FCC Rejects ACA Application for Review of CAF Cost Model Inputs

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The Federal Communications Commission (FCC) has denied an application for review filed by the American Cable Association (ACA) that challenged two aspects of the Wireline Competition Bureau’s (Bureau) April 2014 Order that finalized certain engineering assumptions and inputs for the cost model that will be used to determine support amounts for Phase II of the Connect America Fund.  First, ACA challenged the Bureau’s decision to adopt an 8.5 percent cost of money for use in the cost model, arguing it is “significantly in excess of forward-looking market rates.”  Second, ACA challenged the Bureau’s decision to adopt a subscription rate of 70 percent for the purpose of estimating the amount of revenues that a carrier may reasonably recover from end-users, arguing that it “is well below that expected over the long-run life of the [cost model] – and even below that expected over the five-year funding period.”  Viewed together, ACA argued that the two “errors” will cause the cost model to provide excess support to incumbent price cap carriers.  The FCC did not find merit in ACA’s claim.  In rejecting ACA’s application for review, the FCC concluded that the Bureau’s selection of the input values for the cost of money and the subscription rate are reasonable, clearly reflecting the Bureau’s consideration of the record before it, its own analysis, and its predictive judgment of future conditions.

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