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Associations suggest changes to capital budget mechanism for RLEC CAF support

09.02.15 – The rural associations recently wrote the FCC regarding their proposed capital budget mechanism, which they previously submitted as a means to ensure more equitable and efficient distribution of federal universal service support for rate-of-return companies.

NTCA, ITTA, USTelecom, WTA, ERTA and NECA now propose a modification to the original proposal to ensure that a greater proportion of universal service resources is directed not only toward areas in which network plant is depreciated, but also toward locations where consumers lack access to the then-current speed thresholds mandated by the FCC.

The letter proposed a simple adjustment to the annual allowed loop expenditure based on a company’s broadband availability. A three-step process would:

  1. determine a target broadband availability for all companies based on the national average broadband availability for all rural, rate-of-return carriers; 

  2. calculate the difference between each company’s actual broadband availability and the target broadband availability; and 

  3. adjust the company’s annual allowed loop expenditure based upon the result of that calculation.

The associations also clarified that the capital budget mechanism in and of itself is not meant to operate as an overall control on the USF budget. Rather, it is intended to serve as a means of determining, within a budget that is fixed by other means, how that budget is to be apportioned among carriers in terms of supporting eligible investment.