The Federal Communications Committee (FCC) released a Report and Order on July 24, 2023 that adopts a voluntary Enhanced Alternative Connect America Cost Model (A-CAM) support program to promote widespread deployment of 100/20 megabits per second (Mbps) broadband across areas served by rate-of-return incumbent local exchange carriers (ILECs).
The FCC also released a Notice of Proposed Rulemaking (NPRM) and a Notice of Inquiry (NOI). The NPRM seeks comment on how to amend legacy rate-of-return support mechanisms in the near term to align them with the current broadband deployment and support environment.
The NOI takes a longer-term view and seeks to build a record on methods for modifying the Universal Service Fund (USF) high-cost program to promote affordable and available broadband services in the years to come.
Notice of Proposed Rulemaking (NPRM)
The NPRM seeks comment on three key areas:
- Reforms to legacy support mechanisms and appropriate funding
- Appropriate deployment obligations for carriers receiving Connect America Fund Broadband Loop Support (CAF BLS) when the current deployment term ends this year
- Methodologies for preventing duplication of support between legacy high-cost Universal Service Fund support mechanisms and funding provided by other federal and state agencies.
Updates to CAF BLS, Other Legacy Support Mechanisms, and the Budget
The Budget Control Mechanism (BCM) seeks comments and questions on the following points.
Budget for Legacy Support and Methods for Reducing Support
In light of reforms adopted for the Enhanced A-CAM program, the FCC makes to remove support received by carriers electing Enhanced A-CAM from the legacy budget. The legacy budget is reset to the level of the 2023–2024 demand.
Future Savings Associated With the Election of Fixed Support by Legacy Support Recipients
Savings accrue to the budget applied to the remaining, non-electing legacy support recipients? Under this proposal, transitional support for legacy support recipients electing Enhanced A-CAM begins to phase down after six years and the savings associated with the phasedown would be applied to the legacy support budget.
- Should other adjustments be made to the BCM to better account for ongoing trends to Consumer Broadband Only Loop (CBOL) conversions?
- Should the BCM be adjusted to address high rates of CBOL adoption?
- Should the budget or BCM be revisited after the Broadband Equity Access and Deployment (BEAD) process is complete?
Increased CBOL Revenue Imputation
Comments sought and related questions include:
- Whether reforms should be undertaken to reduce amount of pre-BCM support
- Should the CBOL revenue imputation be increased to reflect inflation?
- If CBOL revenue imputation is raised, what would be the impact on end-user broadband rates?
- If the CBOL revenue imputation is increased for CAF BLS, should the cap be raised cap for A-CAM and Alaska plan carriers?
- What considerations should be taken in account for carriers serving Tribal lands?
Comments are sought on whether the FCC should take steps to reduce HCLS and target more support to CAF BLS. If so, related questions include:
- How should HCLS be phased down?
- If it’s possible for HCLS indexed cap to decline in regular annual increments over 10 years until it reaches $0, should this period be shorter or longer?
- Are there alternative methods that should be considered?
Connect America Fund Inter-Component Communication (CAF ICC)
Comments are sought on whether:
- To increase the budget for legacy carriers to account for reductions in CAF ICC support
- FCC should adopt measures to accelerate the phase out of CAF ICC for rate-of-return (RoR) carriers
Other related questions include:
- Should adjustments be made to CAF ICC to reflect the growth of CBOLs?
- Should the eligible recovery or base period revenue amounts be reduced to reflect conversion to broadband-only lines?
Deployment Obligations for CAF BLS Recipients
A second five-year term with additional 25/3 Mbps deployment obligations begins January 1, 2024.
Comments are sought on whether the commission should continue to require deployment obligations for CAF BLS recipients, and if so, if obligations should be increased to 100/20 Mbps.
Other questions include:
- How would number of locations to which the carrier must deploy be determined?
- How should locations with other deployment obligations (competitive overlap or enforceable obligations) be reassessed or adjusted?
- Should the FCC defer commencement of the next five-year term to January 1, 2025?
Adjustments to Support to Reflect Funding from Other Federal or State Programs
Comments are also sought on measures to prevent duplication of support where a provider other than the legacy RoR carrier is awarded funding.
- Should CAF BLS be eliminated in areas where competitors have been awarded funding to provide broadband service?
- Under FCC rules Section 54.319, a RoR carrier loses CAF BLS for any census blocks in which at least 85% of residential locations are served by unsubsidized competitors.Should this standard be extended to include locations served by competitors subject to awards by federal or state agencies?
- How to reduce support in areas served by an unsubsidized competitor or subject to enforceable deployment commitments?
The order tentatively concludes that support be calculated for the entire study area, then disaggregated using an allocation method, using one of the following methods of disaggregation methodology:
- Based on the relative density of competitive and non-competitive areas
- Based on the ratio of competitive to non-competitive square miles in a study area
- Based on the ratio of calculated A-CAM support for competitive areas to total study area support
The order seeks comment on timing of any support reductions associated with qualifying funding to competitors. Related questions include:
- Are phased reductions appropriate?
- Should support for the RoR carrier be made only when the required competitive deployment is made?
The order seeks comment on process for determining that a qualifying grant award has been made to a competitor.
- Should the support reduction under Section 54.319 be extended to reduce HCLS or CAF ICC?
- Seeks comment on the treatment of legacy support in areas where the RoR ILEC receives grant funding for broadband deployment from another federal or state agency. Are further safeguards necessary to prevent double recovery of investment paid for with grants?
The order seeks comment on how the above proposals promote or inhibit advances in diversity, equity, inclusion, and accessibility.
Notice of Inquiry (NOI)
The NOI seeks comment on whether and how the Commission should modify its USF high-cost support program considering the anticipated deployment in most high-cost areas of broadband networks offering a minimum of 100/20 Mbps service made possible through various funding programs, including:
- FCC programs
- Programs created by the Infrastructure and Jobs Act
- Other state and federal programs
The FCC’s focus since the 2011 USF/ICC Transformation Order has been on support deployment of new networks and their associated operational costs for a limited term. The commission recognizes that providers in high-cost areas that already operate such fully deployed networks might not have a business case for continuing to operate those networks and provide services absent ongoing support that will augment existing revenues.
Similarly, providers that receive support under programs such as BEAD that are designed to kick-start network deployment without providing support for sustained operations may face similar circumstances. Depending on the scope of this problem, lack of funding could threaten the sustainability these full-service networks in high-cost areas.
The NOI solicits information about the best methods for determining the support needed by carriers to efficiently maintain these full-service networks in the future. The commission seeks comment on appropriate methods of measuring and evaluating the future support needs of carriers with full-service networks, particularly where providers have received significant upfront federal or state funding.
The commission also asks whether differences in how providers were previously subsidized should be considered to avoid paying for the same costs twice, and if so, how.
Comments sought on how the FCC would define a full-service network, meaning a network potentially eligible for ongoing (sustainability) support.
Comments and Questions
- Will network performance standards or other requirements be factors?
- Will it be required that provider can extend service to residential or businesses locations within a defined period, for example, requiring to turn up service to a location within seven to 10 business days
- Should the definitions differ for Tribal lands, Alaska, or remote and isolated areas?
Developing a Support Methodology
The notice seeks comment on:
- Whether existing cost models can be leveraged to estimate monthly costs necessary to sustain a full-service network, or if the commission should develop a new model
- How to address costs in areas where locations are served by multiple carriers, but not all locations are served by all carriers
- What objective, up to date, and available data sources can be used in the development of this cost model
- How to model the present value of expected revenues of an efficient full-service network
- How to account for the fact that providers receiving current support must set prices to mass market customers that are reasonably comparable to urban rates
- How to account for revenue received from other federal and state grants that provide support on a one-time basis for deployment or provide continuing support to sustain operations
- How often updates to an ongoing support model should be considered
- Model alternatives and whether other approaches should be prioritized
Setting a Budget and Support Term
This notice seeks comment on how to determine a budget for ongoing support to sustain the operations of a full-service network operating in high-cost areas.
The notice expects that a fixed term for support is necessary and asks how long that term should be and what data or assumptions should be used to evaluate term length.
Service Obligations and Accountability
The notice seeks comment on:
- Whether the commission should consider adopting rules to ensure accountability in the use of support to sustain operation of full-service networks
- Whether to require annual or quarterly performance testing and, if so, what the parameters should be.
- Support withholding for failing to meet requirements
We’re Here to Help
For more information on developments related to the Enhanced A-CAM program and changes to Legacy Rate-of-Return support, contact your Moss Adams professional.