Draft Rural Broadband Order – New A-CAM Funding Offer Will Provide $200 Per Location, With Increased 25/3 Mbps Deployment Obligations
Federal Communications Commission Chairman Ajit Pai has released a draft rural broadband Report and Order and Further Notice of Proposed Rulemaking that will be considered at the FCC’s December open meeting.[1] Among other things, the draft order provides a new set of model support offers to rate-of-return carriers currently receiving Alternative Connect America Cost Model (A-CAM) funding. The new offer provides support of up to $200 per location, per month, tied to an obligation to build out 25/3 Mbps broadband service to additional locations. The term of the revised A-CAM offer will be ten years, beginning January 1, 2019, and running until December 31, 2028.
Before getting into the details, let’s start with some quick history of the A-CAM.
In the 2016 Rate-of-Return Reform Order, the FCC adopted a process to allow some rate-of-return ILECs to voluntarily elect to receive model-based USF support from the A-CAM for a term of 10 years in exchange for meeting specific broadband network build-out obligations.[2] The cost model option was not available to any rate-of-return carrier that had deployed 10/1 Mbps broadband service to 90 percent or more of its eligible locations in a state, based on June 2015 FCC Form 477 data. For carriers eligible to elect the A-CAM, support was not be provided to census blocks where the carrier or any of its affiliates were providing voice and 10/1 Mbps or better broadband services using either fiber-to-the-premises or cable technologies, based on June 2015 FCC Form 477 data. Also, support was not be provided to census blocks served by “qualifying” unsubsidized competitors.
Rate-of-return carriers that were eligible to move to the A-CAM received offers of support in August 2016.[3] But, the total amount of support and transition payments for those carriers that chose to move to the model exceeded the A-CAM’s 10-year budget by more than $160 million annually, forcing the FCC to scale back the offers of support. First, the A-CAM per location funding cap was reduced to $146.10, and because the revised amounts still exceeded the budget, the FCC cut support offers (and corresponding deployment obligations) further by varying percentages based on locations in a carrier’s study area lacking broadband service at speeds of at least 10/1 Mbps.[4] The FCC then extended revised offers of support in December 2016. A total of 191 rate-of-return carriers received 228 revised offers of A-CAM support,[5] and in January 2017, 182 carriers accepted 217 of those revised offers in 39 states.[6]
In March of 2018, the FCC released an order continuing its efforts to reform the high-cost support mechanism rules that apply to rate-of-return carriers.[7] The FCC boosted the A-CAM’s budget so that all recipient locations with costs above $52.50 per location were funded up to a per-location funding cap of $146.10. In an accompanying further notice, the FCC sought comment on increasing the per-location funding cap to $200.
The point here is that rate-of-return carriers generally ended up receiving A-CAM support amounts that were less than what was originally promised. In response to the FCC’s request for comments, carriers vigorously advocated for an increase in the A-CAM budget to allow the FCC to fully fund the original offers of support. These demands have been met in the draft order, but with a condition to increase the 25/3 Mbps deployment. To the details.
New A-CAM Offer Will Provides $200 Per Location, Per Month, With An Obligation To Increase 25/3 Mbps Broadband Service Deployment
The FCC will make a new set of model support offers to existing A-CAM carriers. The new offer provides support of up to $200 per location, per month, tied to an obligation to increase 25/3 Mbps broadband service deployments.[8]
If all A-CAM carriers accept, the total cost of increasing the per location funding to $200 is $67 million per year. According to the FCC, this increase in A-CAM funding will not affect USF support available to rate-of-return carriers that receive support pursuant to revised cost-based rules.
25/3 Mbps Service Deployment To A Percentage Of Fully Funded Locations, Based On Population Density Of Service Area
Here are more details on the new strings attached to the new support offers, starting with the number of locations that must receive 25/3 Mbps service. Each carrier that accepts the new A-CAM offer must deploy 25/3 Mbps broadband service to a number of eligible locations equal to at least 50%, 65%, or 85% of the number of fully funded locations, depending on the population density in the carrier’s service territory – low, medium, and high density.[9] Here is the full breakdown:
· 50% of fully funded locations for low density carriers
· 65% of fully funded locations for medium density carriers
· 85% of fully funded locations for high density carriers
The term of the revised A-CAM offer will be ten years, beginning January 1, 2019, and running until December 31, 2028 (a two-year extension of A-CAM for carriers that accept).
Rate-of-return carriers accepting the new A-CAM offer will be required to meet their 25/3 Mbps deployment obligation incrementally over the 10-year support term, with the first milestone being due in 2022.[10] Specifically, each A-CAM carrier that accepts will be required to provide 25/3 Mbps broadband service to a specific percentage of the requisite number of eligible locations each year beginning with 2022. (A carrier’s requisite number of eligible locations is based on the carrier’s total number of fully funded locations and service area population density, as explained above.) Here are the 25/3 Mbps service deployment milestones:
· 40% of eligible locations by end of the 2022
· 50% by the end of 2023
· 60% by the end of 2024
· 70% by the end of 2025
· 80% by the end of 2026
· 90% by the end of 2027
· 100% by the end of 2028
Rate-of-return carriers accepting revised A-CAM offers will be obligated to meet the deployment milestones to which they previously agreed with respect to 10/1 Mbps broadband service.
After the FCC adopts the draft order (assuming it does and no substantial changes are made), the FCC’s Wireline Competition Bureau will release a public notice announcing the revised model-based support amounts and corresponding deployment obligations. A-CAM rate-of-return carriers will then have 30 days to accept (or deny). Any such election shall be irrevocable. Carriers that decline the new support offer will remain subject to the terms of their prior A-CAM authorization.
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For More Information On This Topic, Try These Blog Posts:
A-CAM II: A New Model Offer for “Legacy” Rate-of-Return Carriers (November 2018)
FCC Considering Minor Changes to “Legacy” Rate-of-Return USF Budget (April 2018)
FCC Provides More Funding For A-CAM Carriers (March 2018)
A-CAM Companies Make Final Push For More Funding (December 2017)
NTCA Presses FCC To Review High-Cost USF Budget (August 2017)
NTCA Survey Says: High-Cost USF Shortfall Harming Rural Broadband Deployment (August 2017)
A Watershed Moment: The FCC’s 2016 Rate-of-Return Reform Order (March 2016)
***** Footnotes *****
[1] Connect America Fund, WC Docket No. 10-90; ETC Annual Reports and Certifications, WC Docket No. 14-58; Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135; Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Report And Order, Further Notice Of Proposed Rulemaking, And Order On Reconsideration, FCC-CIRC1812-02 (Nov. 21, 2018) (2018 Draft Rural Broadband Order).
[2] Connect America Fund, WC Docket No. 10-90, ETC Annual Reports and Certifications, WC Docket No. 14-58, Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Report and Order, Order and Order On Reconsideration, and Further Notice Of Proposed Rulemaking, FCC 16-33 (rel. Mar. 30, 2016) (Rate-of-Return Reform Order).
[3] Wireline Competition Bureau Announces Support Amounts Offered to Rate-of-Return Carriers to Expand Rural Broadband, WC Docket No. 10-90, Public Notice, DA 16-869 (2016).
[4] Connect America Fund, WC Docket No. 10-90, Report And Order And Further Notice Of Proposed Rulemaking, FCC 16-178, ¶ 7 (2016).
[5] Wireline Competition Bureau Authorizes 35 Rate-Of-Return Companies To Receive More Than $51 Million Annually In Alternative Connect America Cost Model Support And Announces Offers Of Revised A-Cam Support Amounts To 191 Rate-Of-Return Companies To Expand Rural Broadband, WC Docket No. 10-90, Public Notice, DA 16-1422 (2016).
[6] Wireline Competition Bureau Authorizes 182 Rate-Of-Return Companies To Receive $454 Million Annually In Alternative Connect America Cost Model Support To Expand Rural Broadband, WC Docket No. 10-90, DA 17-99 (Jan. 24, 2017) (A-CAM 2nd Authorization PN).
[7] Connect America Fund, WC Docket No. 10-90, ETC Annual Reports and Certifications, WC Docket No. 14-58, Establishing Just and Reasonable Rates for Local Exchange Carriers, WC Docket No. 07-135, Developing a Unified Intercarrier Compensation Regime, CC Docket No. 01-92, Report and Order, Third Order On Reconsideration, and Notice Of Proposed Rulemaking, FCC 18-29 (rel. Mar. 23, 2018).
[8] “These revised offers, in effect, fund the initial offers extended by the Bureau on August 3, 2016, before those offers were reduced for budgetary reasons.” 2018 Draft Rural Broadband Order at ¶ 14.
[9] 2018 Draft Rural Broadband Order at ¶ 23.
[10] 2018 Draft Rural Broadband Order at ¶ 27.