Big decisions loom in presidential and universal service elections for rate-of-return carriers
November elections are upon us! Not only the presidential election - but also A-CAM elections. (Funny, neither Donald nor Hillary has brought this up.) Unlike the presidential election, the A-CAM elections start a series of deadlines leading up to the anticipated January, 2017 inauguration date of the Commission's new plan for providing USF support to rate-of-return carriers for the deployment of broadband-only services.
By November 1, companies must notify the FCC if they wish to start receiving A-CAM model-based support. Carriers considering electing model-based support will need to evaluate on a state-level basis whether the support offered will be sufficient to cover the cost of deploying broadband services at the requisite speeds to the specified number of residential and small business locations. The Commission has stressed that support and compliance is calculated at the state level for A-CAM electors.
There is no required format for sending the FCC an A-CAM election. Carriers must submit a letter signed by an officer of the company that:
- confirms the carrier elects the model-based support amount as specified in the Wireline Competition Bureau's August 3 Public Notice announcing the offers of support, and
- commits to satisfy the specific service obligations associated with that amount of support.
Carriers not electing A-CAM support stay on legacy RoR support mechanisms, which will include the CAF Broadband Loop Support mechanism composed of both the former ICLS and the new support for broadband-only loops.
Alaska companies also have an additional option to elect the new Alaska Plan. This election, however, is not due until December 7. Companies must submit a performance plan by that date in order to opt into the Alaska Plan (a number of companies have already submitted such plans). Alaska companies also have the opportunity to elect A-CAM, but must do so by November 1. They may also choose not to take either the Alaska Plan or A-CAM support, and stay on legacy support.
Tools to help determine which path to take
The FCC has released deployment obligations for both model and legacy support mechanisms. For those electing the model, the FCC has recognized that facts on the ground may not always match what is in the model, and thus may necessitate some flexibility in the required number of locations needed to be deemed in compliance. The FCC is permitting a carrier to deploy to 95 percent of the required number of locations without a reduction of model-based support. (Information for the A-CAM obligations) For carriers remaining on legacy support mechanisms/CAF BLS, they may select one of two methods for determining their deployment obligations: weighted average cost method or A-CAM cost method.
The FCC has released several other tools to help carriers determine the potential financial impact of choosing either path. Operating expense limits are based on a regression model that uses housing units and density to determine a company's OpEx cap. The cap applies to both HCLS and CAF BLS for companies remaining on legacy support. After true-ups, a carrier will only experience reductions if its operating expenses exceed the cap. Preliminary information regarding capital investment allowances is also available; final numbers (incorporating any corrections) should be released before year end. Operating expense and capital investment allowance worksheets are available on neca.org.
While the Commission does not expect to start the competitive challenge process until sometime in 2017, current competitive coverage data, using Form 477 data submitted through August 29, 2016, and census block boundary data, is available at: https://transition.fcc.gov/wcb/OverlapBlocks2016ForPub.xlsx.
What happens after November 1
After A-CAM elections are submitted, the following sequence of events will determine final support levels:
- The Bureau will determine whether the total support of all carriers electing the model exceeds the overall 10-year budget for the model path set by the Commission (up to $150 million annually above the total of A-CAM electors' legacy amounts, and an additional $50 million if the Commission decides circumstances warrant it).
- If the total exceeds the budget, the Bureau may either revise model-based support amounts and deployment obligations for carriers who initially elected model-based support, or they may revise the eligibility requirements to scale back the number of companies eligible for model support to meet the budget.
- If the Commission revises the support amounts and deployment obligations, carriers will have to confirm within 30 days they are willing to accept the revised final offer. If they don't, they will be deemed to have declined the revised offer. Those carriers who initially accept model-based support but subsequently decline the revised offer will continue to receive support through legacy mechanisms.
Carriers electing the A-CAM must withdraw from the NECA common line pool, but can elect to have their common line, end user and broadband customer loop charge tariffed by NECA. A carrier electing A-CAM is permitted, but not required, to charge a wholesale consumer broadband-only loop rate that does not exceed $42 per-loop per-month. Companies electing A-CAM can, however, remain in NECA's traffic sensitive pool.
NECA working with FCC, USAC to coordinate the transition
NECA has been working closely with the FCC and USAC to coordinate all facets of this transition, and to help member companies prepare for this decision and the changes this will subsequently bring. Among past and future activities, we:
- Posted OpEx limitation and CIA worksheets on our website for companies to use in determining how these will impact support payments, if applicable;
- Provided Commission staff with projections and cost data for use in a number of the analyses published by the FCC and USAC;
- Are preparing an adjusted average schedule filing to account for the OpEx and CIA limits; and
- Will be filing tariff revisions on December 19, 2016, to become effective January 3, 2017, to prepare for implementation of the A-CAM elections and the CAF BLS, as well as revised CAF-ICC to account for broadband-only line counts. Shortly thereafter, NECA will begin collecting forecasted data for the 2017 tariff filing that will be submitted in June 2017.
Milestones in implementing universal service reform for rate-of-return carriers
Deadline for all carriers to elect A-CAM support. If A-CAM is oversubscribed, the FCC may take any of several actions, including announcing adjusted A-CAM support levels based on new budget figures, and carriers will have 30 days to decide whether or not they still want A-CAM support.
USAC to announce RoR high-cost support budget figures for first half of 2017, based on information it currently has, i.e., the CAF BLS forecasts and HCLS submitted by NECA. This will not reflect the outcome of the A-CAM election or carriers electing to receive support pursuant to the Alaska Plan.
Deadline for Alaska companies to opt into the Alaska Plan by submitting performance plans.
Date for NECA and other carriers to file required tariff revisions, including for broadband-only loop service on 15 days' notice.
Implementation of operating expense limits, capital investment allowance, and CAF BLS support, as well as A-CAM support.
Tariff revisions including broadband-only Loop Service tariffs are scheduled to become effective.
Date by which carriers must submit broadband deployment information to USAC.
Filing date for projected CAF BLS (Form 508) for upcoming July 2017-June 2018 tariff year.
USAC to announce RoR high cost support budget figures for upcoming tariff year.