JSI News & Commentary: A-CAM Support Policies Demand More Attention

The teams still playing in Major League Baseball’s 2015 Post Season all have one thing in common-they practiced all aspects of the game every day in order to keep playing in October. The great American pastime provides a key life lesson-preparation. Planning and preparation are keys for a successful baseball season, especially when managing a bullpen or preparing an infield shift for an adroit left-handed batter. It seems that preparation is an important component of most, if not all, worthwhile endeavors.

Consider our rural telecom industry. The Federal Communications Commission (FCC) has been “preparing” the rural carriers for its reform of the federal Universal Service Fund (USF) for several years, ever since the 2010 National Broadband Plan and its 2011 Transformation Order. Yet despite the seemingly ample time preparing for reform, the FCC appears to be running up against a self-imposed deadline to finish many important preparations for federal USF reform. Since we are on the receiving end of the FCC’s federal USF reforms, we also need to prepare and respond to proposals intended to reform vital federal support for rural carriers. In this JSI News and Commentary, we focus on one issue in the FCC’s proposed Alternative Connect America Model (A-CAM) that may not be getting enough attention-namely, the use of two policies designed to limit the number of households or business locations that are eligible for A-CAM support. Early attention to these two policies will help you prepare for what lies ahead if your company transitions to the A-CAM, and may even impact your operations if you don’t voluntarily elect the A-CAM.

The A-CAM’s beginnings were in the price cap carrier reforms. The price cap carriers proposed a model to the FCC for use in updating and improving its hybrid cost proxy model, which has been used since 2000 to provide support for certain price cap carriers. The FCC modified this proposed model for all price cap carriers and subsequently created the A-CAM for rural carrier purposes.

For our discussion about the eligibility of locations in a study area, it isn’t necessary to revisit the historical development of the A-CAM except for understanding that the A-CAM contains two modules. These two modules define the overall structure of the A-CAM. The first, the “Cost to Serve” module, determines the cost of providing universal service to specific locations using a multitude of inputs and rules. Although critical review of these inputs and engineering rules is vitally important, we’ll set this review aside for discussion in a future newsletter.

Our focus today is on the “Support Module.” It is in this second module where the FCC determines the number of locations in a study area that will be eligible for federal USF. The FCC uses two policies to make this determination: the competitive overlap policy and the benchmark policy.

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