O'Rielly Vote Seen as Only Question Mark to Elimination of USF Rate Floor
RLEC groups expect the FCC will adopt the rural telco rate floor elimination order on Friday's agenda, the only question mark being Commissioner Mike O'Rielly's vote. ITTA Vice President-Regulatory Affairs Mike Jacobs said he would be surprised if O'Rielly supports the order, given past support of the rate floor concept. O'Rielly's office didn't comment Wednesday. The other commissioners' approvals were seen likely. The FCC didn't comment.
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Chairman Ajit Pai has been vocal about his opposition to the rate floor, calling it philosophically "crazy" (see 1902050051) and "broken" (see 1705180061). The draft order said the rate floor results in many rural voice subscribers paying higher rates while "creat[ing] costly and time-consuming reporting and notification requirements for carriers." Its repeal has "a certain inevitability to it," Jacobs said.
Pai Wednesday tweeted a letter dated that day from Republican Sens. John Thune of South Dakota and Jerry Moran of Kansas, backing elimination of the rate floor rule. Citing the letter, Pai said he also believes the rule to be “inherently flawed and unnecessary” and he hopes the agency "scraps it this Friday!"
When the FCC in 2017 froze the rate floor, O'Rielly said he didn't understand why commissioners didn't widely support the rate floor idea since it was "built on a solid premise" that companies should get some level of revenue from subscribers before getting subsidies. He suggested means-testing the high-cost program.
Absent some FCC action, the rate floor will go from $18 to $26.98 on July 1, according to the draft order. "No one wants these rates to go up,” said NTCA Senior Vice President-Industry Affairs and Business Development Mike Romano.
WTA would prefer rate floor elimination, said outside counsel Gerard Duffy of Blooston Mordkofsky. It's critical that there's "some sort of action -- either elimination of rate floor or extension of existing freeze -- before RLEC members have to notify customers of rate increase and (in some cases) seek state commission approval of rate increase," he emailed. WTA said it's pleased Pai's getting a rate floor order on Friday's agenda.
Under the rate floor system, incumbent LECs that get high-cost loop support but charge less than the rate floor for local service and state regulated fees will get less in high-cost support money. The rate floor began in 2012 at $10, then $14 in 2013, before it was pegged to the average urban rate starting in 2014. That's when it would have gone to $20.46 except for the agency then phasing in rate hikes at $2 a month every year until it reached the urban rate figure and then in 2017 freezing the rate floor at $18 until July 1.
Rather than a repeated similar "fire drill" of going to the FCC about a looming dramatic rate increase and getting a stopgap fix, "our hope is this time we can conclusively put it to bed," Romano said.
The initial policy has merits, though the effects of how it has played out have been a problem, Jacobs said. He said aside from eliminating it, other options include disaggregating the rate floor for localities or regions. Some sort of "middle ground" solution like maintaining the current $18 freeze would have been "probably the right outcome," he said.