Clyburn, O'Rielly Propose Expenses to Be Excluded From Rural Telco USF and Rate Base
FCC Commissioners Mignon Clyburn and Mike O'Rielly jointly proposed a list of expenses that rate-of-return telcos would be excluded from recovering through USF subsidy mechanisms and their consumer rate base. They hope such personal and other nonbusiness items will be included in a pending rate-of-return draft order (see 1801160040). Two rural telco groups involved in discussion with the commissioners back the effort and hope "consensus" action will clear the way for advancing broader USF goals.
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"We both wholeheartedly support action to curb impermissible expenditures," Clyburn and O'Rielly blogged Wednesday. "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."
They proposed expenses to be "categorically excluded from reimbursement" after "months of collaborative discussions," internally and with NTCA and WTA. Nine items would be excluded from USF and rate-base reimbursement: personal expenses, personal travel, personal vehicles, penalties, political contributions, and -- subject to certain exceptions -- tangible property, "aircraft/Watercraft/Off-road Vehicles" -- food and beverages, and membership fees. Another nine items would be excluded from USF reimbursement, with their rate-base treatment covered by a final rule generally requiring them to be "reasonable and customary for similarly situated companies": charitable donations, scholarships, sponsorships, entertainment, artwork, cafeteria/dining facility costs, and -- subject to certain exceptions -- housing allowances, gifts and child care.
"This list is the bare minimum of what the Commission should accept as we seek to make the high-cost program more efficient," Clyburn and O'Rielly wrote. "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." This has "bipartisan and industry support," and "if you're going to tackle waste, fraud and abuse, it's important to tackle all of it," an O'Rielly aide told us.
Chairman Ajit Pai said the draft order would set "strong new rules to prevent abuse of the high-cost program," noted a spokesman Wednesday. Other commissioner offices didn't comment.
NTCA and WTA agreed USF shouldn't be improperly used, and support only "investing in and operating rural networks that deliver reliable and affordable communications services." The "good news is that improper use of support is a highly rare occurrence," they said jointly. They called allegations rare, cited the findings of an FCC Office of Inspector General investigation, and noted subsequent safeguards.
"We worked collaboratively last year to develop a proposal that can further strengthen the many accountability measures already in place, thereby promoting even more effective use of support and providing much-needed brighter-line clarity to small businesses about what is and is not recoverable through regulated mechanisms," the groups said. "We hope that reaching consensus on measures such as these can allow us to get back to the productive conversation of what it actually takes to achieve a shared national goal of universal service."
Citizens Against Government Waste welcomed the proposal. USF "was never intended to support the purchase of fancy boats, big mansions or country club memberships," said Deborah Collier, tech and telecom policy director. "Using the funds for these purposes takes away taxpayer resources to help communities connect. CAGW is supportive of the measures proposed ... to rein in this type of spending and direct it to where it is needed.”