News Release 7/2/2021

RURAL TELEPHONE, BROADBAND SERVICES PLACED IN JEOPARDY AS A RESULT OF STATE OFFICIALS’ ACTIONS

Rural Texas telephone companies have been placed in jeopardy by Texas state officials. According, to the operators of Texas’ rural telephone companies, that places all telecommunications services, including broadband internet access, at risk for both residential and business customers. This comes after the Texas Public Utility Commission has failed to act, and Governor Greg Abbott vetoed legislation meant to address the problem.

“Without the reversal of state officials’ actions in the very near future, Texas’ rural residents can expect the degradation, and perhaps even elimination, of even very basic telephone services, as well as many advanced services, such as those associated with internet use over broadband, and transport of wireless/cellular calling and data,” said Darren Patrick, general manager of Wes-Tex Telephone Cooperative, Inc., which is headquartered in Stanton, Texas.

Texas’ rural areas are provided telecommunications services by more than 40 small telephone companies serving more than 50 percent of the geographic area of Texas. Because of the relatively low density of population in rural areas, the Texas Legislature mandated that rural telephone services receive financial support from the state Universal Service Fund. That financial support is required by both state and federal law to allow rural companies to provide service equal to similar service provided by the large deregulated national companies at comparable prices. Under present law, state financial support is provided to local carriers based on the portion of their network attributable to basic telecommunications services which only includes voice telephone service. This same network provides the infrastructure and interconnecting network of fiber-optic lines which allow customers access to high-speed broadband internet. The TUSF is funded, not through a general tax, but through a uniform charge on the revenues of the state’s telecommunications providers, the largest of which have chosen to focus on urban or cellular customers.

The warning by Texas’ rural telephone providers is made following two distinct actions by Texas state officials regarding payments from the Texas Universal Service Fund (TUSF). “First, the Public Utility Commission, which regulates rural telephone service, has under collected revenues and thus

stopped providing the full amount of TUSF funding which that agency itself had previously ordered as necessary in dozens of individual company rate proceedings,” explained Weldon R. Gray, the CEO of Texas Statewide Telephone Cooperative, Inc. (“TSTCI”), the statewide association that represents 25 of Texas’ 46 small companies which receive TUSF funding.

“That action, statewide, amounts to approximately $10 million per month since January in reduced TUSF payments to rural companies,” said Gray. “We have challenged that unlawful action in court, but that is a slow, drawn out process and basic services will likely decline before a judicial answer is rendered.” Since the PUC took this action to essentially defund rural telephone service, the winter storm in mid-February forced the resignation of the three PUC commissioners who made the initial decision. The Governor has since appointed new PUC commissioners to replace those forced to resign, and these commissioners have the authority and could fully restore funding under current law. However, so far no action has been forthcoming. According to Gray, “the matter has not been on any PUC agenda in more than a year.” Because of the PUCs actions, TSTCI turned to the Texas Legislature this spring to adopt H.B. 2667 to address TUSF contributions in order to compel the Commission to lawfully restore full TUSF funding to rural areas. The legislation was sponsored by Rep. John Smithee and Sen. Charles Perry and received overwhelming affirmative support from both Republicans and Democrats in passing the Legislature. However, without advanced notice of any concerns, it was vetoed by Gov. Greg Abbott on June 18.

“It remains a mystery to us why Governor Abbott vetoed such a popular bi-partisan measure that means so much to rural citizens of the state,” Gray added. “In his veto Statement, the Governor referenced transformational broadband reform, but these actions by both the PUC and the Governor work in direct contradiction to those initiatives. TSTCI and other rural telecommunications providers are on record supporting the broadband bills as initiatives to expand broadband access despite the fact that the majority of the areas that they serve will not be eligible under any of the programs created.”

Gray explained, “In reality, many rural areas, including the areas served by TSTCI’s members, already have broadband which far exceeds the standards set forth in the broadband legislation. This is because small rural providers who are recipients of support from the TUSF have built hybrid networks capable of telephone service, broadband and all forms of high-tech communications service. TUSF is a key revenue component which allows these hybrid networks to exist. While TUSF is calculated and

based on the portion of that network attributable to voice services, without these revenues, the network as a whole is unsustainable. Failure to stabilize the TUSF places critical infrastructure and existing broadband in much of rural Texas directly at risk.”

Gray estimates that unless the courts, or the PUC, take corrective action in the very near future, Texas rural residents will start seeing a rapid decline in the quality of their basic telephone services, dramatic increases in local rates, or both. Any service failure of these basic services will also adversely impact the rural infrastructure and networks necessary to accommodate the full range of advanced telecommunications services (i.e. broadband internet, wireless calling, internet movies and gaming, and data transfer services) on which rural Texas relies.

“These detrimental actions by Texas state officials, if not corrected in the immediate near future, could have devastating effects not only on Texas rural small business and residential consumers, but also on those major rural business users such as farming, oil and gas development, border security, feedlots, ranching, cotton gins, etc.”

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For more information contact:

Weldon R. Gray, TSTCI

weldon@tstci.org

903-658-0055