The Rural ILEC Dilemma

  • Post category:Blog

The current and future access revenue of many small, rural ILECs are in serious jeopardy.

The FCC is cutting the interstate rate-of-return, phasing it down over 5 years to 9.75%.  It has also put limits on operating and capital expenses, while reducing termination charges for small RoR ILECs to zero by 2020, in its headlong rush toward bill and keep. The Commission has also phased down – very rapidly – high cost settlements to a hard $250 per line cap for some very rural, very high cost companies.

These drastic moves have decreased interstate settlements, in some cases dramatically, for companies receiving either traditional cost-based or average schedule settlements. The FCC’s revenue reductions were an obvious attempt to control ILEC costs and encourage broadband deployment, while incentivizing them to move from their actual or simulated costs to its statistically derived A-CAM system.

Unfortunately, the newly minted A-CAM support process has restored lost revenues for only some small, high cost companies, while many others are either not eligible, or were offered far less model support than even their reduced legacy settlements provide.

In its almost singular focus on broadband, the Commission seems to have forgotten, or abandoned, its longstanding requirement of universal telephone service at affordable rates. Its recent measures to reduce traditional revenue streams for rural ILECs will make it difficult for many of them to continue providing ubiquitous, reasonably priced telephony services.

It may be time for these severely affected ILECs to seek help beyond NECA or their state, regional and national associations.