Rural ISPs catch a break as FCC decides not to slash USF support

Rural broadband providers breathed a sigh of relief this week, after the Federal Communications Commission (FCC) announced it would waive steep cuts to Universal Service Fund (USF) support which were set to take effect in July.

In an order formalizing the waiver, the FCC said it determined “current circumstances pose significant burdens on legacy carriers, which would be exacerbated should there be a significant reduction in support, at a time when they are facing insufficient cash flow and increased expenses.”

Commissioner Brendan Carr in a statement pointed specifically to inflation as a key source of pressure for small, rural operators. “The dollars they need to extend their networks and connect Americans are not going nearly as far today as they did a short while ago. So, today’s decision makes eminent sense,” he said.

The cuts in question would have reduced the support rural operators receive from two USF programs: Connect America Fund Broadband Loop Support and High Cost Loop Support. Both are subject to a budget control mechanism implemented in 2016 which is designed to systematically lower the monthly per-line subsidy operators receive over the course of several years.

Industry group WTA – Advocates for Rural Broadband noted in a statement the 2022 round of cuts was expected to reduce support by nearly 14%. That would have left smaller rural local exchange carriers with a quarter to a half million dollars in lost revenue and larger carriers with a million dollars or more, it said.

This is the second year in a row the FCC has decided to waive the budget control mechanism cuts. In 2021, it opted to forego a scheduled 8.6% reduction in support.

NTCA–The Rural Broadband Association, which warned last month the cuts could chill broadband investment, hailed the waiver. Michael Romano, NTCA’s SVP for industry affairs and business development, said in a statement the decision to forego cuts will “allow rural broadband providers to keep their focus on deploying networks and delivering services rather than figuring out where to cut back investments and operations in the face of a significant budget cut.”

Likewise, WTA SVP of Government and Industry Affairs Derrick Owens said it was “extremely grateful” for the move, though added the group believes “the FCC should eliminate the BCM entirely.”