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FCC Draft Enhanced A-CAM NPRM – Increased Funding For Increased Speeds

Tony Veach

April 29, 2022 – During its May 19, 2022 open meeting, the Federal Communications Commission will vote to approve a Notice of Proposed Rulemaking (NPRM) on the Alternative Connect America Cost Model (A-CAM) program. If adopted, the NPRM will seek public comment on a proposal submitted by the ACAM Broadband Coalition asking the FCC to establish an Enhanced A-CAM program, and related issues. A draft version of the A-CAM NPRM was released with the FCC’s tentative agenda for the open meeting.[1]

Background – Universal Service A-CAM Program

As part of broad, fundamental reforms to the universal service fund’s (USF) high-cost support mechanism, in 2016, the FCC adopted a process allowing certain rate-of-return ILECs to switch to model-based USF support.[2] Rate-of-return carriers that opted in to the A-CAM receive USF support in exchange for meeting defined build-out obligations.[3] Multiple offers to join the A-CAM program resulted in 19 carriers in A-CAM I (support term ends in 2026), 243 carriers in Revised A-CAM I (support term ends in 2028), and 185 carriers in A-CAM II (support term ends in 2028).[4]

The ACAM Broadband Coalition’s Petition For Rulemaking – An Enhanced A-CAM Program

In November 2020, a handful of carriers that receive A-CAM support – the ACAM Broadband Coalition – filed a petition for rulemaking requesting that funding under the FCC’s A-CAM program be extended at current levels for an additional six years – 2029 through 2034.[5] The ACAM Broadband Coalition later proposed further modifications to its ACAM Enhancement Plan,[6] which “would increase buildout obligations for 90 percent of eligible locations to a minimum speed of 100/20 Mbps and the remaining 10 percent of eligible locations to a minimum speed of 25/3 Mbps.” However, these modifications would require one substantial change to the Coalition’s original proposal – a significant increase in the yearly ACAM funding level for each year of the revised program, from $1.087 billion to $1.474 billion (assuming all ACAM companies participate).

The FCC’s Draft A-CAM NPRM

The FCC’s draft NPRM seeks comment on all aspects of the ACAM Broadband Coalition’s proposal to create an Enhanced A-CAM program. Overall, the NPRM breaks down into two sections: (1) Issues related to the ACAM Broadband Coalition’s proposal; and (2) proposals to improve administration of the USF high-cost program.

The information below summarizes the issues teed up for comment on creating an Enhanced A-CAM program that are related to A-CAM universal service support: total annual A-CAM funding; A-CAM cost model inputs; increasing the per location support cap; determining the number of eligible locations used for the calculation of support amounts and buildout obligations, expanding the amount of eligible locations; extending the A-CAM funding term; and a glidepath carrier proposal.

Proposed Increase In Total A-CAM Support.  The ACAM Broadband Coalition proposes that carriers electing Enhanced A-CAM support be required to deploy 100/20 Mbps or faster broadband service to 90 percent of eligible locations, and 25/3 Mbps or faster broadband service to the remaining 10 percent. Support amounts provided to carriers under the current A-CAM programs were based on a cost model that generally calculated support for providing broadband services at speeds of at least 4/1 Mbps, 10/1 Mbps, and 25/3 Mbps. Thus, the ACAM Broadband Coalition’s proposal would require an increase in total A-CAM funding, as well as an increase to the number of eligible locations and an extension of the term of support. The Coalition estimates that if all eligible carriers elect the Enhanced A-CAM, as it is proposed, A-CAM support would be increased by $389.5 million per year, from approximately $1.1 billion per year to $1.49 billion per year, a 35.4% increase.[7] Most Revised A-CAM I and A-CAM II carriers would receive an additional six years of support, while A-CAM I carriers would receive an additional eight years of support. The FCC has requested comment on the proposed increase to total A-CAM funding, and the following related issues:

  • Do the proposed deployment obligations justify the proposed support increases, both in the aggregate and for specific A-CAM recipients?

  • Are there other support mechanisms the FCC should explore to increase the efficiency of the support amounts in these areas? For example, the FCC has recognized the benefits of competitive mechanisms to efficiently allocate high-cost universal service support. What mechanism would be appropriate to allocate support most efficiently in this instance, given the time-sensitivity of receiving binding commitments to provide service at a level of at least 100/20 Mbps and the ongoing commitments to provide support for 25/3 Mbps service to A-CAM I and A-CAM II carriers through 2028?[8]

Potentially Outdated Cost Model.  The FCC has requested comment on continuing to rely on the A-CAM cost model, noting that due to the passage of time and “the pace of technological developments since the development of the model,” it may no longer correctly estimate costs of providing broadband service.[9] At the same time, the FCC acknowledges creating a new model would be time-consuming and could yield vastly different results.

  • Does the A-CAM framework, and especially the model on which it is based, continue to be an appropriate method of calculating support going forward?

  • What are the costs and benefits associated with relying on the existing model?

  • Should the FCC develop a new cost model based upon 2020 census geographies and updated inputs?

Per Location Support Cap.  The 35.4 percent uptick in total annual A-CAM funding in the ACAM Coalition’s proposal is caused by the proposed increase to the cap on support per location, per month. It currently sits at $200 for most eligible locations, with A-CAM II eligible locations in Tribal areas capped at $213.12. The ACAM Broadband Coalition proposes increasing the cap on support to $300 per location or 80 percent of model costs, whichever is greater.

Using a $300 per location cap, the FCC estimates, would increase “fully funded” eligible locations to 719,061 from 682,200. This estimate excludes certain locations that are not currently eligible, but would become eligible under the ACAM Coalition’s proposal.[10] Using the 80 percent metric implies a funding cap in excess of $300 for 136 companies; a funding cap of less than $400 for 40 companies; and a funding cap of more than $100 for 29 companies. The FCC’s analysis includes only currently eligible census blocks and A-CAM recipients that Coalition included in its analysis.[11] The FCC invites comments, as well as economic studies, on how to determine the appropriate amount of support for the Enhanced A-CAM program, and the following issues:

  • Is this methodology consistent with the model design and framework?

  • What is the rationale or justification for providing support as a percentage of model costs in some instances, rather than relying on a higher cap?

  • Because upgrading capacity of existing fiber is less costly than installing new fiber, should the FCC offer a lower level of support for those areas where the provider has already deployed fiber?

  • What are the incremental costs of the proposed commitments under the Enhanced A-CAM proposal?

  • Would a subsidy that covered those costs be sufficient, and if not, what other costs should be covered, such as recovery of costs for existing A-CAM locations and why?[12]

  • How should the Tribal Broadband Factor be incorporated into Enhanced A-CAM? Do the generally increased support amounts and universal deployment obligations relieve the need for a separate Tribal Broadband Factor?[13]

Determining Eligible Locations – For Support Amounts & Buildout Obligations.  To calculate Enhanced A-CAM support, the ACAM Broadband Coalition proposes to use eligible model locations, rather than eligible post-Fabric locations. The FCC notes, however, that “the Broadband DATA Act requires that, after the creation of the Fabric and associated maps, the Commission use those maps ‘when making any new award of funding with respect to the deployment of broadband internet access.’”

If eligible model locations are used to calculate a carrier’s A-CAM support, and the Fabric is used to determine serviceable locations included in buildout obligations, the FCC will have to reconcile discrepancies between the two in certain situations. In other words, certain situations would require the FCC to reduce a carrier’s support amount, pro rata, based on the difference in locations between the model and the Fabric. For example, a carrier’s number of model locations could be greatly overstated in comparison to the Fabric. This would create an apparent windfall of support, requiring a reduction in support. The FCC has requested comment on the use of eligible model locations to calculate support, and the following issues:

  • The FCC specifically requests comment on how it can reconcile the difference between model locations and Fabric locations, especially in cases where the number of model locations significantly exceeds the number of serviceable locations in the Fabric.

  • Should the FCC use the approach taken in the RDOF – a pro rata support adjustment when a support recipient’s updated location count is less than 65% of the cost model locations within the recipient’s area in a state – for the Enhanced A-CAM program?

  • Would such an approach be useful for the Enhanced A-CAM program and comply with the Broadband DATA Act?

Expanding Eligible Locations.  As part of its proposal, the ACAM Broadband Coalition proposes expanding the number of locations that are eligible for funding under the Enhanced A-CAM program in two ways:

1. addition of census blocks that were ineligible for A-CAM I because they were “FTTP-served” by the incumbent or one of the incumbent’s affiliates; and

2. addition of census blocks that were excluded from A-CAM I because they were served by an unsubsidized competitor with at least 10/1 Mbps broadband service.

First, the FCC acknowledges that “it may not be cost-effective to provide support for census blocks where the A-CAM carrier is already offering service of at least 100/20 Mbps.”[14] Accordingly, the FCC proposes to use the post-Fabric broadband deployment maps to exclude from eligibility for Enhanced A-CAM any census block to which an A-CAM carrier has already deployed 100/20 Mbps or faster to service to all locations in the block. Comment is sought on that proposal and “how it would be best put into operation.”

  • One possibility would be for the Enhanced A-CAM offer to simply exclude locations in ineligible census blocks, which would no longer be eligible for A-CAM support if a carrier elected the offer, and support for those locations would cease upon authorization of Enhanced A-CAM. However, the FCC recognizes that an A-CAM provider reporting 100/20 Mbps or faster service for certain locations may require continued support for those locations, particularly if the provider relied on loans to fund deployment under the terms of the existing A-CAM programs. Another option would be for the Enhanced A-CAM offers to include fully deployed census blocks, but only at the current A-CAM I or A CAM II funding levels. Comment is sought on these options.[15]

Second, the FCC “propose[s] to re-assess the eligibility of census blocks under Enhanced A-CAM for all carriers based on the provision of service by unsubsidized competitors.” This analysis will take into account the definitions of served and unserved used by the Infrastructure Act broadband funding programs: “Given that locations with 10/1 Mbps service are considered “unserved” pursuant to the Infrastructure Act, it may be reasonable to expand eligibility to include these census blocks. On the other hand, some unsubsidized competitors serving these census blocks may now provide at least 100/20 Mbps.”[16] Comment is requested on these issues:

  • The FCC “tentatively conclude[s] that locations, rather than census blocks, in which an unsubsidized competitor provides at least 100/20 Mbps should be ineligible for support because those locations would be considered ‘served’ pursuant to the Infrastructure Act.”[17]

  • Comment is sought on whether eligibility by served location, rather than census block, will be feasible for an Enhanced A-CAM offer.

  • Should census blocks served by an unsubsidized competitor with at least 25/3 Mbps also be ineligible for support under Enhance A-CAM? (Such census blocks would be considered underserved pursuant to the Infrastructure Act.)

  • The provision of at least 25/3 Mbps service by an unsubsidized competitor may be evidence that the A-CAM carrier is not the most efficient provider of service in that area and that another program, such as BEAD, may be able to more cost effectively achieve deployment of 100/20 Mbps or faster service.

  • In some cases, these (census blocks where an unsubsidized carrier is providing 25/3 Mbps broadband service) may be census blocks that were split by a study area boundary and a price cap carrier reported providing service in the census block. How should those census blocks should be tested for eligibility?

  • For both A-CAM I and A-CAM II carriers, should competitive overlap be re- assessed in all census blocks before making a new offer? What criteria should be used?

Ineligible Locations – Those Funded Through Another Program At 100/20 Mbps Or Higher.  The FCC proposes to remove from eligibility under the Enhanced A-CAM, those locations that are already funded through another federal/state program at 100/20 Mbps or higher.[18] Examples of applicable broadband funding programs include the Broadband Infrastructure Program (BIP), American Rescue Plan Act (ARPA), Coronavirus State and Local Fiscal Recovery Funds (SLFRF), and Tribal Broadband Connectivity Program (TBCP). Comment is sought on this tentative conclusion and the following related issues:

  • Is it necessary to independently address the funding commitments made by each of these programs, or do any of the other eligibility rules proposed above effectively cover the locations associated with these commitments?

  • On the other hand, are there other unserved or underserved locations in census blocks currently ineligible for A-CAM I or A-CAM II that can and should be made eligible for support?

Extended Funding Term: 2022 - 2034.  Under the ACAM Broadband Coalition’s proposal, the Enhanced A-CAM program would begin immediately, “with increased support paid retroactively to the beginning of 2022, and extend through 2034.” Comment is sought on this proposal:

  • A primary purpose of extending the term of support is to provide additional time to recover the capital used to meet deployment obligations. As a result, the FCC would expect the term could be adjusted to coincide with adjustments to support amounts or deployment obligations, such as because of reconciliation with the Fabric.

  • How should the term be adjusted, if at all, if changes are made to the deployment obligations or annual support amounts?[19]

Glide Path Carrier Proposal.  Under the current A-CAM program, glidepath carriers “receive additional transitional support if their model-based support is less than the amount of legacy support they received prior to their election of model-based support,” with “transitional support declines over time based on the size of each carrier’s support reduction.”[20] The ACAM Coalition proposes that glidepath companies that elect Enhanced A-CAM would either: (1) continue to receive support pursuant to their current schedule until such time as their total annual support is less than that under the Enhancement Plan and, at that time, they would convert to the Enhancement Plan funding level; or (2) receive support at the level provided for in the Enhancement Plan.

  • Comment is sought on the Coalition’s glide path proposal.

  • Alternatively, should the glidepath carriers’ transitional support amounts and schedule be re-assessed based on their new, Enhanced A-CAM support amounts?

**********

[1] Connect America Fund: A National Broadband Plan for Our Future High-Cost Universal Service Support, WC Docket No. 10-90; ETC Annual Reports and Certifications, WC Docket No. 14-58; Telecommunications Carriers Eligible to Receive Universal Service Support, WC Docket No. 09-197; Connect America Fund – Alaska Plan, WC Docket No. 16-271; Expanding Broadband Service Through the ACAM Program, RM-11868; Notice Of Proposed Rulemaking, FCC-CIRC2205-02 (Apr. 28, 2022) (Draft A-CAM NPRM), https://docs.fcc.gov/public/attachments/DOC-382821A1.pdf.

[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 (Mar. 30, 2016). In the 2016 Rate-of-Return Reform Order or Order, the offer to receive A-CAM support was not available to any rate-of-return ILEC that had deployed 10/1 Mbps broadband service to 90 percent or more of its eligible locations in a state, based on FCC Form 477 data as of the date of release of the 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 (Aug. 3, 2016), https://docs.fcc.gov/public/attachments/DA-16-869A1.pdf. The FCC extended multiple offers to elect cost model support, resulting in multiple iterations of the A-CAM program (A-CAM I, Revised A-CAM I, and A-CAM II), all of which have different constraints, support levels, and deployment obligations. See 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 18-176 (Dec. 13, 2018).

[4] Draft A-CAM NPRM at ¶ 11. “The A-CAM programs currently provide support for more than 350,000 locations that could be considered ‘unserved’ pursuant to the Infrastructure Act because the A-CAM carriers have commitments to provide service only at speeds of 10/1 Mbps or 4/1 Mbps, or on reasonable request, and more than 800,000 locations that could be considered ‘underserved’ under the Infrastructure Act because the carriers have commitments to provide service only at 25/3 Mbps. Id. at ¶ 22.

[5] Expanding Broadband Service Through the ACAM Program, RM No. 11868, Petition For Expedited Rulemaking (filed Oct. 30, 2020), https://ecfsapi.fcc.gov/file/103051469192/ACAM%20Broadband%20Coalition%20Petition%20Final.pdf. In exchange for lengthening the funding term, the ACAM Coalition proposed new 100/25 Mbps broadband deployment obligations beginning in either 2022 or 2025. Other general details of the plan, as originally proposed by the ACAM Coalition, included voluntary participation, decreased number of locations receiving lower speeds, and no alterations to the A-CAM program’s current framework or annual budget.

[6] Letter from Genevieve Morelli, ACAM Broadband Coalition, to Marlene H. Dortch, Secretary, FCC, RM-11868 and WC Docket No. 10-90, at p. 1 (Feb. 17, 2022); Letter from Genevieve Morelli, ACAM Broadband Coalition, to Marlene H. Dortch, FCC Secretary, RM No.11868, WC Docket No.10-90 (Jan. 19, 2022), https://www.fcc.gov/ecfs/filing/1011948411718; Letter from Genevieve Morelli, ACAM Broadband Coalition, to Marlene H. Dortch, FCC Secretary, RM No.11868, WC Docket No.10-90 (Dec. 17, 2021), https://ecfsapi.fcc.gov/file/12171799321573/12.15.21%20Ex%20Parte%20WCB.pdf.

[7] Draft A-CAM NPRM at ¶ 38.

[8] Id. at ¶ 40.

[9] Id. at ¶ 39.

[10] Id. at footnote 109.

[11] Id. at footnote 110.

[12] Id. at ¶ 41.

[13] Id. at ¶ 42.

[14] Draft A-CAM NPRM at ¶ 44. A-CAM carriers have already reported deployment of 100/20 Mbps or faster service to over 347,000 eligible locations, and 33 have deployed at least 100/20 Mbps service to at least 90% of the eligible locations in their service areas. Id.

[15] Id.

[16] Id. at ¶ 45.

[17] Id.

[18] Draft A-CAM NPRM at ¶ 47.

[19] Id. at ¶ 48.

[20] Id. at ¶ 49.