FCC Eases Budget Restrictions for Rural Rate-of-Return Carriers

The Federal Communications Commission temporarily waives, on its own motion, the application of the budget control mechanism for rate-of-return carriers that receive high-cost universal service support from legacy mechanisms. The FCC adopts instead a budget constraint of 0%, i.e., a full waiver of the budget constraint, for the July 2023 to June 2024 tariff year, and directs the FCC's Wireline Competition Bureau to work with the Universal Service Administrative Company (USAC), the administrator of the federal Universal Service Fund (USF or Fund), to implement the budget control mechanism using 0%. Absent a waiver, the projected budget control reduction factor would exceed 18%, resulting in a substantial reduction in support for most legacy rate-of-return carriers at a time when they continue to face cash flow issues and increased expenses as they emerge from the pandemic. The FCC’s rules expect that carriers would have an opportunity to make up any reduction to Connect America Fund Broadband Loop Support (CAF BLS) through higher consumer broadband-only revenues.  CAF BLS supports voice and broadband-only lines to the extent that the carrier’s interstate common line and broadband-only line costs (i.e., revenue requirements) exceed its revenues.