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SPONSOR: |
Griego |
DATE TYPED: |
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HB |
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SHORT TITLE: |
Universal Service Act of |
SB |
628 |
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ANALYST: |
Padilla |
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APPROPRIATION
|
Appropriation
Contained |
Estimated
Additional Impact |
Recurring or
Non-Rec |
Fund Affected |
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FY03 |
FY04 |
FY03 |
FY04 |
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|
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Indeterminate
–see narrative |
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|
Recurring |
General
Fund |
(Parenthesis
( ) Indicate Expenditure Decreases)
REVENUE
|
Estimated Revenue |
Subsequent Years Impact |
Recurring or
Non-Rec |
Fund Affected |
|
|
FY03 |
FY04 |
|
|
|
|
|
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$10,000.0 |
Recurring |
New
Fund – Universal Service Fund |
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|
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(Parenthesis ( ) Indicate Revenue Decreases)
Relates to Senate Bill 629 and House Bill 715
Also relates to Senate Bill 530 and House Bill
636
LFC Files
Responses
Received From
Attorney
General
Public
Regulation Commission
SUMMARY
Synopsis
of Bill
Senate Bill 628 repeals the current state Rural
Universal Service Fund and establishes the Universal Service Act of New
Mexico. The bill would allow the
imposition of a 1.5 percent surcharge on customers’ monthly intrastate
telecommunications bills in order to create the Universal Service Fund
(“Fund”). The Fund would provide money
directly to telecommunications carriers in
The bill also:
The fund itself would be used as follows:
Significant
Issues
FUND AND DETERMINATION OF NEED: The need for the Fund is unclear. Significant funding for universal service has
long been provided at the federal level, financed by customers through
surcharges on their phone bills. The AG’s office reports that current funding
nationwide is approximately $1.617 billion.
The PRC explains that the bill essentially
renames a fund that currently exists under statute. The state Rural Universal Service Fund
currently contains approximately $2,000.0.
Both the PRC and the AG point out that there has
been no determination of need for the Fund created by this bill or for the
establishment of the Fund at $10,000.0.
The PRC believes a determination of need should be based on a definition
of acceptable costs, an established rate of return for investor-owned carriers,
a distribution system that offers carriers to choose the best technologies and
to balance the needs of all its customers.
SURCHARGE: This bill would impose a new 1.5% surcharge
on most intrastate telecommunications bills to pay for the Fund. Federal and
state taxes and surcharges currently imposed on consumers’ telecommunications
bill are considerable, comprising approximately 40% of the total average bill
for basic landline service. If the Fund
is in fact not needed (see above paragraph), the AG’s office believes consumers
will be “over-taxed.”
ADMINISTRATION OF THE FUND: While the bill extensively defines the
make-up of the board, authority for the use of the fund and the rate of the
surcharge is solely with the administrator.
The functions of the Board are limited. The Board appoints the
administrator but simply receives the administrator’s decisions with no
opportunity to offer input. The bill
requires the administrator to be completely independent of the PRC.
FISCAL IMPLICATIONS
Senate Bill 628 creates a new fund financed by a
new surcharge on telecommunications services.
The Attorney General’s office points out that
the surcharge this bill would impose is, in effect, a tax. Combined with other taxes and potential
surcharges, the new surcharge could price low and fixed income customers out of
the market for basic services.
The PRC believes there will be significant
fiscal implications for the PRC. See
below under “administrative implications.”
ADMINISTRATIVE IMPLICATIONS
The bill does not limit the amount of the Fund
that can be used for administrative expenses, which include the expenses of the
board, the expenses and compensation of the administrator, and the audit costs
of an independent accounting firm.
The bill imposes a number of requirements on the
PRC but does not appear to provide funds for this purpose. There are no provisions, for example, for
staff for the Board or for the cost of rulemaking by the PRC. If the intent of the bill is for the PRC’s
expenses to come out of the Fund, the PRC questions the need for the bureaucracy
of the Board.
CONFLICT, DUPLICATION, COMPANIONSHIP,
RELATIONSHIP
This bill relates to Senate Bill 629 and House
Bill 715, which deal with rural telecommunications carriers. It also relates to Senate Bill 530 and House
Bill 636, which create two new funds for telecommunications projects.
OTHER SUBSTANTIVE ISSUES
The AG’s office believes this bill may conflict
with the Alternative Forms of Regulation (AFORs) currently in place for Qwest
and Valor. The Fund would allow Qwest or
Valor to recover costs for providing basic telephone service. However, pursuant
to its AFOR, Qwest was ordered to invest $788 million in its infrastructure.
The PRC believes the repeal of the existing
state Rural Universal Service Fund may conflict with the Commission’s RUSF
rules enacted in December 1999 and the PRC’s Final Order on Utility Case No.
3223, currently on appeal in the New Mexico Supreme Court.
The PRC believes the bill’s description of the
administrator strongly suggests the National Exchange Carrier Association
(NECA). The PRC notes that it has
already chosen an administration of the state Rural Universal Service Fund
(RUSF). NECA applied for the position
but did not win the bid.
POSSIBLE QUESTIONS
LP/prr