Brief(1)
Sub. for S.B. 666 would amend the Kansas Telecommunications Act of 1996 (Kansas Act) to do the following:
Composition of the KUSF Working Committee. The bill would require the Kansas Corporation Commission (KCC) to facilitate a Kansas Universal Service Fund (KUSF) working committee on or before June 1, 1998. The working committee would include 18 members: representatives from various segments of the telecommunications industry; an Internet service provider; a representative from the Citizens' Utility Ratepayer Board; a Kansas university faculty member with expertise in telecommunication technology; a representative of elementary and secondary schools; a representative of a public library; a large business; a small business; and four legislators (two House members, one from each party; two Senate members; one from each party).
Charge to the KUSF Working Committee. The bill would require the working committee to discuss, identify, and develop recommendations regarding technology issues, KUSF funding regulatory procedures, modifications to basic and enhanced universal service, and other issues identified by the committee, including, but not limited to:
Reporting Requirement. The bill would require the working committee, on or before December 1, 1998, to submit to the KCC a report of the committee's activities and recommendations. For its part, the KCC would have to submit a report and recommendations to the Legislature at the beginning of the 1999 Session based on the committee's activities.
Freeze on Customer Surcharge. The bill would freeze the surcharge collected from customers at an amount not to exceed 9.89 percent of a telecommunications company's intrastate retail revenues, although lesser amounts may be collected from customers to fund the KUSF.
Wireless Telecommunications Service Providers. The bill would establish a KUSF contribution formula for wireless telecommunications service providers. This contribution must be equitable and nondiscriminatory and must be based on the wireline providers' contributions, reduced by the individual wireless provider's percentage of minutes of usage initiated and terminated entirely over the wireless network, divided by two.
Freeze on Reimbursement for Infrastructure Deployment. The bill would prohibit until July 1, 1999, the KCC's approval of local telephone companies' requests for additional KUSF funding to provide enhanced universal service.
Deletion of Higher Speed Internet Service Requirements. The bill would eliminate the requirement in the Kansas Act for local telephone companies to provide dial-up Internet access on and after July 1, 1999 to support 28.8 kilobit per second Internet service. Instead, the bill would require dial-up access to support the highest quality service that is technically and economically feasible, as determined by the working committee and as may be subsequently determined by the KCC.
Effective Date of Act. The bill would take effect upon publication in the Kansas Register.
Background
The Kansas Act required the KCC to establish the KUSF on or before January 1, 1997. The amount initially estimated to fund the KUSF was $111 million. Intrastate toll and access rates for long distance were to be reduced by that amount over a three-year period with the objective of equalizing interstate and intrastate rates. During the first year of implementation, the KUSF built up a reserve of $15.5 million excluding outstanding payments. The KCC staff is proposing to the Commissioners that this reserve be used in the second year of KUSF implementation to reduce the 1998 assessment percentage applied to contributors. The KCC staff also recalculated the size of the KUSF, reducing the funding requirement from $111 million to $108 million. The KCC authorized an increase in payphone rates and eliminated the free directory assistance call in its order on competition (December 27, 1996). The increased revenues resulting from this change in rates were included in the KUSF and applied in the first year of implementation to Southwestern Bell's and Sprint's recovery from the KUSF. If the Commissioners agree with staff's recommendation, the size of the KUSF could be reduced in the second year by an additional $8 million to allow Southwestern Bell and Sprint to retain that amount as partial replacement of revenues lost through access reduction. According to KCC staff, the combined recalculation of the original estimate of the Fund and the $8 million reduction resulting from rebalancing the increase in payphone charges and elimination of free directory assistance would establish the size of the KUSF at $100 million and reduce the assessment percent in the second year of implementation from 9 percent to 6.8 percent.
Disbursements from the KUSF in the first year were applied predominantly to replacing local telephone companies' revenues which were lost through intrastate access reductions. Legislative concerns about the size of the KUSF stem from future, in part indeterminate, costs associated with the other purposes for which KUSF disbursements are statutorily authorized. These purposes include:
"Enhanced universal service" is statutorily defined as SS7 capability; basic and primary rate ISDN capability (or the technological equivalent); full-fiber interconnectivity (or the technological equivalent) between central offices; and broadband facilities to all schools, hospitals, public libraries, and state and local government facilities requesting such services. In information provided by KCC staff to the House Committee on Utilities, it was estimated that an additional $78.6 million would be needed to fund the KUSF to support enhanced universal service and 28.8 Internet access requirements in accordance with the Kansas Act.
The introduced version of S.B. 666 would have amended several provisions of the Kansas Act. In general, the bill would have provided the KCC with greater flexibility to: determine the level of funding for and nature of disbursements from the KUSF; adopt regulatory reform plans; reduce regulation and deregulate telecommunications services; and conduct earnings audits.
The Senate Committee on Commerce amended the bill to focus primarily on curbing the size of the KUSF by freezing the maximum surcharge to be collected from customers, and by freezing reimbursements for deployment of universal service, enhanced universal service, and certain infrastructure investments, until the KUSF working committee has been afforded the opportunity during the remaining months of 1998 to consider certain issues related to enhanced universal service and Internet access services and formulate recommendations. The Senate Committee amendments also proposed another method of reducing wireless providers' assessments to the KUSF.
The Senate Committee of the Whole amended the bill to: freeze the customer surcharge at an amount not to exceed 9.89 percent and apply the freeze on reimbursements for infrastructure deployment only to enhanced universal service. Another amendment is technical.
1. *Supplemental notes are prepared by the Legislative Research Department and do not express legislative intent. The supplemental note and fiscal note for this bill may be accessed on the Internet at http://www.ink.org/public/legislative/fulltext-bill.html.