Pai Wants Rate Floor Freeze; Increase Currently Set to Be Phased in by 2016
FCC Commissioner Ajit Pai wants the rate floor for phone service frozen indefinitely at its current $14 monthly average per subscriber, his spokesman said Monday. While the rate is frozen, Pai would be in favor of studying how to curtail “excessive subsidies,” which the rate floor doesn’t target, the spokesman said. The FCC last month announced the new rate floor of $20.46 (CD March 21 p14). A circulating order up for a vote at Wednesday’s commission meeting would phase in the rate increase, upping it to $17 in early 2015, with the rest of the increase scheduled for 2016, an FCC official said. A Wireline Bureau spokesman declined to comment.
Sign up for a free preview to unlock the rest of this article
Communications Daily is required reading for senior executives at top telecom corporations, law firms, lobbying organizations, associations and government agencies (including the FCC). Join them today!
The bureau Friday released the results of its 2014 urban rate survey, which asked for fixed voice service rates from a sample of service providers encompassing 497 census tracts and 103 companies. “The FCC’s so-called ‘rate floor’ is supposed to ensure that urban and rural rates are ‘comparable,'” Pai said in a written statement (http://fcc.us/1i8UPsK). “Even though the Bureau’s data reveal that the local phone rate in Washington, DC is $14.10, the FCC is on the precipice of raising rates for rural Americans from $14.00 to $20.46. As a result, rural Americans will have to pay 45 percent more for local phone service than those living in our nation’s capital. On top of all that, this rate increase will not save the government any money."
"Our focus right now is on trying to stop the rate floor increase because that’s going to go into effect soon and it’s a completely irrational policy,” said Pai’s spokesman. The rate floor doesn’t even reach excessive subsidies, he said: A telco at the $14 rate floor now would get the same amount of federal money as it would at the new rate floor of $20.66. The way the rate floor system is set up is that rural residents should pay the average in the urban areas, he said. The result will be an increase in local phone rates for rural customers, without saving the government a dime, he said.
The Connect America Fund order made it clear that USF was there to make rates reasonably comparable between urban and rural counterparts, an FCC official said. “They're not there to make them ridiculously cheap.” The local rate floor doesn’t mean telcos have to raise their rate, he said: It just says that, dollar-for-dollar, companies won’t get a subsidy below that floor.
"We definitely share Commissioner Pai’s concerns,” said Eric Keber, director-government affairs at the Western Telecommunications Association. WTA and other associations have called for a delay in implementation. “At the very least, it’s absolutely necessary to delay the July 1st deadline for rate increases so that the public can review the methodology the FCC used to come up with the $20.46 rate floor,” Keber told us. WTA is reviewing the FCC’s methodology for its urban rate survey. “From a high level at this point there’s definitely some aspects of it that are questionable, such as relying on ’standard, non-promotional, stand-alone, residential voice service’ to determine average rates around the country,” Keber said. “That’s what companies are advertising, not the rates that consumers actually pay when they buy voice as part of a bundle of services.”