• The background of the RDOF and how it relates to Connect America Fund Phase II;
• How the RDOF works (budget, eligible areas, support awarded, deployment);
• The two-stage RDOF application process;
• Unresolved issues and potential pitfalls in RDOF; and
• Considerations and recommendations for RDOF participants.

This event builds on our annual Universal Service Fund webinar and ongoing coverage of the FCC’s efforts to close the “digital divide” between rural and urban areas.

As detailed in the R&O and FNPRM, the Commission will require fixed and mobile broadband providers to report more precise broadband availability and service information than required under the current FCC Form 477 filings. Separately, the Commission will create a nationwide database containing geocoded locations for all areas where broadband connections can be installed—the Broadband Serviceable Location Fabric ("Fabric"). The Commission will use the Fabric to create publicly-available maps showing areas across the country that are served and unserved by broadband service. Among the expected benefits, the new broadband deployment data collection and mapping framework will allow the Commission to better target Universal Service Fund support, which has been a hot-button issue since the agency mothballed Phase II of the Mobility Fund in 2018 after the accuracy of mobile wireless coverage maps was called into question.

The R&O creates the underlying structure for the broadband deployment data collection, creation of the maps and Fabric, and other requirements, while the FNPRM seeks comment on the specifics for these processes. As such, the summary below covers those pieces together.

Provider Reporting Requirements

Under the R&O, fixed and mobile broadband providers will be required to report broadband availability and service data twice per year. The FNPRM proposes to apply this requirement only to facilities-based providers with services exceeding 200 kbps in at least one direction, consistent with current Form 477 requirements. Each category of broadband provider will be subject to additional specific requirements. For example, wireline and satellite providers will be required to report service availability using either polygon shapefiles or lists of addresses, fixed wireless shapefiles must be in the form of propagation maps that reflect speed and latency variations, and mobile wireless providers can only use propagation maps.

Verifying Broadband Availability Data

As required by the Broadband DATA Act, the R&O includes several processes through which the Commission will “verify the accuracy and reliability” of the broadband deployment data submitted by providers, and the FNPRM seeks comment on these and other potential verification processes. In particular, the Commission plans to cross-check provider data with information in the Universal Service Administrative Company ("USAC") High Cost Universal Broadband portal, conduct audits, and use crowdsourced data from consumers and other entities using qualified third-party testing services. A corporate officer for each provider will have to certify the truth and accuracy of their submissions and the FNPRM proposes to require that mobile providers submit an additional certification from a qualified engineer and asks whether to extend that to fixed providers. Additionally, the Broadband DATA Act requires that the agency test and report on the feasibility of partnering with federal agencies to collect verification information. As such, the FCC proposes and seeks comment on a pilot program whereby drive-test hardware would be installed in some last-mile federal delivery fleet vehicles, such as those used by the United States Postal Service.

Creation of Coverage Maps

Under the Broadband DATA Act, the Commission must use the granular broadband availability data submitted by providers and other coverage information the FCC will collect from federal, state, local, and Tribal governmental entities (and potentially third parties) to create three maps: (1) the Broadband Map, depicting the availability of both fixed and mobile broadband service overlaid onto the Fabric data; (2) a map depicting the availability of fixed broadband service, and (3) a map depicting the availability of mobile broadband service. The maps must be updated at least twice a year using the most recent provider data. The DODC would have required that providers themselves submit granular coverage maps.

Creation of the Fabric

The Broadband DATA Act requires the Commission to create “a common dataset of all locations in the United States where fixed broadband Internet access service can be installed” and to use that information to create the Fabric, which must contain “geocoded information” for those locations. To identify these locations, the Commission proposes to follow the approach used in the Connect America Fund, with residential locations identified based on the Census Bureau’s definition of a “housing unit” and business locations included when they would be expected to demand consumer-grade broadband services (i.e., small businesses). Under the DODC, the Commission planned to delegate creation and management of the Fabric to USAC. The Act prohibits this but allows the Commission to contract with an entity that has geographic information system expertise to take on these responsibilities.

Challenge Process

The Broadband DATA Act requires, and the R&O establishes, a user-friendly challenge process through which consumers, government entities, and others can challenge the accuracy of provider broadband data, coverage maps, and the Fabric. The Commission originally proposed to have USAC create and manage the challenge portal, but this is prohibited by the Act. Challenges for fixed service will be permitted based on availability and coverage, but mobile broadband challenges can also be based on quality of service metrics, such as delivered user speeds. Challenges to Fabric data that providers contest will be submitted to the Commission for resolution, and it proposes to resolve these disputes within 60 days. The R&O and FNPRM also establish and seek comment on enforcement mechanisms for when inaccurate information is submitted to the FCC.

Next Steps

Congress has sent mixed messages about how quickly it wants the FCC to implement the new broadband mapping framework and data collection. On the one hand, the Broadband DATA Act gave the Commission 180 days to issue final rules implementing the Act and exempted the FCC’s rulemaking from Paperwork Reduction Act review, which often delays final enactment of rules. On the other hand, Congress has not yet allocated funding to the Commission to develop the broadband maps and Fabric, which will necessitate a lengthy procurement and development process. Nevertheless, the Commission is moving forward so that it “complete[s] the rulemaking required within the statutory deadline and in anticipation of receiving necessary funding” so that it can make the maps available “as quickly as possible.” Thus, the FCC likely will adopt final rules regarding the new broadband mapping and data collection process in September 2020.

If you have any urgent questions, please contact your usual Kelley Drye attorney or any member of the Communications Practice Group. For more information on other aspects of the federal and state response to the COVID-19 pandemic, as well as labor and employment and other issues, please visit Kelley Drye’s COVID-19 Response Resource Center.

FCC Approves Twelfth Set of COVID-19 Telehealth Program Applications, Closes Filing Window

On June 25, 2020, the FCC’s Wireline Competition Bureau (“WCB”) announced via Public Notice (DA 20-667) that it will no longer accept new applications for funding from the COVID-19 Telehealth Program, noting that demand for funding exceeds available Program funds based on applications received. This announcement comes after the June 24 approval of 77 additional applications and $29.41 million in funding. To date, the FCC has approved 444 funding applications in 46 states plus Washington, D.C. for a total of $157.64 million in funding. Congress appropriated $200 million for the Program in the CARES Act.

The FCC also released a report on the CARES Act spending plan in accordance with section 15011(b)(1)(B) of the legislation, which requires the agency to submit a plan describing how it will use the covered funds.

FCC Further Extends Temporary Waivers of Relay Services Rules

On June 22, 2020, the FCC’s Consumer and Governmental Affairs Bureau extended temporary waivers (DA 20-650) through August 31, 2020 for Telecommunications Relay Service (“TRS”) providers to ensure relay services remain available for individuals who are deaf, hard of hearing, deafblind, or have a speech disability. These waivers extend actions previously taken to grant TRS providers flexibility.

FCC Further Extends Inteliquent Access Stimulation Waiver

On June 23, 2020, the WCB granted (DA 20-655) Inteliquent’s request for renewal of its temporary waiver of certain access stimulation rules until September 1, 2020. Inteliquent requested a limited renewal of the temporary waiver, with respect to traffic it terminates in six urban areas to preexisting customers on the basis that its terminating-to-originating traffic ratios in those areas continue to be particularly unbalanced as a result of the “unprecedented amounts of conference platform traffic that Inteliquent is terminating for pre-existing customers Zoom and Cisco Webex to facilitate remote work and other forms of social distancing.”

The WCB originally granted Onvoy d/b/a Inteliquent a temporary and limited waiver of the FCC’s rules that treat competitive local exchange carriers with an interstate terminating-to-originating traffic ratio of at least 6:1 as engaging in access stimulation.

FCC Resolves CAF Phase II, Rural Broadband Petitions

On June 26, 2020, the WCB, Rural Broadband Auctions Task Force, and Office of Economics and Analytics, resolved petitions (DA 20-677) filed by the Connect America Fund (“CAF”) Phase II Coalition and Skybeam, LLC (“Skybeam”) seeking waiver of the letter of credit rules for the CAF Phase II auction (“Auction 903”) and Rural Broadband Experiments. Petitioners requested that the FCC allow them to comply with the recently adopted letter of credit rules for the Rural Digital Opportunity Fund instead. The FCC found good cause to grant a limited waiver to all Auction 903 and Rural Broadband Experiments funding recipients until December 31, 2021, because of the increased consumer demand for robust broadband services and severe financial hardship on the companies imposed by the COVID-19 pandemic.

FCC Announces Section 106 Emergency Authorizations

On June 25, 2020, the FCC’s Wireless Telecommunications Bureau issued a Public Notice (DA 20-668) announcing an electronic process for FCC licensees to apply for expedited Section 106 review or for emergency authorization to resume standard review for qualifying critical infrastructure projects. Section 106 of the National Historic Preservation Act requires the FCC to account for the effect of any proposed “undertakings” on historic properties, including construction or collocation of wireless communications facilities.

The CAF provides support to broadband service providers to deploy networks in rural and other high-cost service areas. In addition to meeting their deployment obligations, CAF recipients must show that they provide broadband services meeting certain performance requirements that vary by CAF program. Last year, the FCC established uniform testing procedures for CAF recipients to demonstrate that they meet the relevant performance requirements. The testing requires CAF recipients to measure the speed and latency of their broadband services to see if they meet the applicable program benchmarks. Service providers unable to meet their performance requirements lose funding on a sliding scale based on how far they miss the benchmarks. The FCC initially established a July 1, 2020 deadline for CAF recipients to report their broadband performance testing results. However, many service providers raised concerns regarding both the timing and procedures for testing. In particular, these stakeholders noted that the July 1, 2020 reporting deadline would come before many CAF recipients are required to deploy most of their networks. These service providers also took issue with the current cost and availability of testing equipment and requested more time to become familiar with the CAF broadband performance testing process.

The Order attempts to address CAF recipients’ concerns in two ways. First, the FCC will delay the start of testing reporting for many CAF recipients to better align with the deployment deadlines for the different CAF programs. For example, the FCC is in the process of authorizing funding for winning bidders at the CAF Phase II auction that closed last year. These newly-authorized service providers would have at least until 2022 to deploy 40% of their broadband networks. As a result, the FCC will delay the start of testing reporting for CAF Phase II auction winners until January 1, 2023, to ensure a sufficient sample size. Second, the FCC will create mandatory pre-testing periods for CAF recipients to see how their networks and testing equipment perform without risk of losing support for missing the applicable speed and latency program benchmarks. The pre-testing period also will provide time for the cost of testing equipment to decrease and the availability of such equipment to increase. Note that the FCC will not delay the July 1, 2020 broadband performance testing start date for recipients of CAF Phase II model-based support. CAF Phase II model-based support recipients generally are large price-cap carriers that must deploy 80% of their networks by the end of 2020 and that have prior broadband testing experience. A summary of the new pre-testing and testing start dates for the major CAF programs is below:

CAF Program	Pre-Testing Start Date	Testing Start Date
CAF Phase II (model-based)	January 1, 2020	July 1, 2020
Rural Broadband Experiments	January 1, 2021	January 1, 2022
Alternative Cost-Model I	January 1, 2021	January 1, 2022
Alternative Cost-Model II	January 1, 2022	January 1, 2023
CAF Phase II (auction)	January 1, 2022	January 1, 2023

The Order also provides more flexibility in CAF broadband performance testing by, among other things, expanding the number and types of locations that can be used as testing endpoints, clarifying that the same location can be used for both speed and latency testing, and making the speed and latency testing timeframes less rigid. These changes should help lower the compliance burdens on smaller providers.

You will find more details on some of the most significant October meeting items after the break:

Measuring CAF Recipients’ Broadband Performance: The draft Order on Reconsideration would modify the uniform testing methodologies for all carriers receiving Connect America Fund (“CAF”) support to use for speed and latency testing established by the Wireline Competition Bureau, Wireless Telecommunications Bureau and Office of Engineering and Technology last year, and provide flexibility based on carrier sizes, networks and technical abilities. The modifications would, for example, align testing dates more closely with build-out obligations and establish a pre-testing period so that carriers can address any issues without penalty before formal testing and reporting begins.

911 Fee Parity: The draft Declaratory Ruling responds to a primary jurisdiction referral from a dispute between 911 districts in Alabama and BellSouth and other telecommunications carriers. The federal NET 911 Act prohibits states from discriminating against interconnected VoIP services by assessing a higher 911 fee than is assessed on traditional telecommunications services. Under Alabama law, local telephone services were assessed per “line” to the network while VoIP services were assessed per telephone number (not per line). The Declaratory Ruling is intended to ensure parity between VoIP services and traditional telecommunications services by clarifying that the NET 911 Act provision applies to the total amount of 911 fees that a subscriber pays for the same 911 outbound calling capability. Thus, even if the per-unit assessment is the same, the state may not impose a larger total fee on VoIP providers.

Tariff Rules Modernization: The draft Report and Order would adopt two uncontroversial changes to the FCC's tariff filing requirements that were the subject of a 2018 Notice of Proposed Rulemaking and Interim Waiver Order released nearly a year ago. Specifically, the Order would allow carriers to cross-reference their tariffs and those of their affiliates, and would remove the requirement that certain carriers file short form tariff review plans 90 days before their annual interstate access charge tariff filings are effective. The requirements have become outdated now that tariffs are submitted and reviewed electronically, and annual access charge filings have diminished in complexity.

The release of the NPRM was our first look at the specifics of a proposal that broke a month ago. The NPRM does not propose a specific budget, primarily raises questions about how to proceed, and does not contain any proposed rules. Nevertheless, opponents of the proposal have been most vocal since word of the NPRM came out, and we expect those USF stakeholders to continue in opposition to the approach. Meanwhile, proposals to reform USF contributions remain stalled (and lacking any consensus), while the contribution factor hovers around 20% of assessable revenues.

Section 254 of the Communications Act requires the FCC to establish “sufficient and predictable” mechanisms to promote universal service goals. Funding must be explicit (ending the pre-1996 Act era of implicit USF subsidies) and funding must be available on an equitable and nondiscriminatory basis, among other things. Through the USF, financial support is provided to reimburse the cost of services under four separate programs—High-Cost (aka “the Connect America Fund”), the Low Income Program (aka “Lifeline”), Schools and Libraries (aka “E-rate”), and Rural Health Care—that implement the FCC’s mandate of ensuring all Americans have access to universal service. Presently, each program operates with some form of annual funding cap or estimated budget but the total amount differs based on the specific needs or demand.

With the NPRM, the FCC proposes for the first time to establish an overall cap on the Universal Service Fund. The NPRM states at the outset of the discussion that one of its goals is to promote a debate about the relative effectiveness of the USF programs—indicating that there may be some basis to the reservations USF stakeholders have expressed. The FCC seeks comment on whether the overall cap should be set at $11.42 billion—the total of the 2018 authorized budgets for the individual programs (and $3 billion above the actual expenditures of the programs).

The NPRM contains a number of questions about how a cap should operate, whether to index the cap to inflation, whether one-year projections or five-year projections should be used and what would happen if the budget cap is reached. In addition, in a surprise, the NPRM asks whether the budgets for the E-rate program and the Rural Health Care program should be combined in a single budget. Commissioner Starks called out this proposal as raising “an alarm for me” and even Commissioner O’Rielly pronounces himself “not sold” on the proposal. With respect to Lifeline, the NPRM does not propose any changes to the program. Commissioner O’Rielly claims the proceeding is not a “back door” cap on Lifeline – although he states he would be willing to establish such a cap directly.

Looking Ahead

This is setting up to be a particularly contentious debate. One side downplays the proposal as simply encouraging a “healthy debate” and not placing any immediate limits on expenditures, while the other side argues that the proposal would undermine universal service policies and eventually pit one program against another in competition for funds. Now that the details of the proposals are out, USF stakeholders are expected to weigh in. Already, many USF-focused organizations have expressed concern about the proposal, and the NPRM is not likely to allay any of those concerns.

Notably missing from the NPRM is a discussion of USF contributions. Although logically distinct from operation of the programs themselves, it is no secret that even the current size of the Fund places pressure on the current system of supporting USF through end user interstate and international telecommunications revenues. For half of 2018, the USF contribution factor exceeded 20%, and early demand projections for the Third Quarter of 2019 make a return to a 20% factor a distinct possibility. The FCC last seriously considered contributions reform in 2008, but proposals have stalled and the Federal-State Joint Board is deeply divided on how to proceed. Changes to the contribution system do not appear likely any time soon, regardless of what happens with this NPRM.

The FCC imposed the rate floor in 2011 due to concerns that rural carriers could use USF support to offer rates below those found in urban areas for comparable services. The agency found such action would undermine its duty to support “reasonably comparable” services between rural and urban areas. The rate floor reduces the USF support for carriers whose basic voice rates (plus state-mandated fees) fall below a FCC-set floor based on charges for comparable service in urban areas. However, the rural rate floor continued to increase following its adoption, eventually surpassing the charges for service in some urban areas. In response, the FCC froze the rate floor in 2017 (at $18) while it considered reforms to the policy. In the absence of further action by the agency, the rate floor would jump to nearly $27 in July 2019, likely leading to concomitant price increases for rural customers.

In support of the rate floor elimination, the FCC plans to conclude that the policy created a perverse incentive for carriers to raise rural rates to avoid losing USF support. The agency also would find that this incentive particularly hurt older consumers and Tribal area residents by hampering access to affordable telecommunications services. The FCC anticipates finding that the rate floor places unnecessary regulatory burdens on rural carriers, who must seek authorization from state authorities and satisfy customer notification requirements for rate hikes. Finally, the agency would question prior claims that rural carriers used USF support to offer artificially low rates and note that CAF recipients must meet strict buildout obligations that prevent carriers from failing to put their subsidies to use.

The rural rate floor would be eliminated 30 days after publication of the proposed order in the Federal Register. All rural carriers subject to the rate floor, as well as consumer advocacy groups, should closely review the proposed order and work with counsel to assess its impact. It remains to be seen what level of support the proposed order receives at the meeting. Both Republican Commissioner O’Rielly and former Democratic Commissioner Clyburn strongly opposed eliminating the rural rate floor when the FCC froze it in 2017. At the time, the Commissioners argued that rural carriers should recoup some revenue from their subscribers first before relying on USF support and called for means-testing CAF support in lieu of eliminating the rate floor. While there is no indication that Commissioner O’Rielly has softened his views or whether current Democratic Commissioners Rosenworcel and Starks oppose the elimination of the rate floor, it is likely that the proposed order will draw at least some dissent. Such dissent may fuel calls for reconsideration or subsequent appeals of the rural rate floor elimination following the April meeting.

You will find more details on the significant April meeting items after the break:

Spectrum Incentive Auction: The draft Public Notice would propose auction application and bidding procedures for licenses in the Upper 37 GHz (37.6-38.6 GHz), 39 GHz (38.6 GHz-40.0 GHz), and 47 GHz (47.2-48.2 GHz) bands. In the first auction phase, participants would bid for generic 100 megahertz blocks in the three mmW bands. The first auction phase also would determine the amount of incentive payments due to incumbent licensees that opted to relinquish their existing spectrum holdings. The second auction phase would establish the specific frequency assignments awarded to the auction winners. The actual number of licenses available for auction is not yet settled and will depend upon how many incumbent licensees previously agreed to give up their existing spectrum holdings for payment or accept modified licenses. The FCC would announce the particular licenses available at auction in advance of the auction application deadline. The FCC expects to complete the auction by the end of 2019.

37 GHz/50 GHz Band Access: The draft Order would facilitate the auction of the Upper 37 GHz band by establishing procedures for the Department of Defense (“DOD”) to operate in this spectrum on a shared basis with commercial wireless operators under limited circumstances. Specifically, the FCC would review DOD requests to use Upper 37 GHz band frequencies, contact potentially-affected commercial wireless licensees, and help coordinate shared usage, if possible. The draft item also would permit the licensing of Fixed-Satellite Service earth stations to transmit in the 50 GHz (50.4-51.4 GHz) band to potentially provide faster, more advanced services.

OTARD Reform: The draft Notice of Proposed Rulemaking would reform the FCC’s OTARD rule, which currently protects only end-user antennas (e.g., satellite TV dishes) from state, local, or private restrictions. Under the FCC’s proposal, the OTARD protections would be extended to hub or relay antennas used by fixed wireless providers that represent the backbone of emerging 5G networks. The FCC would seek input on how reforming the OTARD rule would impact small antenna infrastructure deployment, particularly in rural areas. The FCC anticipates retaining OTARD rule exceptions for state, local, and private restrictions on antennas based on public safety issues or historic preservation objectives, so long as the restrictions are not overly burdensome and apply in a nondiscriminatory manner.

Legacy Regulation Forbearance: The draft Order would partially grant a petition filed by USTelecom asking the FCC to forbear from enforcing certain legacy long-distance service regulations applicable to former Bell Operating Companies (“BOCs”) and other incumbent carriers. First, the FCC would no longer require incumbent rate-of-return carriers to offer long-distance service through a separate affiliate. Second, the FCC would grant incumbent carriers relief from the “provisioning interval” requirement obligating them to fulfill telephone exchange service and exchange access requests within the same period that they provide such services to affiliated entities. Third, the FCC would refrain from requiring incumbent carriers to submit reports about their legacy “special access” services. Finally, the FCC would eliminate a BOC-specific requirement to provide nondiscriminatory access to poles, conduits, and rights-of way, finding the obligation duplicative of a similar access rule already imposed on all local exchange carriers. The FCC plans to hold off on USTelecom’s request that it forbear from enforcing its incumbent carrier network element unbundling and resale mandates, but the agency likely will take up this issue before the end of the year.

Rate Floor Elimination: The draft Order would abolish the USF “rate floor” that limited the amount of Connect America Fund support received by some rural carriers to build and maintain networks in underserved areas. Today, if a carrier elects to charge its customers less than the rate floor set by the FCC for voice service, the difference between the amount charged and the rate floor is deducted from the amount of USF support received by the carrier. The FCC plans to conclude that this process results in artificially-inflated rates for rural customers and should be eliminated, along with all of the rate floor’s associated reporting and customer notification requirements. The FCC previously froze the rate floor for two years while it considered reforms and the rule’s elimination would prevent a nearly 50% increase in the rate floor scheduled to take effect in July 2019.

Highlights from the 10th Annual Update will include:

• Unpacking the first significant revisions to the Form 499-A Instructions in several years.
• What’s next for the E-rate program after the amortization waiver and Category 2 budget recommendations.
• The impact of NaLA v. FCC on proposals to modify the Lifeline program.
• The transition to High Cost Phase II support and increases in the Rural Healthcare budget.
• Prospects for contributions reform in 2019.

Under the FCC’s proposal, the Fraud Division would be comprised of existing Enforcement Bureau staff reassigned from other divisions who currently work on USF-related investigations. Once established, the Fraud Division is expected to collaborate with the FCC’s Office of the Inspector General, the Department of Justice, and other federal and state agencies to prosecute fraud involving USF programs. But beyond its proposed basic composition and collaborations, the FCC offered few details regarding how the new Fraud Division fits into its existing enforcement structure. For example, the Order provides no information regarding the anticipated size or leadership of the Fraud Division. The Order also does not explain whether the proposed Fraud Division would operate as a replacement for or some other evolution of the Enforcement Bureau’s existing USF Strike Force established in 2014, which the FCC similarly charged with combating waste, fraud, and abuse in USF programs. In addition, the Order does not indicate what role, if any, the new Fraud Division would have in prosecuting violations involving other FCC-supported programs, such as the Telecommunications Relay Services. Finally, unlike the other Enforcement Bureau divisions, which generally are organized around a broad subject matter (e.g., spectrum, media), the new division would be organized around a particular violation: USF fraud. Thus, it remains to be seen how the new Fraud Division would operate in concert with its concomitant divisions during investigations and enforcement actions.

As the FCC’s Fraud Division proposal involves internal Enforcement Bureau reorganization and does not alter existing regulations, it is not subject to notice and comment rulemaking. In accordance with federal law, however, the Fraud Division will not be established until the FCC’s reorganization plan receives approval from the White House Office of Management and Budget as well as both the House and Senate Appropriation Committees. The FCC did not provide a timeframe in which such approval is expected.

Text Messaging Classification: The draft Declaratory Ruling would classify the two most popular forms of text messaging – Short Message Service (“SMS”) and Multimedia Messaging Service (“MMS”) – as information services subject to light-touch regulation, and not commercial mobile services required to comply with legacy common carrier rules. In doing so, the FCC would note that text messaging services possess the capacity to store and retrieve information normally found in information services, such as email. FCC rules significantly curtail the ability of common carriers to block the transmission of communications. The FCC is concerned that applying the common carrier classification to text messaging would prevent service providers from utilizing anti-spoofing, anti-spam, and anti-robotext technologies. By officially declaring text messaging an information service, the FCC is hoping to spur further adoption of these blocking technologies and keep text-massaging relatively spam-free.

Reassigned Numbers Database: The draft Report and Order would establish procedures to create a single database that will enable robocallers and others to verify whether a particular number has been permanently disconnected, meaning the number may have been reassigned to a new consumer. With limited exceptions, federal law prohibits robocalls to wireline and wireless phones without the called party’s prior consent. As a result, a business could be subject to liability for making a call to what it thought was a consenting customer when the number actually was reassigned to a new consumer that never provided consent to receive such traffic. The FCC expects the database to reduce these incidents after its implementation, which could occur as early as next year. But just as important as what the draft item would do is what it would not do. The FCC would not establish a safe harbor for callers that rely on the database but still reach a number assigned to a non-consenting consumer. In fact, the FCC explicitly would decline to address outstanding issues regarding the definition of an automatic telephone dialing system and potential liability for calls to reassigned numbers stemming from the D.C. Circuit’s ACA International v. FCC decision earlier this year, stating that it will take up these issues in a separate proceeding.

Spectrum Frontiers Auctions: The draft Report and Order would adopt rule changes to facilitate a consolidated auction of high-frequency spectrum in the Upper 37 GHz Band (37.6-38.6 GHz), 39 GHz Band (38.6-40.0 GHz), and 47 GHz Band (47.2-48.2 GHz). The draft item would modify the band plans for these frequencies to move from 200 megahertz channels to 100 megahertz channels to facilitate incumbent repacking, ensure consistency with international allocations, encourage equipment standardization across spectrum bands, and promote secondary market transactions. The new licenses would be auctioned on a Partial Economic Area (“PEA”) basis. The draft item also would lay the groundwork for the FCC’s second incentive auction. The 39 GHz Band is home to incumbents holding licenses in non-contiguous spectrum blocks that overlap multiple PEAs. In order to resolve these encumbrances, incumbents would be afforded the options of either modifying their licenses or relinquishing their licenses in exchange for “vouchers” of “equivalent value” to use in bidding for new licenses at the auction or cash incentive payments. The FCC expects to complete the auction by the end of 2019.

Rural Broadband Funding: The draft Report and Order, Notice of Proposed Rulemaking, and Order on Reconsideration would offer additional funding to certain carriers, predominately located in rural areas, that currently receive so-called “model” (versus legacy rate-of-return) support under the Connect America Fund. In exchange for additional funding of up to $200 per location, the carrier would need to expand the availability of broadband service meeting the FCC’s current high-speed benchmark of 25 Mbps download/3 Mbps upload in current service locations and provide broadband service of at least 10 Mbps download/1 Mbps upload speeds in new service locations. The item would provide opportunities for legacy rate-of-return carriers to receive additional funding and transition to model-based support if they can meet the high-speed benchmark. The item also would seek comment on whether the FCC should award support in areas “overlapped” by unsubsidized competition through an auction. The FCC would ask how it should determine whether an area is sufficiently overlapped, the appropriate size of the areas to be auctioned, and the auction bid weighting methodology. Finally, the draft item would deny reconsideration of the FCC’s decision earlier this year to increase model-based support.

Communications Marketplace Report: The draft Report would provide an overview of competition in mobile wireless, fixed broadband, audio, video, and satellite communications markets. The Report would assess the state of communications deployment and barriers to market entry. It also would compile a list of geographic areas not served by any provider of advance telecommunications. The FCC is required to issue the Report this month under the RAY BAUM’S Act passed earlier this year. The Report consolidates and replaces a number of separate reports covering different areas of the communications industry, such as the annual mobile wireless competition report required by Section 332 of the Communications Act and the report on cable industry prices required by Section 623 of the Communications Act. However, the broadband deployment report required by Section 706 of the Communications Act would remain separate, along with other FCC reports not covered by the RAY BAUM’S ACT. The next Report is due by the end of 2020.

The Mobility Fund provides financial support to wireless service providers to maintain and extend mobile broadband and voice services in unserved and underserved areas. The FCC plans to give out over $4.5 billion in support through the MF-II auction to expand 4G LTE coverage in places lacking such service. The Order addresses four key issues:

1) Relaxing Letter of Credit Requirement: The FCC requires a MF-II auction winner to obtain a letter of credit covering the support received, which allows the FCC to recover funding in the event the service provider fails to meet its performance milestones. Recognizing the significant costs of obtaining a letter of credit, the FCC will allow a service provider to significantly reduce the letter of credit’s value (and simultaneously reduce the letter of credit’s cost) once the service provider meets its 80 percent service milestone. The FCC also stated that a service provider can cancel the letter of credit once it meets its final performance milestone. With these changes, the letter of credit obligations for the MF-II auction match the letter of credit obligations imposed in the Connect America Fund Phase II (“CAF-II”) auction, which covers fixed broadband deployment.

2) Clarifying Collocation Obligation: The FCC initially indicated that funding recipients would be required to provide reasonable collocation by other service providers on “all” towers that the recipients owned or managed. A number of service providers asked the FCC to reconsider this requirement, pointing out that a similar collocation requirement applicable to earlier auction winners only covered “newly constructed” towers. The FCC resolved this discrepancy by clarifying that the collocation requirement only applies to newly constructed towers in the areas where the service provider receives MF-II support.

3) Maintaining Budget and Disbursement Schedule: The FCC refused to increase the budget for the MF-II auction in response to wireless industry claims that it did not provide enough money to achieve full 4G LTE coverage in all eligible areas. The FCC affirmed its budget calculation methodology and stated that it would re-evaluate if more funding is necessary in the future. The FCC denied requests to base the budget on wireless carriers’ projected costs, expressing concern that such a system would encourage inflated claims and waste. The FCC also affirmed its monthly disbursement schedule after carriers asked it to allow larger support payments early in the network construction process. While the FCC recognized that carriers would likely incur most costs early in the network construction process, it found that trying to match each carriers’ costs during the deployment process would strain the MF-II budget. The FCC also noted that CAF-II will operate on a monthly disbursement schedule.

4) Preserving Performance Requirements: The FCC rejected calls to lower the minimum level of service required from MF-II auction winners from the current 10/1Mbps median data speed and 100 ms latency benchmarks. The FCC found such benchmarks necessary to ensure that rural offerings keep pace with their urban counterparts and do not become a “second-class” service.

The FCC also declined to extend bidding preferences to small businesses in the MF-II auction, which Commissioner Clyburn supported, or adopt new limitations on winning carriers entering into equipment exclusivity arrangements. In addition, the FCC retained the role played by the Universal Service Administrative Company in verifying the data wireless providers submit to demonstrate compliance with their MF-II auction buildout requirements.

With the last MF-II auction reconsideration petitions resolved, the FCC can move on to finalizing the set of areas eligible for funding. The FCC recently issued an initial map of areas presumptively eligible for funding. The FCC’s eligibility determinations will be subject to a challenge process, which is scheduled to begin on March 29, 2018. However, it remains unclear when the challenge process will conclude and the FCC will announce the final list of areas eligible for support through the MF-II auction. Whenever it occurs, the MF-II auction will have transformative impacts on rural wireless broadband deployment, so stakeholders should assess whether funding opportunities exist in their service areas and consider participating in the auction process.

The Auction is the second part of CAF Phase II. The initial part of CAF Phase II occurred in 2015, when ten price cap carriers accepted offers of support calculated by a cost model in exchange for the providers’ commitment to deploy and maintain voice and broadband service in high cost areas. Service providers that seek to participate in the Auction will bid on providing service to eligible high cost areas including those areas where incumbent price cap carriers declined the support calculated by the cost-model. In 2016, the FCC adopted the Phase II Auction Order, which established the rules for the Auction’s bidding process including the bidder performance obligations, application mechanism, bidder eligibility criteria, eligible areas, and post-auction obligations. More recently, in March 2017, the FCC adopted bidding weights for the different performance category tiers for Auction 903 (as previously discussed here). The Notice takes final steps towards executing the Auction by resolving specific details of the mechanics established in these earlier proceedings.

The FCC previously decided that geographic areas eligible for bidding would be designated by census block but reserved the right to require bids be submitted based on census tracts in order to limit the number of discrete biddable units. In the Notice, the FCC proposes to use census block groups containing one or more census blocks as the minimum geographic area that can be bid on during the Auction. This is intended to provide flexibility to providers regarding the scope of the network area since the use of census tracts might require providers to bid on a broader geographic area than they want to cover. The Notice reaffirmed that the Wireline Competition Bureau will release an updated list of eligible census blocks using recently available Form 477 data at least three months prior to the deadline for short-form applications.

APPLICATION REQUIREMENTS

Auction 903 will involve a two-stage application process in which a short-form application will be used pre-auction to establish a bidder’s eligibility to participate while the long-form application will involve a more extensive review of bidder qualifications after bidding is complete. The Notice seeks comment on the type of information an applicant should be required to provide in both its short- and long-form applications. The FCC makes the proposals regarding the following matters in the Notice:

State Selection and Overlapping State Bids

An applicant must identify the states in which it intends to bid for support in the short-form application. The applicant will be restricted to bidding on eligible census blocks in the states identified in its application. Separate applicants that are commonly-controlled or are parties to a joint bidding agreement may not bid in the same states. The Notice provides entities with options to avoid running afoul of the restriction on overlapping bids. A company has the option of submitting a single application to qualify for the Auction then designating the operating company that would receive the support if the bid is successful. If a parent company or a consortium/joint venture is a winning bidder in the Auction, the FCC proposes to allow the entity to designate at least one operating company for each state that will be receiving Phase II support. The winning bidder would not be allowed, however, to apportion a package of eligible census block groups in a winning bid among multiple operating companies.

Alternately, parties that have common control or are part of joint bidding arrangement can bid independently, just not for the same states. To ensure this state overlap provision is abided by, the FCC proposes requiring each applicant to certify that it knows it cannot place bids in the same state as (i) another commonly-controlled entity; (ii) another party to a joint bidding arrangement related to the Auction that it is a party to; or (iii) any entity that controls a party to such an arrangement. Additionally, the FCC propose to require short-form applicants to briefly describe any agreements relating to participation of the applicant in Auction 903 bidding. In the long-form, winning bidders will be required to submit updated information on any such agreements as well as possibly disclosing the specific terms, conditions, and parties involved.

Performance Tier and Latency Combinations

The FCC previously created an auction framework that included four technology-neutral broadband performance tiers with increasing speeds and usage allowances along with commitments to either low or high latency (“public interest obligations”). In the Notice, the FCC outlines its proposals for the information and process to be used in assessing an applicant’s ability to meet the public interest obligations it selected on the short-form application.

• Operational Information. For each chosen performance tier and latency combination, an applicant must show how it will provide service and that it is reasonably capable of meeting the public interest obligations for each state it selects. Included in an Appendix of the Notice are a list of questions that each applicant would need to provide brief, narrative responses to as a part of its application.
• Required Information for Applicants Proposing to Use Spectrum. An applicant proposing to use spectrum to provide service will need to (i) identify the spectrum bands it will use for last mile, backhaul, and any other part of the network; (ii) describe the amount of uplink and downlink capacity (in MHz) that it has access to in these bands for last mile; (iii) explain the authorization it has to operate in the spectrum band; and (iv) provide call signs and/or application file number associated with its spectrum authorizations. In addition, for the long-form application, the FCC proposes to require each applicant to provide any updates to the relevant spectrum authorizations and certify that the applicant will have access to the spectrum band it proposes to use for at least ten years from the funding authorization date. The Notice includes a list of spectrum bands the FCC has identified as those likely to be used for last mile connectivity. Comment is sought on the sufficiency of the uplink or downlink bandwidth in these bands. A provider that intends to offer satellite service must also identify any space station licenses that will be used in the areas where it intends to bid.
• Use of Information Provided to FCC in Other Contexts. The FCC proposes to allow staff to consider any information that a provider has submitted to the FCC in other contexts when assessing whether a provider is reasonably capable of meeting its public interest obligations. To aid with this process, applicants will be required to provide any relevant identifiers in its short-form application including FCC registration number, associated study area codes, and Form 499 filer ID number.
• Precluding Eligibility of Certain Technologies from Certain Performance Bids. The FCC proposes to exclude applications that propose to use certain technologies from bidding on certain performance tier and latency combinations. For example, satellite providers would be prohibited from selecting low latency in combination with any of the performance tiers.

The FCC also proposes that, in addition to providing audited financial statements, applicants should identify and explain specific information from their most recent financial statements on the short-form application. Earlier rules determined that applicants that are not subject to audits in the ordinary course of business but have provided voice, broadband, or electric transmission services would be permitted to wait until after it is announced as a winner bidder to provided audited financial statements. The FCC seeks comment on whether such providers should be required to submit unaudited information during the pre-auction application process.

Additionally, the FCC intends to use a five point scale, responses to one financial question and status of four financial metrics, to assess financial information. Specifically, the FCC will ask whether an applicant received an unmodified, non-qualified opinion from an auditor of its prior year-end audited financial statement. The four metrics to be considered are (1) latest operating margins, where a margin greater than zero receives one point; (2) time interest earned ratio (TIER), where TIER/interest greater than or equal to 1.25 receives one point; (3) current ratio (i.e., current assets divided by current liabilities), where a ratio greater than or equal to 2 would receive one point; and (4) total equity divided by total capital, where a result greater than or equal to 0.5 would receive one point.

Applicants would also need to certify in the short-form application that they performed due diligence regarding participation in the Auction including evaluating all technical and marketplace factors that may have an impact on the level of support being bid on.

RESERVE PRICES

The FCC previously determined that the reserve price, representing the maximum amount of support the FCC is willing to provide for service to a particular area, will be set using the Connect America cost model (CAM) and bids that exceed the reserve price will not be accepted. In the Notice, the FCC proposes to set the reserve price to be the total of the support amounts calculated for each eligible census block in a census block group, subject to the support cap on extremely high-cost areas. For census blocks with costs that exceed the high-cost threshold, the FCC proposes imposing a funding cap of $146.10 per location per month. The reserve price in those extremely high-cost areas would then be equal to $146.10 multiplied by the number of locations that census block.

BIDDING PROCEDURE

The FCC proposes to use a descending clock auction that will consist of sequential bidding rounds for the Auction. The system would announce a base clock percentage at each round that would be used to delimit the acceptable prices in each round of the Auction. The base clock would begin at a high level, indicating a support amount equal to the full reserve price, and then it would descend in subsequent rounds as bidders indicate the bid percentage (equal to a certain support amount) they are willing to accept to provide service in that area.

The base clock percentage will continue to descend with subsequent rounds until the aggregate amount of support represented by bids in a round is no greater than the support amount budgeted for that round. Once this happens, the system will assign support to bidders in areas where there are no competing bids. If there are still competing bids, the system will continue with subsequent rounds and the clock percentage will continue to descend until there is no competition.

The Notice also seeks comment on the amount of information that should be made available to the public and to bidders during the Auction process. The FCC proposes to withhold from the public information related to the short-form application before the Auction. After the Auction results are announced, the FCC would make available short-form application information and bidding data, except confidential financial information, operational information, and proxy bidding instructions. The FCC will make information available to bidders during the Auction about the status of their bids and the areas in the states in which they are qualified to bid.

The FCC created the rural rate floor rule in 2011 in response to concerns that rural carriers used universal service support to subsidize artificially low rates. The FCC found this disparity potentially undermined its duty to support “reasonably comparable” services between rural and urban areas. As a result, the rural rate floor rule reduces the universal service support for carriers whose rates (plus state-mandated fees) fall below a floor set by the FCC based on charges for comparable service in urban areas. Following its adoption, the rural rate floor continued to increase, eventually surpassing the charges for basic phone service in some urban areas.

Rural telecommunications providers and consumer advocates allege that the rural rate floor undercuts the FCC’s obligation to ensure the affordability of basic services. Critics claim that the rule results in rural customers losing access to basic voice service, with a particular impact on older Americans and Tribal communities. Critics also claim that the rural rate floor fails to account for lower average incomes in rural areas and support more localized rate floor calculations to ensure the costs of basic services in rural areas remain reasonably comparable to charges in urban areas.

The FCC seeks comment on these arguments and whether it should reform the rural rate floor methodology or eliminate the rule entirely. Specifically, the FCC asks whether rural carriers should be allowed to charge lower rates than their urban counterparts without losing subsidies, and whether it should replace the single, national rate floor with more localized state and regional rate floors. The FCC also requested input on how the rural rate floor intersects (and potentially undermines) state authority over rate regulation. The FCC seeks comment on the rural rate floor’s impact on universal service contributions, noting that current rules redistribute any subsidy reductions to other carriers instead of lowering carriers’ overall contribution burden. Finally, reflecting its recent emphasis on economics-driven decision making, the FCC invited commenters to submit cost-benefit analyses, questioning whether the rural rate floor and its accompanying reporting obligations impose unnecessary administrative and compliance costs.

The FCC also froze the rural rate floor at $18 (the current limit), preventing an increase to $20/month scheduled for July. The freeze will expire in two years if the FCC does not take any action to reform the rural rate floor.

The proposed rulemaking differs significantly from the discussion draft the FCC circulated weeks before the meeting. Most importantly, the discussion draft stated that the FCC expected commenters to strongly support eliminating the rural rate floor rule and indicated the FCC would eliminate the rule later this year. By contrast, the proposed rulemaking leaves the door open to keeping some reformed version of the rural rate floor alive. The differences between the discussion draft and the proposed rulemaking provide rare insight into the FCC’s deliberations, a consequence of Chairman Pai’s recent process reforms designed to increase transparency.

Despite the softened language, both Commissioner O’Rielly and Commission Clyburn criticized aspects of the proposed rulemaking. Commissioner O’Rielly suggested he would have dissented if the proposed rulemaking remained aimed at eliminating the rural rate floor. The Commissioner expressed his support for the rule, stating that rural carriers should recoup some revenue from subscribers before relying on federal subsidies. The Commissioner noted that the rule does not prevent carriers from charging lower rates below the rural rate floor; it just prevents them from using subsidies to keep such rates artificially low. In contrast to Chairman Pai, Commissioner O’Rielly questioned the assumption that rural customers cannot afford unsubsidized rates and called for means-testing support to rural and other high-cost areas. In an unexpected dissent, Commission Clyburn echoed Commissioner O’Rielly’s call for means-testing high-cost support in order to crack down on universal service waste. The Commissioner advocated for comprehensive reform in how the FCC hands out high-cost support and dissented because the proposed rulemaking was limited to rural rate floor issues.

Whether the rural rate floor will undergo significant reform or even survive the proposed rulemaking remain open questions. What is certain is that telecommunications issues impacting rural and other high-cost areas will remain an area of FCC focus. Comments on the proposed rulemaking will be due 30 days after Federal Register publication, with reply comments due 45 days after Federal Register publication. If you are interested in becoming involved in this proceeding, or have questions about how the proposed rulemaking impacts your business, please contact the authors of this post or your regular Kelley Drye contact person.

In 2011, the Commission’s USF/ICC Transformation Order established the CAF and provided for two phases of funding for expanding broadband coverage to unserved locations. The USF/ICC Transformation Order established rules wherein CAF Phase II would be provided through the combination of a forward-looking cost model of constructing modern multi-purpose networks and a competitive bidding process. The competitive auction process serves as a mechanism to determine support in geographic areas where price cap carriers declined the support determined by the cost model. In May 2016, the Commission created an auction framework that included four technology-neutral broadband performance tiers with increasing speeds and usage allowances along with commitments to either low or high latency. In addition, the Commission issued a Further Notice of Proposed Rulemaking (FNPRM) that sought comment on specific procedures for weighting the bids for the Phase II auction.

This Order establishes the bid weights for the CAF Phase II auction. According to the Press Release, the goal of the weighting process is to give credit to bids that offer more robust service. The Order does this by adding specified values to a bid, depending on the performance tier and latency. (A lower bid is a more competitive bid, so those assigned a positive weight are at a disadvantage.) All bids in the reverse auction will be considered simultaneously across performance tiers such that bidders that propose to meet one performance tier will be directly competing against bidders proposing to meet other standards. The weighted values are as follows:

• Minimum (speeds of at least 10 Mbps downstream and 1 Mbps upstream) gets 65;
• Baseline (speeds of at least 25 Mbps downstream and 3 Mbps upstream) gets 45;
• Above-baseline (speeds of at least 100 Mbps downstream and 20 Mbps upstream) gets 15;
• Gigabit (speeds of at least 1 Gbps downstream and 500 Mbps upstream) is 0;
• High latency gets 25; and
• Low latency gets 0.

• Deny a petition requesting that it reconsider the decision to score bids relative to applicable reserve price;
• Grant a petition requesting that it reconsider its decision to re-auction areas served by high latency providers that do not meet a certain subscribership level. Instead, the Commission will provide all authorized recipients with a full ten year term of support if they comply with the Phase II terms and conditions; and
• Grant a petition to lower the usage allowances for the above-baseline and Gigabit performance tiers from unlimited to 2 terabytes of data. As a result, providers in these two tiers will be allowed to cap data usage at 2 terabytes of data.

The Commission will seek comments next about the auction mechanics. Upon completion of that proceeding, the Commission will set a final auction date, which is expected to be before the end of 2017.

Proposals from traditional and non-traditional eligible broadband providers will be accepted through Tuesday, October 14, 2014, at either the census block or the census tract level as chosen by the applicant. Winning applicants, all of whom will be selected simultaneously, will receive ten years of recurring support, rather than one-time support. The Order also details obligations for winning bidders, including obtaining Eligible Telecommunications Carrier (ETC) status (if not already held), build-out milestones, and reporting requirements, along with enforcement measures in the event of non-compliance.

For more information, please click here for our client advisory.

In Friday's Order, the FCC establishes a $100 million budget for the experiments and sets the criteria for selecting which proposals to fund. Funding will be made available for three categories of projects in areas where the incumbent is a price cap carrier:

• $75 million for projects delivering service at 25 Mbps downstream and 5 Mbps upstream in high cost areas for the same or lower amount of support than will be offered to carriers in CAF Phase II
• $15 million for projects delivering service at 10 Mbps downstream and 1 Mbps upstream in high cost areas
• $10 million for projects delivering service at 10 Mbps downstream and 1 Mbps upstream in extremely high cost areas

The Commission invites proposals utilizing a diverse array of technologies, including fiber and wireless networks, and will be open to non-traditional providers, such as electric utilities and wireless broadband providers. The Order establishes rigorous buildout milestones, with strong enforcement mechanisms to ensure compliance. In addition, the proposals will be required to identify whether the applicant will offer a low-income broadband plan, and further requires awardees to offer Lifeline service once they have been designated as an eligible telecommunications carrier (“ETC”). The Commission also will provide entities seeking to serve tribal areas with a 25% bidding credit. However, the Order also sets limits on funding available. Specifically, in order to ensure a diversity of experiments, the Order caps the size of projects and the amount of funding that a carrier may accept.

Final applications are due 90 days after the release of the Order, and the Commission expects to make its selections by the end of the year. The Order also includes a Further Notice of Proposed Rulemaking, which seeks comments on how the CAF Phase II competitive bidding process can offer bidding credits in situations where states have agreed to provide matching funds to expand rural broadband.

The text of the Order and rules have not yet been released, although Commission staff has given indication the release will be prompt. When the Order becomes available, we will provide additional details.

In this 5th annual webinar, Kelley Drye will walk you through the USF changes you need to know, with a focus on changes affecting the 2014 Form 499-A. We also will discuss how to ensure compliance during the year and offer tips for handling USF audits, PQAs, Lifeline IDVs and related inquiries. Our speakers will offer analysis and practical advice based on frontline experience in audits and appeals, and years of providing compliance and enforcement advice in this area.

The following topics will be addressed:

• Major Changes in the Fund’s Programs During 2013
• Changes to Reseller Revenue Procedures in 2014
• Changes in the 499-A Form and Instructions
• Significant Developments in the USF Audit and FCC Appeal Processes
• Lifeline, Contributions and E-rate Enforcement Actions

Steve Augustino, Partner

John Heitmann, Partner

Date:

February 27, 2014 12:00 PM - 1:00 PM EDT

Location:

Webinar

Additional Information:

Please click here to register or contact Alexandra Meaza at 202.945.6674.

This webinar is free of charge. Presentation slides and a recording of the webinar will be available to registrants.

In the final days of the Genachowski era, the FCC’s Wireline Competition Bureau continued to press forward to implement and refine the Connect America Fund (“CAF”). Late yesterday, the Bureau released a number of order and notices on various parts of the CAF that will affect both Tier 2 and Tier 3 local exchange carriers (“LECs”) and their support.

First, to implement the CAF Phase II program in price cap LEC service areas, the Commission ordered the establishment of a process for determining eligible areas for Phase II support. After examining the National Broadband Map to determine whether census blocks are unserved and determining whether unsubsidized competitive providers in served blocks are offering both voice and broadband services, the Commission will put together a list of those census blocks it concludes lack unsubsidized providers and that are, therefore, potentially eligible for support. Such designations would then be open to challenges by both price cap LECs and unsubsidized competitors.

The second possible framework on which the Commission seeks comment would facilitate rate-of-return carriers’ voluntary participation in CAF Phase II, which sets defined support amounts for a defined period of time with specific service deployment requirements and which may prove advantageous for some rate-of-return carriers. Recognizing that rate-of-return carriers already have the option of voluntary conversion to price cap regulation, the Commission seeks comment on what steps it could take to further these conversions and on others issues that may arise in the provision of Phase II support to those carriers.

And, finally, following its questioning in the original CAF Order whether the authorized rate of return for CAF participants should be lower than the current 11.25 percent, the Commission issued a staff report on the proper rate-of-return for LECs participating in CAF programs, concluding that the rate should fall between 8.06 and 8.72 percent. The Commission also issued an accompanying notice seeking comment on that report’s analysis and recommendations.

You can expect the Bureau to continue to press forward on implementing the CAF, even with the Chairman exiting. In fact, we believe a new Phase I order for price cap LECs will be released very soon – possibly today.

These two topics are at the core of what we cover in this blog. The complicated mix of carrier-to-carrier compensation mechanisms, which make how a call is classified critical to determining its cost, has engendered significant litigation involving such issues as VoIP, prepaid calling cards, access charges, reciprocal compensation and many others. Meanwhile, the funding and administration of the $7 billion per year Universal Service Fund is a constant source of audit issues, enforcement actions and rulemaking proposals.

According to the FCC's release, the February 8 agenda will include a Connect America Fund and Intercarrier Compensation NPRM. The agenda item is described this way:

Connect America Fund and Intercarrier Compensation Reform NPRM: A Notice of Proposed Rulemaking to get broadband to all of rural America and spur investment and job creation, by modernizing the Universal Service Fund and intercarrier compensation (ICC) system while cutting waste and inefficiency. Through the use of market-driven, incentive-based policies and increased accountability, the NPRM proposes near-term support for broadband deployment in unserved areas and measures to address ICC arbitrage, as well as a long-term transition from current high-cost support and ICC mechanisms to a single, fiscally responsible Connect America Fund.

Readers should note the reference to "measures to address ICC arbitrage." It appears that some of the compensation issues that have been on hold pending comprehensive intercarrier compensation reform may be singled out for separate action. At the same time, the item raises the long-promised "long term transition" from the current compensation mechanisms. Mark February 8th on your calendar. Will this be the beginning of the end of the FCC's quest?