FCC Stops July Rural Phone Rate Hike

The FCC voted 2 to 1 to stop a federally mandated rate increase for certain rural phone customers, pending review of an FCC policy known as the “rate floor.” The FCC froze the current minimum rate for local voice services at $18 per month for customers of companies that receive support from the FCC’s universal service program. That minimum rate, or rate floor, was scheduled to rise to $20 on July 1, and to $22 on July 1, 2018. The freeze will remain in effect until the agency takes action.

In rural areas where the cost of providing service is high, phone company revenues come from three primary sources: customer rates, subsidies from the Universal Service Fund to keep those rates affordable, and intercarrier payments from long-distance providers. In 2011, the FCC set a rate floor for local voice services based on a national average; carriers that do not to charge their customers at least the rate floor amount are penalized with a loss of universal service funding.

However, stakeholders ranging from the AARP to the National Tribal Telecommunications Association to small, rural telephone companies told the Commission the rate floor has made basic voice service less affordable in some rural areas, resulted in rural rates that are higher than some urban areas, limited consumer choice, and slowed broadband deployment. In a Notice of Proposed Rulemaking the agency sees comments on the policy.

Commissioner Michael O’Rielly said the rate floor originated when the Commission was presented with evidence of a number of rural companies charging “far, far below reasonable rates to subscribers, but seeking full reimbursement of their costs from scarce federal Universal Service Fund dollars.” That needs to be looked at, he added.

He also cautioned that setting a more generous rate floor will have an impact on the rates for standalone broadband. “To be more specific, because we have a cap on the high-cost budget, each dollar spent to keep the rate floor artificially low is one less dollar available to bring down the consumer rate for broadband services in rate-of-return areas.” If the system can’t be fixed then the same rate floor would be re-started, according to O’Rielly.

NTCA–The Rural Broadband Association CEO Shirley Bloomfield said: “This ill-designed regulation has harmed consumers in current form, and a pause and thoughtful fresh look at how this policy is working has long been needed.”

May 19, 2017      


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