Opinion ID: 165579
Heading Depth: 2
Heading Rank: 4

Heading: Funding Mechanism

Text: In the Order on Remand, the FCC modified its non-rural, high-cost support mechanism. To determine eligibility and the amount of support that non-rural carriers in each state will receive, the Commission established a cost benchmark of two standard deviations above the national average cost per line. Order on Remand ¶ 49. Non-rural 30 carriers in states with average costs exceeding the national average are eligible for support under the new mechanism. In crafting its new cost support mechanism, the FCC relied on rate data compiled in a GAO Report. Id. ¶ 49 & App. C. The GAO Report identified and compared individual rates in urban and rural areas served by non-rural carriers. Id. App. C. Applying the definition of “reasonably comparable” rates discussed above, the FCC concluded that current rates were reasonably comparable. Id. ¶ 49. The Commission then concluded that setting the cost benchmark at two standard deviations would adequately support the goal of ensuring reasonably comparable urban and rural rates. Id. In that the non-rural, high-cost support mechanism contained in the Order on Remand rests on the application of the definition of “reasonably comparable” rates invalidated above, it too must be deemed invalid. On a separate note, we did intimate in Qwest I that we would be inclined to affirm the FCC’s cost-based funding mechanism if it indeed resulted in reasonably comparable rates. However, we expected the Commission to return to us with empirical findings supporting this conclusion. Once again, we find no evidence in the record before us to support the FCC’s pairing of rates to costs in this context. In other words, the FCC based the two standard deviations cost benchmark on a finding that rates were reasonably comparable, without empirically demonstrating a relationship between the costs and rates surveyed in this context. 31 On remand, the FCC must utilize its unique expertise to craft a support mechanism taking into account all the factors that Congress identified in drafting the Act and its statutory obligation to preserve and advance universal service. No less important, the FCC must fully support its final decision on the basis of the record before it.