Verizon Slams Oklahoma Proposal for Toll-Free Statewide Fund

The plan, submitted by the commission staff, would make all instate calls toll-free, with a surcharge on customers’ monthly bills covering the resulting loss to competitive carriers, estimated at $118 million annually. The surcharge would underwrite a new fund replacing the Oklahoma High Cost Fund. The commission has set a March 29 vote on whether to advance the plan to the Legislature.

Implementing the plan as constituted would “replace a $37 million fund with a $271 million-plus fund in order to subsidize the lost toll revenues and networks costs necessary to augment the network and build new facilities,” Verizon said. Local exchange carriers would be compelled to provide long-distance service in-state over the new network for “free,” the telco said. Already commission staff members have raised their estimate of the monthly consumer surcharge to cover the program from $2 to $3.19, it said.

The commission has set an April 1 date for reporting on the proposal to the Legislature -- a deadline with which the telco found enormous fault. In the same filing, the company hailed the commission for voting Thursday to open a new inquiry on availability of universal service in high-cost areas around the state. If not rushed, the new inquiry “is a more appropriate procedural vehicle to determine the nature and scope of any problems with the existing high cost fund and to adopt targeted solutions as necessary,” wrote attorney Jack Clark of Clark Stakem, which represents Verizon. The telco plans to submit additional comments that “more fully address the serious, unanswered legal and policy issues” it has with the proposal, he said.

The speedy turnaround rejects advice from Attorney General Drew Edmondson, Verizon said. Edmondson’s office “has urged the Commission to slow down, evaluate the legal and jurisdictional considerations first, and build a real record before adopting this sweeping new plan,” the filing said.

Edmondson raised concerns about the validity of a Feb. 22 supplemental economic analysis by the commission staff, Verizon said, quoting earlier remarks by the attorney general: “[F]urther economic analysis is needed and more specificity required regarding the ultimate cost to the consumer should this plan be adopted.” The staff analysis is plagued by “material deficiencies,” said Clark. “As the Attorney General has said, getting the economic analysis right is critically important not just for carriers but for consumers, who bear the ultimate responsibility to pay for the plan in a monthly surcharge on each of their wireline, wireless and VoIP numbers,” he added.

Verizon believes the staff analysis underestimates the costs to consumers “because it fails to include all of the costs of implementing the plan, particularly the substantial sums that will be incurred to augment the network and build new facilities where needed to enable local exchange carriers to transport interexchange calls statewide for ‘free,'” its filing said. The staff’s analysis “also fails to include, among other things, the large up-front administrative costs necessary to update legacy billing and provisioning systems to enable a numbers-based methodology of contributing to a new fund to pay for the plan.” The commission staff acknowledges lacking data, such as on reciprocal compensation and toll revenue by non-interexchange carrier providers of long-distance services that would be lost under the plan, the Verizon filing said.

Verizon said the staff analysis may overestimate by as many as 623,000 the quantity of “assessable numbers,” meaning those on which surcharge revenue is estimated. That miscount may have occurred, the company said, because the staff included in its calculations “intermediate numbers” as defined under FCC numbering rules. It isn’t clear that such numbers, or even a portion of them, should be included in the base deemed to generate the revenue to support the new fund, the company said. Some uses to which providers put these numbers could take them out of the equation, skewing the calculations on which the surcharge is based, Verizon said.

“If these numbers are excluded, the estimated surcharge would rise from $3.19 to $3.49 per number -- and would rise further still when all the costs of the plan are included,” the filing said. FCC efforts to adopt a numbers-based contribution system at the federal level could clarify this situation, the company said. But moving to a numbers-based system before the FCC acts raises many issues, it said. “In a national market with common billing and universal service systems, it does not make sense to administer multiple numbers-based systems with contribution rules that may vary significantly from one jurisdiction.”

The commission’s “unnecessarily expedited” schedule doesn’t allow enough time to correct such “material deficiencies,” the filing said. So the commission should suspend its self-imposed April 1 deadline and allow the legal, public policy, jurisdictional and data issues still outstanding to mature fully and be dealt with, the company said.

The state’s proposal would “ban interexchange carriers from competing in the Oklahoma market and establish a new fund that is more than seven times the size of the current Oklahoma High Cost Fund,” Verizon said. Wireless and VoIP connectivity costs are supposed to be recoverable under the plan, but those costs are left out of the staff analysis as well, the filing said.