A-CAM II: A New Model Offer for “Legacy” Rate-of-Return Carriers
Federal Communications Commission Chairman Ajit Pai has released a draft Report and Order and Further Notice of Proposed Rulemaking that will be considered at the FCC’s December open meeting.[1] The item revises universal service fund (USF) rules that apply to rate-of-return incumbent local exchange carriers.
In one section that will garner substantial attention, the FCC offers model-based USF support derived from the Alternative Connect America Cost Model (A-CAM) to all rate-of-return carriers currently subject to “legacy” cost-based rules. This new model offer is referred to as “A-CAM II.” Support under A-CAM II will last for 10 years, beginning January 1, 2019. Carriers accepting the offer will be required to deploy 25/3 Mbps broadband service to a certain number of locations in their service area by the end of the 10-year term.
The new model offer is similar to the original A-CAM offer but with several “critical adjustments.”[2] For instance, A-CAM II will be available to carriers that were excluded from the first A-CAM because they have deployed 10/1 Mbps broadband service to more than 90% of eligible locations. Full details are below.
Background & Context: The First A-CAM Offering
In the 2016 Rate-of-Return Reform Order, the FCC created a process for some rate-of-return carriers to voluntarily elect to receive model-based USF support from the A-CAM for 10 years in exchange for meeting broadband build-out obligations.[3] This opportunity was not available for 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. The model did not provide support to census blocks where a 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. Also, support was not provided to census blocks served by “qualifying” unsubsidized competitors. The response by eligible carriers was overwhelming, causing the FCC to scale back funding.
After the release of the A-CAM, carriers were divvied up into winners and losers under the model, with a winner being a company that received more total annual funding under the A-CAM than it had received under the existing cost-based rules. Rate-of-return carriers that fell into the ineligible group wondering why they were being punished for their good deeds – deploying 10/1 Mbps broadband service to 90% or more of their service area. Still others opined that the first A-CAM was the beginning of the FCC’s long game to move all carriers to cost model regulation and eliminate rate-of-return regulation.
A-CAM II: A New Model Offer for Legacy Rate-of-Return Carriers
The FCC will extend a new model offer – A-CAM II – to rate-of-return carriers. The new model support offer is similar to the original A-CAM offer but with several “critical adjustments.”[4] The A-CAM II offer will be available to all rate-of-return carriers that did not previously elect model support or support pursuant to the Alaska Plan.[5] It is even available to carriers that were excluded from the first A-CAM because they have deployed 10/1 Mbps broadband service to more than 90% of eligible locations, and carriers that will receive more annual support under the model than they currently receive.[6]
The A-CAM II will offer support of up to $200 per location, with a $52.50 per location funding threshold. The per location cap will not be reduced, and funding this new model offer will not affect the budget for rate-of-return carriers that remain on legacy cost-based support. The A-CAM II includes a Tribal Broadband Factor, and will provide support in census blocks where a carrier or its affiliates have deployed fiber-to-the-premises or cable facilities. The A-CAM II will rely on broadband coverage data from the most recent FCC Form 477 to identify and exclude areas where an unsubsidized competitor presumably offers service. Stated another way, there will be no process to challenge the presence of unsubsidized competitors. Yes, you heard that correctly.[7]
Support under A-CAM II will last for 10 years, beginning January 1, 2019. As for build-out obligations, A-CAM II recipients will be required to deploy 25/3 Mbps broadband service to a number of locations equal to the number of eligible fully funded locations in their service area by the end of the 10-year support term. Carriers accepting A-CAM II will also be required to deploy service to a number of capped locations, as well as maintain their existing voice and broadband service as of December 31, 2018. Below are further details on the A-CAM II.
Who is Eligible for A-CAM II: All rate-of-return carriers that currently receive USF support under the legacy cost-based rules and do not receive A-CAM or Alaska Plan support are eligible for A-CAM II. To be clear, A-CAMM II will even be made available to carriers that were excluded from the first A-CAM because they have deployed 10/1 Mbps broadband service to more than 90% of eligible locations in their service areas. Also, rate-of-return carriers that will receive more annual support under the model than they currently receive will be eligible.
How Much A-CAM II Funding: The A-CAM II will offer model-based USF support of up to $200 per location. The A-CAM II will have a $52.50 per location funding threshold. The $200 per location cap will not be reduced, regardless of how many carriers accept the offer. Because the FCC has “delinked” the legacy budget from the model budgets, funding the A-CAM II will not affect the budget for rate-of-return carriers remaining on legacy support.
10-Year Term of Support: Support under A-CAM II will last for 10 years, beginning January 1, 2019.
Areas “Presumed” to be Served With 25/3 Mbps Service are Excluded From Support: The A-CAM II will exclude – not provide support for locations – census blocks “presumably” served by an unsubsidized competitor that offers voice and 25/3 Mbps or faster broadband service. There will be no challenge process. The FCC will use the most recent Form 477 data to determine which census blocks are presumably served by unsubsidized competitors providing voice and 25/3 Mbps broadband service and should be excluded.
25/3 Mbps Broadband Service Deployment Obligations: Rate-of-return carriers accepting the new A-CAM II offer will be required to deploy 25/3 Mbps broadband service to a number of locations equal to the number of eligible fully funded locations in their service area. Specifically, carriers accepting A-CAM II will be required to offer at least 25/3 Mbps service to 40% of fully funded locations by the end of 2022, to 50% of the requisite number of funded locations by the end of 2023, an additional 10% each year thereafter, and 100% by 2028.[8] Carriers accepting A-CAM II will be required to report geocoded location information for all new broadband deployments.
A-CAM II Election Process: There will be a one shot election process. The Wireline Competition Bureau will release a public notice announcing each carrier’s A-CAM II support amount, and then carriers will have 45 days to make a decision. Any such election shall be irrevocable.
4/1 Mbps Deployment Obligations to “Capped” Locations (Not Fully Funded): Rate-of-return carriers accepting A-CAM II will be required to offer at least 4/1 Mbps broadband service to a defined number of locations that are not fully funded by the end of the 10-year support term (2028). Carriers with a density of more than 10 housing units per square mile will be required to offer at least 4/1 Mbps to 50% of all capped locations. Carriers with a density of 10 or fewer housing units per square mile will be required to offer at least 4/1 Mbps to 25% of all capped locations. The remaining capped locations will be subject to the reasonable request standard. Carriers accepting A-CAM II will be required to report geocoded location information for all new broadband deployments.
Broadband Service Performance Standards: Rate-of-return carriers accepting A-CAM II will be required to provide a minimum usage allowance of the higher of 170 GB per month or one that reflects the average usage of a majority of consumers, using Measuring Broadband America data or a similar data source. For all locations that are fully funded, carriers will be required to certify that 95% or more of all peak period measurements of round-trip latency are at or below 100 milliseconds. The high-latency metric used in the CAF Phase II auction proceeding will apply to any capped locations served by a non-terrestrial technology. Under this standard, carriers are required to certify that 95% or more of all peak period measurements of round-trip latency are at or below 750 milliseconds, and with respect to voice performance, a score of four or higher using the Mean Opinion Score (MOS).[9]
FCC Form 477 Broadband Deployment Data: When making the A-CAM II offer, the FCC will rely on broadband coverage data from the most recent FCC Form 477.
Tribal Broadband Factor: The A-CAM II will include a 25% Tribal Broadband Factor that reduces the funding threshold by 25%, putting it at $39.38 for locations in Tribal areas. Additionally, the funding cap for Tribal lands will be increased to $213.12 per location.
Transition for Carriers Receiving Less Support Under the A-CAM II: There is a three-tiered transition process for carriers that receive less model support than they had received under legacy support rules. It is the same as the one used for existing ACAM recipients – if the difference between legacy and model-based support is 10% or less, the carrier will have a one-year transition; if greater than 10% but not more than 25%, then the transition period will be four years; and if the difference is greater than 25%, then the transition will occur over the full-term of the plan, with no extra transition support only in the final year of the term.
Other Terms and Conditions: To the extent the FCC is silent regarding the terms and conditions of the new model offer, the FCC adopts the terms of the original A-CAM offer.
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For More Information On This Topic, Try These Blog Posts:
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] If the FCC misses anything, if there is an issue with the A-CAM II that the FCC has not addressed, then the terms and conditions of the first A-CAM will apply. 2018 Draft Rural Broadband Order at ¶ 32 (“To the extent this Report and Order is silent regarding the terms and conditions of the new model offer, we adopt the terms of the original A-CAM offer.”).
[3] 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) (2016 Rate-of-Return Reform Order).
[4] If the FCC misses anything, if there is an issue with the A-CAM II that the FCC has not addressed, then the terms and conditions of the first A-CAM will apply. 2018 Draft Rural Broadband Order at ¶ 32 (“To the extent this Report and Order is silent regarding the terms and conditions of the new model offer, we adopt the terms of the original A-CAM offer.”).
[5] 2018 Draft Rural Broadband Order at ¶ 29.
[6] Carriers whose offer will include no fully funded locations are eligible. As explained by the FCC, this means that “a carrier may elect the offer even if it would be required to deploy only 4/1 Mbps or on reasonable request.” 2018 Draft Rural Broadband Order at ¶ 41.
[7] The FCC is skeptical of using a challenge process which requires incumbent providers to prove a negative. “Relying on the certified FCC Form 477 data will permit us to avoid a time-consuming and administratively burdensome challenge process. In the challenge process for the first A-CAM offer, the Bureau granted only 61 challenges of the more than 250 requests to change A-CAM coverage.” 2018 Draft Rural Broadband Order at ¶ 45.
[8] The FCC will allow A-CAM II recipients to deploy to only 95% of the required number of fully funded locations by the end of the term of support. Those 5% of locations would then shift into the carriers’ obligations to offer service to the number of capped locations. 2018 Draft Rural Broadband Order at ¶ 62, footnote 139.
[9] 2018 Draft Rural Broadband Order at ¶ 61.