Rate Floors – A Bad Idea That May Be Ending

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As you know, the minimum local rates that small rural ILECs must charge to receive full USF support have been frozen by the FCC at their current $18 per month. They were scheduled to go $20 on July 1 of this year, and $22 on July 1, 2018.

This action, in and of itself, is good news. The even better news is that the Federal Communications Commission has issued a Notice of Proposed Rulemaking (NPRM) to completely review whether the rate floor has accomplished its original purposes; whether changes to its methodology should be made; or – the best news of all – whether the arbitrary, mandated rate floor should be eliminated totally.

A host of rural ILECs, along with their representatives and associations, plus stakeholders ranging from the AARP to the National Tribal Telecommunications Association, have long and rightfully contended that the rate floor has made local service less affordable in many high cost, rural areas; raised rural rates above urban rates in some cases; limited customer choices; and slowed broadband deployment.

The Commission, until now, has turned a deaf ear to these valid arguments against the rate floor. In fact, its policies over the past several years seemed to be more about exercising rigid controls over rural ILECs, and less about universal service at affordable rates for all Americans. While Universal Service is mandated by the milestone communications Acts of 1934 and 1996, the FCC’s restrictive rules and regulations have made it increasingly difficult for small companies to meet the very beneficial goals of providing universal service.

Just recently, of course, the FCC lured small, rural ILECs into its ACAM process with estimated support levels, then used its arbitrary internal budget to cut proposed funding to both model and legacy companies. This “ACAM scam,” along with the arbitrary rate floor, and several other past measures to limit, freeze, or reduce previously allowable costs, have severely reduced USF support. There is now a real FCC-induced threat to both universal service in rural America, and to the small carriers that have always offered this service in an efficient and affordable manner.

Finally, the Commission, led by Republican Chairman Ajit Pai, seems to be sensitive – and willing to listen –  to the concerns of small ILECs. This latest NPRM demonstrates once more that this is no longer Tom Wheeler’s FCC.