- Associated Press - Tuesday, November 3, 2015

COLUMBIA, S.C. (AP) - A regulatory agency could effectively decide whether cellphone customers in South Carolina will start paying a fee created for rural phone service.

The state Public Service Commission began hearing arguments Tuesday on a petition filed by more than 20 local telephone companies. They want the agency that oversees utilities to declare that wireless companies compete for their customers.

Such a ruling would trigger a fee expansion under state law. At issue is the state’s Universal Service Fund, which the Legislature created in 1996 to ensure affordable phone service for rural areas where it’s costly to extend and maintain lines.

The state’s 1 million landline customers would pay less as the fees extend to 4.5 million cellphone customers and all internet phones. Currently, some of the state’s roughly 400,000 “voice-over internet phone” users pay the fees, though how many is unknown, according to the state’s Office of Regulatory Staff.

Both sides argue it’s an issue of fairness.

Proponents say it spreads the cost to everyone who benefits from landline connections, since even wireless calls are relayed over landlines between cellphone towers.

Opponents argue it forces cellphone users to subsidize old technology.

“I just think we don’t need any additional taxes,” Columbia real estate agent Rush Bradshaw told the commission, noting he has no landline service either at home or work.

Attorney John Bowen for the South Carolina Telephone Coalition contends taxes aren’t the issue.

“We’re not talking about taxes. We’re talking about competition between two types of carriers,” he said.

Currently, landline customers pay nearly 3 percent of their bill for rural landlines. That will continue to rise without the extension but drop to 1 percent if it goes through. Cellphone users in South Carolina already pay the federal USF fee.

The money is distributed to rural providers dubbed “carriers of last resort.”

Wireless companies argue the entire subsidy program is antiquated and should be evaluated.

Michelle Robinson, a Verizon vice president, called it a vestige to when few companies monopolized the industry.

“Where there’s competition, regulations and subsidies shouldn’t exist,” she said. “There’s no need to double-down on this fee. The need for funding is much diminished. Why not evaluate that and determine today’s needs?”

But the question before the commission is only whether wireless companies offer competing services.

The hearing will resume Wednesday. An attorney for the wireless companies argued Tuesday the petition should be dismissed entirely. There is no timeline on any potential decision.

“We’ve been hoping for a proceeding like this a long time. We believe that because they’re competing in the marketplace, they should be treated like other competitors,” said attorney Frank Ellerbe for the South Carolina Cable TV Association, who argued against the dismissal motion. “Everyone competing out there on the marketplace has to pay” just as he said his clients did when they provided voice service.

He noted that lawmakers had no idea in 1996 “how the wireless world would develop.”

The landline companies filed the petition in August.

A coalition of five wireless companies, including Verizon, fought efforts earlier this year to extend the fee legislatively. That bill narrowly passed the Senate in April but has yet to reach the House floor. Debate can resume when the Legislature returns in January.

But Sen. Gerald Malloy, D-Hartsville, said he doesn’t foresee the contested bill being addressed next year, when infrastructure and education funding will top the Legislature’s to-do list.

“We have to look at the priorities of the body,” said Malloy, who opposes the idea. “This is not one of our priorities.”

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