On Friday, May 31, 2019, the FCC released a much-anticipated notice of proposed rulemaking (“NPRM”) to consider the adoption of an overall budget cap on the Universal Service Fund (“USF”), separate from any individual budgets for each of the four USF programs. The NPRM is in response to years-long advocacy on the part of Commissioner O’Rielly to impose budgets on USF spending, and it comes over dissent of the two Democratic Commissioners. While Commissioner O’Rielly justified the proposal as responsible stewardship of public money and said it would not limit funding in the near future, Commissioners Rosenworcel and Starks criticized the proposal as undermining the goals of Universal Service and, at worst, creating a “universal service hunger games” among the support programs.

The release of the NPRM was our first look at the specifics of a proposal that broke a month ago. The NPRM does not propose a specific budget, primarily raises questions about how to proceed, and does not contain any proposed rules. Nevertheless, opponents of the proposal have been most vocal since word of the NPRM came out, and we expect those USF stakeholders to continue in opposition to the approach. Meanwhile, proposals to reform USF contributions remain stalled (and lacking any consensus), while the contribution factor hovers around 20% of assessable revenues.


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We attended the Audit Committee meeting at USAC’s quarterly business meeting this morning.  While much of the discussion concerned internal controls USAC has in place to oversee its functions, the business update portion of the meeting gave us a snapshot into contributor and beneficiary audit activity at USAC.  The presentation gave us some insight into a likely increased amount of activity over the next few months.

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At its last open meeting in 2017, the five FCC Commissioners unanimously voted to adopt a Notice of Proposed Rulemaking (NPRM) and Order regarding the Commission’s Rural Health Care (RHC) Program, a 20-year old initiative aimed at improving rural health care provider access to first telecommunications services and later an array of communications services, including Internet access, dark fiber, and business data services.  This item is part of FCC Chairman Ajit Pai’s overall initiative to close the “digital divide,” and proposes to increase the $400 million spending cap for the first time since 1997.  The NPRM also proposes to change how the FCC handles demand beyond the cap, from general proration to prioritization based on rurality or remoteness.  As such, all interested stakeholders should carefully monitor and consider participating in the rulemaking process.  Comments will be due 30 days after publication of the item in the Federal Register (which usually takes a few weeks) and reply comments will be due 60 days after publication.

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CashIn the first action of its kind, on June 7, 2017, the Federal Communications Commission (“FCC”) issued an amendment to a Notice of Apparent Liability for Forfeiture and Order (“NAL”), for alleged violations of the rules governing the Universal Service Rural Health Care Program (“RHCP”). The FCC found that the fine proposed in the initial NAL was not based on the correct violations and included violations beyond the agency’s one-year statute of limitations.  However, by changing the type of conduct found to violate the RHCP rules and increasing the proposed fine, the FCC’s amendment presents its own statute of limitations concerns and raises questions about the use of amendments in enforcement actions.  The amendment also is the first foray by Chairman Pai into Universal Service enforcement matters since he assumed the chairmanship in January of this year.

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