The Federal Communications Commission (“FCC” or “Commission”)ral elements of its 2011 Transformation Order[1] have not achieved the intended result. On April 23, 2014, the FCC adopted a cornucopia of documents including a Declaratory Ruling, Orders, a Seventh Reconsideration and Further Notices of Proposed Rulemaking.[2] 

The Commission continues to profess an interest in promoting broadband deployment in rural and remote areas of the country. To that end, the Commission eliminated rules implementing the Quantile Regression Analysis, a universally reviled mechanism to allocate high cost support to rural carriers. The FCC proposes and seeks additional comment on a Connect America Fund (CAF) for rate of return carriers (primarily rural carriers), which may include a standalone broadband option, and increasing the broadband performance obligation to a 10:1 standard.

The Wireline Competition Bureau adopted the revised Cost Model methodology for determining price cap carrier support under Phase II of the CAF.[3] The FCC’s action built on that action by proposing rules for the competitive bidding process for areas rejected by the price cap carrier. The Commission streamlined the process to allow more non-traditional providers, including cable companies, satellite providers and electric cooperatives to bid for support to provide service to these areas.

The most contested and lively discussion between the Commissioners focused on the implementation of the local rate floor, which will increase rural service rates as much as 46 percent to reflect urban rates. Commissioner Pai remains adamantly opposed to the policy as contrary to the public interest and harmful to network investment. Chairman Wheeler advocates for the phase in of the local rate floor as a mechanism to ensure that subsidies do not unfairly benefit rural subscribers. The FCC intends to phase in the local rate floor over several years with the first substantial jump in January 2015. Interestingly, the FCC plans to exempt Lifeline subscribers to protect low-income Americans.