Pai Plans to Circulate Rural USF Item Soon to Explore Appropriate Budget, Increase Certainty
FCC Chairman Ajit Pai said he plans to circulate soon a rural high-cost USF item, which he said would explore an appropriate budget and other ways to increase program certainty. The aim is to spur broadband deployment without inviting inefficient investment or operations, he said. Pai has been making increasing noises about updating rate-of-return USF funding rules (see 1711030065 and 1712210041), but his comments in a recent letter were his most explicit yet on expected action. He responded Dec. 19 to an Oct. 30 letter from Rep. John Ratcliffe, R-Texas, who asked the FCC to address a funding "shortfall" impeding the broadband efforts of smaller rural carriers. Both letters were posted Wednesday in docket 17-18.
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Pai noted previous voice-oriented USF support complicated stand-alone broadband efforts of rate-of-return carriers, which a 2016 FCC order was intended to remedy (see 1603300065). "I wish I could tell you that the FCC has fixed this problem, but we have not," Pai wrote Ratcliffe. "Despite what was framed as an order adopting 'significant reforms,' the last Administration's Rate-of-Return Order has not had its intended effect. I still hear from small carriers that offering standalone broadband would put them underwater. This is unfortunate but unsurprising."
He said RLECs also still lack "sufficient incentive to be prudent and efficient in their expenditures," as he said his dissent from that order predicted. "Due to the complexity of the budget control mechanism, carriers do not have the certainty they need to make the long-term investment decisions that will lead to greater connectivity," he wrote Ratcliffe. "It has become clear, as my colleagues and I have worked our way through the punch list of lingering issues from the 2016 Order, that our next focus must be on this issue." He said he backed the 2016 decision to allow carriers to opt into receiving broadband support based on an Alternative Connect America Model (A-CAM).
"To address these issues, I plan to circulate in the near future an item that will explore how this situation can be changed and to determine the appropriate budget levels," he wrote Dec. 19. "I'll ask my colleagues to join me in considering how to address the uncertainty caused by the current budget control mechanism -- such as guaranteeing at least some minimum level of support to ease the unpredictability and allow reasonable capital planning -- while being mindful of mitigating the incentives for rate-of-return carriers to operate inefficiently and over-invest capital to increase profits." An FCC spokesman didn't comment Wednesday.
“We are optimistic the Commission will address rural USF funding issues in the near future,” ITTA President Genny Morelli said. ITTA and others have pushed to increase monthly A-CAM funding for recipients by about 40 percent to $200 per eligible location. The A-CAM campaign "is definitely still alive,” she said. If the FCC had approved additional A-CAM funding by Dec. 31, every recipient would have had to accept both the support and additional buildout duties, she said, but if additional funds are offered now, participation would be voluntary.
"We have reason to believe that the vast majority of A-CAM companies will accept the additional funding -- over 200 of them sent letters to the Commission urging additional funding -- but every A-CAM company will have the right to choose whether to do so," she emailed. "We will continue to urge the Commission to act early in the first quarter of 2018 to provide additional funding to the A-CAM program as well as to allocate additional money to the legacy mechanisms to help relieve the budget shortfall problems legacy companies are experiencing."
High-cost USF helped expand rural broadband, but more can be done, said USTelecom Senior Vice President Jon Banks. "A thorough budget review would be really helpful to assessing the support necessary to close the digital divide in rural America," he told us. "Making near-term improvements is important too. We think they’re going to be moving forward on this soon." He said the "punch list" of proposals is “really about making the program stronger, more efficient and less prone to criticism.” For example, one NTCA proposal is to incorporate an inflationary factor into caps on operating expenditures.
NTCA asked the FCC near term to tap high-cost reserves to "backfill cuts" made in USF support to RLECs by budget controls in the revised legacy rate-of-return mechanism, Senior Vice President Mike Romano told us recently. He suggested the FCC also could resume collecting USF contributions at a rate to ensure an annual overall high-cost budget of $4.5 billion, which recently expired (a little over $2 billion of that is rate-of-return, most of the rest is for larger, price-cap carriers). Both measures would be interim ways of mitigating problems, he said. "We would love to see near-term funding relief and we’d love to see questions on how to handle the longer-term budget," probably through a new rulemaking, he said. NTCA also wants the FCC to address various technical issues.