Statewide Level Rate Study Thomas A. Petee, Ph.D. Auburn University at Montgomery Center for Government & Public Affairs

jStatewide Level Rate Study Alabama Board commissioned AUM to conduct a study and determine a Statewide level rate A level rate can be determined through a calculation of: – Revenue (wireless) paid by the Wireless Board to each Emergency Communication District (ECD) for FY , plus any other revenue that should have been paid in that fiscal year – Revenue generated through the system for land line/VoIP to establish a baseline for each ECD for wire line services – Total eligible wireless and land line/VoIP connections that are available in the State of Alabama

Statewide Level Rate Study To ensure accuracy in the estimation of land line/VoIP rates, ECD’s were categorized into one of three groups: – ECD’s that have not changed their rate since October 1, 2010 – ECD’s that increased rates between October 1, 2010 and September 30, 2011 – ECD’s that increased rates between October 1, 2011 and April 30, 2012

Statewide Level Rate Study ECD’s that have not changed their rate since October 1, 2010 were asked to provide: – Data on surcharge fees collected for the highest revenue generating year of the past five fiscal years ( )

Statewide Level Rate Study ECD’s that changed their rates between October 1, 2010 and September 30, 2011 were asked to provide: – The month in which they first collected fees under the newly established rate – The average monthly revenue for those months in which fees were collected under the new rate; this would then be annualized by multiplying the average figure by 12 months

Statewide Level Rate Study ECD’s that changed their rates between October 1, 2011 and April 30, 2012 were asked to provide: – Specific information as to the amount of the increased rate for the emergency service charge – A copy of notification to the primary telephone provider of the district as to when the new increased rate is to go into effect – The line counts for each month of fiscal year October 1, 2010 – September 30, 2011

Statewide Level Rate Study Telephone Providers were asked to provide data for the month of December, 2012 on: - The number of wire line surcharges - The number of post-paid wireless surcharges - The number of pre-paid wireless surcharges

Statewide Level Rate Study For the calendar year 2012, the average surcharge rates were: Wire line -$3.79 (combined business/residential) Wireless -$0.70 (for both pre- and post-paid)

Statewide Level Rate Study From the data provided by the ECD’s, we calculated an annual baseline revenue estimate for 2012: Wire line/VOIP $72,964, Wireless$32,188, TOTAL$105,152,317.34

Statewide Level Rate Study In addition to the baseline revenue, a number of adjustments needed to be factored in to arrive at a target revenue estimate: - a 2% ECD revenue buffer (not including pre-paid wireless) - a 20% cost recovery for wireless - the 7% add-on for pre-paid wireless point of sale - the fee paid to the Examiners for Public Accounts for auditing

Statewide Level Rate Study The calculation of those costs were as follows: Baseline revenue$105,152, % revenue buffer $1,967, % cost recover for wireless $6,437, % add on for pre-paid point of sale $473, Auditing costs $1,390, TARGET REVENUE ESTIMATE$115,421,291.97

Statewide Level Rate Study From the telephone providers, we determined the following line estimates per month for each type of telephone line: Landline/VOIP1,603,970 Post-paid Wireless2,965,589 Pre-paid Wireless 794,192

Statewide Level Rate Study Annualized, those estimates are as follows: Landline/VOIP19,247,640 Post-paid Wireless35,587,068 Pre-paid Wireless 9,530,304 TOTAL LINE SURCHARGES64,365,012

Statewide Level Rate Study Consequently, the estimated level rate was calculated as follows: $115,421,291.97/64,365,012 = $1.7932

Statewide Level Rate Study Using that rate (rounded up to $1.80), the estimated post-implementation surcharge collections would be as follows: Landline/VOIP$34,645, Post-paid Wireless$64,056, Pre-paid Wireless$17,154,547.20