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News Release

Commission Sets Rate For Universal Service Fund Surcharge
July 10, 2000 (2000-034)
Contacts: Ron Eachus, Chairman, 503 378-6611; Roger Hamilton, Commissioner, 503 378-6611; Joan H. Smith, Commissioner, 503 378-6611; Bob Valdez, Public Information Officer, 503 378-8962
Salem, OR - The Oregon Public Utility Commission (PUC) today approved a 2.35 percent surcharge on all retail telecommunications sales to fund a new Oregon Universal Service Fund (OUSF) expected to bring in $46 million a year to help pay for affordable basic telephone service in Oregon's high-cost rural areas.
The surcharge will be assessed against companies beginning in September. Companies will likely pass along the surcharge to customers, who will see it as a separate item on their bill.
The Oregon legislature, through Senate Bill 622, required the PUC to establish the fund and pay for it with a surcharge. Traditionally, phone companies have charged substantially more than costs for some services to ensure rural areas are served.
"The fund should help equalize costs between urban and rural areas," Commission Chairman Ron Eachus said. "And since it is replacing implicit subsidies previously built into rates with an explicit subsidy, the prices for some telecommunications services should go down."
Eliminating the implicit subsidies is also designed to remove any competitive advantage incumbent carriers may have over new companies entering the market.
And creating a state fund allows the industry to move to cost-based rates without adversely affecting rates in rural areas.
The surcharge will be $1.18 for a customer with a $50 monthly bill. It's $2.35 for a $100 bill. Wireless (cell) phone bills or charges for internet services are exempt from the surcharge. However, qualified wireless companies could opt in at a later date.
The rate set by the Commission is designed to ensure the fund is large enough to provide meaningful support, yet not so large that it makes basic telephone service unaffordable. The Commission used a cost benchmark of $21 per phone line. Companies will receive money from the fund to provide service to areas of the state where costs exceed the benchmark.
The program will not allow companies to increase their profits. The Commission order directs participating companies to file new tariffs with the Commission no later than September 1, 2000 that completely offset monies received from the fund. The offset will take the form of reduced rates for other telecommunication services.
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