Consumers to Receive Telephone Tax Relief

April 14, 2008

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WEATHERFORD – Following months of work by the Legislature and policymakers, a reduction in the size of the Texas Universal Service Fund (“TUSF”) is one step away from a successful conclusion.

The Texas Universal Service Fund review began with the passage of SB 5, groundbreaking legislation in 2005, which directed the Texas Public Utility Commission to determine what changes needed to be made to the fund to better reflect today’s competitive marketplace. State Representative Phil King (R-Weatherford), the chairman of the House Regulated Industries Committee, sponsored the bill.

“When we began this process in 2005, the most important consideration we had was to make sure that we reduced the taxes associated with the fund, which every Texas consumer will see as a smaller charge on telephone bills,” State Rep. Phil King said. “At the same time, we knew we had to do this in a way that balanced our desire to reduce taxes with our goal of ensuring that ratepayers see the ultimate benefit.”

On April 9, the Texas Public Utility Commission reported that all parties involved in the process had agreed to a balanced settlement that will be good for all Texans. The parties to the proceeding included the PUC staff, large telephone carriers, the cable industry and the Office of Public Utility Counsel, which is the PUC’s in-house consumer advocacy arm.

Currently, the TUSF is funded by an assessment on consumer’s telephone bills, currently 4.4 percent. “The proposal now before the commissioners will result in a 64% reduction in the size of the fund, and that’s good news,” King said. “But it accomplishes this in a way that serves the interests of rural customers, and that is a critical consideration for the folks in Parker and Wise counties, and so it is also a critical consideration for me.”

The TUSF was originally created to ensure that telephone service would remain affordable for Texans, particularly in rural areas, as the industry transitioned from regulated monopolies to a consumer-driven free market. The proposed reduction in fees imposes strong restrictions that carefully limit any potential rate changes in rural areas.

The proposed settlement will now go before the commissioners of the PUC for consideration. A final vote could come as soon as April 25.