FCC proposes looser rate rules and an eligible services list for its rural telehealth broadband subsidy; comments due Sept. 30

Thirty-four out of 340. That is how many approved Federal Communications Commission (FCC) Telecom Program requests in Alaska in funding year 2025 set their rural rate by comparing it with prices other customers actually pay [1]. The rest leaned on other routes, including a rate method the FCC once called a “safety valve” [1]. On August 31, the FCC published a proposal to rework those rules in its Rural Health Care Program, the federal subsidy that pays part of the connectivity bill behind rural telehealth [1].

What changed

The FCC adopted the item, a Third Further Notice of Proposed Rulemaking and Order in WC Docket No. 17-310 (FCC 26-54), on August 6 and released it August 7 [2]. Its Federal Register publication on August 31 started the clock: comments are due September 30, 2026, and reply comments October 30 [1].

The notice asks for comment on six things [1]:

• how to define “similar services” and “comparable rural areas” when setting the rural rate;
• how to lighten or replace the cost studies carriers file when no market rate exists;
• how to push backup connections toward cheaper technology;
• a proposed eligible services list for the program;
• processing targets for the program’s administrator, the Universal Service Administrative Company (USAC);
• whether to end USAC approval of “evergreen” contracts, along with a proposal to delete the Healthcare Connect Fund annual report.

One piece takes effect now. In the attached order, the FCC waived its cost study rule so that rural rates approved in funding years 2024, 2025 or 2026 can be reused for funding year 2027 [2].

Who it affects

The program has two parts. The Telecom Program, set up in 1997, pays the difference between a provider’s rural rate for telecommunications service and the rate for comparable service in a city in the same state [2]. The Healthcare Connect Fund, created in 2012, gives a flat 65% discount on broadband and related services, including for consortia that mix rural and urban sites [1, 2]. In funding year 2024, the fund accounted for 56.8% of Rural Health Care Program commitment dollars [1].

Eligibility is narrow. The Telecommunications Act of 1996 directed carriers to serve “any public or nonprofit health care provider that serves persons who reside in rural areas” at rates “reasonably comparable to rates charged for similar services in urban areas in that State” [3]. Today the law lists eight categories: teaching institutions and medical schools, community and migrant health centers, local health departments, community mental health centers, not-for-profit hospitals, rural health clinics, skilled nursing facilities, and consortia of those providers [2].

A physician-owned office is not on that list. A practice that runs a certified rural health clinic, or that belongs to a hospital-led consortium, is the kind of participant these rules reach. Carriers serving rural areas are affected too, since they prepare the rate justifications [2].

How does the FCC set rural telehealth broadband rates?

Under the Telecom Program, carriers use three methods in order [2]. Method 1 averages what the carrier charges commercial customers for similar service in the provider’s rural area. Method 2 averages other carriers’ tariffed or public rates there. Method 3, used only when neither works, is a cost-based rate backed by an itemized cost study [2].

For two decades nobody used Method 3; it first appeared in funding year 2017, as bandwidth demand grew, especially in Alaska [2]. The FCC tried a centralized Rates Database in 2019, then eliminated it in 2023 after finding “significant anomalies,” and reinstated the three methods while it looked for a permanent fix [2]. Since then, it has let participants reuse previously approved rates. They did so nearly 500 times in funding years 2024 and 2025 [1].

The notice asks whether the current definition of similar service, speeds within 30% above or below the requested service, is still reasonable [1]. It asks whether comparable rural areas could include rural areas in adjoining states, which would mean reading a statute that refers to urban areas “in that State” [1]. It also floats three alternatives to cost studies, drawn from suggestions by GCI Communication Corp.: carriers’ actual wholesale rates, previously approved rates or cost models, and projections from rates approved at other bandwidths [1]. For wholesale rates, it asks whether 9.75%, the cap used for high-cost rate-of-return carriers, should limit any added return [1].

What it means for your practice

Your rate paperwork for funding year 2027 should look familiar. If your carrier would otherwise need a Method 3 cost study, it can use the rate from your most recent funding commitment for the same facility and service, as long as that commitment was issued in funding year 2024, 2025 or 2026 [2]. If no such rate exists, a rate for similar service to a facility with similar geography can be used. If neither exists, a full cost study is still required [2].

Backup connections may face a cost test. The program’s rules don’t currently distinguish primary from secondary service [1]. The FCC gives the example of a provider paying for C-band satellite for both, when a low earth orbit service might do for backup [1]. It asks whether to write into the rules its existing guidance that a backup’s cost “must reasonably reflect its use as a secondary service, and it must be the most cost-effective option available,” and whether to rank primary service ahead of backup when funding is reviewed [1].

A list of what’s covered could replace guesswork. Healthcare Connect Fund eligibility today rests on a broad definition rather than a formal list [2]. USAC has posted lists of common eligible products for about five years [1]. The FCC proposes an eligible services list modeled in part on the E-Rate program’s, updated as needed by its Wireline Competition Bureau [1]. It also directs that bureau to look for chances to clarify which entities qualify [1].

One reporting task could go away, but not this month. The rule requiring each Healthcare Connect Fund applicant to file an annual report by September 30 for the preceding funding year remains in force [1]. The FCC proposes deleting it and says it tentatively agrees the report has become “a hurdle” for applicants [1].

Medicare payment for the telehealth visit itself is a separate question, handled by CMS; our July report on the 2027 fee schedule proposal covered the rural health clinic provisions.

What to do now

1. File the Healthcare Connect Fund annual report by September 30 if you receive fund support; the proposal to drop it is not final [1].
2. Comment by September 30 in WC Docket No. 17-310. The FCC asks commenters for real examples, such as cases where a provider chose a higher-cost service over a cheaper one and why, or where a service appeared eligible but USAC denied funding [1].
3. Confirm your 2027 rate basis with your carrier under the waiver for rates approved in funding years 2024 through 2026 [2].
4. If you hold an evergreen contract, watch the evergreen question: the FCC asks whether providers can “assume the risk of a potential future finding of a violation” if they rely on a contract USAC hasn’t approved [1].
5. Weigh a comment on processing times. The FCC asks whether USAC should aim to decide workable funding requests by September 1, about five months after the application filing deadline, as it does for E-Rate [1].

The policy fight

The cost study debate has a record from the 2023 round. Commenters opposed tougher evidentiary rules for cost studies [2]. USTelecom said approval “often takes significant time and resources to obtain, making it impracticable for many providers,” according to the FCC’s summary [2]. GCI said the 2023 proposal would “layer onerous obligations atop of the already burdensome cost-study process for no discernable benefit” [2]. Alaska Communications warned that the burden “may curtail participation in the Telecom Program” [2].

The FCC answers that the statute obliges it to guard against improper payments, so rural rates must rest on “trustworthy, accurate, and well-documented data” [1]. It also flags a risk in loosening the rules: if carriers pick which commercial rates to compare, they might choose only those that yield the highest price [1].

On process, the Schools, Health & Libraries Broadband Coalition said “there is no need for applicants to submit and wait for approval from USAC for their multi-year contracts” [1]. The FCC notes the trade-off from E-Rate, which skips that approval: bidding violations found years later lead to a larger recovery [1]. The Ad Hoc Broadband for Rural Health Group said the annual report data “is no longer a meaningful metric for measuring HCF performance goals” [1].

Chairman Brendan Carr tied the item to rural hospital closures and specialist shortages, saying the program must support telehealth “in a predictable, sufficient manner” [2]. Commissioner Olivia Trusty called telehealth “the modern house call” and said she looks forward to reviewing the record [2]. If the rulemaking runs past funding year 2027, the FCC has told its Wireline Competition Bureau to decide whether waivers for funding year 2028 and beyond are needed [2].