By: Andy Regitsky
On November 15, 2021, the Infrastructure Structure and Jobs Act (Infrastructure Act) became law, directing the FCC to establish the Affordable Connectivity Program (ACP). Congress appropriated $14.2 billion to the Program to support discounted broadband service to qualifying low-income households by providing a monthly benefit of: (1) up to $30 per month; (2) up to $75 per month for eligible households on qualifying Tribal lands; or (3) up to $75 per month for eligible households in high-cost areas. The Infrastructure Act requires “the Commission to permit ACP providers to offer a high-cost area benefit of up to $75 per month, in high-cost areas where the provider demonstrates that the standard up-to-$30 per month benefit would cause the provider particularized economic hardship so the provider may not be able to maintain the operation of all or a part of its broadband network.”
In a Sixth Report and Order (Order) in Docket 21-450 that will be adopted at its August 3, 2023, meeting, the FCC will mandate rules to implement the up-to-$75 monthly ACP benefit in high-cost areas.
Here are the new rules about to be created by the Order:
As required by the Infrastructure Act, the Commission utilizes the definition for high-cost areas established by the National Telecommunications and Information Administration (NTIA) for its Broadband Equity, Access, and Deployment (BEAD) grant program. Thus, a “‘high-cost area” means an unserved area in which the cost of building out broadband service is higher, as compared with the average cost of building out broadband service in unserved areas in the United States. For purposes of defining “high-cost area,” the term “unserved area” means an area in which not less than 80 percent of broadband-serviceable locations are unserved locations.
It is important to note that only facilities-based providers are eligible to provide the increased benefit. Each participating facilities-based provider must demonstrate “economic hardship” to be eligible. To demonstrate that it is facing economic hardship, the agency finds that,
A provider that demonstrates it is unable to cover the costs of maintaining the operation of all or part of its broadband network in a high-cost area where it seeks to offer the high-cost area benefit as described below meets the “particularized economic hardship” standard. Hereafter, we describe such a provider as operating at a loss. To establish “particularized economic hardship,” we will require providers to submit documentation, such as an income statement, showing that they are unable to cover the costs of maintaining the operation of all or part of their broadband network for each high-cost area for which the high-cost area benefit is being sought. Aside from required documentation, we will also require each provider to certify to and explain how the economic hardship limits its ability to “maintain the operation of all or part of its broadband network” in each high-cost area for which it seeks to offer the high-cost area benefit.
(Draft Order at para. 12).
At a minimum, participating providers must demonstrate particularized economic hardship by submitting an affidavit supported by an income statement demonstrating the provider is currently operating at a loss in each high-cost area(s) for which the provider is seeking approval to offer the high-cost area benefit. To facilitate the administration of the benefit and minimize provider burdens, providers may submit a single application with supporting documentation for all of the high-cost areas where they are seeking approval to offer the high-cost area benefit. To support its affidavit, the provider must include a copy of its most recent income statement(s) covering the previous fiscal year of operations or the last six quarters of operations, and separately identify, in the method determined by the FCC’s Wireline Bureau, the high-cost areas, as designated by NTIA, that the provider serves and in which it is seeking to provide the high-cost area benefit.
To demonstrate that it is operating at a loss, the income statement, and cost allocation as applicable, must show that the provider’s broadband revenue has been below broadband expenses in at least four of the last six fiscal quarters or for the last full fiscal year for each relevant high-cost area.
To maximize flexibility, the Commission will allow a provider to choose the reasonable cost and revenue allocation method(s) that it will use rather than prescribe one.
The FCC directs the Universal Service Administrative Company (USAC) to enable participating providers to electronically submit the requisite particularized economic hardship showings.
To account for changing financial circumstances, participating providers approved to offer the high-cost area benefit must annually resubmit a showing of particularized economic hardship to demonstrate continued eligibility to offer the high-cost area benefit.
If a provider fails to submit the renewal submission by the deadline, the provider shall provide written notice to its ACP households receiving the high-cost area benefit at least 30 days prior to the last date that the provider is approved to offer the high-cost benefit and a second notice at least 15 days before the last date that the provider is approved to offer the high-cost area benefit.
According to the Commission, the new rules will decrease the “digital divide.”
The steps we take today to implement this provision will help narrow the digital divide by ensuring that more low-income households throughout the country, including households in rural and insular areas, have access to discounted broadband services. In particular, the high-cost area benefit will maximize provider participation in the ACP, by encouraging additional providers to participate in the ACP in high-cost areas and incentivizing existing ACP providers experiencing an economic hardship in high-cost areas to continue participating in the program.
(Id., at para. 1).