FCC Blocks Rural Telco USF Rate Floor Hike During Review; O'Rielly Eyes Means Test
FCC commissioners voted 2-1 to freeze and review a rural rate floor that requires rate-of-return carriers to charge customers a certain monthly amount for basic voice service to avoid losing USF support. While voting in favor, Commissioner Mike O'Rielly suggested "means testing" the high-cost program so USF support better targets consumer need. Commissioner Mignon Clyburn dissented, saying the commission should have addressed other rural USF issues, particularly waste, fraud and abuse. NTCA and WTA applauded the freeze and criticized the rate floor.
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The order approved Thursday will keep the monthly rate floor at $18 per subscriber. The floor was scheduled to rise to $20 July 1 and to $22 July 1, 2018. An accompanying NPRM seeks comment on whether and how the FCC should address the rate floor going forward. The freeze will stay in effect while the FCC reviews its policy, but for no more than two years, said a release.
"It’s time to give the rate floor a hard look," said Chairman Ajit Pai. "Under this notice, we’ll explore whether to fix or eliminate this broken policy. I’m also glad that we will freeze the rate floor at $18 to prevent the impending 11 percent price hike that rural consumers would otherwise face a few weeks from now."
O'Rielly said he supported the rate floor concept and was "puzzled" by the opposition. He said it didn't force rural rate hikes; just forced carriers to pay for the "delta" if they wanted to keep rates lower than the USF subsidy rate floor. "Let’s also accept this stone cold reality: rural does not necessarily mean poor," he said. "There are plenty of rich, middle-class and poor people throughout all rural America. Our job at the commission is to ensure that those who face higher costs -- and can’t afford them -- are still able to access communications services. This means we shouldn’t subsidize the telephone or broadband rates for very wealthy people, no matter where they live."
"If we can means-test Medicare, why not the FCC’s high-cost program?" O'Rielly said. "There is no reason why anyone who earned more than $1 million last year shouldn’t pay the full cost of their telephone or broadband service. Towards that end, I have worked with Commissioner Clyburn on draft NPRM text to take the first steps on this project. We intend to put this out for consideration shortly. I firmly agree that it may take a bit of time to get all of the pieces to work -- and I have no intent of adding layers upon layers of burdens on communications companies or disrupting parts of the program that have already been adopted -- but moving in this direction is the right thing to do."
Clyburn didn't object to pausing the rate floor hikes, but wanted broader action. "My repeated calls for addressing waste, fraud and abuse in the high-cost program: ignored; any hope of addressing these concerns in a balanced, comprehensive package: smashed; and the freeing up of additional money to impact the budget control mechanism which would have been the result of a more efficient process: not happening," she said. "Aggressively going after waste, fraud, and abuse in our universal service programs only seems to happen when one program is being discussed, and that is Lifeline."