USF Quantile Regression Replacements Pondered in CAF Rulemaking
The FNPRM on potential quantile regression analysis (QRA) replacements proposes several new mechanisms to more efficiently disburse limited USF money, agency and industry officials told us. A Connect America Fund order on circulation (CD April 8 p1) would eliminate the QRA benchmarks rule, FCC Chairman Tom Wheeler said in a blog post Wednesday (http://fcc.us/1iq7vHP). The QRA was “well-intentioned” but hasn’t had “the desired effect,” Wheeler wrote. The order also deals with the local rate floor, timing, amounts, and does some “cleanup” on reporting dates, agency and industry officials said.
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The QRA, meant to encourage efficient spending, has actually led to a slowdown in broadband buildout, NTCA has said. It was a “bump in the road,” NTCA economist Rick Schadelbauer said at an association event Wednesday. Nearly 70 percent of NTCA members postponed or canceled broadband deployment projects “strictly due to the uncertainty” surrounding USF changes, he said.
The further notice seeks comment on NTCA’s “Capital Budget Mechanism” (CBM), industry and agency officials said. The CBM -- supported by USTelecom, NECA and the Western Telecommunications Alliance -- would look at each carrier’s need to invest, defined by its amount of depreciated plant. Instead of the QRA, which tells a company whether its investments are justifiable after they have already been made, the CBM would indicate how much a company could spend going forward that would be eligible for recovery.
One proposal in the FNPRM deals with the so-called “race to the top,” in which companies have no reason to make prudent investments because every extra dollar they spend above a certain point would be reimbursed, an agency official said. The option under consideration would freeze the national average cost per loop, with reimbursement percentages that change each year, the official said. The goal is to make sure carriers always have some skin in the game, the official said.
"We have shared concern with the sustainability of the high-cost loop support mechanism for some time,” said Michael Romano, NTCA senior vice president-policy. It’s “sorely in need of fixes,” he said. “With all these things, the devil’s in the details."
Another proposal would specify that, after 2014, no new investment in areas with an unsubsidized competitor would be recoverable through legacy high-cost mechanisms, such as high-cost loop support (HCLS) and interstate common line support (ICLS), an agency official said. The purpose would essentially be to phase out those mechanisms, and move rate-of-return carriers to something more like what the price cap carriers have, the official said.
NTCA would have several concerns about such a proposal, Romano told us. “We're open to a conversation” about transitioning away from existing mechanisms -- HCLS and ICLS are “unsustainable in the long run” -- but the unsubsidized competitor piece is “something that the commission is still struggling with, even in the price cap context,” he said. “We're eager for a conversation about how to update the mechanisms,” but this is “very much in beta mode and requires a lot more thought and analysis."
The FNPRM also seeks comment on NTCA’s proposal for a standalone broadband fund, with specific questions about how to keep it within the $2 billion budget for rate-of-return areas, an agency official said. Some questions include whether there should be company-specific caps or overall caps, how to make sure the cap functions, and whether ICLS amounts should be reduced, the official said.
NTCA has provided the commission with several filings that it says show its proposal, on a stated set of assumptions provided and fully disclosed, will “come within or at least close to the budget for 2017,” Romano said. It definitely wouldn’t exceed the budget by “any material amount” by 2017 or 2018, he said. “We believe, and we've given everything we can in terms of information to show, that this proposal we've put forward is responsive to, and cares for, the budget considerations that have been put forth by the commission.”