FCCThe FCC adopted a report and order, released late yesterday, that frees up an additional $50 million annually for rate of return carriers that adopted the model-based A-CAM Universal Service option. More carriers than expected chose that option, creating a $160 million budget shortfall in the program, which aims to spur the deployment of broadband to areas where it is not available today.

This week’s order also included a notice of proposed rulemaking (NPRM) seeking comment on whether the commission should increase the A-CAM Universal Service budget to further close the funding gap.

Rate of return carriers that traditionally received high-cost Universal Service funding had the option of remaining on that program, which pays some of carriers’ costs based on embedded costs, or transitioning to the A-CAM option, which bases support on a cost model. Those choosing the A-CAM model also were required to commit to more aggressive broadband deployment buildout schedules.

A-CAM Universal Service Plans
The FCC now plans to issue new offers with lower funding levels and less aggressive deployment schedules to carriers that chose the A-CAM option and for whom A-CAM funding was higher than funding would have been under the traditional program.

Carriers will have 30 days to decide whether to accept the revised offers or remain on the traditional program. If sufficient funding is subsequently made available to fully fund the A-CAM program, those carriers also would be required to meet their original deployment targets.

Those carriers that chose the A-CAM option even though the funding level was lower than it would have been under the traditional program will receive the full A-CAM support they were initially offered and will be required to meet their original deployment targets. According to the report and order, 45 offers of support out of 274 A-CAM offers accepted fall into this category.

In scaling back funding offers and deployment obligations for the other carriers that chose the A-CAM option, the FCC said it will “adjust the offer of support in a fashion that is designed to apply a reduction in the offer to all such carriers, while preserving as much of the original offer as possible for those that are lowest deployed.”

Plans include reducing the funding cap to $146.10 per location and reducing support offers by varying percentages based on the percentage of locations lacking 10/1 Mbps. Funding will be targeted “more towards companies that have deployed 10/1 Mbps broadband service to a lower percentage of locations in eligible high-cost census blocks,” the FCC said.

Carriers that did not choose the A-CAM option will not receive revised offers but will remain on the traditional program.

The FCC has sufficient money in the high-cost Universal Service to cover the additional $50 million allocated to carriers choosing the A-CAM option. Beyond that the FCC would have to increase the overall high-cost program budget, which would likely entail increasing the percentage of revenues that long-distance carriers must pay into the fund.

The Legacy Program?
Neither the report and order  nor the NPRM discuss funding for carriers remaining on the traditional embedded cost program, but USTelecom and NTCA – The Rural Broadband Association have argued that funding for that program should be increased.

A key concern is that current funding is insufficient to enable carriers to offer stand-alone broadband at rates that are comparable with those in urban areas. NTCA recommends an increase in funding to that program of $100 million annually.

FCC Commissioner Michael O’Rielly left carriers with a glimmer of hope with regard to the traditional high-cost program. In a statement about the A-CAM report and order, O’Rielly said he “remained cognizant of the issues that have been raised . . . to ensure that the legacy option remains a viable path for carriers and their customers.”

He added that the FCC should make decisions aimed at promoting broadband deployment in a “holistic manner” and that “[w]e should carefully allocate any available funding in a way that maximizes coverage to unserved consumers regardless of the particular program or path.”