No More Rate Floors

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The FCC’s recent decision that eliminates the high cost USF program’s local service rate floor rule is a real win for small RLECs all over the country. The rate floor forced proportionately higher local rates on rural customers, dampened RLEC investment in broadband, and actually ran counter to the FCC’s own core Universal Service principles. The April 12th Report and Order rescinds a policy adopted in 2011, and ends its reporting requirements after July 1, 2020.
Chairman Ajit Pai, in his statement accompanying the order, put it best: “During the Obama Administration, the FCC created the ‘rate floor,’ a regulatory catch-22 in which rural phone companies have to choose between raising rates…or losing their universal service support.” The result, he said, was that “the rate floor arbitrarily raised prices paid by rural consumers,” mandating “higher rates for those who can least afford them,” including “low income seniors, veterans, and those living on Tribal lands. And notably, (it) didn’t provide any benefit to the Universal Service Fund.”
Noting that the FCC had sought public input on whether or not the rate floor should be eliminated completely, Chairman Pai wrote that “the feedback we got overwhelmingly favors consigning (it) to the ash heap of history. The AARP, National Consumer Law Center, National Tribal Telecommunications Association, and many other groups agree that the rate floor unnecessarily harms rural America.”
“The Order,” he concluded, “is a big win for rural Americans.” And also, we would stress, for the RLECs who serve those rural customers.