to the extent that they exceed a benchmark set in relation to the national average cost per loop (NACPL). Carriers with the highest loop costs relative to the national average have minimal incentive to reduce their expenses and eliminate waste. Carriers with costs close to the ever rising NACPL risk losing all HCLS for prior investments, while carriers with higher cost per loop are sheltered from the impact of the HCLS cap. The FCC adopted a revised methodology for applying the cap on high cost loop support so that support is distributed more equitably among all high-cost carriers, and to incentivize carriers with the highest loop costs to curb waste in the operation of their study areas. (FCC 14-190, Section VI. 99) Budget Control Mechanism (FCC 16-33, Section II.B.6) In line 3b of each carrier’s Appendix A calculation sheet, the FCC previously adopted an overall budget of $4.5 billion for the high-cost program, and a budget within that amount of $2 billion per year for high-cost support for rate-of-return carriers. It did not, however, adopt a method for enforcing the budget for rate of return carriers. The FCC now adopts a self-effectuating mechanism for controlling total support distributed pursuant to High Cost Loop Support and Connect America Fund Broadband Loop Support to stay within the budget for rate-of-return carriers. Waterfall Pursuant to the Implementation Rules in D.91-09-042 and D.15-06-048, the phase-down of the CHCF-A funding percentage level is reinitiated effective January 1 following the year after the completion of a Small ILEC’s GRC, and follows a six-year course. A Small ILEC’s CHCF-A funding level remains at 100% for the first 3 years after GRC completion; the funding level is then reduced to 80% during the fourth year if no subsequent GRC application is submitted. The funding level then drops to 50% during the fifth year if no GRC application is submitted, and the funding level is further reduced to 0% during the sixth year. This 6-year phase down of funding level is known as the Waterfall. The funding percentage levels for the seven Small ILECs for CY 2017 are summarized in Table 3, as well as line 12 of each carrier’s Appendix A calculation sheet:
to the extent that they exceed a benchmark set in relation to the national average cost per loop (NACPL). Carriers with the highest loop costs relative to the national average have minimal incentive to reduce their expenses and eliminate waste. Carriers with costs close to the ever rising NACPL risk losing all HCLS for prior investments, while carriers with higher cost per loop are sheltered from the impact of the HCLS cap. The FCC adopted a revised methodology for applying the cap on high cost loop support so that support is distributed more equitably among all high-cost carriers, and to incentivize carriers with the highest loop costs to curb waste in the operation of their study areas. (FCC 14-190, Section VI. 99) Budget Control Mechanism (FCC 16-33, Section II.B.6) In line 3b of each carrier’s Appendix A calculation sheet, the FCC previously adopted an overall budget of $4.5 billion for the high-cost program, and a budget within that amount of $2 billion per year for high-cost support for rate-of-return carriers. It did not, however, adopt a method for enforcing the budget for rate of return carriers. The FCC now adopts a self-effectuating mechanism for controlling total support distributed pursuant to High Cost Loop Support and Connect America Fund Broadband Loop Support to stay within the budget for rate-of-return carriers. Waterfall Pursuant to the Implementation Rules in D.91-09-042 and D.15-06-048, the phase-down of the CHCF-A funding percentage level is reinitiated effective January 1 following the year after the completion of a Small ILEC’s GRC, and follows a six-year course. A Small ILEC’s CHCF-A funding level remains at 100% for the first 3 years after GRC completion; the funding level is then reduced to 80% during the fourth year if no subsequent GRC application is submitted. The funding level then drops to 50% during the fifth year if no GRC application is submitted, and the funding level is further reduced to 0% during the sixth year. This 6-year phase down of funding level is known as the Waterfall. The funding percentage levels for the seven Small ILECs for CY 2017 are summarized in Table 3, as well as line 12 of each carrier’s Appendix A calculation sheet:
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