§ 54.1310   Expense adjustment.

   (a) Until June 30, 2015, for study areas reporting 200,000 or fewer
   working loops pursuant to § 54.1305(h), the expense adjustment
   (additional interstate expense allocation) is equal to the sum of
   paragraphs (a)(1) and (2) of this section.

   (1) Sixty-five percent of the study area average unseparated loop cost
   per working loop as calculated pursuant to § 54.1309(b) in excess of 115
   percent of the national average for this cost but not greater than 150
   percent of the national average for this cost as calculated pursuant to
   § 54.1309(a) multiplied by the number of working loops reported in
   § 54.1305(h) for the study area; and

   (2) Seventy-five percent of the study area average unseparated loop
   cost per working loop as calculated pursuant to § 54.1309(b) in excess
   of 150 percent of the national average for this cost as calculated
   pursuant to § 54.1309(a) multiplied by the number of working loops
   reported in § 54.1305(h) for the study area.

   (b) Beginning July 1, 2015, the expense adjustment for each study area
   calculated pursuant to paragraph (a) of this section will be adjusted
   as follows:

   (1) If the aggregate expense adjustments for all study areas exceed the
   maximum rural incumbent local exchange carrier portion of nationwide
   loop cost expense adjustment allowable pursuant to § 54.1302(a) (the
   HCLS cap), then each study area's expense adjustment will be reduced by
   multiplying it by the ratio of the HCLS cap to the aggregate expense
   adjustments for all study areas.

   (2) If the aggregate expense adjustments for all study areas are less
   than the HCLS cap set pursuant to § 54.1302(a), then the expense
   adjustments for all study areas pursuant to paragraph (a) of this
   section shall be recalculated using a cost per loop calculated to
   produce an aggregate amount equal to the HCLS cap in place of the
   national average cost per loop.

   (c) The expense adjustment calculated pursuant to paragraphs (a) and
   (b) of this section shall be adjusted each year to reflect changes in
   the amount of high-cost loop support resulting from adjustments
   calculated pursuant to § 54.1306(a) made during the previous year. If
   the resulting amount exceeds the previous year's fund size, the
   difference will be added to the amount calculated pursuant to
   paragraphs (a) and (b) of this section for the following year. If the
   adjustments made during the previous year result in a decrease in the
   size of the funding requirement, the difference will be subtracted from
   the amount calculated pursuant to paragraphs (a) and (b) of this
   section for the following year.

   (d) High Cost Loop Support is subject to a reduction as necessary to
   meet the overall cap on support established by the Commission for
   support provided pursuant to this subpart and subpart K of this
   chapter. Reductions shall be implemented as follows:

   (1) On May 1 of each year, the Administrator will publish an annual
   target amount for High-Cost Loop Support in the aggregate. The target
   amount shall be the forecasted disbursement amount times a reduction
   factor. The reduction factor shall be the budget amount divided by the
   total forecasted disbursement amount for both High Cost Loop Support
   and Broadband Loop Support for recipients in the aggregate. The
   forecasted disbursement for High Cost Loop Support is the High Cost
   Loop Support cap determined pursuant to § 54.1302 as reflected in the
   most recent annual filing pursuant to § 54.1305.

   (2) Each quarter, the Administrator shall adjust each carrier's High
   Cost Loop Support disbursements as follows:

   (i) The Administrator shall apply a per-line reduction to each
   carrier's High Cost Loop Support equal to one-half the difference
   between the forecasted disbursement amount and the target amount
   divided by the total number of loops eligible for support. To the
   extent that per-line reduction is greater than the amount of High Cost
   Loop Support per loop for a given carrier, that excess amount will be
   subject to reduction through the method described in paragraph
   (d)(2)(ii) of this section.

   (ii) The Administrator shall apply an additional pro rata reduction to
   High Cost Loop Support for each recipient of High Cost Loop Support as
   necessary to achieve the target amount.

   [ 80 FR 4479 , Jan. 27, 2015, as amended at  81 FR 24344 , Apr. 25, 2016]

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