NECA files 2019 average schedule high-cost loop universal service formula
Recently we filed the 2019 modification of the average schedule high-cost loop universal service formula. If approved by the FCC, the formula will be in effect from January 1, 2019, through December 31, 2019.
USF HCL expense adjustments
The formula is used to calculate interstate universal service fund high-cost loop expense adjustments for average schedule companies. The proposed HCL formula conforms to FCC USF reporting rules and produces payments consistent with those experienced by similarly situated cost companies as required by the Commission’s Part 69 rules.
FCC rules require all rate-of-return carriers, including A-CAM and Alaska Plan companies, to submit HCL data. For average schedule companies receiving A-CAM or Alaska Plan support 1, we provide the required information to USAC using the proposed 2019 average schedule HCL formula.
Proposed formula changes
The 2019 proposed cost per loop formula produces an overall 12 percent increase in HCL support compared to current payments 2 for average schedule companies eligible to receive support. The proposed formula increase is driven primarily by increases in corporate operations expenses and depreciation expenses of Cable & Wire Facilities Category 1 and Central Office Equipment Category 4.13 investment reported by sample average schedule companies, used in the CPL formula development.
The effect of the formula on each company’s payment varies depending on its specific CPL and loop count:
- For most companies, CPL and payments will increase as a result of the proposed formula.
- Five companies will begin receiving payments for the first time in 2019.
- Twelve study areas will realize total payment reductions due to changes in the formula breakpoints, a significant change in loop counts, or a lower estimated 2019 pro-rata adjustment factor.
Proposed formula updates
The proposed formula was also updated for the following:
- The rate of return was reduced by 25 basis points as required by the FCC’s 2016 USF Reform Order. The proposed CPL formula reflects a rate of return of 10.375 percent, which is a blended RoR representing 10.5 percent in effect for the first six months of 2019 and 10.25 percent for the last six months of 2019.
- An operating expense limitation factor has been applied to average schedule companies’ original exchanges CPL, introduced in the 2016 USF Reform Order and modified in the 2018 USF Reform Order.
- The formula for calculation of the corporate operations expenses limit is further modified by the FCC’s 2018 USF Reform Order to include consumer broadband-only lines.
Calculate the effect on your payment
At the end of August, we notified our members of the proposed CPL formula and its effects. For further analysis, a worksheet containing the new CPL formula can be found on our website (login required) under Member Services>Average Schedule Resources>Worksheets/tools/forms. You can enter your demand data and the actual pro-rata adjustment factor, as it becomes available, and determine the actual effect on your HCL payment.
1 There are 130 out of 288 average schedule companies receiving A-CAM or Alaska Plan support.
2 The estimated payments are calculated at the frozen National Average Cost Per Loop ($647.87) and preliminary pro-rata adjustment factor of 0.77056 and do not reflect possible further reductions resulting from the application of the rate floor adjustment, $3000 per line limit or the FCC’s budget control mechanisms administered by USAC.