0. and Data-Only Broadband Support
Telecommunications Consulting
Reform Impacts to High Cost Loop Support, Interstate Common Line Support
and Data-Only Broadband Support * 5
Vincent H. Wiemer, CPA Principal

1. Critical Issues

2. “Glide Path” Budget Impact
Some carriers may elect model support although it is less then current support
However, in a two-step election process a carrier may elect but then withdraw
However, para 69 contains an unusual and punitive provision
If a “model loser” ends up withdrawing, the model loss will be deducted from the total RoR budget

3. High Cost Loop Support Algorithm calculates Local Loop costs
Depreciation expense on subscriber CWF and basic exchange Circuit Equipment
Maintenance, network and general support, network operations, corporate operations and operating tax expenses attributed to the local loop portion of the network
Return on investment
Calculates a Study Area Cost per Loop (SACPL)
Study Areas with SACPL that is > 115% of the high cost threshold receive HCLS
High cost threshold, still called the “National Average Cost per Loop” (NACPL), is frozen at $647.87
Will be recalculated after Model Electors leave

4. High Cost Loop Support Limits
Limits on Individual Carrier Support
Limits to eligible costs
Corporate Operations Expense Limit
Total Operations Expense Limit
Capital Investment Allowance
Reduced Rate-of-Return
Support limit of $250 per line per month
Limits on Total Fund
FCC proposed Glide Path rules will decrease total funds to RoR carriers by taking transition funds from RoR budget
Total RoR High Cost Budget capping mechanism
50% per line, 50% per rata

5. Application of HCLS Limits
Total HCLS budget calculated
Start with $2 billion budget or total demand for funds (if less)
LESS: CAF ICC and Model Electors legacy & transition support amounts
EQUALS: Available HCLS & CAF BLS
Forecast HCLS calculated for all carriers
Individual carrier limits applied

6. Application of HCLS Limits
Target HCLS calculated
Target HCLS = Forecast HCLS disbursements x (budget amount / total calculated amount for HCLS and CAF BLS mechanisms)
Calculate reduction factor so disbursements do not exceed budget
Per-line reduction = [½ (Calculated HCLS – Target HCLS)] / total eligible loops in HCLS mechanism
Pro rata reduction: applied as necessary to get to Target HCLS

7. CAF Broadband Loop Support
FCC did not want to create a “new” mechanism for data-only broadband support so they combined it with ICLS and gave it a new name
Really two separate mechanisms
Interstate Common Line Support
Recovers interstate portion of common line costs
Consumer Broadband-Only Support
New mechanism to provide some support for data-only broadband

8. CAF BLS Limits Limits on Total Fund
FCC proposed Glide Path rules could decrease total funds to RoR carriers
Total RoR High Cost Budget cap
Limits on Individual Carrier Support
Limits to eligible expenses
Corporate Operations Expense Limit
Total Operations Expense Limit
Capital Investment Allowance
Support limit of $250 per line per month
$42 consumer broadband-only support high cost threshold
Limits applied in like manner as HCLS

9. Broadband-Only Support
Calculation of Support
Calculate CL investments and expenses using an interstate factor of 100%
CL costs then divided by number of voice and voice+data line in study area
Multiply by number of CBOL loops
Equals CBOL loop cost to remove from SpA
Subtract $42 per CBOL line per month (high cost threshold)

10. Attribution of CAF BLS
CAF BLS must be attributed to various elements to allow “the reasonable opportunity to meet their revenue requirements” (para. 155)
First, applied to interstate common line and broadband-only revenue requirements being trued up
Second, applied to interstate common line RRQ for current year
Third, applied to broadband-only RRQ for current year
Unmet RRQ will be recovered through the consumer broadband-only rate

11. Deployment Obligations
Requirement to use CAF BLS to deploy to unserved area
20% to 35% of 5-yr projected funds
PROBLEM: These funds are already being used to recover CL RRQ and to support Broadband-only Loops
If CAF BLS is also required to be used for deployment, carriers are denied the opportunity to recover CL costs and CBOLS is not supported

12. Issues Requiring Attention
“Glide Path” transition payment impact on Rate of Return budget
Operating expense limit statistical impact
Calculation of deployment obligations
Double obligation of CAF BLS funds

13. Questions? Vincent H. Wiemer, CPA Principal vince@alexicon.net
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