FCC’s O’Rielly: Rate of Return for Rural Broadband is “Sound”

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FCC Commissioner Michael O’Rielly told rural broadband providers Tuesday the agency’s “rate of return” framework is “sound” and not too complicated. Released last spring, the Rate of Return Order was intended to achieve a long-term fiscally-responsible system to provide certainty for carriers to invest in broadband and expand their service to rural America.

He spoke at the fall conference of the WTA, Advocates for Rural Broadband, formerly called the Western Telecommunications Alliance. O’Rielly said the reforms established requirements to extend broadband to unserved consumers, to better target funding to where it is needed most while being cognizant of prior investments, and to prevent funding areas where actual competition exists. They also improved transparency and accountability regarding how the funding is used. It’s voluntary for carriers. More than 200 rate-of-return carriers in 43 states elected and have been authorized to receive model support.  

O’Rielly acknowledged WTA members were concerned the order could be read to include a “kill switch,” cutting off all recovery for capital projects that exceeded a certain threshold. He wasn’t in favor of that and said he’s pressed the staff to make clear that rate-of-return carriers can undertake additional investments to deploy broadband in a cost-effective manner without fear that they will lose support.

The Commission also has an item under consideration specifying what expenses are not recoverable through universal service or allowable in the rate base — like golf club memberships or artwork.

From a broader perspective, O’Rielly believes the FCC should examine the budget for universal service, across all four distribution programs, and how those interact with each other to bring costs under control as pressure to increase spending continues. Over the past number of years, the Commission has authorized funding of at least $11 billion for universal service: $4.5 billion for high-cost, $3.94 billion plus annual inflation for E-rate, $2.25 billion or more for Lifeline, and $400 million for Rural Healthcare.  

September 20, 2017              

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