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Rate-of-Return Reform

Rate-of-Return Reform

The FCC is working to bridge the digital divide by expanding the reach of broadband across rural America. The modernized Connect America Fund (CAF) aims to drive universal availability of modern networks that can provide voice, broadband and advanced mobile services, and ensure that rates and usage allowances for these services are reasonably comparable in urban and rural areas.

Recent reform orders targeting rate of return carriers are central to this effort. These orders aim to bring broadband to rural communities by offering carriers a fixed amount of support to build out high-speed Internet access and deliver broadband service to a defined number of locations in unserved areas.

The 2016 Rate-of-Return order established the Alternative Connect America Cost Model (ACAM) program, which gives carriers a set amount of monthly support over a 10-year term to deploy broadband at speeds of up to 25 Mbps downstream/3 Mbps upstream (25/3 Mbps). The 2016 order required carriers to decide whether to elect ACAM support or remain with a modified version of the legacy support mechanisms, Connect America Fund Broadband Loop Support (CAF BLS) and High Cost Loop Support (HCLS).

The 2018 Rate-of Return order made a revised ACAM offer to carriers that had previously elected ACAM support, offering them additional funding to meet expanded broadband deployment obligations. The 2018 order also established a new ACAM II fund open to carriers that had remained on CAF BLS support, and adopted a new budget and new broadband deployment obligations for carriers that opt to remain with CAF BLS.

In 2023, the FCC established Enhanced ACAM, which offers additional support over 15 years to carriers transitioning from ACAM, Revised ACAM, ACAM II and CAF BLS to deploy faster broadband to more locations, including locations in some of the most difficult-to-reach areas of the country. Carriers participating in Enhanced ACAM must provide broadband service with speeds of at least 100 megabits per second downstream and 20 megabits per second upstream (100/20 Mbps).

ACAM

Established by the FCC in 2016, ACAM uses a model to calculate monthly support based on the forward-looking economic costs of deploying a high-speed network and delivering broadband service. The program gives carriers specific, predictable monthly payments – with support of up to $146.10 for each fully funded location – and requires carriers to meet the following service requirements over the 10-year term of the program (2017-2026):

  • Maintain existing voice and broadband service and offer speeds of at least 10 Mbps downstream/1 Mbps upstream (10/1 Mbps) to a number of eligible locations equal to the number of fully funded locations (locations for which the carrier receives support for the full cost of build-out)
  • Offer broadband speeds of at least 25/3 Mbps to a number of eligible locations equal to a certain percentage of fully funded locations depending on the population density of the carrier’s service area.
  • Offer broadband speeds of at least 4/1 Mbps to a number of eligible locations equal to a certain percentage of capped locations (locations for which the carrier receives support for only the partial cost of build-out) depending on the population density of the carrier’s service area
  • Provide broadband upon reasonable request to the remainder of locations

Carriers receiving ACAM support must meet annual 10/1 Mbps (or greater) deployment milestones starting in year four of the program (2020).

Revised ACAM

Established by the FCC in 2018, the Revised ACAM offer increases model-based support for existing ACAM carriers to up to $200 per location and expands the ACAM program budget by $67 million. Carriers electing Revised ACAM support must still meet the 10/1 Mbps deployment obligations of the original ACAM offer and expand deployment at speeds of 25/3 Mbps. The program runs 10 years, from 2019 through 2028. Participating carriers must meet annual 25/3 Mbps (or greater) deployment milestones starting in year four, 2022.

CAF BLS

Established by the FCC in 2016, CAF BLS provides support for voice, voice and broadband service, as well as stand-alone broadband service. The fund, a reform of Interstate Common Line Support (ICLS), helps carriers recover the difference between loop costs associated with providing broadband-only service and consumer broadband-only loop revenues. In 2018, the FCC set a 2019-2020 budget for CAF BLS of approximately $1.55 billion, which will rise annually with inflation, and reduced the monthly per-line limit on support from $250 to $225 as of July 2019 and $200 as of July 2021. The 2018 order also establishes new deployment obligations for carriers remaining on CAF BLS support, requiring them to expand deployment of broadband at speeds of 25/3 Mbps.

ACAM II

Established by the FCC in 2018, ACAM II is open to carriers that elected to remain on legacy CAF BLS support following the 2016 Rate-of-Return order. The program offers carriers up to $200 per location per month and requires carriers to meet the following service requirements over the 10-year term of the program (2019-2028):

  • Maintain existing voice and broadband service as of December 31, 2018
  • Offer at least 25/3 Mbps service to a number of eligible locations equal to the number of fully funded locations and at least 4/1 Mbps service to a number of eligible locations equal to a percentage of capped locations depending on the population density of the carrier’s service area, and meet similar obligations for eligible locations on Tribal lands

Participating carriers must meet annual deployment milestones starting in year four, 2022. Carriers that elect ACAM II support will receive transition payments if their ACAM II support is less than their 2018 legacy support.

Enhanced ACAM

Established by the FCC in 2018, Enhanced ACAM provides additional support over 15 years to carriers that were participating in other CAF programs – ACAM, Revised ACAM, ACAM II and CAF BLS – to deploy broadband service with speeds of at least 100 megabits per second downstream and 20 megabits per second upstream (100/20 Mbps). Payments begin in 2024 and Enhanced ACAM carriers have until Dec. 31, 2028, to complete deployment.

For information about other legacy funds that pay support to Rate of Return carriers, including High Cost Loop Support (HCLS), Safety Value Support (SVS) and Intercarrier Compensation (ICC), please see the High Cost funds page.

Related Orders

Rate-of-Return Reform Order (FCC 16-33) – Order adopting voluntary path to model based support for rate-of-return carriers (ACAM)

Rate-of-Return Order (DA 16-661) – Addressed Rate-of-Return budget control, operation expense limitation and capital investment allowance.

Rate-of-Return Reform Order (FCC 18-29) – Order codifying rules about eligible expenses and offering additional ACAM support for expanded broadband deployment

Rate-of-Return Reform Order (FCC 18-176) – Order establishing ACAM I Revised and ACAM II and adopting new deployment obligations for rate-of-return carriers

Enhanced ACAM Order  (FCC 23-60) – Order establishing Enhanced ACAM to bring 100/20 Mbps speeds to all eligible locations.

Rate-of-Return Reform Order (FCC 23-118) – Deferred the commencement of the next five-year deployment obligation term for legacy rate-of-return carriers receiving CAF BLS in 2024 until January 1, 2025

Spreadsheets

FCC Resources

Overview of the FCC’s Rate-of-Return Reforms Webinar

Update on Implementation of RoR Reform Order Webinar

Contact Us

If you have any questions or concerns in the meantime, we are here to help you navigate these changes successfully. Contact us at HCQuestions@usac.org.