Another Annual Access Filing Wrinkle – Lower Consumer Broadband Only Loop Rates for Some ROR LECs

By: Andrew Regitsky

The ILECs begin making their Annual Access Filings (AAFs) next week with an effective date of July 1, and this year’s big event is full of unusual occurrences.  CCMI has already communicated to the industry the importance of this year’s filings because of the upcoming split of ILEC switched access rates between 8YY and non-8YY calls and the downward movement of some 8YY rates.  In addition, we are still waiting to see if the FCC will grant the USTelecom request for new ILEC revenues sources to recover lost 8YY revenues.  If the Commission plans on granting this request, it must act quickly.  If these were the only changes for this year, it would still be a challenge to analyze and ensure that ILECs implement these changes correctly.  On June 3rd, however, the Commission took an unexpected action that will almost surely change some access rates well after the July 1 effective date.  Specifically, the FCC in a June 3, 2021, Order in Docket 10-90 waived on its own volition the application of the current budget control mechanism for rate-of-return (ROR) carriers that receive high-cost universal service support from legacy FCC mechanisms.  Instead, the budget control mechanism will be zero percent for the 2021-22 tariff year.  Here is some background for this decision.

ROR LECs that still obtain legacy support may receive High-Cost Loop Support (HCLS) and/or Connect America Fund Broadband Loop Support (CAF BLS). 

HCLS provides support to carriers with high loop costs based on the extent that an individual company’s cost per loop exceeds the national average cost per loop.  CAF BLS supports voice and broadband-only lines to the extent that the carrier’s costs (i.e., revenue requirements) exceed its revenues.  In the USF/ICC Transformation Order, the Commission adopted an overall budget for the high-cost universal service program, including a $2 billion annual budget for rate-of-return carriers.  To ensure that the support distributed to rate-of-return carriers did not exceed $2 billion annually, the Commission subsequently adopted a “self-effectuating mechanism”—known as the budget control mechanism—to enforce the rate-of-return budget by reducing HCLS and CAF BLS claims as necessary to meet the budget constraint.  (Order. at para. 2).

The budget control mechanism incents ROR LECs receiving legacy support to keep their costs down and provides stability for the Universal Service Fund.  (USF).  It ensures that overall ROR LEC support increases each year by no more than the rate of inflation.  This year, without FCC intervention, the amount needed to support ROR LECS would exceed the ROR support budget by 8.6 percent.  In other words, each LEC would receive only 91.4 percent of the funds they need to reach their revenue requirement.  The FCC believes; however, this would create a cash flow problem for many rural ILECs, especially in a year in which they have attempted to keep customers connected during the pandemic.  Therefore, the Commission will not reduce the funds each carrier will receive by 8.6 percent.  This will change some access rates and will result in some access changes after July 1.

We expect that today’s waiver of the budget control mechanism will reduce the rates for Consumer Broadband-Only Loop (CBOL) services that would otherwise be charged beginning July 1, 2021, by at least some rate-of-return carriers that receive CAF BLS support.25 We recognize that such carriers are in the midst of preparing their annual tariff filings. To be effective on July 1, 2021, their annual tariff filings made on 15-days’ notice must be filed on June 16, 2021.  To be effective on 7-days’ notice, they must be filed on June 24, 2021. Carriers benefiting from this waiver must file tariff revisions reflecting the effect today’s waiver will have on their rates. Recognizing, however, that carriers may not have sufficient notice to revise the annual tariff filings that they have been preparing, we do not require affected carriers to account for the waiver of the budget control mechanism in their upcoming annual tariff filings. Instead, we require affected carriers to account for the impact of the budget control mechanism either in their annual tariff filings or in revised tariff filings with an effective date no later than 45 days after adoption of this Order. [by July 18].  (Id., at para. 11).

ILEC Annual Access Filings begin on June 16th.  Of course, CCMI will have all the changes, effective either on Jul1 or sometime after.