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Well into football season, USF reform for rate-of-return carriers still to come 

Last spring, FCC Chairman Tom Wheeler famously pledged to a Senate committee he would implement RLEC USF reforms by football season. Now that we are half way through the NFL and college football seasons, how much closer are we to universal service support reform for rate-of-return carriers?

Since that Wheeler appearance before the Senate Financial Services and General Government Appropriations Subcommittee, rural telecom stakeholders have continued to work on universal service reform for rate-of-return carriers on several fronts. One is support for companies whose customers want broadband service without the voice component. Rural phone companies lose high cost loop support that makes their service affordable when voice and broadband services are bundled together. The rural associations have been discussing a solution to the stand-alone broadband problem with the FCC for several years, with the proposed Data Connection Service as one option that would change existing support rules to allow RLECs to receive high-cost support for broadband-only connections. (See article in summer 2015 issue of Access.)   

What about the bifurcated approach?

Another option that has been explored more recently, but not yet officially supported by the rural associations, is generally referred to as the FCC’s proposed bifurcated approach, which would establish separate mechanisms for recovery of costs based on investments before or after a given date. Recent industry efforts to come up with technical assumptions for such an approach include an August meeting with FCC staff at which industry participants provided materials to aid in identification and discussion of issues that may require further examination and resolution arising out of such an approach, including possible effects on: 

  • rates for consumers who take a combination of voice and broadband in the future; 
  • rates for consumers who purchase voice service only going forward; and
  • local service rates and state universal service funds.

In a speech at NTCA’s fall conference, FCC Chairman Thomas Wheeler spent most of his time on the various proposals for universal service reform.  He said any new mechanism must:

  • be forward-looking, 
  • ensure equitable distribution of funds,
  • prevent double recovery, and
  • stay within the established budget.

Wheeler also recognized that any new mechanism would require a timely, but reasonable transition period, although he was not specific on what that period might be. He called the effort “a once-in-a-generation opportunity to put the rate-of return-carrier program on solid footing.”  

FCC updates proposed A-CAM

The FCC has also proposed a transition framework for a voluntary election by rate-of-return carriers to receive model-based support. In its April 2014 Connect America Order and FNPRM,  it directed the Wireline Competition Bureau to make the needed adjustments to the Connect America Cost Model currently in use for price cap carriers to adapt it for rate-of-return areas.  

The Bureau recently released the latest version of its Alternative Connect America Cost Model for rate-of-return carriers, which incorporates the results of its study area boundary data collection as well as other refinements. The rural associations have expressed support for making a voluntary model-based path available to rate-of-return carriers who might be interested in opting into such a support mechanism. But they said inputs and outcomes require greater examination both prior to an initial limited voluntary election and even more so for any possible voluntary use beyond such an initial phase.  

Wild finish?

Based on the ongoing meetings with FCC staff, Wheeler does not seem to be backing off the end-of-football season promise. Will it be a smooth steady ride to accomplish his goals or will there be a Hail Mary pass with time ticking down to 0:00 to get the job done? Stay tuned, football fans.  

Bob Deegan contributed to this article. Bob is senior government relations counsel. He can be reached at rdeegan@neca.org.


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