Yesterday U.S. Senators Klobuchar and Franken sent a letter to FCC Chair Wheeler on their continued concern about the impact of the FCC’s Transformation Order on Rate of Return carriers and their ability to further invest in their networks.
Here’s an excerpt of the letter…
We write to you today to request that the Federal Communications Commission (FCC) remain committed to recognizing the importance of investing in rural America. We urge the FCC to continue reviewing the reforms to the Universal Service Fund (USF) and their impacts on small rate-of-return regulated telecom carriers and the rural consumers they serve in Minnesota.
Since the initial 2011 USF reform order, the FCC has made significant progress in the deployment of broadband to unserved customers in rural areas served by price-cap carriers through the Connect America Funds. However, there is continued concern about the impact of the reform order on rate-of-return carriers and their ability to further invest in their networks and bring high-speed broadband to the areas they serve. The 2011 order has caused uncertainty for these companies. Of particular concern are the impacts of the Quantile Regression Analysis on capital investment and financing for broadband deployment. While the FCC has taken some steps to provide relief from these negative impacts, the Commission should continue to move forward on addressing any lingering uncertainty.
A reminder for folks who don’t eat and sleep telecom regulation – the Universal Service Administrative Company has a nice cheat sheet of definitions…
Price Cap Carriers
A price cap carrier is a carrier not subject to rate base/rate-of-return regulation. A price cap carrier is limited in its ability to raise rates on the basis of a formula defined by the FCC. The extent to which a carrier can raise rates depends on its growth in expenses and a productivity growth factor.
A rate-of-return (ROR) carrier is one that is allowed to set rates on its various products and services so that it earns no more than the rate-of-return authorized by the FCC. FCC rules define the rate base (specified plant items) upon which a carrier is allowed to earn a return.