On April 25, 2012, the FCC adopted an Order establishing a long-awaited methodology for setting the new High Cost Loop Support (“HCLS”) levels that rate-of-return carriers may receive from the Universal Service /Connect America Fund.  Appendix B applies the new methodology to identify the benchmarks for each rate-of-return carrier. 

As part of its Universal Service Reform Order, the FCC adopted the benchmarking rule in an attempt to moderate the expenses of those rate-of-return carriers with very high costs, while further encouraging other rate-of-return carriers to advance broadband deployment.  The FCC estimates that the new benchmark will cut the support available to approximately 100 study areas with very high costs relative to similarly situated peers, while approximately 500 study areas will receive additional, redistributed support to fund new broadband investment.  To minimize the impact on rate-of-return carriers that will receive less HCLS under the benchmark, the new rules phase in the new support limits over the next two years.   

The FCC will also require all rate-of-return carriers to file a new build-out plan in 2013.  The plan will account for the new broadband obligations, and will need to be updated annually to reflect progress and the impact of high-cost universal service support.  The FCC will review those plans and updates, as well as other information provided in the annual section 54.313 reports, to ensure that carriers comply with their public interest obligations.  

If you have any questions regarding the new methodology or build-out plan requirements, please contact James Moskowitz at (202) 872-6881 or jmoskowitz@cm-chi.com.