FCC Proposes Model-Based CAF for Rate-of-Return Carriers

The FCC wants rate-of-return telecom companies to transition to model-based support as today’s voice-focused high-cost Universal Service Fund is phased out and converted to a broadband-focused Connect America Fund program.

Small rural ROR companies today receive USF support based on how their actual costs compare to nationwide averages, but critics argue that today’s system does not provide an incentive for telcos to deploy network infrastructure in the most efficient manner. The CAF program for larger price cap carriers is already slated to use a cost model to calculate support levels.

“We propose to adopt a transition framework for a voluntary election by rate-of-return carriers to receive model-based support,” wrote the FCC in a further notice of proposed rulemaking (FNPRM) released last month. “We tentatively conclude that such a framework could achieve important universal service benefits, creating a framework that creates incentives for deployment of voice and broadband-capable infrastructure.”

The commission’s recommendations for a CAF program for rural carriers included in the FNPRM were shaped in large part by a proposal previously filed by the Independent Telephone and Telecommunications Alliance, an organization that represents medium-sized telecom companies such as CenturyLink, Cincinnati Bell, Consolidated, Frontier, and TDS Telecom. Some of these are actually price cap carriers.

NTCA- The Rural Broadband Association also submitted recommendations for a CAF program for ROR carriers, but in the FNPRM the FCC largely dismisses that proposal, arguing that it “relies on complicated cost-calculations based on embedded costs.” The NTCA represents the vast majority of the nation’s smallest carriers, nearly all of which are ROR carriers.

In comparison, the FCC called ITTA’s proposal the “most comprehensive plan in the record” for transitioning the high-cost USF program into a CAF program.

Clicky