[Federal Register Volume 84, Number 88 (Tuesday, May 7, 2019)]
[Rules and Regulations]
[Pages 19874-19877]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-09241]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 10-90; FCC 19-32]


Connect America Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) eliminates the rate floor and, following a one-year period 
of monitoring residential retail rates, eliminates the accompanying 
reporting obligations after July 1, 2020.

DATES: Effective June 6, 2019.

FOR FURTHER INFORMATION CONTACT: Suzanne Yelen, Wireline Competition 
Bureau, (202) 418-7400 or TTY: (202) 418-0484.

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report 
and Order in WC Docket No. 10-90; FCC 19-32, adopted on April 12, 2019 
and released on April 15, 2019. The full text of this document is 
available for public inspection during regular business hours in the 
FCC Reference Center, Room CY-A257, 445 12th Street SW, Washington, DC 
20554 or at the following internet address: https://docs.fcc.gov/public/attachments/FCC-19-32A1.pdf.

[[Page 19875]]

I. Introduction

    1. In 2011, the Commission adopted a rule aimed at limiting 
universal service support received by rural carriers whose rates are 
below a set minimum rate. This requirement is known as the ``rate 
floor.'' If a carrier chooses to charge its customers less than the 
rate floor amount for voice service, the difference between the amount 
charged and the rate floor is deducted from the amount of support that 
carrier receives through the Universal Service Fund (Fund). Intended to 
guard against artificial subsidization of rural end user rates 
significantly below the national urban average, the practical effect of 
this rule has been to increase the telephone rates of rural 
subscribers, who are often older Americans on fixed incomes, lower-
income Americans, and individuals living on Tribal lands. These 
Americans are some of those least able to afford the needless rate 
increases caused by the rate floor. In 2017, after several years of 
experience with it, the Commission froze increases in the rate floor 
for two years to give us an opportunity to ``revisit it to ensure our 
policies continue to further our statutory obligation to ensure 
`[q]uality services . . . available at just, reasonable, and affordable 
rates.' ''
    2. After a thorough review of the record evidence, the Commission 
now eliminates the rate floor and, following a one-year period of 
monitoring residential retail rates, eliminates the accompanying 
reporting obligations after July 1, 2020. Doing so ends the de facto 
federal mandate to needlessly increase telephone service rates for many 
rural Americans above those carriers would otherwise assess, and avoids 
a further increase from $18 to $26.98 on July 1, 2019--an increase that 
would have reduced the affordability of telephone service for rural 
Americans, including the elderly, low-income individuals, veterans, and 
their families. As a result, the Commission ensures that rural 
consumers continue to receive quality services at just, reasonable, and 
affordable rates, while also ensuring that rural carriers continue to 
receive the predictable and sufficient universal service support needed 
to serve high-cost areas.

II. Discussion

    3. The Commission finds that the rate floor, which leverages the 
Commission's universal service support to penalize lower prices for 
rural Americans who may least be able to afford such increases, is not 
justified as a matter of policy. To the extent the rate floor ever 
served a public purpose, the Commission finds that purpose long since 
carried out. The Commission agrees with the diverse coalition including 
stakeholders like the AARP, the National Consumer Law Center, the 
National Tribal Telecommunications Association, and small, medium, and 
large rural telephone companies that the rate floor is inconsistent 
with the direction of the Communications Act to advance universal 
service while ensuring that rates are just, reasonable, and affordable. 
Accordingly, and based on an extensive and near-unanimous record, the 
Commission eliminates the rate floor.
    4. First, the Commission finds that the rate floor creates a 
perverse incentive for carriers to raise local rates, harming consumers 
in rural areas and making telephone service less affordable. No one 
disputes that the rate floor has increased rates for voice service in 
rural areas, despite the Commission's goal to ``preserve and advance 
universal availability of voice service.'' These price increases 
negatively affect rural consumers and ``could lead to some customers 
losing affordable access to basic service entirely.'' The Commission 
finds the rate floor raises rates for--and has a particularly 
deleterious effect on--older Americans on fixed incomes, subscribers in 
Tribal areas, low-income consumers, and seasonal customers making 
traditional voice service less affordable, often for consumers who need 
the service most. Indeed, the record suggests that low rates often 
served ``legitimate purposes [with] substantial public interest and 
safety benefits'' at stake, for example, emergency phones, seasonal 
lines, or basic service for elderly or low-income consumers. Low rates 
for such service ensure that phone service and access to 911 service is 
available in the event of an emergency for customers that may not be 
able to afford telephone service at higher rates. There may be other 
reasons that market rates in rural areas could be below the national 
average urban rate. For example, prices may be higher for local urban 
rates because ``urban customers have access to much more populous local 
calling areas than rural customers.'' In addition, local urban rates 
are not uniform, so many urban consumers are paying rates below the 
national urban rate average.
    5. Second, the Commission finds that the rate floor places 
unnecessary regulatory burdens on state commissions and rural telephone 
companies. For example, rural carriers must ``expend limited internal 
resources to notify customers of impending rate increases and . . . 
seek permission from their state commission for such increases.'' 
Moreover, a rate floor requires burdensome proceedings for rural 
incumbent LECs and state commissions related to rate increases and 
other compliance measures such as customer notifications and reporting 
obligations. The record reflects that rate increases caused by the rate 
floor burden both carriers and state commissions ``where rate cases or 
other notices or applications are required to be prepared, filed and 
litigated,'' often on an expedited basis ``where urban rate survey 
completion and results are delayed . . . .'' In other words, the rate 
floor creates needless state and federal regulatory compliance costs--
wasting resources that could be better put to improving quality of 
service and closing the digital divide.
    6. Third, the Commission finds that the rate floor is a 
particularly ineffective means of conserving scarce federal funds. 
Unlike other mechanisms to control expenditures, such as the cost model 
for A-CAM carriers (which targets higher spending to higher-cost areas 
and limits spending available in lower cost areas) or the budget 
control mechanism for rate-of-return carriers (which limits total 
spending and creates incentives for carriers to control costs), the 
rate floor neither targets spending in an efficient manner nor creates 
incentives for carriers to control costs. Instead, it simply rewards 
carriers that artificially inflate prices, regardless of whether they 
invest efficiently or control their costs. And any purported savings 
from the rate floor have dissipated in recent years with the advent of 
the rate-of-return budget control mechanism--that's because savings 
from the rate floor are redistributed to other rate-of-return carriers 
through increased headroom in the budget, with no overall savings to 
the Fund.
    7. Fourth, to the extent that the rate floor was trying to solve 
the problem of ``artificially low'' rates, the Commission finds that it 
has outlived its usefulness. As a preliminary matter, the record does 
not support the notion that rates for voice service are artificially 
low. But in any case, as a result of the rate floor, the monthly 
recurring rate has risen and is now $18 in many rural areas, and 
``ultra-low voice service rates are becoming relatively rare.'' What is 
more, these rates are substantially higher than the Commission expected 
in 2011. At the time, the Commission anticipated that by July 2014 the 
rate floor would be ``close to the sum of $15.62 plus state regulated 
fees''--or $16.80 in inflation adjusted terms.
    8. Fifth, changes to the Fund's support mechanisms for rural 
carriers since the

[[Page 19876]]

rate floor's adoption have largely eliminated any potential impact 
rates would have on the universal service support mechanisms. For 
example, the Commission has imposed concrete broadband buildout 
obligations on all legacy carriers, eliminated the support disparity 
between voice-only and broadband-only lines, and created incentives for 
legacy carriers to move from rate-of-return regulation to incentive 
regulation. Each of these changes reorients the Commission's high-cost 
system from one tied to carriers' historic costs and revenues from 
telephone services toward one where funding is tied to the fulfillment 
of certain broadband deployment obligations. And it is accordingly no 
surprise that the number of carriers potentially subject to the rate 
floor has rapidly diminished: Of the 940 study areas that were once 
potentially subject to the rate floor, only 654 are still subject to 
it.
    9. In short, the Commission finds that the costs of either 
increased rates or reduced support (and therefore reduced deployment) 
ultimately borne by rural consumers outweigh any putative benefits to 
the Fund. The record in this proceeding overwhelmingly supports 
elimination of the rate floor rule; commenters agree that the rule 
imposes significant costs with little benefit. And the Commission 
agrees with one commenter that, in essence, ``the rate floor penalizes 
rural customers without any real benefit to the overall size of the 
fund.'' Accordingly, the Commission eliminates the rate floor rule and 
its accompanying reporting obligation.
    10. The Commission disagrees with the only commenter that supports 
maintaining the rate floor. Although NCTA argues that eliminating the 
rate floor would skew competition and increase subsidies at the expense 
of consumers, the Commission finds the opposite to be true. Rural 
carriers receiving high-cost loop support can only recover their 
operating costs and investments where they face high per-line costs of 
providing service. Commission rules already require carriers to use 
subsidies to offset demonstrated high costs--not to subsidize below-
market rates. Rather, the rate floor itself skews competition by 
artificially inflating the prices that certain carriers may charge--
requiring a carrier to charge above-market rates in a town, for 
example, for fear of losing its support in the surrounding countryside. 
Without the rate floor, prices in competitive areas can freely adjust 
to competitive levels. And the rate floor is a double penalty for 
consumers since carriers can maintain their subsidies so long as they 
also charge consumers higher rates.
    11. Finally, the Commission eliminates the reporting obligations 
associated with the rate floor after July 1, 2020, thereafter relieving 
carriers of the obligation to report residential local service rates. 
Although the Commission does not expect that carriers will begin 
charging artificially low rates as a result of the elimination of the 
rate floor, maintaining this reporting obligation for one year will 
allow the Commission to monitor any unexpected and significant changes 
in residential local services rates reported by carriers in their July 
1, 2019 and 2020 annual filings.

III. Procedural Matters

A. Paperwork Reduction Act

    12. This document eliminates a reporting requirement and contains 
no new information collection requirements subject to the Paperwork 
Reduction Act of 1995 (PRA), Public Law 104-13. In addition, the 
Commission notes that pursuant to the Small Business Paperwork Relief 
Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), it 
previously sought specific comment on how the Commission might further 
reduce the information collection burden for small business concerns 
with fewer than 25 employees. The document, by eliminating a reporting 
requirement, reduces any burdens on small entities.

B. Congressional Review Act

    13. The Commission will send a copy of this Report and Order to 
Congress and the Government Accountability Office pursuant to the 
Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    14. Regulatory Flexibility Act.--The Regulatory Flexibility Act of 
1980 (RFA) requires that an agency prepare a regulatory flexibility 
analysis for notice and comment rulemakings, unless the agency 
certifies that ``the rule will not, if promulgated, have a significant 
economic impact on a substantial number of small entities.'' In the 
Report and Order, the Commission is eliminating a rule and its 
accompanying reporting obligation. Accordingly, the Commission 
certifies that the rule changes adopted herein will not have a 
significant economic impact on a substantial number of small entities. 
The Commission will send a copy of the Report and Order in a report to 
be sent to Congress and the Government Accountability Office pursuant 
to the Small Business Regulatory Enforcement Fairness Act of 1996. In 
addition, the Commission will send a copy of the Report and Order to 
the Chief Counsel for Advocacy of the Small Business Administration. A 
copy of the Report and Order (or summaries thereof) will also be 
published in the Federal Register.

IV. Ordering Clauses

    15. Accordingly, it is ordered, pursuant to the authority contained 
in sections 201, 219, 220 and 254 of the Communications Act of 1934, as 
amended, 47 U.S.C. 201, 219, 220, 254, this Report and Order is 
adopted.
    16. It is furthered ordered that Part 54, of the Commission's 
rules, 47 CFR parts 54, is amended as set forth in the following.
    17. It is further ordered that the rules adopted in this document 
will become effective 30 days after the date of publication in the 
Federal Register.

List of Subjects in 47 CFR Part 54

    Communications common carriers, Health facilities, Infants and 
children, Internet, Libraries, Reporting and recordkeeping 
requirements, Schools, Telecommunications, Telephone.

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR part 54 as follows:

PART 54--UNIVERSAL SERVICE

0
1. The authority citation for part 54 is revised to read as follows:

    Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
254, 303(r), 403, and 1302, unless otherwise noted.


0
2. Amend Sec.  54.313 by revising paragraph (h) to read as follows:


Sec.  54.313  Annual reporting requirements for high-cost recipients.

* * * * *
    (h) In their annual reporting due by July 1, 2019 and July 1, 2020, 
all incumbent local exchange carrier recipients of high-cost support 
must report all of their rates for residential local service for all 
portions of their service area, as well as state regulated fees, to the 
extent the sum of those rates and fees are below $18, and the number of 
lines for each rate specified. Carriers shall report lines and rates in 
effect as of June 1. For purposes of this subsection, state regulated 
fees shall be limited to state subscriber line charges, state universal 
service fees and mandatory extended area service charges.
* * * * *

[[Page 19877]]

Sec.  54.318  [Removed and Reserved].

0
3. Remove and reserve Sec.  54.318.

[FR Doc. 2019-09241 Filed 5-6-19; 8:45 am]
BILLING CODE 6712-01-P