Step 1 What is Supported

The High Cost Program of the universal service fund, which is administered by USAC, ensures that consumers in all regions of the nation have access to and pay rates for telecommunications services that are reasonably comparable to those in urban areas.

Only eligible telecommunications carriers (ETCs) - whether incumbent local exchange carriers (ILECs) or competitive ETCs (CETCs) serving in the areas of ILECs - receive High Cost Program support.

Five High Cost Support Components

Each of the High Cost components has its own requirements for certification and submission of line count and revenue data as required. The five components are:

• High Cost Loop (HCL) support, which includes two sub-components, Safety Net Additive (SNA) support and Safety Valve Support (SVS)
• High Cost Model (HCM) support
• Interstate Access Support (IAS)
• Interstate Common Line Support (ICLS)
• Local Switching Support (LSS)

ILECs can be a combination of either rural or non-rural company, and "price cap" or "rate-of-return" company. These categories determine the type of High Cost Program support for which an ILEC is eligible. The table below provides an overview of which type of High Cost Program support is available to each category.

Type of Support	Rural or Non-Rural?	Price Cap or Rate-of Return?	Is it Capped?	Subject to True Up Process?	Subject to ILEC Disaggregation Plans?
HCL	Rural	Both	Yes	No	Yes
HCM	Non-Rural Only	Mostly Price Cap	No	No	No. Data at wire center level.
IAS	Mostly Non-Rural; few Rural	Price Cap	No	Yes. Quarterly reconciliation.	No. Data at UNE Zone level.
ICLS	Mostly Rural; few Non-Rural	Rate-of-Return	No	Yes	Yes
LSS	Rural Only	Mostly Rate-of-Return	No	Yes	Yes
SNA	Rural	Both	Yes	No	Yes
SVS	Rural	Both	Yes	No	Yes

Rural or Non-Rural Carrier?

For purposes of High Cost support, a rural carrier is one that serves a relatively small number of telephone lines or a relatively small area. The definition of a rural telephone company can be found in Section 153(37) of the Communications Act of 1934, as amended (47 U.S.C. Section 153(37)), and provides that rural telephone company means a local exchange carrier that:

• Provides common carrier service to any local exchange carrier study area that does not include either:
  • Any incorporated place of 10,000 inhabitants or more, or any part thereof, based on the most recently available population statistics of the Bureau of the Census; or
  • Any territory, incorporated or unincorporated, included in an urbanized area, as defined by the Bureau of the Census as of August 10, 1993;
• Provides telephone exchange service, including exchange access, to fewer than 50,000 access lines;
• Provides telephone exchange service to any local exchange carrier study area with fewer than 100,000 access lines; or
• Has less than 15 percent of its access lines in communities of more than 50,000 on the date of enactment of the Telecommunications Act of 1996.

Any carrier that does not meet this definition is considered a non-rural carrier.

Price Cap Carriers

A price cap carrier is a carrier not subject to rate base/rate-of-return regulation. A price cap carrier is limited in its ability to raise rates on the basis of a formula defined by the FCC. The extent to which a carrier can raise rates depends on its growth in expenses and a productivity growth factor.

Rate-of-Return Carriers

A rate-of-return (ROR) carrier is one that is allowed to set rates on its various products and services so that it earns no more than the rate-of-return authorized by the FCC. FCC rules define the rate base (specified plant items) upon which a carrier is allowed to earn a return.