The Federal Communications Commission’s Wireline Competition Bureau (Bureau) has approved the modifications proposed by the National Exchange Carrier Association (NECA) to the formula used to calculate universal service high-cost loop support (HCLS) for average schedule rate-of-return carriers. In December 2014, the FCC adopted a Report and Order that modified the way HCLS expense adjustments are calculated starting July 1, 2015. The targeted change to the former HCLS rule was designed to provide a more equitable distribution of HCLS among carriers by reducing support proportionally among all HCLS recipients to remain within the shrinking HCLS cap, instead of eliminating support altogether for some companies while preserving support for other companies. In March 2016, the Commission adopted the Rate-of-Return Reform Order, which among other things prescribed a new rate of return to be phased in over a six- year period, beginning July 1, 2016, and adopted limits on operating expenses to be recovered through high-cost support.
On May 13, 2016, NECA filed proposed modifications to the current HCLS formula for average schedule companies to reflect the decreased rate of return, and requested that they take effect on July 1, 2016 and remain in effect through December 31, 2016. On June 17, 2016, the Bureau released an order adopting NECA’s modifications of the average schedule universal service HCLS formula for the period from July 1, 2016 through December 31, 2016. On August 25, 2016, NECA filed another proposed modification to the current HCLS formula for average schedule companies and requested that they take effect on January 1, 2017, and remain in effect through December 31, 2017. The Bureau issued a public notice seeking comment on NECA’s proposed formula, and none was received.
