October 2019
News and Updates
Here are some updates from the Texas Telephone Association. View as Webpage
Update from Executive Director Lyn Kamerman
Moving into fall, eyes on elections and the regulatory arena
As we move into the cooler fall months, we are seeing no shortage of activity in the political and regulatory arena.
 
After the Texas Legislature left town at the end of May, there has been plenty of policy activity with dozens of interim committees meeting to address issues for next session. Much of the focus has been on issues such as preventing mass violence, issues arising from the new school finance bill and looking ahead at redistricting after the 2020 census.
 
Capitol observers are beginning to focus on 2020 elections. At least one senator and three members of the Texas House of Representatives have recently announced retirements. At least five senators up for reelection already have at least one announced challenger and about 48 House members are expected to see opponents in reelection efforts. 
 
There has been an ongoing controversy regarding a secret recording of Texas House Speaker Dennis Bonnen by Empower Texas in which the speaker allegedly made comments to the effect of being willing to grant media credentials to conservative political action group Empower Texas if the group targeted 10 House Republicans in upcoming primaries. The Texas Department of Public Safety’s Texas Rangers have been investigating the situation for potential criminal activity. Empower Texas on October 15 released the recording to the public. 

The Republican Caucus met October 18 and sanctioned Speaker Bonnen with a number of individual Republican House members calling for the speaker's resignation. Early Tuesday morning, Speaker Bonnen announced he would not be seeking re-election for speaker and for his seat in the House. Bonnen's decision to not seek reelection means his House District 25 will be open for the first time in decades and House members will be jockeying to become the next House speaker. The election of the next speaker won't happen until the Legislature convenes in January 2021.
 
Still the wheels continue to turn at the Public Utility Commission of Texas and at the Federal Communications Commission.

The Texas PUC on September 30 published a draft rule to comply with SB 1358, which was approved by the Legislature this year. Specifically, the draft rule would amend administrative penalties when notices of violation in cases under the Public Utility Regulatory Act are not responded to by the alleged violator. This is one of several projects the PUC has opened to address recent legislation. The Texas Telephone Association team will continue to monitor this activity at the PUC.

SB 586 activity continues at Texas PUC

The TTA team continues to monitor reviews under SB 586, which the Texas Legislature approved in 2017 to reform the Texas Universal Service Fund.

On October 16, orders were filed in regarding the outstanding 2017 annual reports to reclassify and close the dockets. This is unusual but consistent with the actions taken in Etex’s docket, reflecting there would be no further action on these projects and opening the door for rate adjustment proceedings based on 2017 reports. 

In docket no. 50026, Eastex’s application to adjust its support from the Texas Universal Service Fund, the PUC has filed a public notice, entered a protective order and set a deadline of October 25 for staff’s recommendation on its proposed procedural schedule.

Meanwhile, all 43 small Incumbent Local Exchange Carriers that opted into the new reporting mechanism under SB 586 have filed 2018 annual reports. There still has not been any material activity in the dockets so far, with recommendations on the 2018 reports expected in early December.  

Virgin Mobile moves for rehearing on the Texas PUC’s denial of expansion of state-supported Lifeline services

Virgin Mobile on September 23 filed a motion for rehearing with the Texas PUC in response to the PUC’s decision to deny Virgin Mobile’s request to expand its designation as a Lifeline-only Eligible Telecommunications Provider into additional parts of Texas and receive state low-income support. 

Virgin Mobile’s request for rehearing is a prerequisite for an appeal, as Virgin Mobile is required to exhaust all administrative remedies before appealing a PUC decision in the courts. In its motion for rehearing, Virgin Mobile argues the PUC erred based on policy decisions on the expansion of state-supported Lifeline service instead of legal reasons. Virgin Mobile argues the PUC’s refusal to grant a good cause waiver is in error.   I n its motion, Virgin Mobile presents policy arguments that the Commission’s application of the rule ignores a consumer shift away from using landline phones and is not consistent with a goal of universal service

The PUC on October 11 extended the time to act on Virgin Mobile’s motion for rehearing to the maximum allowed by law.

Texas PUC opens rulemaking on competitive carrier high-cost support

The Texas PUC on October 1 opened a new project to address high-cost per-line support available to competitive eligible telecommunications providers (ETPs) in small, rural service areas under SB 586, which was approved by the Texas Legislature in 2017. As outlined in the PUC’s rule adopted to implement SB 586, high-cost support in small, rural local phone service areas for companies will be determined using a formula based on the amount of support and the number of eligible lines.

The TTA team will continue to monitor the proceeding for potential developments.

Texas PUC reviews telecom interconnection rules

The Texas PUC staff on October 4 issued a memo recommending the commission review rules related to telecommunications interconnection in project no. 49765. Under state law, all state agencies must review and consider readopting its rules every four years. Public comments are due by November 25 and reply comments will be due by December 9.

The PUC’s current interconnection rules were adopted during a time of great local interconnection activity and there have been many disputes over the past 20 years. However, local interconnection has become relatively common over the past few years without a major interconnection dispute since 2011.

To the extent that TTA members would like TTA to propose specific amendment to the PUC’s interconnection rules through comments, please contact TTA’s regulatory chairman, Wes Robinson at wes@eastex.com .  

Hilliary acquisition CCNs remain pending
 
Electra Telephone Company (Townes) filed an application with the Public Utility Commission of Texas for an amendment to its Certificate of Convenience and Necessity ( CCN) to reflect its purchase by Hilliary in March (Docket No. 49364 ). Similarly, Tatum Telephone Company in April filed an application to amend its CCN (Docket No. 49412 ) to add Hilliary as an additional doing-business-as name on its certificate. The PUC staff recommended approval in late July.
Around the Texas Capitol – John Hubbard and Ian Randolph
Fall at the Capitol: it is all about elections
Things have finally started cooling off and summer’s making way (sort of) for fall, there is shortage of heat at the Texas Capitol.
 
We are seeing members of the Texas Senate and Texas House of Representatives make decisions on whether to run for re-election.
 
  1. At the same time, one issue that might have flown under the radar for some Texans is the upcoming election on November 5 when voters will consider 10 proposed amendments to the Texas Constitution.
 
Constitutional amendments require the support of two-thirds of the Texas House of Representatives and Senate and a majority of voters. 
 
While the U.S. Constitution is brief and vague and, therefore, a flexible document subject to interpretation by the federal courts, the Texas Constitution is one of the longest in the nation. The Texas Constitution is 203 pages long with more than 200 amendments spanning 17 articles and serves as more of a statutory document specifying what state government can or cannot do.
 
Since the Texas Constitution was adopted in 1876, it has been amended hundreds of times and it has collected a number of odd provisions over the years. For example, Article VII, Section 2c of the Texas Constitution relates to the release of the state’s claim to certain lands in Upshur and Smith counties. Article XVI, Section 21 deals with contracts for public printing and binding as well as repairs and furnishings of legislative facilities.
 
Still, as it is a state constitution, it establishes the structure for Texas government. Article I establishes the Legislature while Articles II and III establish the executive and judicial branches of state government, respectively. Article VII deals with education and Article VIII deals with taxation and state revenue. Article VIII includes a number of sections that prohibit or severely limit various state taxes. For example, Section 1-e prohibits a state property tax. Section 24 requires that an income tax on individuals -- as opposed to corporations – be approved by a majority of voters in a statewide referendum and that the revenue from the tax be dedicated for property tax reduction and to fund education. While Section 24 does not completely prohibit a personal income tax, the requirement that such a tax be approved in a statewide referendum is seen by virtually all legislative watchers as an impossibility and an all-but income tax ban.
 
As we look ahead to Nov. 5, 10 proposed constitutional amendments, approved by the Legislature during this year’s legislative session, are on the ballot for consideration by voters. They deal with a variety of topics ranging from disaster relief funding to animal retirement. Some proposed amendments include:

  • Proposition 1 that would allow municipal judges to hold more than one office at a time; 
  • Proposition 5 that would dedicate existing sales and use taxes on sporting goods to the Texas Parks and Wildlife Department and the Texas Historical Commission,
  • Proposition 8 which would establish a fund for flood prevention infrastructure,
  • Proposition 10 which would require a constitutional amendment in addition to the statewide referendum before an income tax on natural persons could go into effect.
 
A complete list of propositions along with arguments for and against each can be found here .
 
We encourage you to take some time and familiarize yourselves with each proposition on the ballot so you can cast an educated vote on November 5.
In the State and Around the Nation
October is National Cybersecurity Awareness Month: Stay safe online 
Data breaches. Phishing attacks. Malware.

Cybersecurity and threats to consumers and businesses remain a constant concern within the telecommunications industry.

Whether it is a Fortune 500 company, a small business or a consumer at home, cybercriminals do not discriminate in targeting vulnerable computer systems. And would-be cyberthieves’ tactics are constantly evolving.

October is National Cybersecurity Awareness Month . National cybersecurity awareness month -- a joint effort between the Cybersecurity and Infrastructure Security Agency (CISA) at the U.S. Department of Homeland Security, and the National Cyber Security Alliance -- is intended to raise awareness about the importance of cybersecurity and to make sure all Americans have the resources they need to be safer and more secure online.
E-rate deadlines coming up
There are several important federal E-rate deadlines approaching in October.

October 28 is the invoicing deadline for funding year 2018 recurring E-rate services. For service providers unable to submit invoices to Universal Service Administrative Company, which administers the E-rate program under the Federal Communications Commission, by October 28 they can file a request for a 120-day extension.

In addition, October 28 is the deadline for interested stakeholders to submit nominations for six positions on the USAC board of directors, including three representatives from the service provider community, two representing the schools and library community and one of representing state consumer advocates. Currently, the incumbent local exchange carrier representative position is held by Joel Lubin, consultant for AT&T. Other board seats for service providers represent the cable operators and commercial mobile radio service providers.

Finally, service providers have until October 31 to complete updated Form 498s to reflect their business type. More information can be found here . USAC must collect this information to comply with the Digital Accountability and Transparency Act of 2014 .
FCC revises intercarrier compensation for traffic pumping
The Federal Communications Commission on September 27 released an order to address so-called “traffic pumping’’ and requires local exchange carriers to pay intermediate carrier charges.

“Traffic pumping’’ – or access stimulation -- occurs when a local carrier with high access charge rates enters into an arrangement with another company with high call volume operations, such as chat lines, adult entertainment calls or “free” conference calls.

The arrangement inflates or stimulates the number of calls into the local carrier’s service area, and the local carrier then shares a portion of its increased access revenues with the “free” service provider or provides some other benefit to that company. The local company’s profits from such an arrangement are typically so great that its charges become unreasonable and unlawful under FCC regulations, according to the FCC .

The new rules are aimed at eliminating the financial incentives associated with traffic pumping.

In 2011, the FCC attempted to address the issue by transitioning terminating end office switching rates to bill-and-keep, but carriers were able to avoid the new rules by applying originating end office rates for toll-free traffic. The new order addresses this by updating what it defines as “access stimulation” and addresses issues such as revenue sharing agreements and originating-to-terminating traffic ratios. If a local exchange carrier trips the mechanism, they will be obligated to pay intermediate carrier charges, which typically include interoffice transport and tandem switching costs.
FCC’s Internet freedom order upheld on appeal
The U.S. Court of Appeals for the District of Columbia on October 1 upheld most of the Federal Communications Commission’s Restoring Internet Freedom Order adopted by the FCC in December 2017, including a decision to classify broadband as an information service, rather than a telecommunications service .

One element of the FCC rules that the court did not uphold relates to the FCC’s assertion that it could preempt state-level actions involving net neutrality and an open Internet, unless the FCC specifically can show that those requirements conflict with FCC policies.

The court also remanded back to the FCC on three points, including: the order failed to examine the implications of its decisions on public safety; the order does not sufficiently explain what reclassification will mean for the regulation of pole attachments; and the order did not adequately address concerns about the effects of broadband reclassification on the Lifeline program.

Given the court’s decision to enable state-by-state regulations, it could increase pressure on Congress to act to adopt national network neutrality legislation. 
Sprint faces FCC troubles  
The Federal Communications Commission on September 24 issued a news release announcing Sprint claimed tens of millions of dollars in monthly Lifeline subsidies for serving about 885,000 Lifeline subscribers who were no longer using the service. 

A spokesperson for Sprint stated that “an error occurred” in July 2017 when newly-implemented changes by the FCC required Sprint to update how it calculates usage and eligibility of Lifeline customers, according to the Kansas City Star .

This error reportedly affected almost 30 percent of the company’s Lifeline subscribers.
 
This timing was unfortunate for Sprint, which has an estimated $26 billion merger with T-Mobile before the FCC. 

FCC Commissioner Geoffrey Starks issued a news release saying the development “ directly impacts our review of the proposed merger between Sprint and T-Mobile, one of the largest wireless transactions in FCC history. Given the enormity of the apparent wrongdoing committed here, we must pause our Commission review.”

The FCC on October 15 voted to approve the merger, according to news reports.

Meanwhile the lawsuit by 19 states to block the merger continues, with the trial set for December 9.  Mississippi recently agreed to settle and withdraw from the lawsuit in exchange for the company agreeing to deploy a 5G network in Mississippi within three years that would reportedly provide high-speed access to at least 62 percent of the state’s population.   Following Mississippi’s agreement, seventeen states and the District of Columbia remain in the lawsuit.
FCC considers delaying broadband testing
The Federal Communications Commission on October 25 will consider a draft order regarding testing broadband speed and latency for recipients of high-cost support under the federal Connect America Fund.

The FCC had delayed broadband testing for small rate-of-return companies until January 2020. If adopted as drafted, the order would delay testing requirements until a CAF provider hits certain buildout obligation milestones.  
R Street publishes policy study on electric cooperative offering broadband services
R Street, a Washington DC-based free-market think tank on September 25 published a policy study “ Financial and Governance Protections for Electric Cooperatives ” that deals with broadband issues. 

In the study, R Street identifies three problems associated with non-regulated electric cooperatives offering competitive broadband services. These include:
  • R Street acknowledges providing broadband in a quasi-competitive market where consumers may say “no” is a riskier financial proposition than delivering electricity as a monopoly. As a result, R Street recommends electric cooperatives think through and adopt governance protections to ensure that the electric business is significantly insulated from the risks associated with competitive broadband services. 
  • R Street points to concerns related to cross subsidies, noting that when a business sells one product consumers must buy and one that it hopes they will buy, there is a strong incentive to cross-subsidize the competitive offering through the monopoly consumer base. R Street said it is necessary to adopt clear accounting protections to make sure electricity consumers are not subsidizing others’ high-speed Internet service. 
  • R Street recognizes the legitimate interests of the state and federal governments to increase broadband access while stressing that it is also necessary to ensure that there are not perverse consequences to promoting electric cooperatives’ broadband services in ways that could limit lower-cost or higher-access opportunities.

R Street in the study points to legislative changes in a few states related to electric cooperatives deploying broadband services, including Texas SB 14 that was approved by the Legislature this year. The TTA legislative team worked with the authors to include language dealing with cross-subsidies and pole attachment rates to create a level playing field for industry players.

R Street points out that the Texas law, like legislative action in Mississippi, Alabama, North Carolina and Maryland, provides no independent oversight to ensure that rates charged for electric services do not include any broadband service costs.
In the News
The U.S. Department of Agriculture is investing $152 million in 19 rural broadband projects across 14 states. The USDA rural broadband funding projects are in Illinois, Indiana, Kentucky, Minnesota, Missouri, North Carolina, North Dakota, Oklahoma, Pennsylvania, Tennessee, Texas, Virginia, West Virginia and Wisconsin. “Deploying high-speed broadband internet connectivity, or ‘e-Connectivity,’ in rural America expands access to essential health, educational, social and business opportunities,” Deputy Under Secretary for Rural Development Donald “DJ” LaVoy said in a press release. “President Trump and Agriculture Secretary Perdue are committed to fully utilizing all resources Congress provides for building and modernizing this critical infrastructure in rural America, because we believe that when rural America thrives, all of America thrives.” Read more.

With enterprises moving more of their workloads and applications to the cloud, CenturyLink has expanded its on-demand network connectivity to Google Cloud Platform (GCP). CenturyLink is now able to connect business premises and public data centers with its Cloud Connect Dynamic Connections service to GCP. With previous partnerships in place with Microsoft Azure, Amazon Web Services and Oracle, CenturyLink is covering the cloud bases to offer services across its fiber network and edge locations to the various clouds. Read more.

We were intrigued by a  letter  and a  filing  by just the state members of the Federal-State Joint Board on Universal Service. By way of background, the Joint Board was created by Congress in the Telecommunications Act of 1996 to make recommendations on how to implement the provisions in the law aimed at ensuring quality telecommunications and information services are available everywhere in the U.S. "at just, reasonable, and affordable rates." The idea was to get state and federal regulators working together to reach a consensus before enacting reforms since telecommunications services are regulated at both levels.  Read more.

(Op-ed from D r. Steven E. Johnson, chancellor of WGU Texas)
The Federal Communications Commission (FCC) recently announced plans for a  $1.5 billion project  that will expand broadband access to thousands of underserved areas in the U.S., including to nearly 34,000 rural homes and businesses in Texas. As part of the  Connect America Fund , broadband providers in the Lone Star State will receive $76.7 million in funding over the next 10 years to provide these services to 89 Texas counties, from the Gulf Coast to the Panhandle. This effort by the FCC is a sign of progress. However, according to a report by Connected Nation, “ Rural Broadband: A Texas Tour ,” 1.8 million Texans, most of them in rural areas, don’t have high-speed internet access — and the FCC initiative is only estimated to reach a small percentage of Texans who urgently need broadband access. Read more.

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