The
High Cost Support Mechanism provides support to eligible telecommunications
service providers to help ensure that the rates for telecommunications
services paid by Americans living in rural or remote areas are comparable
to the prices charged to those living in more densely populated areas.
As the administrator of the High Cost Support Mechanism, USAC must determine
the amount of support that can be made available to eligible service
providers, all in accordance with FCC regulations. In 1998 and again
in 1999, USAC distributed $1.7 billion annually to companies that serve
high cost areas. In 2000, USAC distributed more than $2.2 billion. Appendix
B provides funding information by state.
There are five components to the High Cost Support Mechanism:
- High Cost Loop support for rural carriers provides support for
the cost of the "last mile" of connection for rural companies in service
areas where the cost to provide this service exceeds 115 percent of
the national average.
- Local Switching support provides interstate assistance which helps
cover the high fixed switching costs for companies that serve fewer
than 50,000 customers.
- Long Term support helps offset interstate access charges for rate
of return-regulated companies.
- High Cost support for non-rural carriers covers the cost for the
"last mile" of connection in service areas where the cost to provide
this service in the state exceeds 135 percent of the national average.
- Interstate Access support helps offset interstate access charges
for price cap companies.
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The Federal High Cost
program is extremely important to the customers that we
serve. We serve a very large land mass in the Badlands and
on the prairie of South Dakota. All our customers live in
either very small communities, on the reservations or in
rural and remote areas. These areas are very expensive to
provide good, high quality of service. Without the High
Cost support mechanisms, Golden West would not be able to
serve its customers with the high level of service that
our customers expect and deserve at an affordable and reasonable
rate."
Tim Dupic, Vice President
Regulatory Affairs, Golden West
Telecommunications Co-op, Inc.,
Wall, SD
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Each of these components plays an integral role in advancing the objectives
of Congress and the FCC to keep the cost of telecommunications services
reasonable for subscribers living in high cost, rural, or remote areas
of the United States, while at the same time maintaining the high quality
of service required by law. The result is that recipients of telecommunications
services near communities such as Dell City, TX, or King Salmon, AK
pay rates comparable to their more urban neighbors.
Service providers must be designated as eligible telecommunications
carriers, or ETCs, in order to receive high cost support from USAC.
ETCs of a variety of types and sizes, including incumbent local exchange
carriers, competitive local exchange carriers, wireless carriers, telephone
cooperatives, and independent telephone companies, participate in the
High Cost Support Mechanism.
In order to prevent waste, fraud, and abuse, the High Cost Support
Mechanism has been subjected to audits of its operations, procedures,
and financial operations by independent accounting firms. In addition,
the cost information submitted by companies seeking high cost support
is audited to ensure accuracy.
USAC contracted with the National Exchange Carrier Association, Inc.
(NECA) for support services necessary to administer the High Cost Support
Mechanism during the period covered by this report. The contractor performed
the tasks associated with the contract in a fully satisfactory manner.
