January 31, 2018 - 9:45 am
By Mignon Clyburn | Commissioner
Michael O'Rielly | Commissioner

Work on the Commission's rate-of-return regulation has historically been a bipartisan exercise. We both helped lead the effort as part of the Commission's 2016 Rate-of-Return Reform item, to define which expenses would be out of bounds for purposes of reimbursement by the FCC's universal service fund (USF) and a carrier's consumer rate base. As the Commission begins to explore potential changes to its regulations for rate-of-return carriers, we both wholeheartedly support action to curb impermissible expenditures. The public trust is violated, if or when bad actors take extensive leeway in defining what is acceptable for reimbursement by the FCC and ratepayers. Past stories highlight spending on personal mansions, fancy boats, lavish parties, and country club memberships, just to name a few.

Thankfully, after months of collaborative discussions both internally and with representatives of two major trade associations, NTCA and WTA, we have produced a list of expenses that should be categorically excluded from reimbursement. While we may not see eye-to-eye on many issues, we agree that this list is the bare minimum of what the Commission should accept as we seek to make the high-cost program more efficient. It addresses the most egregious activities and brings needed reform and clarity to the program. These exclusions should be considered for adoption within the Commission's other USF programs as well.

Below is the result in chart form. Although more steps may need to be taken in the future, at a minimum, we hope that these exclusions can and will be adopted permanently as part of the Commission's current rate-of-return item.

Category of Expenses Excluded from USF Excluded from Rate Base
Personal Expenses Yes Yes
Personal Travel Yes Yes
Personal Vehicles Yes Yes
Tangible Property not logically related or necessary to offering voice or broadband service Yes Yes
Aircraft/Watercraft/Off-road Vehicles (except reasonable business travel expenses or as necessary to access areas not seasonally reachable by road travel) Yes Yes
Food and Beverage (except reasonable amount for work and work-related travel) Yes Yes
Membership fees (except for professional organizations) Yes Yes
Penalties Yes Yes
Political Contributions Yes Yes
Cost of Operating Cafeterias/Dining Facilities Yes **
Charitable Donations Yes **
Scholarships Yes **
Sponsorships Yes **
Housing Allowances (unless part of taxable compensation or for temporary assignment for work) Yes **
Gifts (unless part of taxable compensation) Yes **
Childcare (unless part of taxable compensation) Yes **
Artwork (and other objects that possess aesthetic value) Yes **
Entertainment Yes **
** For those categories not explicitly excluded from the Rate Base (in yellow above), the final rule would include a general requirement that any expenses must be reasonable and customary for similarly situated companies. This further narrows the universe of permissible expenses from the Rate Base.