FCC Allows RLECs to Deploy Broadband Above USF Limit by Paying for Excess Costs
The FCC changed a rule to give rural telcos more flexibility to invest in broadband networks without losing high-cost USF subsidy support. The order approved Thursday by commissioners 3-0 will allow rate-of-return carriers to receive USF support for broadband deployment projects with average location costs that exceed a company's capital expenditure limit if they pay for the excess amounts with their own funds. Under a March 2016 rural USF overhaul order, a company construction project that exceeds that limit loses all its USF support, said commission officials and a news release. Thursday's order granted in part an NTCA petition for reconsideration.
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The order "makes the first simple but needed change to the stand-alone broadband rules the FCC adopted just last year," said Chairman Ajit Pai, who cited a conundrum facing rural telcos. "A carrier may have to exclude certain high-cost homes from a project entirely in order to avoid losing all funding for the project, even if including those homes would be more efficient in the long run," he said. "Today we amend this rule to only disallow expenses above the threshold -- encouraging efficient builds without increasing the cost to taxpayers. ... This is just the latest example of how we intend to promote broadband deployment to help close the digital divide."
Commissioner Mignon Clyburn said the old rule could "chill" broadband investment. "This disallowance of all, not simply the excess of reimbursements, had the potential of leaving adjacent locations 'permanently stranded' without broadband-capable service," she said. Clyburn also said she hopes and expects the FCC to soon pause a looming "voice rate floor hike" and act "to rein in waste, fraud and abuse in the high-cost program."
Commissioner Michael O'Rielly said he didn't intend the old rule to be a "kill switch" and wished the FCC could have acted quicker. He said he hopes the FCC will address "in very quick order" a remaining "punch list" of issues raised by NTCA's recon petition. O'Rielly also said he expects the FCC to have to issue fewer recon orders now that it's making draft agenda items publicly available three weeks ahead of monthly meetings. He said he hopes the commission will make the pilot project permanent and extend the release of drafts to items on circulation.
NTCA issued a statement welcoming the FCC action. “[C]orrecting the flaw in the capital investment limit for smaller rural operators is significant in removing a disincentive to broadband investment and allowing greater flexibility for smaller companies to design their networks to reach more consumers,” said NTCA Senior Vice President Michael Romano. "[W]e look forward to more in-depth conversations on several other important items mentioned today, including the rate floor, the ‘punch list’ of other issues still teed up by our petition for reconsideration, and how we can otherwise make sustained progress on deployment of wireline and wireless infrastructure in our country’s hardest-to-serve locations.” USTelecom also hailed the rule change. "Fixing this quirk in the rule will help spread deployment to the highest cost portion of rural America in dire need of access to broadband," said CEO Jonathan Spalter in a statement.