Surrogate Cost Methodology Waiver Granted for December 2016 Tariff Filings


The FCC’s Wireline Competition Bureau (Bureau) has waived on its own motion the FCC rules that limit the costs that must be shifted from the Special Access category to the Consumer Broadband-only Loop category in certain circumstances that lead to distortive pricing effects unrelated to the provision of broadband. This waiver applies only to the December 2016 tariff filings.  The Bureau determined that, in certain limited situations, the surrogate cost methodology over-allocates costs out of the Special Access category, thereby reducing the revenue requirement and resulting special access rates more than intended and, in the worst case scenario, to zero.  Such special access rates would likely be unreasonably low until the FCC revisits the allocation methodology and, when Special Access category costs rise, special access rates would spike.

The limited waiver applies only in circumstances in which subtraction of surrogate consumer broadband-only loop costs from a carrier’s Special Access category would result in the need to reduce the carrier’s special access rates other than broadband transmission rates associated with the provision of retail broadband Internet access service. In those cases, the carrier may opt to limit the level of costs subtracted from the Special Access category to the amount only affecting those broadband transmission rates, pending further consideration of current surrogate cost estimation rules. As a waiver condition, carriers electing this option must limit their Consumer Broadband-only Loop revenue requirement reported to USAC for Connect America Fund Broadband Loop Support (CAF BLS) purposes to this amount.

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