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Telecommunications Division

RESOLUTION T- 17064

Public Programs Branch *

December 14, 2006

BY ADVICE

LETTER NO.

FILED BY:

 

DATE

FILED:

293

Calaveras Telephone Company

(Calaveras)

9/29/2006

314

California-Oregon Telephone Company

(Cal-Ore)

9/29/2006

191

Citizens Telecommunications Company

of the Golden State

(Citizens-GS)

9/25/2006

180

Citizens Telecommunications Company

of Tuolumne

(Citizens-Tu)

9/25/2006

312

Ducor Telephone Company

(Ducor)

9/29/2006

385

Global Valley Networks, Inc.

(Global Valley)

9/29/2006

271

Foresthill Telephone Company

(Foresthill)

9/29/2006

292

Happy Valley Telephone Company

(Happy Valley)

10/2/2006

260

Hornitos Telephone Company

(Hornitos)

9/29/2006

351

Kerman Telephone Company

(Kerman)

9/29/2006

224

Pinnacles Telephone Company

(Pinnacles)

9/29/2006

359

The Ponderosa Telephone Company

(Ponderosa)

9/29/2006

349

Sierra Telephone Company

(Sierra)

9/28/2006

341

Siskiyou Telephone Company

(Siskiyou)

9/27/2006

665

Verizon West Coast Incorporated

(Verizon-WC)

10/2/06

334

Volcano Telephone Company

(Volcano)

9/29/2006

188

Winterhaven Telephone Company

(Winterhaven)

10/2/2006

1. pursuant to guidelines adopted in D.88-07-0225; and

2. incorrect determination of the Net Interstate Expense Adjustment.

General Rate Cases (GRCs)

Kerman, Sierra and Volcano informed the Commission in their AL filings of their intent to file a GRC before the end of 2006. Siskiyou's latest GRC filing was in 2005 for test year 2006. Foresthill filed a GRC in 2005 for test year 2007. Calaveras, Cal-Ore, Ducor, Pinnacles and Ponderosa filed their GRCs for test year 2004. Global Valley filed its GRCs for test year 2003. Citizens - Golden State, Citizens- Tuolumne, Happy Valley, Hornitos, Verizon - West Coast and Winterhaven's last GRC filing was for test year 1997.

In the 1997, 2003, 2004, 2006, and 2007 test year GRCs, the carriers were authorized a 10% rate of return.

Means Test

§ B of the Implementation Rules requires that each CHCF-A support request be subject to a means test, i.e. a small LEC's CHCF-A support is limited to forecasted intrastate results of operations not to exceed the small LEC's authorized rate of return. The forecasted earnings shall be based on at least seven months of recorded financial data, annualized for the year in which the advice letter is filed. D. 91-09-042 also provides that the means test is not required in determining an LEC's CHCF-A funding 12 months after a decision or resolution is rendered by the Commission in a General Rate Case proceeding.

Pursuant to § D of the Implementation Rules, the phase down of the CHCF-A funding level is reinitiated effective January 1 following the year after the completion of a GRC. The funding levels are 100% for the first 3 years, 80% the fourth year, 50% the fifth year, and 0% thereafter. This 6-year phase down of funding level is known as the Waterfall.

The funding levels for the 17 small LECs for 2007 are summarized below:

Small ILEC

GRC Test Year

2007

    Calaveras

2004

100%

    Cal-Ore

2004

100%

    Citizens-GS

1997

0%

    Citizens-Tu

1997

0%

    Ducor

2004

100%

    Global Valley

2003

80%

    Foresthill

1997

0%

    Happy Valley

1997

0%

    Hornitos

1997

0%

    Kerman

2008

100%

    Pinnacles

2004

100%

    Ponderosa

2004

100%

    Sierra

2008

100%

    Siskiyou

2007

100%

    Verizon-WC

1997

0%

    Volcano

2008

100%

    Winterhaven

1997

0%

§ B of the Implementation Rules authorizes the small LECs to include the changes of their federal Universal Service Fund (USF) funding in the annual CHCF-A filings. Pursuant to Resolution T-16117, the change of USF funding level shall be determined by the difference between the forecasted USF support for the current year and the forecasted USF support for the coming year. The current year's forecasted USF support is the amount adopted by the Commission for the current year CHCF-A revenue requirement. The coming year's forecasted USF is the amount projected by the National Exchange Carrier Association (NECA), the administrator of USF.6

Paragraph B of Appendix A of Decision 91-05-016 allows the inclusion of regulatory changes of industry-wide effect that have an impact on revenues issued by the Commission and FCC. In the small LECs filing for the 2006 CHCF-A funding, the small LECs' funding request included recovery of revenues attributable to a recovery of revenue lost attributable to a decision issued by the Federal Communications Commission (FCC). On February 24, 2005, the Federal Communications Commission (FCC) released its Declaratory Ruling and Report and Order in its Intercarrier Compensation Docket (CC Docket No. 01-92) (the T-Mobile Decision). The T-Mobile Decision established new rules prohibiting LECS from imposing compensation arrangements on commercial mobile radio service providers through tariffs. Instead, the LECS must negotiate compensation arrangements with CMRS providers. In resolution T-16967, dated December 1, 2005, the Commission maintained that the impact of the FCC T-Mobile decision should be addressed in the small LECs 2006 CHCF-A filings when the results of the small LECs negotiated agreements with wireless carriers have been determined and the losses, if any, have been determined.

In the 2007 CHCF-A filing, Calaveras, Cal-Ore, Ducor, Global Valley, Foresthill, Kerman, Pinnacles, Ponderosa, Sierra, Siskiyou, and Volcano included recovery of revenues that would have been billed to the wireless carriers if not for the T-Mobile Decision. Compensation arrangements have been negotiated by these carriers with Nextel, Sprint PCS and UbiquiTel.

1 The T-Mobile Decision established new rules prohibiting LECS from imposing compensation arrangements on commercial mobile radio service providers through tariffs. Instead, the LECS must negotiate compensation arrangements with CMRS providers.

2 This is consistent with directives set forth in D.01-02-018 and D.01-09-064.

3 Verizon Telephone Company resulted from the merger of GTE of CA and GTE Contel.

4 The January 2007 monthly support will be paid in February 2007; the December 2007 monthly support will be paid in January 2008.

5 D.88-07-022 was modified by D.91-05-016, D.91-09-042, Resolution T-16117, D.00-09-072, D.01-02-018, and D.01-05-031. These guidelines are summarized in the Appendix of D. 91-09-042, which are hereinafter referred to as the Implementation Rules.

6 Data used is the NECA projected 2007 USF Payments provided by NECA on October 12, 2006.

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