All RLECs Subject to ARC Imputation for CBOL
In recent months, JSI has had inquiries from clients that are considering offering standalone broadband, now known as Consumer Broadband-Only Loops or “CBOL.” Among the considerations that we have discussed with clients is how this offering will impact revenues received from the Access Recovery Charge (ARC) that will not be offset by additional CAF-ICC support. As explained below, offering CBOL requires both A-CAM electors and those receiving Legacy support to “impute” the ARC on all CBOL lines. Because ARCs cannot be charged to customers with CBOL lines, clients should consider other options to make up lost revenues.
The ARC, which is charged to customers’ voice lines, plays an integral role in calculating CAF-ICC support for each RLEC. This is because revenues from the ARC are applied prior to determining the amount of CAF-ICC support. When the FCC introduced CBOL in the 2016 USF Reform Order, the Commission expressed its concern that when customers transition to CBOL and drop their voice lines, there would be less ARC revenues resulting in an increased amount of CAF-ICC support. To address this concern, the FCC ruled that the ARC must be imputed on all CBOL lines. The imputation of the ARC for CBOL means that in calculating CAF-ICC, USAC will treat CBOL lines as though ARCs are being charged, even though this is not occurring.
Although it first appeared that the imputation would only apply to recipients of CAF-BLS support, in December 2016 the FCC clarified that the imputation applies to all RLECs, including A-CAM recipients. Also, in a recent Order, the FCC limited the imputation for CBOL lines that were in effect when the 2016 Reform Order was released. According to this ruling, which is effective July 1, 2018, the FCC will only reduce an RLEC’s CAF-ICC support if its maximum accessible ARCs and imputed ARCs fall short of a “baseline” amount. This baseline amount is determined by using the RLEC’s ARC revenues from tariff year 2015-16. As part of the annual tariff filing process, NECA and JSI will be providing additional guidance regarding the implementation of this new ruling in the coming weeks.
While the FCC’s imputation requirements help to ensure that the CAF-ICC is not adversely impacted, it unfortunately impacts clients due to the loss of ARC revenues without any corresponding increase in CAF-ICC support. FCC rules allow ARCs to be charged only on voice lines so clients should consider other options to make up lost ARC revenues when implementing CBOL lines. These options include eliminating the ARC by meeting the rate ceiling and imposing cost recovery fees on broadband subscribers.
JSI will be explaining these and other options at its 2018 Management Seminars and our staff are available any time to provide guidance on these matters. For assistance, please contact Steve Meltzer, Brian Sullivan or John Kuykendall in JSI’s Maryland office at 301-459-7590.