FCC to Spend $9 Billion on Rural Broadband Subsidy Program

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By Bryce Baschuk  

April 23 --The Federal Communications Commission has agreed to spend $9 billion over the next five years to encourage greater deployment of broadband infrastructure in rural and unserved areas across the nation.

The $1.8 billion in annual funding marks a 70 percent increase from the first phase of the agency's Connect America Fund (WC Docket No. 1090). The ultimate goal of the program is to help bring advanced communications access to the approximately 5 million Americans that currently lack it, commission officials said during the agency's April 23 meeting. The actions build upon the FCC's work in 2011 to modernize the Universal Service Fund (USF) and intercarrier compensation (ICC) systems that support voice communications and broadband deployment.

The order provides funding alternatives if eligible price-cap carriers like Verizon Communications Inc., AT&T Inc. and CenturyLink Inc. decide not to accept the subsidies. The order established new rules for an auction that details who would be able to bid for unclaimed federal broadband funds.

QRA Benchmark Elimination

Commissioners supported FCC Chairman Tom Wheeler's decision to eliminate the agency's quantile regression analysis (QRA) tool for reimbursing rural carriers. The QRA, also known as the benchmarking rule, was adopted in 2012 as a part of the FCC's USF/ICC reform order as a means to limit capital and operating expenses.

“Over the last year, many rural carriers have argued that the uncertainty created by our regression model has hindered their ability to invest in their networks,” said Democratic Commissioner Jessica Rosenworcel. “Today we answer their pleas because we have determined they were right.”

The National Association of Regulatory Utility Commissioners commended the “long overdue” decision to eliminate the QRA, which it said “discourages network investment by rural carriers” and may have “triggered litigation and other unintended consequences,” according to a separate statement. “The elimination of the quantile regression caps is significant and very welcome,” said Michael Romano, senior vice president of policy at NTCA-The Rural Broadband Association.

Rate Floor Increase

The commission approved a proposal that seeks to delay the impact of the agency's proposed rate floor increase until 2015 and phase in the impact of that rule more gradually over time. The congressionally mandated rate floor sets the minimum amount that eligible companies can charge consumers for basic phone service in order to receive federal subsidies.

Republican Commissioner Ajit Pai dissented, in part, because he opposed the commission's proposal to increase the rate floor from $14 to $20.46 for nearly 1 million Americans. “The rate floor [increase] targets those very Americans who are waiting for the economic recovery to arrive,” Pai said.

Wheeler said “Congress told us that those subsidies should not produce disparate results in consumers' wallets so it falls to us to implement that instruction.” Wheeler explained that the agency's wireline bureau calculated the average monthly rate to be $20.46 based on aggregate data collected from the nation's voice providers.

Broadband Capacity Requirements

The commission also approved a future notice of proposed rulemaking that seeks to improve broadband speed requirements for eligible recipients of federal funds. Specifically, the commission seeks comment on whether it should increase its required speed of 4 megabits per second (Mbps) upstream to 10 Mbps.

Republican Commissioner Michael O'Rielly said he was disappointed that the order sought to increase broadband speed requirements before the agency has determined that all consumers have access to at least 4 Mbps. “Raising the speed standard is a questionable approach that potentially sends the wrong signal” to carriers and consumers, he said.

Wheeler said the commission asked for input on whether or not to increase broadband speed requirements because the “last thing we want is for USF to result in a second class status for broadband in rural areas.”

The commission also seeks comment on whether it should change phase II of its Mobility Fund (WT Docket No. 10-208) to target those areas which are not currently served by private sector commercial deployment of 4G LTE services. Some carriers had previously expressed concern that the commission may phase-down USF support for high-cost wireless carriers.

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

For more information read the FCC's announcement here: http://www.fcc.gov/document/fcc-takes-major-strides-toward-further-expansion-rural-broadband

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