FCC Gives Some Rural Telcos Option of BDS Incentive Regulation; Second Chance Added

The order allows RoR telcos receiving fixed high-cost USF support to opt into "light touch" BDS regulation similar to a 2017 price-cap framework. Eligible carriers include 200 model-based telcos, 13 on an Alaska plan and others that are price-cap affiliates, said a release. Electing carriers will be freed from ex-ante price regulation for traditional lower-speed (DS3 and below), TDM-based "channel terminations" to end users in areas deemed competitive under a market test, and for packet-based and higher-speed TDM service. The order freezes some BDS rates for three years, which a commission official told us applied to the last-mile services relieved of pricing regulation under the market test.

One FNPRM seeks comment on the pathway for ending ex-ante pricing regulation for lower-speed TDM transport of electing RoR carriers. Responding to partial court reversal and remand, a second FNPRM proposes to remove pricing regulation of TDM transport services of price-cap carriers.

"In attracting infrastructure investment, as in catching flies, honey works better than vinegar," said Chairman Ajit Pai, calling the agency's BDS traditional approach "marked by price controls and micromanagement." Some eligible RLECs opting out of "yesteryear's" BDS regime won't face a "regulatory gauntlet for just this part of their overall business -- ironically, a business that's facing increasing competition," he said. Incentive regulation "eliminates the need for expensive cost studies and tariff filings as well as compliance with cost assignment and separations rules," said Commissioner Brendan Carr.

Offering "strong support," Commissioner Mike O'Rielly would have preferred electing carriers base initial rates on a 9.75 percent RoR (the draft targeted 10.5 percent). He was grateful carriers choosing incentive regulation during a second election window would be required to set their rates at a somewhat lower rate of return, and said the order further weakens the need for a separations overhaul. The first window will be in 2019, the second in 2020, an official told us.

The decision to give RLECs a second opt-in opportunity was made at O'Rielly's request, Wireline Bureau Chief Kris Monteith told reporters. Deputy Bureau Chief Lisa Hone said a few other tweaks responded to meetings, including implementing proposals of the National Exchange Carrier Association. The group focused in docket 17-144 on "timing of cost studies, processes for setting initial BDS rates for current pool participants, and issues related to participation in NECA’s Traffic Sensitive tariff."

The actions are a "grab bag of decision-making and rulemaking," Rosenworcel said. "Instead of conducting analysis about the state of the market, this order just draws parallels 'where we can.' In doing so, it borrows analysis from an earlier decision involving much larger carriers with far greater economies of scale and determines for smaller providers 'the same circumstances could exist' in rural areas. But there is no data to demonstrate the truth of this assertion."

"Legacy regulations impose unnecessary and burdensome costs on fixed support carriers and preclude them from offering beneficial rates and terms to their BDS customers," said ITTA CEO Genny Morelli. NTCA CEO Shirley Bloomfield said RLECs and consumers "can benefit from greater flexibility in structuring service offerings." USTelecom CEO Jonathan Spalter called it "another win for smart, modern 21st century regulation.”

At their meeting Tuesday: commissioners OK'd along party lines rules for the 3.5 GHz band: 1810230037; unanimously approved an NPRM to open 6 GHz band spectrum for Wi-Fi and other unlicensed use: 1810230038; two media items; and a Lifeline enforcement action (see Notebook section at end). Pai announced a review of wireless network resiliency (also see Notebook section at end).