Thoughtware

Article 12/07/2018

New FCC Draft Order Issued November 21 Could Affect Legacy Carriers

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On November 21, 2018, the Federal Communications Commission (FCC) issued a Draft Report and Order, Further Notice of Proposed Rulemaking, and Order on Reconsideration FCC-CIRC1812-02 (Draft Order) that proposes major changes to universal service funding (USF) payments and obligations for both A-CAM and legacy (non-A-CAM) carriers. This alert outlines some of the updates for legacy carriers.

New A-CAM Offer

The Draft Order proposes another A-CAM offer at a $200 maximum per location. Several changes are proposed to the calculation of eligible locations, including but not limited to the following:

  • Inclusion of existing fiber or coaxial cable-served customers by the carrier
  • Carriers wouldn’t be excluded if they have 10/1 Mbps service available in 90 percent or greater of their regulated service area
  • Competitive exclusions for census blocks competitively served by an unsubsidized competitor with 25/3 Mbps and voice service based on the most recent FCC Form 477 data
  • Tribal changes

One important proposed change is no challenge opportunity for competitive carriers you feel have misreported or overstated their service in your regulated serving area. The glide path option would remain unchanged from the previous offer.

This proposal would be a voluntary election—if declined, the legacy carrier would remain under its legacy support and deployment obligations, as changed below. The funding window would run for 10 years starting in 2019. The Draft Order has 25/3 Mbps location obligations starting in year four at 40 percent of the total fully funded locations and increasing 10 percent a year. This Draft Order is scheduled to be voted on during the FCC’s next Open Meeting on December 12, 2018. The Draft Order outlines a fairly aggressive timeline to accept or decline the offer. If the Draft Order is voted on with no additional changes, it would take, at a minimum, 30 days to become effective. The FCC will release information about the new offer’s support amount and deployment obligations sometime after that date. Once the FCC releases this information, legacy carriers would have as little as 45 days to evaluate the offer and deployment obligations and either accept or decline the offer.

Legacy Budget Changes

The Draft Order proposes that the legacy budget will be severed from the A-CAM budget and will be increased both initially and annually going forward. In addition, legacy carriers will be refunded support reductions due to the budget control mechanism (BCM) for the second half of 2018. The 2019 legacy budget will be calculated by the 2018 unconstrained need (total legacy USF before BCM), plus an inflationary factor, plus an additional 7 percent to account for conversions from voice/data broadband to broadband only service. The 2020 budget will start with the 2019 budget, plus an inflationary factor, plus potentially an additional factor for conversions from voice/data broadband to broadband-only service. In addition, 2021 and forward would start with the prior-year budget plus an inflationary factor. These increases in the budget aren’t without strings. Most importantly, new deployment obligations for all legacy carriers based on 25/3 Mbps—instead of 10/1 Mbps obligations for some carriers—are proposed in the Draft Order.

BKD will continue to monitor the progress on this important Draft Order. For more information on how the Draft Order could reduce your BCM effects or to discuss the potential new A-CAM offer, contact Jamie, Bob Abrams or your trusted BKD advisor.


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