Chairman Response Regarding Urban Rate Floor
O F FI CE OF
T HE CH A IRM A N
May 29, 2014
The Honorable Jerry Moran
United States Senate
345 Russell Senate Office Building
Washington, D.C. 20510
Dear Senator Moran:
Thank you for your letter on the implementation of the urban rate floor.
I appreciate your
views and will ensure that your letter will be included in the record of the proceeding and
considered as part of the Commission's review.
In the 2011 USFIICC Transformation Order, the Commission unanimously adopted
reforms to make universal service a fairer system for all consumers and businesses. The Order
included a phase-out of excessive subsidies for basic phone service, which allowed some phone
companies to charge their customers as little as $5 a month, while average urban, suburban, and
even some other rural consumers, were paying over three times that amount. The Commission
determined it was inappropriate to use limited federal high-cost support to subsidize local rates
beyond what is necessary to ensure reasonable comparability between urban and suburban rates
and rural rates, as required by Congress. The reforms are designed to gradually eliminate these
excessive subsidies to level the playing field for all consumers and contain the cost of the
program, which is funded by universal service fees paid by consumers.
Importantly, the Commission's rules do not require carriers to raise their local rates, and
many carriers have made the decision not to raise rates in response to previous increases in the
rate floor. Nevertheless, the Commission appreciates concerns over potentially sizable rate
increases and possible difficulties some carriers may have experienced in making any rate
adjustments at state level in a short period of time. To address these concerns, the Commission
adopted an Order on April23, 2014 that delays any potential universal service support
reductions until January 2015. In addition, the universal service support reductions that do go
into effect in January will only be for those lines with rates below $16, and any future reductions
will be limited to an increase of no more than $2 per year.
I appreciate your interest in this matter. Please let me know if I can be of any further
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