As an early Christmas present from the FCC – and possibly Chairman Tom Wheeler’s last nod to the rural telephone companies before riding off into the sunset on January 20 – the FCC released a Report and Order and related Public Notice (A-CAM rulings) on December 20 which detail the revised Alternative Connect America Model (A-CAM) offer for rate-of-return companies.

The Order places the A-CAM electors into two categories: those whose A-CAM funding exceeded their legacy support (based on 2015 funding); and those whose funding under the A-CAM was less than their legacy support (known as “glidepath adopters”). The Order “locks in” the 35 companies that were initially glidepath adopters. This means that these carriers will soon begin receiving the same level of A-CAM support, and have the same build-out obligations, calculated under the initial offer with no option to go back to legacy support. For the remaining 191 companies, the FCC released revised state-level offers which, as described in more detail below, lower funding levels and change buildout obligations. The FCC announced that these carriers will have until January 19, 2017, to notify the FCC if they elect to receive A-CAM support. Carriers not responding by that date will continue to receive legacy support.

Revised Offers Address Oversubscription and Impose Condition on Acceptance
The A-CAM rulings address the issue of the model’s oversubscription, which occurred when A-CAM rate-of-return carriers elected over $160 million more than the A-CAM budget allowed. To address a portion of the oversubscription, the FCC allocated an additional $50 million annually to the A-CAM budget, bringing the total annual support to $200 million. To address the remaining shortfall, the FCC took into account the “contribution” to the budget offered by the glidepath adopters and reduced the funding cap from $200 to $146.10 per location. The FCC then further reduced support by varying percentages based on the percentage lacking 10/1 deployment by providing a higher percentage of the adjusted offer amount to those with lower existing broadband deployment. Overall, these reductions maintain the overall number of eligible locations, but shifts the buildout requirements, such that carriers have less 25/3 and 10/1 deployment obligations with a greater level of 4/1 and reasonable request obligations.

Additionally, in a related Further Notice of Proposed Rulemaking, the FCC seeks comment on whether or not to allocate additional funding for the A-CAM. This action is in response to comments filed by JSI, the associations and the majority of other commenters who urged the FCC to fully fund the A-CAM. In the A-CAM rulings, the FCC determined that if full funding was ultimately approved, the adopters would be required to meet the buildout obligations specified in the initial offer when they made their A-CAM election as a condition of accepting the revised offer.

Guidance for Next Steps
For carriers that received revised offers that wish to proceed and accept A-CAM support, a letter must be submitted to the FCC at ConnectAmerica@fcc.gov by January 19, 2017. All carriers that will be receiving A-CAM support must notify NECA as well to exit the common line pool. NECA is sending letters to companies explaining this process, as well as the option for NECA to list their common line rates in NECA’s tariff. JSI recommends that A-CAM adopters tariff their subscriber line charge (SLC) and other common line rates either in NECA’s tariff or in a standalone tariff, such as the JSI tariff, in order to retain these sources of revenue.

A-CAM adopters also have options regarding their DSL offerings. Because A-CAM adopters will no longer be receiving legacy support, these carriers can take advantage of a new regulatory framework that allows for the regulated ILEC to provide DSL as a retail offering. This eliminates the obligation to contribute to USF for the provision of the transmission component of DSL as is currently required. Under this approach, A-CAM adopters that already offer the DSL on a detariffed basis would file a 60-day notice with the FCC specifying that the carrier will no longer be offering DSL as a separate transmission service. After the 60 days, the carrier would be offering “detariffed retail Internet access service” and would no longer post rates, terms and conditions on its website. The revenue from providing DSL would then be reported as retail revenue on the Form 499, which would then not be subject to the Federal Universal Service Charge (FUSC). A-CAM adopters that are not currently detariffed would be able to take advantage of this option beginning July 1, 2017, if they elect to exit NECA’s DSL pool by the March 1 deadline.

JSI has developed a checklist of these and other options which should be considered by A-CAM adopters, as well as a templates for the revised offer acceptance letter and the 60-day notice. Please contact your cost consultant, John Kuykendall, Brian Sullivan, or Steve Meltzer at 301-459-7590 if you would like for us to send these to you. JSI also can assist your company decide whether or not to accept the revised offer and can answer any questions about the A-CAM rulings or the 60-day notice process.

Source: JSI e-Lert