JudicialStatewide NewsRural Telephone Service Fee Rises After Court Order to Balance $200 Million Debt

The TUSF has lingered in growing debt since a 2020 decision was made by the Public Utility Commission to reject a much smaller rate increase.
August 8, 2022
Telephone customers are receiving notice of a fee increase in their bills after the Public Utility Commission (PUC) raised rates in compliance with a July court order to balance the books on the Texas Universal Service Fund (TUSF).

On July 14, the PUC approved a fee increase from 3.3 percent to 24 percent on all intrastate phone calls — the mechanism by which the TUSF is funded. It became effective on August 1. Phone customers will see a more than sevenfold increase in the TUSF fee on their respective bills, each detailing the connected fee.

That increase is 9 percent higher than requested by the members of the Texas Telephone Association (TTA), which sued the state back in 2021 over missing payments.

“While we disagree with the severity of the rate hike and will continue to seek a longer term, more affordable alternative, we should not lose sight of the importance of this fund to the cellphone network in rural Texas and the fund’s vital role in keeping 911 service available to over 4 million rural Texans,” TTA told The Texan in a statement.

A spokesman for the PUC told The Texan, “We anticipate reducing the fee to a lower level that will allow the PUCT to maintain an adequate fund balance within approximately one year.”

The Texan Tumbler

The TUSF, a subsidy for rural telecom providers to finance the state’s mandate that all Texans have a phone connection, was $200 million in the red on its obligations to those providers. That sum was expected to grow another $100 million by the time the legislature convened in January.

The deficit stems in part from a rejected 2020 motion to increase the fee to 6.4 percent to compensate for falling tax collections. The PUC rejected the motion out of concern for increasing a tax during the pandemic, instead directing the agency to prioritize funding to “lifeline projects.”

“I think this is not a time when we should be raising taxes on people, particularly not…in the way…this almost irrational singling out of this group of people who we would be taxing,” then-Commissioner Arthur D’Andrea said at the time.

The second domino fell in 2021 when Gov. Greg Abbott vetoed a bill by the Texas legislature directing the PUC to make the TUSF solvent. Abbott’s justification for the veto was the same as that the PUC voiced a year earlier.

The fund has been losing $10-$11 million per month.

A rate hike of such a degree, the PUC wrote, “is appropriate to allow for funding of current expenditures, amounts in arrears, and a sufficient reserve.”

One reason the hike is larger than that requested by the TTA is that a trial court sided against the PUC in another lawsuit against the commission by AMA Techtel Communications. In November 2021, a trial court ordered the PUC to pay its debt to AMA Techtel in full beginning December 1 — an amount of $8 million. That ruling was appealed to the 3rd Court of Appeals where it currently lingers.

But to pay that off immediately, rather than over time, the PUC elected to raise the fee rate higher than requested to make whole the entire fund.

A T-Mobile spokesman told The Texan, “The Public Utility Commission of Texas increased the Texas Universal Service Fund assessment for all wireless customers in the state on the voice portion only.”

“While this will not impact the overall monthly bill for the vast majority of T-Mobile and Sprint customers who are on plans with monthly taxes and fees included, customers on other plans may see a small increase. Our commitment to keeping the price of the monthly talk, text and data included in eligible rate plans isn’t changing as taxes and charges like the Texas Universal Service Fund are separate from rate plan prices.”

After years of uproar from the rural telecom providers, the commission is now hearing it from run-of-the-mill phone customers.

Editor’s Note: This article has been updated to include a comment from T-Mobile and the TTA.


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Brad Johnson

Brad Johnson is a senior reporter for The Texan and an Ohio native who graduated from the University of Cincinnati in 2017. He is an avid sports fan who most enjoys watching his favorite teams continue their title drought throughout his cognizant lifetime. In his free time, you may find Brad quoting Monty Python productions and trying to calculate the airspeed velocity of an unladen swallow.