Bennet & Bennet, PLLC

Late Friday, the FCC released its Order and Further Notice of Proposed Rulemaking (FNPRM) reforming the universal service fund (USF), creating a broadband-based “Connect America Fund” (CAF), and driving intercarrier compensation (ICC) rates down to zero.  With appendices and statements, the Order and FNPRM is 759 pages of Thanksgiving reading.  The Order lays out detailed legal arguments to defend the Commission’s support of broadband networks, both fixed and mobile.  Most notably, the FCC asserts that carriers that experience a loss of support will be unsuccessful if they make a Constitutional “takings” argument.  The Order also establishes the provision of “advanced services” and “mobile services” as new universal service principles.  The new CAF will be funded at approximately $4 billion per year, capped at $4.5 billion.  Approximately $2 billion will flow to Rate-of-Return (RoR) carriers and $1.8 billion to price cap carriers.  Mobile carriers will see a “Phase I” flow of $350 million in the Mobility Fund and $500 million in “Phase II” yearly ongoing support.

RoR carriers will operate under the current USF system for the time being as the FCC considers how it will apply the CAF to RoR carriers.  However, current support levels have been capped and will be phased down.  In addition, ICC rates will be transitioned toward a bill-and-keep mechanism.  There are transitional recovery mechanisms and a burdensome waiver process for “extreme hardship” in order to protect consumers.  While price cap carriers will soon be able to draw funding from the CAF, RoR carriers must wait for the results of the FNPRM to dip into CAF funding as their so-called “legacy” support dwindles.

For wireless carriers, current “portable” high-cost support will be phased down over five years for all carriers, including carriers currently not subject to the cap in Tribal “Covered Locations.”  Mobile carriers that receive high-cost support will be subject to burdensome roaming and collocation obligations.  Rules for Phase I Mobility Fund support will form the basis for ongoing Phase II support that will be fleshed out as part of the FNPRM.  The Commission has made it clear that a carrier must be an eligible telecommunications carrier (ETC) in order to receive support and participate in reverse auctions for support.  Auctions for support will be at the census block level.  While the FCC is leaning heavily toward single round, sealed bid auctions, it has delegated authority to the Wireless Bureau to determine whether more bidding rounds are needed.  Verizon Wireless and Sprint, who recently eschewed high-cost support, will be eligible to bid in reverse auctions.  Right now, both wireline and wireless carriers must determine where their support is disappearing to and where support opportunities will be in the future.

For additional information, please contact Ken Johnson.