fcc_newRate of return carriers face less uncertainty with regard to Universal Service fund high-cost loop support as the result of an order adopted by the FCC on Friday – in the short term, at least.

In the order the FCC said that for 2014 it would maintain the approach to USF benchmarking used in 2013 – summing the capital and operating expense caps.  “We do this to provide sufficient time, after reconciliation of recently filed study area boundary data, for public input on the development of a single cap, as required by the commission,” said the chief of the FCC Wireline Competition Bureau in the order.

In addition, the order delays the phase-in of high-cost loop support reductions by one year rather than making them fully effective in 2014.

Small rate of return carriers have been complaining about the FCC’s plans for capping high-cost loop support since the caps were formalized in April 2012,  arguing that the regression analysis used to establish the caps makes it impossible for an individual carrier to know in advance whether or not its spending levels will exceed the cap. As a result small carriers say investment in broadband infrastructure has declined – and that, they say, is the exact opposite of what USF reforms hoped to accomplish.

Since then the FCC attempted to mollify the carriers by simplifying the methodology used in determining caps, but the carriers said that move did not go far enough.

Initially small carrier associations NTCA and the Western Telecommunications Alliance were most vocal about their discontent with the caps. But last week USTelecom, an association representing larger price cap carriers as well as some rate of return carriers, joined the small carrier associations in calling for further action on the Universal Service caps.

Both USTelecom and NTCA issued statements in support of Friday’s order. But both statements also said more work still needs to be done.

“Today’s action is a much-appreciated step in addressing the issues arising from the FCC’s 2011 USF reform order which have created uncertainty for rate-of-return companies and have stalled rural broadband deployment,” said USTelecom President & CEO Walter B. McCormick Jr. “We appreciate the leadership of Chairwoman Clyburn in this regard, and we look forward to working with the commission to further refine the 2011 order in ways that will provide greater certainty and predictability.”

“We appreciate the work of the FCC staff under the leadership of Acting Chairwoman Clyburn in taking steps to limit some of the impacts of the economic model being used to cap Universal Service Fund support for rate-of-return carriers,” said Shirley Bloomfield, CEO of the NTCA. “While there’s still more to be done to address important lingering questions surrounding the model’s transparency, accuracy and predictability, we hope this action will serve as a springboard for additional productive discussions with the commission about the steps needed to fulfill our country’s universal service mandates in today’s broadband-oriented, IP-enabled world.”

Friday’s order also takes action to resolve USF cap issues specific to Alaska and to Fremont Telephone. Details can be found in the order.

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