FCC, Rural Telcos Hold High-level USF Reform Talks; Draft Order May Be Nearing

The FCC is looking at a two-path rate-of-return USF overhaul: giving rural carriers the option of receiving broadband-oriented support from revised legacy mechanisms or from a new mechanism based on a broadband cost model. There don't appear to be any material sticking points remaining on the model-based mechanism, an industry representative said, but the parties are still working to resolve open issues on possible changes to the legacy mechanisms.

Wheeler and Commissioners Mignon Clyburn and Mike O'Rielly have been spearheading the FCC effort and appear to still be collaborating closely, the industry representative said. They have several goals, including to allow rural carriers to receive stand-alone broadband support, but perhaps the objective they consider most important is to promote additional broadband deployment, the representative said.

The FCC seems to have given up on a possible “bifurcated approach” to overhauling the legacy mechanisms, FCC and industry officials told us. The bifurcated approach would have made regulatory distinctions between old and new investments, divided by a certain date, as part of a transition to a new mechanism, but it received substantial pushback from some rural groups, including NTCA. “Bifurcation is dead,” said an FCC official. The commission is looking at keeping the existing systems but with modifications, the agency official said.

USTelecom and NTCA executives met with Wheeler, O'Rielly and Rebekah Goodheart, a Clyburn aide, on Jan. 29, said a USTelecom filing for the groups posted Wednesday. "We discussed our shared objectives of delivering voice and robust broadband services to people in the highest cost parts of rural America, and the essential role that USF support plays in doing that," said the filing. "In particular, we focused on some key reform issues including broadband buildout goals, the use of a competitive screen to avoid potentially duplicative support and updating the rate of return used in calculating USF support."

The heads of both USTelecom and NTCA met with O'Rielly, Goodheart and Wheeler or his aide Stephanie Weiner Monday and Tuesday to discuss "a set of high-level principles" to which the rural telecom industry could agree regarding rate-of-return USF changes, said a USTelecom filing for the groups posted Thursday. The discussions focused on overall reform of mechanisms for those carriers not opting for the model-based support, it said.

"The associations discussed the FCC looking to set rates that are reflective of small company operations in rural areas and that any changes to the current rate should include a reasonable transition," the filing said. "Second, the associations discussed working with the Commission to effectuate build-out benchmarks that are consistent with the Commission’s goals of ensuring that a portion of future investment reaches previously unserved areas within the carrier’s service territory. Finally, the associations discussed a competitive screen that would ensure that where there is a genuine competitor that meets specific qualifying voice and broadband service standards, the incumbent carrier’s support would be reasonably disaggregated such that carriers do not continue to receive USF support where there is a genuine competitor."

Representatives of NTCA and Golden West Communications met with FCC officials Tuesday about "options for reforming existing universal service support mechanisms to provide standalone broadband support," said an NTCA filing Thursday.