FCC Chairman Foreshadows New Rate-of-Return Order

rural broadband rate of returnFederal Communications Commission (FCC) Chairman Tom Wheeler recently took to the FCC blog to announce that a new order to reform universal support for rate-of-return carriers has been circulated at the agency.  Mr. Wheeler announced progress has been made to support stand-alone broadband providers, improve incentives for providers to connect rural communities, and generally strengthen the rate-of-return system and rural broadband so that it can be reliable and stable for years to come.

Wheeler’s announcement, posted February 19, indicates the much anticipated rate-of-return reforms will be made public soon.  Last June, Commissioner Aijt Pai announced his plan to support rural broadband deployment, declaring, “Rural residents have waiting long enough.” The reforms are anticipated to ease the burden of rural providers who have been required to install telephone service along with broadband.  New reforms are intended to help incentivize broadband deployment in rural communities.

In his post, Wheeler says, for the first time, the telephone provision will no longer be a requirement for rural providers who choose to provide stand-alone broadband service.  This policy change should help providers save costs when building into underserved areas.  In addition, the order is expected to create a voluntary path for providers who prefer a predictable 10 year term with defined support amounts.  For providers that stick with the traditional rate-of-return path, Wheeler says, “the proposed order would provide more certainty for carriers, increase fiscally responsible management of the fund, and ensure that a reasonable portion of support is spent on new build-out to connect those that remain unserved.”

The proposed Order will also adopt financial control mechanisms that Wheeler says will ensure rate-of-return carriers stay within the established budget.  He says ratepayer funds will be used to target areas that are not served by unsubsidized providers, and that rates will be adjusted for incumbent carriers to reflect market conditions.

Chairman Wheeler described a collaborative, give and take process that led to the proposed changes.  Commissioners O’Rielly and Clyburn led the effort, along with input from rate-of-return carriers.  Wheeler said that of the three FCC leaders, not one got everything they hoped would come out of the reforms, but he felt that mutual compromise strengthened the final product.  He believed the effort to be truly bi-partisan, and was proud to have the support of the National Telephone Cooperative Association and United States Telephone Association.

Once the Order is made public, notice for public comment will be included to encourage feedback for additional reforms.

To see Chairman Wheeler’s blog post, click here.

To read more about Universal Service and Connect America, click here.