FCC Opens High-Cost Modernization Proceeding For An All-IP Future

Draft NPRM seeks comments on legacy rate-of-return support, A-CAM sunset issues, BEAD coordination, satellite availability, and the role of USF in the IP transition.

The FCC has circulated a draft Notice of Proposed Rulemaking that would begin a broad reassessment of selected High-Cost Universal Service Fund mechanisms for rate-of-return carriers. The proceeding focuses on legacy cost-based support mechanisms, including CAF BLS and HCLS, and on next steps for areas currently supported by A-CAM I, Revised A-CAM I, and A-CAM II mechanisms that are scheduled to sunset absent further action.

The NPRM frames the proceeding as “High-Cost Modernization” for an all-IP future. The Commission seeks comment on whether to modernize existing mechanisms, establish a new fixed-support mechanism, or maintain the status quo for legacy mechanisms while allowing certain A-CAM mechanisms to sunset. The draft also asks how BEAD funding, enforceable deployment commitments, low-Earth orbit satellite availability, and broadband service obligations should affect future USF support.

Key Proposals and Questions

• Three paths forward. The FCC seeks comment on updating existing legacy and A-CAM support mechanisms, creating a new modernized fixed-support mechanism, or maintaining the status quo while allowing certain A-CAM mechanisms to sunset.
• Support in served or committed areas. The NPRM asks what support remains necessary where the incumbent already serves the area, where a competitor serves the area, or where another provider has an enforceable commitment through BEAD or another funding program.
• Satellite broadband. The FCC seeks comment on how ubiquitous LEO satellite service should affect the design of future high-cost support, particularly in areas where terrestrial 100/20 Mbps service remains unavailable.
• Deployment obligations. The Commission asks what deployment and performance obligations should attach to future support for carriers receiving legacy, A-CAM I, Revised A-CAM I, or A-CAM II support.
• A-CAM I bridge extension. The NPRM seeks comment on a short-term extension of A-CAM I from the end of 2026 through the end of 2028 to align the sunset dates for A-CAM I, Revised A-CAM I, and A-CAM II.
• IP transition. The Commission seeks to refresh the record on the role USF can play in encouraging the transition to all-IP networks and on efficiency measures to ensure USF dollars are targeted effectively.

Why This Matters for Rate-of-Return and Rural Providers

• Carriers receiving CAF BLS, HCLS, A-CAM I, Revised A-CAM I, or A-CAM II support should treat this as a foundational proceeding for future support levels, support eligibility, and performance obligations.
• The proceeding could materially affect how the FCC treats locations already served by terrestrial providers, locations subject to BEAD commitments, and locations served only by LEO satellite broadband.
• Rate-of-return carriers should be prepared to document ongoing operating, maintenance, middle-mile, backhaul, replacement, and service-quality costs that may not be solved by one-time deployment funding.
• The FCC may use BDC/National Broadband Map data more aggressively to target or limit future support, making map accuracy and challenge strategy increasingly important to high-cost support outcomes.
• The IP-transition framing may create opportunities for carriers to explain the costs and operational risks associated with legacy network retirement, rural 911 compatibility, customer migration, and network modernization.

Comment Opportunities

Affected carriers should consider submitting detailed cost, network, and location-specific evidence. Comments should explain where ongoing support remains necessary notwithstanding BEAD commitments or satellite availability, identify the practical limits of LEO service as a substitute for terrestrial networks, and address whether a bridge extension or new fixed-support framework would better preserve service continuity in rural areas.

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