WASHINGTON (CN) - The Federal Communications Commission announced a new method to calculate subsidies provided to telephone and broadband carriers who provided service to high cost rural areas.
The subsidies, called high cost loop support, come from the Universal Service Fund which all telephone users pay into through their monthly bills. Last year the FCC announced that it would start phasing out traditional landline support in favor of development of broadband and wireless services through its new Connect America Fund.
The new methodology will compare spending by providers with similar customer loads and cap support to individual providers based on benchmark costs identified by the comparison. The FCC will compare operating expenses and capital costs.
Providers who exceed the FCC benchmarks will have their high cost loop support reduced beginning in July by 25 percent of the difference between their actual costs and the benchmark. In 2013, the size of the reductions will grow to 50 percent of the difference. By 2014, providers exceeding the benchmark will receive no high cost loop support.
The rule is effective June 22.
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