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Chairman Response Regarding Urban Rate Floor

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Released: June 13, 2014






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


Tom Wheeler

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