State Universal Communications Support

As required by the 2018 Supplemental Operating Budget, ESSB 6032, Section 141(5), the Utilities and Transportation Commission (UTC) is conducting a long-term study on the universal service program and the need for future program funding in unserved and underserved areas of Washington. On December 31, 2018, the UTC submitted to the Legislature a report offering a framework for how the UTC will approach the study.

Over the five-year period authorized for the UCS Program, the commission approved approximately $18.2 million in funding to eligible telecommunications carriers in Washington. The commission authorized this funding according to rules adopted subsequent to the legislation but prior to the start of the program. Now, during the program’s fifth year, funding has adequately maintained small-carrier service prices in Washington’s rural areas at levels comparable to similar services in more urban areas of Washington and nationwide. The funding has also provided a necessary transitional lifeline to Washington’s smaller telephone companies, by enabling network investments that will help these carriers adapt to a changing telecommunications marketplace and modifications in federal support programs.

From 2013-2014 these companies averaged $10.2M in regulated capital expenditures (prior to receiving UCS funds in late 2014) per year. However, from 2015-2017, these companies averaged $21.2M per year in regulated capital expenditures. This is an increase of nearly 208% in regulated capital expenditures despite the fact that regulated telecommunications revenues declined by -6.3% from 2011-2017. These continued investments are supported by the UCS as well as from federal programs such as the FCC's Connect America Fund and other legacy support. The combination of these support programs allow companies to provide both voice and broadband services in the areas they serve.

The small telephone companies that have benefited from UCS Program support have a long history of providing telecommunications services to many high-cost, rural areas of Washington. The owners and employees of these companies are proud and active members of their communities. Their services provide essential telecommunications connectivity (narrowband voice and broadband) to communities whose livelihoods increasingly depend on a digital, interconnected world.

However, it has become increasingly apparent that the telecommunications needs of rural Washington, particularly with respect to access to broadband service, transcends the areas served by small telephone companies. As the nation’s attention shifts from legacy voice services to broadband services, policymakers must consider how best to provide financial support to telecommunications providers, especially where the impact can be achieved in a fiscally efficient manner.

With the passage of 2SSB 5511 (2019), the UCS Program was extended for an additional five years. Without this necessary extension the loss of funding support would have drastically affected small telephone companies and their customers. However, without full funding provided in the state's operating budget, companies and customers will still feel negative effects. The effect will depend on a company’s historical level of state and federal funding assistance, efforts to increase operational efficiencies, and the amount of lead time offered by the UCS Program’s five-year transition. Some companies may be better prepared for the impacts of reductions or elimination of state funding.

As the UCS Program continues to provide state support for rural telecommunications services, the commission stands ready to offer suggestions and other information to policymakers that provide a variety of feasible and innovative solutions to the challenges of providing telecommunications and broadband service in Washington’s rural areas.