Opinion ID: 1433961
Heading Depth: 1
Heading Rank: 7

Heading: h(2 local exchange carriers' contributions

Text: K.S.A. 1996 Supp. 66-2008(b) requires that the KUSF be funded from contributions by all intrastate telecommunications carriers on an equitable and nondiscriminatory basis. Pursuant to this statute, the KCC required all carriers to contribute 14.1% of their intrastate revenues to KUSF. However, the KCC recognized that a certain set of these contributors, based on certain eligibility criteria, would also be entitled to payouts or distributions from the KUSFโto recompensate the contributors for the revenue they lost due to the required access rate reduction. Under the eligibility criteria, the contributors who are also entitled to KUSF distributions are LECs. Thus, instead of requiring these contributors (LECs) to pay into the KUSF 14.1% of their intrastate revenues and then turn around and receive a payment from KUSF for their lost revenues, due to the access rate reduction, the KCC allowed the LECs to set off these amounts. With this setoff, the KCC did not order all LECs to pay a full 14.1% of their intrastate revenues into the KUSF as the other carriers were required to do. Instead, the KCC allowed an LEC to calculate 14.1% of its revenue and then subtract from this figure the amount that the LEC expects to receive from the KUSF as a distribution, to compensate the LEC for revenue it lost due to the access rate reduction. The KCC only requires that the LEC is to pay the result of this equation into the KUSF; the LEC does not have to pay a full 14.1% of its intrastate revenue. Of course, by using such a setoff procedure, the LEC does not actually receive a distribution from the KUSF. The LEC simply keeps the amount of money the KUSF would have distributed to it. According to the KCC, it adopted this setoff procedure to lessen the administration burden placed on the KUSF so as to avoid unnecessary fund transfers. According to KCFN and CMT, the KCC orders violate 66-2008(b), the mandate which requires that the KUSF contributions be equitable and nondiscriminatory. KCFN and CMT assert that the required KUSF contributions are not equitable and nondiscriminatory because the LECs are exempted, under the KCC orders, from contributing to the KUSF in the same manner as all other carriers. As KCFN and CMT point out, all carriers, except for the LECs, must contribute 14.1% of their intrastate retail revenues to the KUSF. On the other hand, KCFN and CMT contend that the LECs do not have to contribute 14.1% of their revenues to KUSF, due to the KCC's setoff procedures. Thus, KCFN and CMT assert that the KCC orders, allowing a setoff procedure, create an inequitable and discriminatory methodology for KUSF contributions which violates 66-2008(b). KCFN and CMT ask this court to strike down the KCC orders regarding KUSF contributions, including the setoff procedure, as a violation of Kansas law. Currently, LECs are the only providers eligible to utilize the setoff procedure. This is because the LECs are the only providers that are initially eligible for KUSF distributions, which may be used to set off the required KUSF contributions. As SWBT points out, there can be no setoff for CMT or KCFN because these providers are not eligible recipients of KUSF funds and will not obtain any distributions from KUSF to offset their required contributions. K.S.A. 1996 Supp. 66-2008(c). SWBT contends that the setoff procedure is nothing more than a net billing process. According to SWBT, the KCC orders regarding the KUSF contribution methodology, including the setoff procedure, is equitable and nondiscriminatory and does not violate 66-2008(a). SIA follows this analysis. The KCC orders relating to the setoff procedures do not improperly exempt LECs from contributing to the KUSF in violation of 66-2008(b), which requires contributions to the KUSF be made on equitable and nondiscriminatory basis. All carriers, including the LECs, are required to contribute 14.1% of their intrastate revenues to the KUSF. Thus, this contribution requirement is set up on an equitable and nondiscriminatory basis. LECs are allowed to setoff their KUSF contributions with a KUSF distribution, to which they are entitled. However, the setoff determination starts out with the calculation that LECs must contribute 14.1% of their intrastate revenues to the KUSF. If a LECs KUSF distribution exceeds this amount, then the LEC is not required to make a contribution to the KUSF. This does not constitute a KUSF exemption for the LEC. Rather, this is simply an accounting mechanism, to prevent the LEC from paying its contribution to the KUSF and the KUSF then paying the money right back to the LEC as a KUSF distribution. The setoff procedure was simply ordered by the KCC to avoid unnecessary fund transfers; it does not exempt the LECs from their required KUSF contributions. All providers are allowed to use the setoff procedure if they receive a KUSF distribution and are required to contribute to the KUSF. A provider may receive a distribution from the KUSF if it meets the eligibility requirements set out in 66-2008(c) and ง 214(e)(1). As 66-2008(c) provides: Pursuant to the federal act, distributions from the KUSF shall be made in a competitively neutral manner to qualified telecommunications public utilities, telecommunications carriers and wireless telecommunications providers, that are deemed eligible. Thus, CMT and KCFN may become eligible for KUSF distributions. At that time, they can utilize the setoff procedures. Nonetheless, they will still be subject to an overall contribution to the KUSF in the amount of 14.1% of their intrastate revenues. This contribution can be paid directly to the KUSF or it can be set off of their KUSF distribution, just as any LEC may do. The right to use the setoff procedure does not make an LEC exempt from its KUSF contribution requirement and will not make CMT and KCFN exempt from such requirement if they become entitled to a KUSF distribution and the right to use the setoff procedure. All providers must contribute 14.1% of their intrastate revenues to the KUSFโwhether as a direct payment or as a setoff. Thus, all providers are required to contribute to the KUSF on an equitable and nondiscriminatory manner as required by 66-2008(b). The KCC's orders relating to the setoff procedures do not exempt LECs from contributing to the KUSF and do not violate 66-2008(b). This issue fails. The Court of Appeals is affirmed in part and reversed in part; the KCC is affirmed. The order of this court entered on January 29, 1998, to stay the KCC's implementation of changes in the access charges of SWBT and Sprint, along with corresponding changes to the KUSF, is hereby dissolved.