Bipartisan Solutions for Universal Service

Last week, I circulated an Order to modernize universal support for rate-of-return carriers. The item now on the floor is the result of months of arduous efforts by Commissioners O’Rielly and Clyburn and their staffs. Commissioner O’Rielly brought a command of the details and genuine desire to discover a solution. Commissioner Clyburn brought her experience, including as a state regulator dealing with these issues, and an equally passionate desire for improvement of the program.

All three of us agreed on two principles: the need for reform in the program to assure the funds went to the delivery of service, and a focus on maintaining existing service and bringing broadband to unserved areas. All three of us had different ideas about how to achieve those goals. None of us got all we wanted in this item, but the public will get what it needs: broadband to rural areas and program reform.

This bi-partisan effort was aided by the rate-of-return carriers themselves. Working through their trade associations, they engaged with the three of us in a productive manner. They, too, found it necessary to accept changes from their original position. Shirley Bloomfield and Walter McCormick personally engaged in principals-level meetings with us. We are pleased that NTCA and USTA have supported the result.

We pledged to Sen. Thune that we would bring forth a solution. We are grateful to the Senator for allowing us the time necessary to reach this conclusion, even though it was longer than any of us anticipated.

The proposed Order sets forth a package of reforms to address rate-of-return issues that are fundamentally intertwined—the need to modernize the program to provide support for stand-alone broadband service; the need to improve incentives for broadband investment to connect unserved rural Americans; and the need to strengthen the rate-of-return system to provide certainty and stability for years to come.

The proposed Order would create an entirely voluntary path for rate-of-return carriers that prefer the predictability of defined support amounts over a ten-year term. Similar to the approach that has successfully spurred deployment by larger “price-cap” carriers, this model-based support comes with defined milestones for efficient, accountable deployment. This model-based option has been actively sought by some rate-of-return carriers, and reflects significant updates and carrier-submitted data from the rate-of-return community.

For carriers who choose to continue receiving support based on traditional rate-of-return principles, 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 buildout to connect those that remain unserved. To better meet the needs of consumers, for the first time, we would provide support for stand-alone broadband without a voice service subscription, building on the framework of our longstanding rules.

To limit the universal service fund’s burden on ratepayers, the proposed Order would adopt budget control mechanisms to ensure that rate-of-return carriers collectively stay within the established rate-of-return budget. Notably, the proposed Order reflects the shared principle embodied in the “Walden Rule,” that we should limit the use of ratepayer funds to support service in an area that is served by an unsubsidized Internet provider. And the proposed Order would lower the authorized rate of return for incumbent carriers to better reflect current financial market conditions. Finally, a Further Notice included with the Order would seek comment on additional reforms that would further guard against waste.

All of us at the Commission share a commitment to ensuring that every American has access to modern communications, which are increasingly integral to participation in our economy and our democracy. Adopting these reforms to put the rate-of-return program on solid footing — reforms which were developed through months of hard work and bipartisan collaboration — will move us closer to achieving this common goal.

Some thought reform and expansion of the rate-or-return program to support broadband wasn’t possible. They were wrong. Bipartisan teamwork and a long slog through difficult issues has produced a result that is good for America.


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