasing the $1.4 billion annual budget for carriers that continue to get support from legacy mechanisms by initiating an annual inflation adjustment, eliminating 2018 cuts and setting a guaranteed floor of minimum support for each carrier. In return, legacy providers would be required to expand deployment of 25/3 Mbps service.

More information can be found here .
In the News
The Federal Communications Commission  announced  additional funding to its Connect America Fund dedicated to expanding broadband internet service to rural communities. The agency will make available $67 million more per year than originally earmarked for the project. The funds could bring high-speed internet connections to more than 100,000 additional households and businesses, per the FCC. Read more.

A Federal Communications Commission advisory committee has proposed a new tax on Netflix, Google, Facebook, and many other businesses that require Internet access to operate. If adopted by states, the recommended tax would apply to subscription-based retail services that require Internet access, such as Netflix, and to advertising-supported services that use the Internet, such as Google and Facebook. The tax would also apply to any small- or medium-sized business that charges subscription fees for online services or uses online advertising. The tax would also apply to any provider of broadband access, such as cable or wireless operators. Read more.

AUSTIN, Texas — Texas Republicans don’t usually look to Lyndon Johnson for inspiration. But the need for improved broadband services in rural areas — to spread telemedicine, viewed as the next frontier of medicine — has caused some to look to the former president’s efforts to connect those same areas to the electrical grid.
“I’m a conservative Republican and believe private enterprise should do that,” said Texas Agriculture Commissioner Sid Miller. “But we kinda got a unique problem in rural Texas. "I can compare it to when electricity first became available and we had [Johnson’s] Rural Electrification Program,” said Miller, an avid supporter of President Donald Trump whose reelection was endorsed by far-right groups. “There’s not enough profit. As a matter of fact, there’s probably not any profit to bring that out to remote areas for the private sector.” Read more .

The $867 billion farm bill that just passed the US House and Senate on Wednesday has provisions designed to spur broadband deployment. Though the bulk of the spending in the bill will go toward subsidies for American farmers and support for programs to feed the poor, the bill also expands the Department of Agriculture's Rural Utilities Service loan and grant program and provides more oversight on how and where that money is spent. That's good news for the millions of Americans living in rural parts of the US who don't have access to high speed internet service. The president of USTelecom, the main lobby group for rural telecom companies, called the bill "an important, but still partial down payment" on providing high-speed internet to rural Americans. "More work remains to ensure scarce federal dollars are reaching truly unserved areas," Jonathan Spalter said in a statement. "And we look forward to working with the new Congress to make this happen." Read more.

The rural broadband gap is narrowing but persists, according to new research from USTelecom. Wired broadband at speeds of 25 Mbps downstream and 3 Mbps upstream was available to 98% of non-rural areas but only 65% of rural areas as of mid-2017, according to USTelecom. The 25/3 Mbps speed level is particularly important because it is the  new target  that the FCC has proposed for the high-cost Universal Service Fund. Read more.

The FCC will investigate whether “one or more” major cellular carriers misled the agency in submitting incorrect data when applying for $4.5 billion in subsidies to extend 4G LTE service to rural areas over the next decade as part of the Mobility Fund Phase II (MF-II). FCC Chair Ajit Pai said in a statement, “A preliminary review of speed test data submitted through the challenge process suggested significant violations of the Commission’s rules.” Read more.

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