The FCC has denied a Petition for Reconsideration filed by Alaska Communications Systems (ACS) challenging the high-cost definition applied to its service obligations in the October 31, 2016, ACS Connect America Fund (CAF) Phase II Order. Because ACS faces unique operating challenges in Alaska, the FCC adopted tailored service obligations for ACS to provide it the flexibility to substitute locations in high-cost census blocks with a limited number of unserved locations in “low cost” census blocks (i.e., blocks for which the cost model did not calculate support) that are costly to serve. The FCC required that the low-cost census blocks be adjacent to high-cost census blocks, and that ACS certify that deployment to each location is high-cost based on a $5,000 threshold. Thus, ACS can only substitute a low-cost census block if at least $5,000 in capex is spent to serve the location. ACS challenged the high-cost definition arguing that there is no reasonable basis to require certification to $5,000. Rather, ACS asserted that the high-cost threshold should be set at $2,577.79, the lower boundary of the supported high-cost range based of the model or many locations would remain unserved. The FCC rejected ACS’ argument, stating that it struck an appropriate balance in providing ACS the flexibility to exchange adjacent unserved locations for which the cost model did not calculate support, but which nevertheless are among the costliest for ACS to serve, while ensuring that support is targeted to high cost areas that need it most.