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News Release
Commission Revises Universal Service Fund Surcharge Rate
November 7, 2000 (2000-053)
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 agreed to increase the Universal Service Fund surcharge from 2.35 percent to 3.24 percent after new projections showed the initial rate overestimated overall telecommunications revenues. The new rate will take effect on telecommunications services billed on or after January 1, 2001. The surcharge will amount to $1.62 for a customer with a $50 monthly bill.
The fund was created by 1999 legislature through Senate Bill 622. The legislation required the PUC to establish the fund and finance it with a surcharge to help pay for affordable basic telephone service in Oregon's high-cost rural areas.
The program will not allow telecommunication companies to increase their profits. Companies that receive monies from the fund must file revenue-neutral tariffs. The offset will take the form of reduced rates for other telecommunication services.
The program is designed to make the previous implicit subsidy explicit through a separate item on customers' phone bills. In the past telecommunication companies subsidized the cost of basic telephone service to high-cost rural areas by charging more than cost for other services used primarily by business customers.
The PUC based the initial OUS rate on published Federal Communications Commission (FCC) statistics. However, further examination of telecommunication revenues for the first six months of 2000 has determined the rate is not sufficient to support the pay-out requirements of the OUS fund.
Without taking the action the fund would not meet financial expectations. The surcharge, levied on all retail telecommunications sales, is expected to bring in $46 million a year.
The current 2.35 percent surcharge has been appearing as a separate item on customers' bills since September of this year. The new 3.24 percent rate will take effect the first of the year.
In addition to the rate increase, the Commission will defer the first distribution from the fund from March 30, 2001, to April 30, 2001. These two actions will support an adequate service level and cover support payments.
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