The FCC should more narrowly target Universal Service Fund high-c...

of last resort and leave the door open for further USF reform. Embarq urged the FCC to be explicit in targeting support using wire centers, rather than implicitly targeting it through study area averaging. “The use of average cost calculations assumes that a CoLR’s rates will be averaged and, therefore, that higher returns in low-cost areas will offset negative returns in high-cost areas,” Embarq said. “Competition has invalidated this assumption, however, as competitors charge lower rates and win customers in low-cost areas, thereby reducing the CoLR’s revenues and eliminating the higher returns that were implicitly subsidizing the below-cost service in high-cost areas.” Embarq suggested that the FCC replace today’s non-rural high-cost support mechanism with a new “Broadband and Carrier-of-Last-Resort Support (BCS) mechanism that supports wire centers with average loop costs greater than a national benchmark.” Once established, the BCS would be capped at its initial level, rising only through FCC action, the carrier said. The FCC would need no new USF funding to create the BCS, Embarq said. Instead, money would come by adding access replacement funds received by wireless carriers, it said. The proposal promotes broadband deployment because BCS support recipients in price-cap areas would commit to building out a minimum of 1.5 Mbps broadband in at least 85 percent of their wire center lines, Embarq said. To keep CoLR service affordable, recipients also would commit to providing local service at rates meeting an FCC- designated benchmark. Failure to meet the benchmark would mean forfeiting the difference between its actual rate and the benchmark, multiplied by the number of lines served, Embarq said. The company’s proposal “would not necessarily take support away from wireless CETCs,” unlike the FCC’s reverse auctions proposal, Embarq said. “Rather, these CETCs would be eligible for support under the new BCS mechanism, provided they meet the conditions to build out network throughout each supported wire center and meet the broadband commitment in those wire centers.” Embarq plans to file a full proposal and support documents this week, it said.