FCC Orders Increase USF to RLECs, Detail Expense Limits; Democratic Dissents Target NPRM

The FCC took USF actions and made proposals intended to help rural telcos provide broadband-oriented service and to improve high-cost subsidy program operations. Dissenting Democrats said their requests for changes to an NPRM went unheeded. Chairman Ajit Pai said the minority members waited too long to make their suggestions, a charge they denied. The commission Friday released two orders and a notice (here) that provide up to $545 million in additional support to rate-of-return carriers, flesh out expense and investment cost-recovery restrictions, and aim to examine the rural USF budget and a possible tribal broadband factor. The item appears largely consistent with a draft (see 1801160040 and 1801170048).

The new funding will help rural carriers "expand broadband deployment," said Pai. He said the notice seeks "ways to improve and simplify the funding system so carriers have predictable support and the right incentives to efficiently invest in broadband." Commissioner Mignon Clyburn dissented and Commissioner Jessica Rosenworcel partially dissented over NPRM questions, with Clyburn and Pai disputing the timing of edits she suggested. Commissioner Mike O'Rielly voiced concern about aspects of the NPRM, particularly the possible removal of capital and operating expense limits, but welcomed changes made that he proposed, including on potential means-testing. Rural telco groups offered some positive reactions, mixed with some disappointment.

A reconsideration order partially granted an NTCA petition challenging the statutory sufficiency of high-cost funding, including under a budget-control mechanism. It revisited the budget controls "by fully funding carrier claims" from July 2017 through June 2018 but decided not to take further immediate steps. The short-term relief will provide a $180 million one-time increase in support, Pai said. While still reviewing the 112-page item, NTCA said the FCC action "to address immediate budget crises represents a much-needed 'shot in the arm' for rural broadband." The recon order also granted NTCA requests to include an inflationary factor in an operational expense calculation going forward, and, to include consumer broadband-only loops in carrier corporate expense calculations. At WTA's request, it clarified the treatment of local exchanges transferred between rate-of-return carriers and others. WTA didn't comment.

Longer term, a report and order provides up to $365 million in additional funding to carriers voluntarily receiving support through the Alternative Connect America Cost Model (A-CAM). The Wireline Bureau is directed "to offer additional [monthly] support up to $146.10 per-location to all carriers that accepted the revised offers of model-based support," said the order. "Under the revised offer, all locations with costs above $52.50 per location will be funded up to a per-location funding cap of $146.10, and the Bureau should adjust deployment obligations accordingly. If all eligible carriers accept this offer, we anticipate that it would result in approximately $36.5 million more support per year for the 10-year ACAM term."

ITTA is disappointed "the Order only provides additional funding to $146.10/month per eligible location" for participating carriers, despite FCC "acknowledgment of the consumer benefits of the A-CAM program and the strong support from state and federal policymakers," emailed President Genny Morelli. "We are hopeful the Commission will vote to provide funding to $200/month once comments on the NPRM have been taken." ITTA also appreciated the budget-control relief.

The order adopted measures aimed at ensuring high-cost USF support is used by eligible telecom carriers (ETCs) only for its intended purposes of helping in the provision, maintenance and upgrading of facilities. It also takes steps to ensure that investments and expenses rate-of-return carriers recover through interstate rates are reasonable. "The rules we adopt are prospective but the underlying obligations are preexisting and many of the rules we adopt today codify existing precedent," it said. "Our rules and the used and useful standard have long governed ETCs and rate-of-return carriers’ behavior." RLECs were concerned about retroactive application (see 1802230014).

The order sets "a simple, clear, and carefully defined, nonexclusive list of expense categories that are precluded from recovery" through high-cost USF: "personal expenses, expenses unrelated to operations, and corporate luxury goods." The "approach differs from that proposed by the rural associations; however, we find that our approach is more consistent with the statutory requirements. ... To the extent we adopt new prohibitions on expenses that may be recovered from high-cost support, our rules apply on a prospective basis." On interstate rate cost recovery, the order detailed investments and expenses presumed excluded, such as personal expenses (travel, lodging and meals) and "expenses unrelated to operations -- including political contributions, membership fees and dues" in outside groups, and penalties or fines.

The NPRM seeks comment on possible changes to the $2 billion Connect America Fund budget for rate-of-return carriers and related questions. It asked whether a tribal broadband factor should be included in new model offers.

Clyburn Concerns

Clyburn detailed a list of requests she made for including additional questions and language that she said were all denied by Pai's office. She said she was "puzzled" and questioned whether the majority wants to close the digital divide, distribute funds more efficiently, and curb waste, fraud and abuse.

Rosenworcel backed the FCC orders but dissented on the new rulemaking. "It fails to ask any questions about how to protect rural consumers who lack other service options if they find they are on the losing end of discriminatory network practices in the wake of the FCC’s net neutrality repeal," she said. "It deserves discussion and our failure to do so is an unfortunate abdication of our most basic consumer protection duties."

Pai said his colleagues didn't propose substantive edits until the very end: "That's not a serious attempt to work towards consensus; rather it smacks of a calculated delay tactic." Clyburn responded: "To suggest that my requests were last-minute, as the Chairman does in his statement, disingenuously characterizes the fact that I had communicated my requests to his office weeks before the voting deadline. Rather than exercise his power to extend the voting deadline, he made it clear that he simply did not want to deal." A Rosenworcel aide agreed with Clyburn's account on the timing and said "it's unfortunate that consensus was not pursued." A Pai spokeswoman emailed: "the Chairman’s statement is accurate and speaks for itself."

The FCC action "is another significant and meaningful step toward closing the rural broadband gap," said USTelecom CEO Jonathan Spalter. "By increasing funding and putting in place tighter controls on expenditures, the Commission is reinforcing its number one priority -- closing the digital divide.”