On July 24, 2023, the FCC released its Report and Order adopting the Enhanced Alternative Connect America Cost Model (“A-CAM”) to promote widespread deployment of 100/20 Mbps broadband access. The Commission also issued a Notice of Proposed Rulemaking (“NPRM”) seeking comment on how to address the immediate needs of legacy rate of return support mechanisms, and a Notice of Inquiry (“NOI”), exploring methods for modifying the Universal Service Fund (“USF”) high cost program to promote affordable and available broadband in years to come. Since release of the Report and Order, the FCC has released illustrations on funding for current A-CAM and CAF/BLS recipients. Key takeaways for each are described below.

Report and Order

In the Report and Order, the FCC makes $13.5 billion in support available over a 10-year extension of the current A-CAM term, to begin on January 1, 2024. Carriers must make their elections by October 1, 2023, and are obligated to serve 100% of unserved locations with broadband speeds of 100/20 Mbps by the end 2028, aligning deployment milestones with the BEAD program. Compliance with deployment obligations, based on meeting the minimum service levels, will be determined regardless of the technology utilized. The FCC reserves the right to change location information until 2025 based on changes in the broadband maps.

The FCC will take measures to prevent duplicative funding, and accordingly, directed the Bureau to coordinate with other federal agencies and to remove from eligibility locations already subject to enforceable commitments to deploy 100/20 or faster broadband service. Enhanced A-CAM recipients also are not eligible to receive BEAD or other future federal grant funding. Further, any locations for which 100/20 Mbps or faster service is provided by an unsubsidized competitor is also excluded from the program. Existing A-CAM carriers that serve locations that already have 100/20 Mbps or faster service will receive at least 50% of their current A-CAM support amount for the duration of the Enhanced A-CAM term.

Carriers that receive legacy support are also eligible for Enhanced A-CAM, and to encourage participation, the FCC will provide electing legacy carriers with a fixed support transition from legacy support to their Enhanced A-CAM support amounts. Specifically, legacy carriers eligible for and electing Enhanced A-CAM, whose 2022 support claims are equal to or greater than the Enhanced A-CAM offer, will receive frozen support equal to their year 2022 support claims for six years, beginning January 1, 2024. Over the next five years, beginning January 1, 2030, their support sill step down to 80%, in 4% increments. Finally, beginning in January 1, 2035, electing carriers will then transition to model-based A-CAM support. For an electing legacy carrier whose 2022 claims are less than its Enhanced A-CAM support offer, support will be stepped up in five annual increments until the Enhanced A-CAM support level is reached by the electing carrier in 2034.

Carriers participating in the Enhanced A-CAM program are required to participate in the Affordable Connectivity Program (“ACP”), and are also required to implement operational cybersecurity chain and risk management plans by January 1, 2024, and submit those plans to USAC. Participants are also subject to other obligations generally required of high-cost support recipients.

Notice of Proposed Rulemaking

In the NPRM, the Commission seeks comment on how to address the immediate needs of legacy return support mechanisms, while balancing its objectives of maintaining its commitment to supporting broadband at evolving levels of service. Specifically, the NPRM focuses on three key areas: 1) a variety of reforms to legacy support mechanisms and appropriate funding, so that rate of return carriers are subject to a smaller reduction when the budget control mechanism applies; 2) appropriate deployment obligations for carriers receiving Connect America Fund Broadband Loop Support (“CAF BLS”) when the current deployment term ends this year; and 3) methodologies for preventing duplication of support between legacy high-cost universal support mechanisms and funding provided by other federal and state agencies for the deployment of broadband. Comments and Reply Comments are due 30 and 45 days after publication in the Federal Register, respectively.

Notice of Inquiry

In the NOI, the FCC seeks to build a record to help the Commission explore methods for modifying the USF in the future, and seeks comment on appropriate methods of measuring and evaluating the future support needs of carriers with full-service networks, particularly where providers have received significant upfront federal and/or state funding. The NOI also seeks comment on whether the Commission can or should leverage the Commission’s existing cost models, or develop a new model, to estimate the monthly costs necessary to sustain a full-service network. Comments and Reply Comments are due 60 and 90 days after publication in the Federal Register, respectively.

What Comes Next

While existing USF recipients evaluate whether E-ACAM is appropriate for their company from a business perspective, the FCC has provided medium term funding certainty (absent location changes) for entities selecting E-ACAM. For current CAF-BLS companies that do not select E-ACAM, longer term funding will be resolved in future FCC decisions. Taken in the context of BEAD and other state and federal grant programs for broadband deployment, it will be up to Congress to determine the longer term future of USF and continuing support for the operation of rural broadband networks.

If you would like to discuss this further, or would like to file Comments, please contact Dee Herman at [email protected] or Shannon Forchheimer at [email protected].