A key element in the determination of USF support for legacy rate of return carriers’ HCLS and CAF-BLS support amounts is the Budget Control Mechanism (BCM). The BCM was first introduced in the FCC’s 2016 CAF Order and later modified in the 2018 CAF Order. In the 2018 CAF Order the FCC created a separate budget amount for HCLS and CAF-BLS which is increased annually by the rate of inflation and also implemented modifications to the application of the BCM. Simply put, the BCM is designed to ensure that support payments to legacy rate of return carriers remain within the established budget. When support claims exceed the budget for a given year, the BCM is applied to reduce support payments in order to stay within that year’s budget for HCLS and CAF-BLS.
On two occasions in the recent past, the FCC has waived the application of the BCM and ordered USAC to set the BCM at 0% resulting in no reductions in HCLS and CAF-BLS support amounts. This occurred most recently for the 2022-2023 tariff year. The FCC’s rationale for waiving the BCM for this period was the recognition that legacy rate of return carriers are facing cash flow issues and increased expenses arising from the pandemic as well as increased demand for broadband service, in particular for broadband only lines that receive a higher level of support.
As discussed previously on this site (see ICORE Blog entries dated 1/20/23 and 3/10/23) the FCC is currently considering proposals and comments regarding Enhanced ACAM and CAF-BLS. In its comments and subsequent discussions with the FCC, NTCA has put forth a plan, that if adopted, would result in legacy rate of return carriers committing to providing higher speed broadband services. The plan also includes corresponding increases to support amounts as well as a waiver of the BCM for either three or five years depending on the level of a carrier’s commitment to broadband deployment at speeds of 100/20.
In recent discussions with the FCC, NTCA has reiterated its previous comments and urged the FCC to promptly adopt the proposals put forth by the ACAM Broadband Coalition and its own proposal for future support payments for legacy rate of return carriers receiving HCLS support and CAF-BLS. NTCA has also discussed the likelihood of a significant BCM adjustment for the 2023-2024 support period and stated that the conditions acknowledged by the FCC leading to previous waivers of the BCM still exist today. For this reason, NTCA suggests that a waiver of the BCM for the 2023-2024 period is justified and that the recurring nature of this issue requires a comprehensive overhaul of the process for determining legacy carrier support as proposed by NTCA in its comments and subsequent discussions with the FCC.
As previously stated here, we support the initiatives put forth by the ACAM Broadband Coalition and NTCA that would result in the delivery of higher speed broadband service to subscribers in rural areas of the country. We believe that at the very least a waiver of the BCM for the 2023-2024 support period is warranted and should be ordered by the FCC. Reducing support payments for legacy rate of return carriers when these carriers are striving to meet increasing demand for higher speed broadband services runs counter to the stated national goal of making affordable high speed broadband service universally available.
