Two key telecom associations – USTelecom and NTCA—The Rural Broadband Association – have asked the FCC for additional Universal Service funding. The requests come in the wake of the revelation that more rate-of-return carriers than anticipated had opted for A-CAM Universal Service funding based on a cost model, creating a budget shortfall of $1.6 billion over a 10-year period. At the time this news came to light, the FCC asked for input from stakeholders about how to address the shortfall.
A-CAM Universal Service Funding
A-CAM is an acronym for “alternative Connect America model.” Carriers opting to receive Universal Service funding based on that model also must commit to building out broadband to customers that cannot get broadband today in conformance with strict targets and deadlines that are more aggressive than those for carriers not opting for A-CAM funding.
In separate filings, USTelecom and NTCA asked the FCC to make up the $160 million annual funding shortfall in A-CAM Universal Service support for the next 10 years.
Both associations also asked the FCC for additional funding for rate-of-return carriers that did not opt for A-CAM Universal Service funding but instead chose to continue to collect funding based on traditional high-cost Universal Service program mechanisms, which cover some of the costs of delivering broadband service based on embedded costs. Traditionally that program only supported broadband lines that also were used to deliver voice services, but it has been reformed to cover lines that only deliver broadband without voice, a service known as “stand-alone broadband.”
USTelecom did not ask for a specific amount of additional funding for carriers choosing to continue to receive payment based on traditional mechanisms. But in a letter to the FCC, USTelecom urged the commission to fully fund carriers remaining on that program.
The problem, USTelecom said, is that support is “capped at 2011 high-cost support levels, which when coupled with a substantial and unpredictable ‘budget control’ reduction, forces carriers to charge broadband service rates far above reasonably comparable urban rates.”
NTCA makes the same argument in its own filing with the FCC and goes on to estimate that the amount needed to fully fund non-A-CAM carriers at “up to $100 million” annually. Without this additional funding, NTCA estimates that ROR carriers will have to charge rates for stand-alone broadband that are twice what consumers in urban areas pay for equivalent services.
NTCA and USTelecom Filings
The FCC previously said that it would consider adding $50 million annually to the A-CAM budget for ROR carriers if warranted. The commission apparently has that amount of money available without major changes to the overall Universal Service program, which also funds the Lifeline low-income program, the E-rate schools and libraries program, a rural healthcare program, and a high-cost program for the nation’s larger price cap carriers.
If the commission opts to allocate the additional $50 million annually to A-CAM Universal Service for ROR carriers, additional funding of as much as $210 million annually would be needed to meet the requirements for both A-CAM and non-ACAM ROR carriers, according to NTCA’s estimate.
Universal Service is funded by the telecom industry as a percentage of long-distance voice revenues – costs that typically are passed on to customers as a charge on their phone bills. According to an NTCA estimate, the additional amount that an individual customer would have to pay to fully fund A-CAM and non-A-CAM carriers could be “less than 25 cents per month for the average ratepayer.”
USTelecom offered a fallback position in the event that the FCC is not able to fully fund ROR carriers that calls for adding $75 million annually to the budget for those carriers on top of the $50 million annually that the FCC apparently has available.
What Will the FCC Do?
What action, if any, the current FCC is likely to take in response to the USTelecom, NTCA and other filings about the A-CAM Universal Service shortfall is unclear. With a presidential transition underway and leadership at the FCC expected to change, Republican legislators and Republican FCC commissioners have asked the current FCC not to make any controversial decisions – and it appears that FCC Chairman Wheeler has opted to comply with those requests.