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Pai Seeks Sufficient and Predictable USF Support for ROR Telcos

Randy Sukow / Nov 21, 2018

The FCC plans address universal service high-cost support shortfalls for rural rate-of-return (ROR) telephone companies during its next monthly meeting, scheduled for Dec. 12. ROR USF reform has been top priority for rural telcos for many years. In response, the Commission expects to raise the level of high-cost support for the first time since 2011. It also plans changes to its 2016 USF reform order, which gave rural telcos an option of using a cost-model or a legacy ROR method to calculate high-cost support.

“Long story short, we’re making the universal service fund a more efficient, effective way of distributing funding to close the digital divide,” FCC Chairman Ajit Pai said in a blog post.

Said Shirley Bloomfield, CEO of NTCA, The Rural Broadband Association, in her blog: “From NTCA members who have roamed the halls of Congress these past several years – sharing their story before members of Congress and testifying before congressional committees on the challenges and cost of rural broadband deployment, to those who literally spent hundreds of hours on committee calls and in FCC meetings sharing the details required in complex mechanics – this order coming to the table could not come soon enough.”

Pai mentioned four expected provisions of the order:

  • The level of support could go up for both ROR and model-based telcos, although Pai did not specify the amount. Additional funding for those using model-based support would be contingent on promises to increase broadband buildout.
  • The Commission would give rural telcos that opted for legacy ROR regulation in 2016 another chance to choose the cost model. The model “would give them a guaranteed revenue stream for a decade in exchange for meeting specified buildout requirements,” he said.
  • The minimum benchmark for USF high-cost fund eligibility would increase from 10 Mbps downstream/1 Mbps upstream to 25 Mbps downstream/3 Mbps upstream. The new standard would then match the definition of broadband the FCC currently uses in its regular Section 706 reports to Congress.
  • Pai said he intends to set a “long-term budget” and end “arbitrary funding cuts” for ROR telcos in order to improve funding predictability. He did not specify dollar amounts for the budget.

The FCC under Chairman Pai regularly releases the text of major items three weeks before its regular monthly meeting. It is likely to release the text of the ROR order later this week or next week. “As we head into the Thanksgiving holiday, I am sincerely hoping for something that we can indeed be grateful for,” Bloomfield said.

Update, Nov. 22: The FCC has published the draft Report and Order. It would increase the annual high-cost support budget for legacy ROR carriers to $1.42 billion annually with increases to adjust for inflation every year. It also revises the cost model for telcos that chose that option in 2016 to increase monthly support up to $200 a month per location.

“We recognize that access to 25/3 Mbps broadband service is not a luxury for urban areas, but a necessity for all. To that end, we adopt additional measures toward our goal of expanding the availability of affordable broadband service to rural America,” the order says in its introduction.

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