You will find more information about the items on the December meeting agenda after the break:

Improving Accessibility and Clarity of Emergency Alerts - The EAS NPRM would propose rules to improve the accessibility and clarity of visual messages distributed to the public through the EAS, which advises the public of emergency alerts issued by government entities. The EAS is comprised of a legacy broadcast system that can only relay audio messages and an internet-based Common Alerting Protocol (“CAP”) system that can relay audio, text and visual messages. Due to the fact that alert initiators using the legacy EAS have some discretion regarding the content of the alert message while EAS participants that use video (such as broadcast or cable television operators) must rely on codes embedded in alerts to create a visual message (usually text), the audio and visual messages associated with the alerts may not match. To improve the clarity of EAS test messages, the EAS NPRM would propose the use of the following script as the visual message for all legacy EAS nationwide tests: “This is a nationwide test of the Emergency Alert System issued by the Federal Emergency Management Agency covering the United States from [time] until [time]. This is only a test. No action is required by the public.” For EAS participants that receive an alert from the CAP system, the FCC would propose to change the nationwide EAS test event code that alert initiators include in the alerts so that the following language is displayed in all visual messages: “Nationwide Test of the Emergency Alert System.” The EAS NPRM would also seek comment on how the legacy EAS can be improved to enable alert originators to relay visual text that matches the audio message and how the EAS can be modified to support greater functionality and accessibility.

Facilitating Satellite Broadband Competition – The Satellite Spectrum Sharing NPRM would grant a petition for rulemaking from SpaceX requesting revisions to the spectrum sharing requirements among NGSO FSS systems. The FCC considers applications for NGSO FSS system licenses, which are used to provide broadband services, in groups based on filing date under a processing round procedure. All NGSO FSS system operators within a processing round that are granted a license must comply with the FCC’s spectrum sharing rules and coordinate with each other in good faith to use commonly authorized frequencies. If the NGSO FSS system operators in a processing round are unable to come to a coordination agreement, then a default spectrum-splitting procedure applies. The Satellite NPRM would propose that the spectrum sharing requirement only be applicable to NGSO FSS systems approved in the same processing round. The FCC would seek comment on a rule that would protect systems processed in an earlier round from being subjected to a certain level of interference from systems processed in a subsequent round and on whether interference protection should end after a period of time. To facilitate analysis of potential interference, earlier-round NGSO FSS system operators would be required to share data regarding their beam locations with later-round NGSO FSS system operators subject to confidentiality or non-disclosure agreements.

Promoting Fair and Open Competitive Bidding in the E-Rate Program – The E-Rate NPRM would propose changes to the E-Rate program rules to improve program integrity. The Schools and Libraries program, or E-Rate, funded by the Universal Service Fund, provides discounted telecommunications and broadband services and equipment to eligible schools and libraries (referenced as E-rate “applicants”). To obtain services and equipment through the E-rate program, an applicant must conduct a competitive bidding process among interested service providers that is commenced by submission of FCC Form 470 to USAC, which then posts the form to its website. Applicants consider bids received directly from interested service providers and then seek funding to pay their chosen service providers by filing an FCC Form 471 with USAC. The E-Rate NPRM would recommend the establishment of a bidding portal through which service providers would provide competitive bidding documentation. The FCC would seek comment on whether applicants also should be required to use the portal to submit other documentation, such as bid evaluation matrices, questions from bidders, and contract documents. In addition, the E-Rate NPRM would ask whether service providers should be required to wait a certain period of time before they could access service providers’ bids. Finally, the E-Rate NPRM would request comment on various issues related to the proposed portal, including how the E-rate’s existing portal could be leveraged to accept service providers’ bids, whether any procurement laws or technical issues would preclude or limit the use of a bidding portal and whether the portal should be used as a repository of documents for purposes of meeting recordkeeping requirements.

With these rules, the FCC sets in motion a process for schools and libraries to receive funding for 100% of purchases to provide remote learning and remote library services during the pandemic. This fund will be a significant one-time opportunity for applicants and service providers and is expected to see high demand for funding.

The Report and Order adopted by the FCC establishes the rules and policies that govern the ECP Fund. The FCC designated the Universal Service Administrative Company (“USAC”) as the program administrator. Schools and libraries that are eligible for support under the E-Rate Program are also eligible to request and receive support through the ECF Program.

Funding Window for School Year 2021-22 Purchases Prioritized

In a change from the draft order previously released by the Commission, the Report and Order prioritizes purchases to be used for providing remote learning and remote library services in the next school year (starting July 1). USAC will open a 45-day ECF Program filing window for purchases for the upcoming year. A date for this window has not been set, but FCC Chairwoman Jessica Rosenworcel said she expects it to open in early June.

The filing window will be available for purchases for use during the period from July 1, 2021 through June 30, 2022. Due to the emergency nature of this program, the FCC does not require competitive bidding for eligible purchases (like is required under the E-Rate program). However, it sets a cap for eligible equipment reimbursement of $400 for laptops and connected devices and $250 for Wi-Fi hotspots. For other eligible equipment (modems, routers and devices that combine the two), the FCC did not set a maximum reimbursement but delegated to the Wireline Bureau to provide guidance on reasonable expenses. The FCC similarly did not set a maximum reimbursement for “advanced communications services” but tasked the Bureau and USAC to identify “outliers” beyond an expected $10 to $25 monthly cost per month. The ECF will not fund self-provisioning or the construction of new networks, except in the case where it is demonstrated that no commercial service is available to the area.

Moreover, the FCC sets per-location and per-user limitations on the availability of funding. Reimbursement may be sought only for one fixed broadband service per location, one connected device per user and one Wi-Fi hotspot per user. In addition, the FCC clarified that Wi-Fi hotspots on school buses and bookmobiles are eligible for reimbursement under the ECF.

Funding is limited to uses made primarily for “educational purposes.” To ensure that devices and services are used primarily for educational purposes, the FCC requires schools and libraries to restrict access to users with appropriate credentials (i.e., a student ID or library card). Schools will be required to certify that they are only that they are only seeking support for eligible equipment provided to students and school staff who lacked access to connected devices sufficient to engage in remote learning. The FCC will also require schools to certify that they are only seeking support for eligible services provided to students and school staff who lacked broadband services sufficient to engage in remote learning. “Staff” includes only those staff members engaging in remote teaching or otherwise providing educational services to students (and would otherwise lack access to connected devices and broadband connections).

Prior Purchases

If funding is available after the initial filing window for 2021-22 purchases, the FCC will open a window for funding of purchase already made by schools or libraries to provide remote connectivity. Specifically, this filing window would cover purchases made by applicants between March 1, 2020 (when most jurisdictions closed schools during the pandemic) and June 30, 2021. USAC and the Bureau will announce when this window will open (assuming funding remains available).

As previously mentioned, the application window has not been announced, but we will monitor and relay updates on the ECF Program as they arise.

The new Emergency Connectivity Fund (“ECF”) will reimburse schools and libraries for internet access and connected devices for students and teachers for remote learning and remote library services. The passage of this legislation has been welcomed by the FCC, with Chairwoman Rosenworcel stating, “the American Rescue Plan provides the FCC with new tools to support the millions of students locked out of the digital classroom.”

The legislation requires the FCC to issue rules within 60 days of enactment to provide funding to eligible schools and libraries. Here’s a look at what to expect in the new fund.

Emergency Connectivity Fund Overview

The ECF provides support for the purchase during the COVID-19 emergency of “eligible equipment or advanced telecommunications or information services (or both)” to provide:

• For schools, for use by schools, students and staff outside the school building; and
• For libraries, for use by patrons outside the library location.

The Act provides funding for 100% of costs associated with the eligible equipment, as well as telecommunications and information services. However, funding may not exceed an amount that the FCC determines to be reasonable. Notably, funding is in addition to, and separate from, funding under the FCC’s E-rate program. The Commission received comment in February on three proposals to permit use of E-rate funds to provide off-campus broadband services, but those proposals likely have been usurped by the ECF.

Funding is available during the COVID-19 emergency, and until the June 30th following the date on which the federal government lifts the COVID-19 emergency declaration.

The FCC is required to issue regulations within 60 days of enactment to provide funding to eligible schools and libraries. We expect a public notice to be issued in the coming days. We will, of course, continue to follow development in this important new program.

In this post, we’re going to take a look at developments in the FCC’s $9 billion-per-year Federal Universal Service Fund and more recent pandemic-related efforts to address deficiencies in broadband access that have been exposed by our year of remote work, school and social activities.

On the universal service front, the principal activity surprisingly has as much to do with non-Universal Service Fund (“USF”) programs as with the USF itself. The USF is a $9 billion-per-year fund with four primary programs aimed at different elements of the challenge to bring broadband telecommunications to all. For 25 years, the Fund has aimed to provide support to increase broadband availability in rural areas, in schools and libraries, among low-income consumers and to serve rural healthcare needs. These programs all have been modified significantly in the last ten years to re-focus on broadband services and de-emphasize (but not completely eliminate) support for voice services. The FCC also has focused on ensuring that these programs are run efficiently while protecting against waste, fraud and abuse by actors with mal intent. In 2020 and early 2021, we’ve discussed efforts to establish a new Connected Care pilot program, to waive rules during the pandemic and to implement a Rural Digital Opportunity Fund.

Separately, as the USF contribution factor continues to reach new and staggering heights, attention is again returning to the idea of USF contributions reform. With the contribution factor expected to top 33% in the next quarter, Acting Chairwoman Rosenworcel pledged to Senators Thune and Wicker to work with Congress “to explore how to improve [the contributions] system” in the coming months. We’ll have more on contributions reform in a future blog post.

Special Programs Dwarf the USF

But the big news of 2021 is turning out to be the additional funding that is being provided outside the traditional fund. In legislation since December, Congress has authorized four programs that affect USF beneficiaries, to the tune of over $13 billion.

• In the Consolidated Appropriations Act (“CAA”), Congress authorized a second Telehealth Fund to provide reimbursement for services and equipment used to provide telehealth services during the COVID pandemic. The Telehealth II fund provides $249.95 million in new funding for this program. The FCC already has designated USAC to administer the new fund and promises to adopt criteria for USAC to use in evaluating applications soon.
• Also in December, Congress authorized an Emergency Broadband Benefit of up to $50 per month for services and a one-time benefit of $100 for a qualifying computer, laptop or tablet for low-income consumers during the pandemic. (For tribal subscribers, the benefit is $75 per month). A total of $3.2 Billion is appropriated for this emergency fund. Importantly, the program is open to providers that do not currently participate in the USF programs, expanding access to the funding. The FCC recently adopted rules for the program and you can read our summary here. The program is expected to begin sometime in April.
• Congress recently approved an additional $7.1 Billion over several years for E-rate support for remote learning and remote library services. The legislation authorizes funding for the purchase of eligible equipment, advanced telecommunications services and/or information services used to support education of students at locations other than the school and to support delivery of library services at locations other than the library. This fund will reimburse 100% of the cost of the equipment or services, up to the amount the FCC determines is reasonable. Funding remains available until the June 30th that is one year after the COVID-19 public health emergency order is terminated. The FCC will have 60 days to establish rules for this program.
• Finally, although not related to the COVID emergency, Congress recently appropriated $1.9 Billion to fund the removal and replacement of telecommunications equipment that is deemed to present a national security threat. The FCC has been developing this so-called “Rip and Replace” program for over a year, contingent on the appropriation of funds, after determining in November 2019 to prohibit recipients of federal USF funding to purchase, install or maintain prohibited equipment. The FCC most recently adopted a Further Notice of Proposed Rulemaking to align its reimbursement priorities with the implementing legislation.

To stay up-to-date on these and other USF developments, join us on March 22, 2021 for our annual webinar discussing the state of the federal Universal Service Fund. This webinar, back for its 12th year, provides an in-depth look at all four USF programs and the USF contribution mechanism, highlighting major developments in the last year and trends for the upcoming year. In addition, this year we will discuss how the ongoing pandemic has influenced the importance of the USF and related policy decisions.

This webinar supplements the knowledge our clients gain from the monthly USF Tracker to provide context and analysis of the issues you need to know.

The 12th Annual Update will address the following, among other topics:

• The COVID-19 Telehealth Program
• The Connected Care Pilot and Rural Healthcare Program
• Lifeline and the Emergency Broadband Benefit Program
• E-Rate Outside the Classroom
• The Rural Digital Opportunity Fund and Broadband Mapping
• Rip and Replace
• Contributions Reform

The December meeting may be the first attended by recently-confirmed Republican FCC Commissioner Nathan Simington, who will replace outgoing Commissioner Michael O’Rielly after today’s confirmation vote in the U.S. Senate. In addition, Chairman Pai recently announced that he intends to leave the FCC on Inauguration Day, January 20, 2021. As a result, the January 2021 FCC open meeting will be his last meeting before the change in administration.

You will find more details about the most significant items on the December meeting agenda after the break.

Securing the Communications Supply Chain – The draft Report and Order would require ETCs receiving Universal Service Fund support to remove and replace covered equipment and services posing a national security risk from their networks. It would also establish a reimbursement program to subsidize smaller carriers to remove and replace covered equipment, specifically those providers with two million or fewer customers, once Congress appropriates the estimated $1.6 billion needed to reimburse eligible providers for such costs. The draft Order would establish the procedures and criteria for publishing a list of covered communications equipment or services, and would adopt a reporting requirement for all providers of advanced communications services to annually report on covered equipment and services in their networks.

Modernizing Equipment Marketing and Importation Rules – The draft NPRM would propose updates to the Commission’s marketing and importation rules under its equipment authorization program. The proposed rules would permit, prior to equipment authorization, conditional sales of radiofrequency devices to consumers under certain circumstances. The NPRM also would propose to allow a limited number of radiofrequency devices subject to Certification to be imported into the U.S. prior to equipment authorization for certain pre-sale activities, including packaging and shipping devices, and loading devices with specific software.

TCPA Order on Reconsideration – The draft Order on Reconsideration would clarify the Commission’s previous interpretation of the TCPA that permitted government and government contractor calls without consumers’ prior express consent. The draft item would address long-standing questions regarding a 2016 Declaratory Ruling that first set guardrails on the government and government contractor exemption. The draft text of this item has not been publicly released.

Modernizing the E-Rate Program – The draft Order would amend the E-Rate invoice filing deadline rule to ensure program participants have sufficient time to complete the invoice payment process. Specifically, the Order would address situations where USAC issues a revised E-Rate funding commitment letter, in which case the FCC will allow recipients additional time to complete the work identified in the revised funding commitment. The draft text of this item has not been publicly released.

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 Tenth Set of COVID-19 Telehealth Applications, Surpassing $100 Million in Funding Out of the $200 Million Allocated

On June 10, the Wireline Competition Bureau (“WCB”) approved 67 additional funding applications for the COVID-19 Telehealth Program. Under the latest funding round, $20.18 million will go to health care providers across 27 states and Washington, D.C. With this latest set of approvals, the FCC’s COVID-19 Telehealth Program has funded 305 health care providers in 42 states, plus D.C., for a total of $104.98 million in funding awarded so far. Congress appropriated $200 million for the Program and the FCC continues to evaluate applications and distribute funding on a rolling basis.

In the most recent episode of Kelley Drye’s Full Spectrum podcast, Special Counsel Denise Smith discussed the COVID-19 Telehealth Program, including healthcare provider eligibility criteria, funding coverage, and key application considerations.

WCB, OMD Defer Form 470 Changes

On June 8, the WCB and the Office of the Managing Director (“OMD”) issued a Public Notice (DA 20-598) notifying E-Rate program participants that the FCC Form 470 will remain unchanged for funding year 2021. Form 470 is the form that E-Rate program applicants use to solicit bids from service providers for eligible services. This is the latest FCC action aimed at allowing schools and libraries to continue to focus their time and resources on responding to the pandemic.

WCB Waives Filing Requirement for RoR ETCs

On June 8, the WCB released an Order (DA 20-641) granting a temporary waiver of the requirement for privately held rate-of-return (“RoR”) eligible telecommunications carriers (“ETCs”) that receive loans from the Rural Utilities Service (“RUS”) to file electronic copies of their annual RUS Operating Report for Telecommunications Borrowers filings by July 1. The RUS is a unit within the United States Department of Agriculture (“USDA”). In the USF/ICC Transformation Order, the FCC required all privately held rate-of-return ETCs to provide a full and complete annual report on their financial condition and operations. The Order notes that it is “not in the public interest to require these carriers to submit a copy of a report that has not yet been required by or reported to the USDA.” These carriers must submit a copy of this report to USAC at the time it is due to USDA. The FCC still requires all ETCs, including those who are RUS loan recipients, to complete the remainder of their Form 481 filing and submit it to USAC by the July 1 deadline.

Commissioner Starks Announces Digital Opportunity Equity Recognition Program

On June 8, FCC Commissioner Geoffrey Starks announced the Digital Opportunity Equity Recognition (“DOER”) Program to commend organizations, institutions, companies and individuals who, through their actions and responses to the COVID-19 crisis, have helped to make quality affordable broadband service available to unserved or underserved communities. Nominations for the first round of recognitions are due to [email protected] by July 8.

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 Seventh Set of COVID-19 Telehealth Applications, Surpasses $50 Million in Funding

On May 20, 2020, the FCC’s Wireline Competition Bureau (“WCB”) approved 43 funding applications for the COVID-19 Telehealth Program. Under the latest funding round, $16.87 million in funding will go to health care providers across 20 states. This includes Children’s National Hospital, the first Washington, D.C. provider to receive funding. With this latest set of approvals, the FCC’s COVID-19 Telehealth Program has funded 132 health care providers in 33 states, plus D.C., for a total of just over $50 million in funding awarded.

Congress appropriated $200 million for the Program and the FCC continues to evaluate applications and distribute funding on a rolling basis. Providers therefore should take action now to assess their interest and ability to participate in the Program, if they have not already done so. On May 21, 2020, the senior counsel for the WCB’s Telecommunications Access Policy Division encouraged providers to apply as soon as possible. "Don't let the perfect be the enemy of the good" he said. “Bureau staff will work with applicants and seek clarification as needed.”

FCC, FTC Demand More Gateway Providers Cut Off Robocallers to Stop Coronavirus-Related Scams

On May 20, 2020, the FCC demanded that service providers take action to stop coronavirus-related scam robocalls from bombarding American consumers. The agency warned a number of “gateway” communications providers allegedly facilitating COVID-19-related scam robocalls originating overseas that they must stop carrying these calls or face serious consequences. Specifically, if the providers do not take action to address the scam robocalls, the FCC will allow other providers to block all traffic from these gateway providers’ networks.

This is the second such action taken by the agencies, following a similar demand in in April, when three gateway providers stopped carrying COVID-19-related scam robocalls within 24 hours of receiving the warning. The FCC and FTC have been working closely with the Department of Justice on these efforts to stop scammers from reaching American consumers. The warning shows that the FCC, FTC, and other agencies plan to aggressively address consumer protection-related issues during the crisis and will target service providers in addition to the underlying scammers to resolve problems quickly.

FCC and IMLS Partner to Keep Libraries and Communities Connected

On May 21, 2020, the FCC announced that it is partnering with the Institute of Museum and Library Services (“IMLS”) to promote use of $50 million in CARES Act funding to help address the digital divide. The CARES Act allocated $50 million in funding to IMLS, the primary source of federal funding for the nation’s museums and libraries, to enable these institutions, as well as organizations serving Tribal communities, to respond to the pandemic. This includes work to expand network access, purchase Internet accessible devices, and provide technical support services to communities. States and territories may use the funds to expand broadband access and prioritize their efforts to high-need communities. $15 million in funding will be awarded through grants to libraries and museums, as well as Tribes and organizations serving and representing Native Hawaiians. Applications are due June 12, 2020 with award announcements anticipated in August 2020.

As part of the FCC’s collaboration with IMLS, the FCC will publicize these CARES Act resources, help conduct outreach to libraries and organizations serving Tribal Communities, and provide information on broadband service providers that may be able to help. The agencies will also work together to ensure that libraries are aware that community use of Wi-Fi networks supported by the FCC’s E-Rate program is permitted during library closures.

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 Establishes the COVID-19 Telehealth Program

On April 2, 2020, the FCC issued a Report and Order (FCC-20-44) establishing the COVID-19 Telehealth Program. The COVID-19 Telehealth Program will provide $200 million in funding, appropriated by Congress as part of the CARES Act, to help health care providers provide connected care services to patients at their homes or mobile locations. The COVID-19 Telehealth Program will provide immediate support to eligible health care providers responding to the COVID-19 pandemic by fully funding telecommunications services, information services, and devices purchased on or after March 13, 2020 until the program’s funds have been expended or the COVID-19 pandemic has ended. The COVID-19 Telehealth Program represents the FCC’s most significant action yet to ensure telehealth services remain affordable and available during the crisis.

On April 8, 2020, the Wireline Competition Bureau (“WCB”) released guidance on the COVID-19 Telehealth applications process. The barriers to funding are relatively low. There are three steps interested providers should take immediately to prepare to apply for the COVID-19 Telehealth Program: (1) obtain an eligibility determination from the Universal Service Administrative Company (“USAC”); (2) obtain an FCC Registration Number (“FRN”); and (3) register with the System for Award Management. The WCB recommends that potential applicants undertake these steps now to apply for the early stages of funding.

On April 10, 2020, the WCB announced via Public Notice (DA 20-403) that it will begin to accept applications for the COVID-19 Telehealth Program beginning today, April 13, 2020 at 12:00 PM ET. Applications for the program may be filed through a dedicated application portal, available on the COVID-19 Telehealth Program page: www.fcc.gov/covid19telehealth. The WCB will accept applications on a rolling basis. To assist applicants in preparing their applications, the WCB will hold a webinar today, April 13, 2020 at 11:00 AM ET, which also will be available on the COVID-19 Telehealth Program page: www.fcc.gov/covid19telehealth. The presentation will assist interested parties in navigating the application portal and provide answers to frequently asked questions regarding the COVID-19 Telehealth Program’s application process. The webinar will remain publicly available for viewing.

FCC Adopts Connected Care Pilot Program

On April 2, 2020, in the same Report and Order (FCC 20-44) establishing the COVID-19 Telehealth program, the FCC adopted the Connected Care Pilot program. This three-year Pilot Program will provide universal service support to help defray certain health care provider costs incurred in delivering connected care services, with a primary focus on services aimed at low-income or veteran patients. The FCC will support selected pilot projects to help health care providers improve health outcomes and reduce health care costs, thereby supporting efforts to advance connected care initiatives. The Pilot Program also would study how connected care could become a permanent part of the Universal Service Fund. All eligible nonprofit and public health care providers that fall within the statutory categories under section 254(h)(7)(B) of the Communications Act, regardless of whether they are non-rural or rural, can apply for funding under the Pilot Program.

FCC Extends E-Rate Program Deadlines

On April 1, 2020, the WCB granted extensions of key deadlines for participants in the Schools and Libraries (or E-Rate) program (DA 20-364). Specifically, the Bureau waived the service implementation deadline for special construction projects for all funding year 2019 applicants and extended the deadline for funding year 2020 applicants by one year (from June 30, 2020 to June 30, 2021). Under the FCC’s rules, applicants normally must complete special construction projects and the network must be in use by June 30th of the applicable funding year. With schools and libraries closed for lengthy periods of time, the Bureau recognized that service providers may not be allowed on the premises and may experience significant challenges in meeting this construction deadline. The Bureau also (1) extended the service delivery deadline for nonrecurring services for funding year 2019 by one year (from September 30, 2020 to September 30, 2021); (2) granted schools and libraries an automatic 60-day extension to file requests for review or waiver of decisions by USAC; (3) provided applicants and service providers an automatic 120-day extension of the invoice filing deadline; and (4) gave all program participants an additional 30-day extension to respond to certain information requests from USAC.

FCC, FTC Demand Gateway Providers Cut Off Robocallers

On April 3, 2020, the FCC and the Federal Trade Commission (“FTC”) demanded that service providers take action to stop coronavirus-related scam robocalls from bombarding American consumers. They specifically warned three gateway communications providers allegedly facilitating COVID-19-related scam robocalls originating overseas that they must take action to stop carrying these calls or face serious consequences. Specifically, if the providers do not take action to address the scam robocalls, the FCC will allow other providers to block all traffic from these gateway providers’ networks. The FCC and FTC have been working closely with the Department of Justice (“DOJ”) on this first-of-its-kind effort to stop scammers from reaching American consumers. The warning shows that the FCC, FTC, and other agencies plan to aggressively address consumer protection-related issues during the crisis. Click here to read more about the FCC and FTC actions.

Chairman Pai Announces More Keep Americans Connected Signatories

On March 25, 2020, Chairman Pai announced that additional service providers have signed the Keep Americans Connected Pledge (see our coverage of the pledge here). Under the pledge, service providers agree to forgo service terminations due to inability to pay, waive late fees, and open Wi-Fi hotspots for those who need them for a 60-day period. There are now 626 service providers and 14 trade associations that have signed the Chairman’s pledge.

FCC Enables Rural Broadband Providers to Waive Certain Consumer Fees

On April 1, 2020, the WCB approved waiver requests from the National Exchange Carrier Association (“NECA”) and John Staurulakis, Inc. (“JSI”) to allow the two organizations to quickly implement tariff changes to ensure that NECA and JSI participant companies have the flexibility to meet the Keep Americans Connected pledge during the COVID-19 pandemic. The WCB’s action immediately permitted waivers of late payment penalties as well as installation and early cancellation fees that the providers normally would be required to assess in accordance with their tariffs. The WCB’s waiver deserves close attention by tariffed service providers and signals the agency’s openness to regulatory relief benefitting consumers.

FCC Waives Restrictions on Hiring Contractors for ASL Interpretation Services

On April 3, 2020, the Consumer and Government Affairs Bureau granted a temporary, limited waiver of the Commission’s rule restricting providers of video relay service (“VRS”) from contracting for video interpretation services with an entity that is not itself an eligible provider (DA 20-378). With increased VRS traffic levels and employee absences due to health concerns, school closures, and other restrictions imposed by state and local authorities, VRS providers continue to face a shortage of interpreters able to work as communications assistants. By allowing VRS providers additional flexibility to contract for qualified American Sign Language (“ASL”) interpreting from other entities, such as providers of video remote interpreting, the FCC hopes to alleviate this shortage.

FCC Postponing 3.5 GHz Auction on Account of COVID-19

On March 25, 2020, the FCC announced a one-month postponement of the 3.5 GHz auction (3550-3650 GHz) in the Citizen’s Broadband Radio Service (“CBRS”), a.k.a. Auction 105 (DA 20-330). The Commission cited the need to protect the health and safety of Commission staff during the auction and the ancillary benefit that parties would have additional time to prepare to participate. FCC Chairman Ajit Pai reiterated the agency’s commitment to hold the auction this summer. The auction is the first in the so-called mid-band, a range of spectrum seen as critical to the rollout of 5G wireless applications. Commissioner Michael O’Rielly tweeted that a further delay would be unlikely absent absolutely compelling circumstances. The start of the auction has been postponed to July 23, 2020 (from June 25, 2020), and the new short-form application filing window is April 23 through May 7, 2020. For more information on the postponement and the auction, please see our blog post.

Wireline Competition Bureau Extends Mozilla Remand Comment Cycle

On March 25, 2020, in response to a March 11, 2020, petition asking for a 30-day extension, the WCB issued a Public Notice (DA 20-331) granting a 21-day extension of the comment and reply comment cycle for the proceeding in the wake of the D.C. Circuit’s remand in Mozilla v. FCC (2018). Comments are due on April 20, 2020 (from March 30, 2020), and reply comments are due on May 20, 2020 (from April 29, 2020).

In issuing the extension, the WCB agreed with the petitioners’ argument that individuals, organizations, and state and local governments whose work is dedicated to public safety are increasingly focused on managing the COVID-19 pandemic and may be unable to submit comments on the public safety issues discussed in the remand proceeding. However, the FCC cited the need for expediency in remand proceedings as the reason for granting a 21-day extension instead of the petition’s request for a 30-day extension.

In addition, the FCC took the following actions in response to the pandemic:

• On March 25, 2020, the Office of Engineering and Technology issued a Public Notice (DA 20-334) granting a 21-day extension of the reply comment deadline in the 5.9 GHz proceeding. Reply comments are now due on April 27, 2020 (from April 6, 2020). Initial comments were due on March 9, 2020. The entire 75 megahertz of the 5.850-5.925 GHz Band is allocated for connected car intelligent transportation systems using dedicated short-range communications ("DSRC") technology. Under pressure to allocate more spectrum for Wi-Fi operations and dissatisfied with the pace of DSRC development and deployment, the Commission has proposed reallocating 45 megahertz of the Band for unlicensed use and 20 megahertz to cellular vehicle-to-everything intelligent transportation system technology, while preserving only 10 megahertz for DSRC.
• On April 10, 2020, the FCC’s Office of Economics and Analytics (“OEA”) extended via Public Notice (DA 20-401) the comment and reply comment deadlines for its Public Notice, released on February 27, 2020, which sought input on the state of the communications marketplace to inform the Commission’s required assessment of competition within the communications industry in its second Communications Marketplace Report to Congress. The Report provides an opportunity for stakeholders to evaluate competitive barriers to wireless and fixed broadband deployment, as well as international services. With this extension, comments are now due April 27, 2020 and reply comments are due May 28, 2020.
• On April 1, 2020, the Wireless Telecommunications Bureau (“WTB”) announced (DA 20-365) a compilation of instructions for filing Special Temporary Authority (“STA”) and waiver requests in response to the declaration of national emergency due to COVID-19 issued on March 13, 2020. The WTB STA and Wavier Filing Guide can be found online here. On April 10, 2020, the Public Safety and Homeland Security Bureau provided guidance to public safety entities on requesting STA and waivers (DA 20-404). All providers should consider whether an STA is appropriate to provide additional flexibility and improve service.
• ​On March 27, 2020, the FCC granted​ STA for 33 wireless Internet service providers (“WISPs”) to use the lower 45 megahertz in the 5.850-5.925 GHz Band for 60 days to address the increase in consumer demand because of the COVID-19 pandemic. Participating WISPs are required to file FCC Form 601 (application for an STA) within 10 days to access the full 60-day STA, and are required to operate in the band on a secondary, non-interference basis so as not to interrupt existing DSRC and federal radiolocation operations.
• ​On March 26, 2020, the FCC's WTB granted AT&T Special Temporary Authority (“STA”) to utilize additional spectrum in Puerto Rico and the U.S. Virgin Islands for 60 days to handle increased network traffic as a result of the COVID-19 pandemic. On March 30, 2020, the WTB granted A:shiwi College & Career Readiness Center an STA to utilize unassigned Educational Broadband Service(“EBS”) spectrum for 60 days in the eligible rural tribal land on the Zuni Reservation in New Mexico for similar reasons. These STAs are in addition to the ones previously granted by the Commission. ​
• On April 10, 2020, the FCC’s WTB enabled AT&T to deploy two cell sites in Wisconsin to support wireless service for a critical medical facility. That facility is being constructed by the U.S. Army Corps of Engineers at the Wisconsin State Fair Park in Milwaukee, Wisconsin to care for COVID-19 patients. The WTB granted AT&T’s request to expedite environmental review of the two proposed wireless tower sites, which will also serve first responders as part of AT&T’s FirstNet public safety broadband network. It is likely that the FCC will grant similar requests to expand communications infrastructure during the crisis.
• On April 2, 2020, the Public Safety and Homeland Security Bureau released a Public Notice (DA 20-367) reminding authorized alert originators, including state and local governments, that the Wireless Emergency Alert (“WEA”) system is available as a tool to provide life-saving information to the public during the coronavirus COVID-19 pandemic. In recent years, the FCC, together with the Federal Emergency Management Agency (“FEMA”) and participating wireless service providers, have taken important measures to promote the effectiveness of WEA, and to make such messages more accessible, including the capability to send more detailed alerts of up to 360 characters for 4G-LTE networks, the option to convey recommended actions for saving lives or property for use in connection with Imminent Threat Messages, and the ability to send alerts in Spanish.
• On March 26, 2020, the WCB waived a number of rules in its Rural Healthcare Program affecting existing users of the support programs. Most importantly, the Bureau’s order (DA 20-345) permits RHC applicants to extend existing evergreen arrangements with service providers by one year, without conducting an additional competitive bidding process, thereby ensuring continuity of service during the crisis. This builds on the Commission's previous waiver of rules for both the Rural Healthcare Program and the E-Rate program.
• On March 30, 2020, the FCC's WCB issued an order (DA 20-354) waiving certain rules requiring involuntary de-enrollment of Lifeline subscribers, including for non-usage of the service, until May 29, 2020. The Bureau also extended the previous waivers​ of the annual recertification and National Verifier reverification process de-enrollments to May 29 so that all of the waivers will expire at the same time.

If you have any questions, please contact your usual Kelley Drye attorney or any member of the Communications Practice Group. For more information on labor, advertising, and other issues, visit Kelley Drye’s COVID-19 Response Resource Center.

Over 500 Service Providers Pledge to “Keep Americans Connected”

On March 13, 2020, FCC Chairman Ajit Pai called on broadband and telephone service providers to forgo service terminations due to inability to pay, waive late fees, and open Wi-Fi hotspots for those who need them for the next 60 days. As of March 31, 2020, the FCC’s Keep Americans Connected page lists 550 participating service providers and 10 trade associations. The providers that have taken the pledge have agreed to, for the next 60 days: (1) not terminate service to any residential or small business customers because of their inability to pay their bills due to the disruptions caused by the coronavirus pandemic; (2) waive any late fees that residential or small business customers incur because of their economic circumstances related to the coronavirus pandemic; and (3) open their Wi-Fi hotspots to any American who needs them.

The Pledge applies only to residential and small business customers. “Small business” is not defined in the Pledge and may be subject to some variation depending upon the service provider. The Pledge does not apply to enterprise customers.

Additional Voluntary Actions for Low-Income Consumers

Chairman Pai also asked providers to expand or implement programs for low-income Americans, and to relax data cap policies in appropriate circumstances. Several carriers have already rolled out modified service offerings aimed at providing Internet access for free or at a reduced cost to low-income individuals and households, as well as K-12 households. Consumers and small businesses should review the list of service providers to determine if additional offerings are available in your area.

FCC Pauses Most Lifeline De-Enrollments for 60 Days

The FCC also has taken actions designed to protect customers of the FCC’s Universal Service Program providing wireless service to low-income customers. On March 17, 2020, the Wireline Competition Bureau issued an order (DA 20-285) waiving the Lifeline program’s recertification and reverification requirements (sections 54.405(e)(4) and 54.410(f) of the Commission’s rules) until May 16, 2020. This FCC order follows several state orders and decisions prohibiting or discouraging public utilities from disconnecting a consumer’s communications services. The FCC order also postpones the March 26, 2020 effective date of the requirement under section 54.406(a) of the Commission’s rules that eligible telecommunications carriers must require their enrollment representatives to register with USAC to May 25, 2020. On March 30, 2020, the FCC also waived the de-enrollment requirement for non-usage of the Lifeline service until May 29, 2020 and extended the previous waivers to May 29 as well so that all of the waivers would expire at the same time.

FCC Eases Rules for Providers of Video Relay Services for the Deaf and Hearing Impaired

On March 16, 2020, the Consumer and Government Affairs Bureau issued an order (DA 20-281) waiving several telecommunications relay services ("TRS") rules and at-home Video Relay Service ("VRS") pilot program requirements in response to increased demand for communications assistants ("CAs") and an anticipated reduction in the number of CAs able to work from call centers. Under the order, rules that limit the number of at-home minutes a CA can handle, that require CAs to have at least three years of experience, and multiple other rules designed to protect against fraud by CAs are waived for 60 days. In addition, the waiver permits a VRS CA to handle international calls (otherwise prohibited under the pilot program) and, in the traditional TRS program, waives the speed-of-answer call requirements. The applicable provisions of the Commission’s rules are waived through May 15, 2020. These actions should enable TRS and VRS providers to keep up with increased demand and to better utilize workforces that are unable to report to a traditional call center during the COVID-19 outbreak.

FCC Temporarily Grants Wireless Carriers Access to Additional Spectrum

The FCC has taken several actions designed to expand the ability of wireless service providers to handle the anticipated increase in demand from remote workers and distance learning in schools. On March 15, 2020, the FCC began granting Special Temporary Authority to several U.S. carriers, allowing them access to additional spectrum for the next 60 days in order to handle the increase in network traffic because of social distancing and stay-at-home orders issued in response to the COVID-19 pandemic. T-Mobile, Verizon (also here), U.S. Cellular, AT&T, rural wireless ISPs, and a tribal service provider in New Mexico have all received permission to utilize additional spectrum. Commissioner Jessica Rosenworcel, in a tweet, questioned whether U.S. networks can handle increased traffic and called on the FCC to utilize the disaster reporting system for COVID-19 and expand reporting requirements beyond telephone service to reflect the “broadband age.”

FCC Actions to Promote Service to Schools, Libraries, and Rural Healthcare Providers

Recognizing the likely increase in distance learning and telehealth services, the FCC has taken multiple actions designed to ease its rules applicable to existing FCC subsidies and is planning to accelerate new programs to support telehealth applications. Schools, libraries, and rural healthcare providers should review these actions carefully to determine their impact on their current operations.

The FCC’s primary actions are as follows:

On March 18, 2020, the Wireline Competition Bureau released an order (DA 20-290) waiving gift rules in the Rural Health Care and E-Rate programs to “enable service providers to offer, and RHC and E-Rate program participants to solicit and accept, improved broadband connections or equipment for telehealth or remote learning.” The order is intended to allow schools, libraries, and rural healthcare providers to meet anticipated short-term demands outside of the restrictions of the programs. By waiving the gift rules, applicants are free to accept – and service providers are free to offer – arrangements that would otherwise qualify as gifts. For example, a service provider might make significantly discounted service available, might waive data caps, or might provide free (or loaner) equipment to meet additional demand, all of which might have disqualified the service provider from future E-Rate or RHC bidding. Under the order, the gift rules (47 C.F.R. sections 54.503(d)(1), 54.603(b), 54.611(b)(2), 54.622(h)(1), 54.623(a)(1)(vi), 54.627(c)(3)(ii)(H), and 54.627(d)(1)(ii)(F)) will be waived through September 30, 2020.

On March 26, 2020, the Wireline Competition Bureau waived a number of rules in its Rural Healthcare Program affecting existing users of the support programs. Most importantly, the Bureau’s order (DA 20-345) permits RHC applicants to extend existing evergreen arrangements with service providers by one year, without conducting an additional competitive bidding process, thereby ensuring continuity of service during the crisis.

On March 30, 2020, the FCC announced that the Commission would consider two actions providing up to $300 million in new support for telehealth services. The Commission first will consider an order implementing a $100 million Telehealth Pilot Program first proposed in 2019. In addition, the Commission will consider an order that implements the recently-passed CARES Act, which provided $200 million to support telehealth applications. The $200 million may be used by healthcare providers for telecommunications services, information services, and devices to support telehealth and will be allocated via streamlined applications for the duration of the crisis. The news release does not specify timing for these actions, but they likely would be voted upon by the Commissioners soon.

FCC Clarifies that the TCPA Does Not Restrict Hospital, Healthcare Provider, and Government COVID-Related Communications

Finally, the FCC’s Consumer and Governmental Affairs Bureau issued an order that will enable many enterprises and small businesses to send certain emergency related communications under the Telephone Consumers Protection Act’s ("TCPA’s") “emergency purposes” exception. On March 20, 2020, the Bureau released a Declaratory Ruling (DA 20-318) regarding the TCPA’s “Emergency Purposes” exception to the consent requirement. The Bureau order declares that COVID-19 constitutes an emergency under the TCPA’s exception, thus allowing communications (voice calls and texts) related to the emergency without consent. The order specifically permits calls/texts where (1) the communication is made by a hospital, healthcare official, state, local or federal government official, or a person or entity acting on their behalf; and (2) the communication is informational, directly related to the COVID-19 pandemic, and related to the imminent health or safety risk of the pandemic. The order provides several non-exhaustive examples of communications that would fall within the emergency purposes exception. The Bureau made clear, however, that marketing messages may not be included in the communications. Indeed, on the same day, the Bureau released a warning identifying several COVID-related scams that had arisen.

It is important to note that this clarification applies to both voice calls and text messages that are sent by the designated entities (so long as the content is related to the COVID-19 crisis). The order is designed to ensure that time-sensitive messages are delivered promptly and are not impeded by the TCPA’s consent requirements. For entities not identified in the Bureau’s clarification, we recommend that you obtain the advice of counsel to determine how the TCPA applies to the proposed call or message. On March 30, 2020, a group of banking interests petitioned the FCC to extend its declaratory ruling to COVID-related communications from banks and financial institutions.

The E-Rate program is the country’s largest educational technology program and assists schools and libraries with obtaining affordable telecommunications and internet services. Under the program, educational institutions receive a discount from the FCC (through the Universal Service Administrative Company) on equipment and services provided by vendors. The discounts range from 20 to 90 percent, with higher discounts targeted to institutions located in high-poverty and rural areas. In order to receive the discount, institutions must use a competitive bidding process that treats price as the primary factor for selecting a vendor. Importantly, institutions may not receive any gifts or other payments in exchange for picking a vendor. Institutions also must pay a portion of the costs for the services and equipment to further incentivize the selection of the lowest-cost bid.

Federal prosecutors alleged that the CEO of a group of charter schools received thousands of dollars from a contracting executive in exchange for selecting the contractor as the schools’ E-Rate service provider. According to the indictment, the pair falsely certified to the FCC that the vendor selection followed the competitive bidding rules and submitted invoices for equipment and services that were never provided to the schools. Prosecutors also alleged that the schools never paid their required portion of the costs for the discounted equipment and services. In addition to potential prison time, prosecutors sought the recovery of any money or property traceable to the alleged E-Rate fraud.

The FCC also may take enforcement action against the schools and the contractor. The FCC recently increased its oversight of the E-Rate program following an uptick in complaints concerning conflicts of interest in bids as well as submissions of falsified claims. Late last year, the FCC required the E-Rate service provider to the New York City Department of Education to return over $17 million in subsidies after a school system consultant submitted fraudulent invoices for work performed by subcontractors he owned. The FCC already required the school system to pay $3 million and adopt a number of compliance measures to resolve the investigation, including the establishment of an E-Rate training program for school leadership and the appointment of an independent compliance monitor. The settlement represented the first time the FCC took enforcement action against an educational institution (instead of a vendor) for E-Rate violations. Moreover, the FCC previously proposed a fine of more than $100,000 and sought to recover E-Rate subsidies from an AT&T subsidiary for allegedly overcharging schools a rate 400 to 500 percent higher than the rate available to other customers.

Large penalties for E-Rate violations are common. First, the FCC often applies a “treble damages” factor to E-Rate overcharges, which can significantly increase fines. Second, the FCC normally imposes a separate fine for each false certification or invoice submitted, which can serve as a forfeiture multiplier. Third, the FCC generally seeks full restitution of improperly disbursed E-Rate support, including for support disbursed beyond the normal one-year statute of limitations for FCC enforcement actions, arguing that such action does not represent a separate fine but rather a recovery of federal funds.

The indictment and recent FCC E-Rate enforcement actions highlight the importance of putting in place strong compliance safeguards governing the request for and use of federal universal service support. Service providers and support recipients therefore should review their E-Rate compliance policies and procedures carefully.

The petition, submitted jointly by Microsoft Corporation, Mid-Atlantic Broadband Communities Corporation (MBC), Charlotte County Public Schools, Halifax County Public Schools, GCR Company and Kinex Telecom, requests clarification as to whether Commission rules will allow use of TV white spaces (TVWS) to extend E-Rate supported broadband services to the homes of 3,500 eligible students. Because TVWS frequencies are available on an unlicensed basis, use of the technology to extend internet access services would not impose additional costs on the E-Rate program. The petition seeks an FCC ruling that use of TVWS to facilitate off-campus use of E-Rate supported internet access services is permissible and does not affect the eligibility of supported services provided on the campus. Comments are due November 3 with reply comments due December 5.

Should the Commission find that the rules do not permit such off-campus use of E-Rate supported internet access services, Petitioners are asking the Commission to waive its rules and allow the partnership to conduct a limited pilot program, which if successful, could be replicated across the country in areas where students do not have broadband access at home.

According to a Pew Research Center analysis of data from the 2013 Census Bureau’s American Community Survey, roughly 5 million homes with school-age children do not have high-speed internet service. Low-income households with minorities contribute to a disproportionate share of that 5 million. The Commission’s 2016 Broadband Progress Report finds that 10% of the country’s population lacks a broadband connection at home. This lack of a broadband connection at home is the central concern that Commissioner Rosenworcel dubbed the “homework gap.”

Does Off-Campus Use Serve an Educational Purpose?

The petition presents a unique issue, stating that neither the Commission’s rules nor the Eligible Services List (ESL) either expressly contemplates or forbids off-campus use of E-Rate supported services. Part of the challenge is that the current E-Rate rules require participating schools to certify that supported services are being used for educational purposes with a presumption that activities occurring on schools grounds serve an educational purpose. However, off-campus use does not have such a presumption. The petition seeks clarification as to whether off-campus use is permitted. At the same time, the ESL prohibits off-campus wireless service, but the TVWS technology uses an on-premises internet connection rather than a cellular network. The partnership does not believe that the ESL even addresses such a scenario and seeks Commission clarification that such use in not prohibited.

How Would TVWS Connect Students at Home?

According to the petition, Microsoft is developing a custom, in-home TVWS access point with Dynamic Spectrum Access technology to operate on the available radio spectrum, including unused or unassigned TV broadcast channels in the VHF and UHF television bands. MBC would install these base stations at select schools to extend the reach of broadband access to the eligible students’ homes. Students would connect using another TVWS access point that converts the TVWS signal to Wi-Fi. This will allow Wi-Fi enabled devices in the home to connect to the network.

The Cost

The petition claims that the effort will not impose any new financial burden on the E-Rate fund. They estimate an initial capital budget of $1.1 to $1.4 million, depending on final design and coverage areas, with funding from state grants and project partners. MBC will incur costs for increased usage without increasing the costs to the schools. Microsoft will provide the equipment necessary to transmit the signal from the school to the homes. Both Microsoft and the schools will gather data and evaluate the program’s effectiveness.

Building Momentum from Past Efforts to Efforts to Bridge the “Homework Gap”

This is not the first effort to address the “homework gap,” but it is novel approach to use TV White Spaces to extend broadband use from the school to the home. FCC Commissioners Rosenworcel and Clyburn have raised the issue during the second E-Rate modernization proceeding, and just this week, Commissioner Rosenworcel noted in her remarks at NATOA that “local solutions deserve federal support.” Just a few months ago, the FCC approved the Lifeline Reform Order, expanding the Lifeline discounts to include broadband services whilst trying to address the “homework gap” by enabling students to complete their online assignments at home.

The Administration has also made inroads in bridging the “homework gap.” ConnectHome, a public private partnership between service providers and the Department of Housing and Urban Development, brings broadband access to public housing communities through commitments from service providers. The program remains active with AT&T as the most recent provider to participate. HUD is in the process of evaluating the program’s success.

The proposal before the Commission builds on the momentum and harnesses the power of technological innovation and public private partnerships. The partnership is a coalition of a federal broadband grant recipient under the Broadband Technology Opportunities Program, two school districts, and three private companies. Both the FCC and Administration have been pushing for public-private partnerships in the broadband space through ConnectED and ConnectHome, and this petition is a prime example of such a partnership. The fact that the Commission put the petition on Public Notice for comment signals more interest from the Commission in hearing from interested parties.

FCC Also Seeks Comments on Waiver of Cost Allocation Rules

In addition to the TVWS Petition, the FCC is also seeking comment on a request filed by the Boulder Valley School District (Boulder) seeking a waiver of the cost allocation rules, Section 54.504(e), to allow school districts to provide internet access to students at home using E-Rate funded broadband networks. Such use would be limited to students without current broadband access at home and where such use does not impose an additional cost burden to the Universal Service Fund.

According to the request, if a local housing authority or other entity covers the cost of the equipment to connect the school district’s network to students in low-income housing, the school districts can cover the costs of providing internet service to such students at no additional cost to the E-Rate fund. Boulder suggests that Commission rules discourage off-campus use of E-Rate supported services, requiring schools to cost allocate the off-campus portion of the services used. However, such allocation would lead to school districts incurring additional costs in trying to determine how much of the service benefits students at home. The Commission seeks comment on Boulder’s request to waive the cost allocation rules.

Given the novel questions at issue in both petitions, we urge interested parties to share their thoughts and input with the Commission as it evaluates no to low cost mechanisms to help address the “homework gap.”

On July 27, 2016, the Enforcement Bureau released a Notice of Apparent Liability to BellSouth Telecommunications (dba AT&T Southeast) for violations of the “Lowest Corresponding Price” requirement of the FCC’s E-rate rules. The Commission found that AT&T had failed to offer the lowest price to two school districts in Florida: Orange County Public Schools (near Orlando, FL) and Dixie County School District (west of Gainesville, FL). The FCC alleges that these two school districts were charged high “month to month” rates for two common business services – Primary Rate Interface ISDN services (referred to as “PRI” service in the NAL) and flat-rated business multiline local service – rates that were sometimes 400% to 500% higher than the lowest rate available to other customers. The Commission proposes a fine of $106,425 and seeks recovery of $63,370 in previously paid E-rate support for the violations.

As background, the LCP rule requires E-rate service providers to offer schools and libraries services “at rates less than the amounts charged for similar services to other parties.” The FCC explained that this rule requires that the schools or libraries receive the lowest price for “similar services” offered to non-residential business subscribers, and that the service provider must affirmatively offer this rate (that is, the school need not request it or negotiate it). In describing the “similar services” test, the Commission stated that it would not be permissible for a service provider to argue that there are no similarly-situated non-residential customers. Other than this explanation of the standard, there has been (until now) little guidance on how to apply the rule to E-rate services.

As stated, in this instance, the NAL alleges that AT&T failed to offer the LCP to these two school districts for a period of years. AT&T provided service to these school districts from July 2012 through June 2015, and the FCC found that AT&T violated the LCP rule over these three years. As we shall discuss in a moment, however, the FCC limited its fine to services provided in the last E-rate year – July 2014 to June 2015.

First, the FCC’s forfeiture calculation methodology is similar to that which it used in other Universal Service contexts. The Commission proposes a base forfeiture of $20,000 for each inaccurate FCC Form 472 and Form 473 filed, plus a “treble damages” factor based on the amounts overpaid to AT&T. Because the FCC chose to limit its fine to only the last E-rate year in which charges were made, the overall fine is relatively modest (at least by today’s Enforcement Bureau standards). Specifically, the FCC proposes a fine of $60,000 for three forms filed within the 2014-15 time period, plus an upward adjustment amount of $46,425, representing three times the $15,475 overcharged during that same time period. Further, the Commission proposes restitution to the Fund in the amount of $63,760 for overcharges during the entire three year period (taking the position not only that reimbursement can be ordered by the Commission but also that the 1-year statute of limitations does not apply to recovery of USF support paid). This is also a first for the FCC, to seek full recovery, which cites to its 2004 Schools and Libraries Fifth Report and Order as the authority to recover in full amounts overpaid by USAC.

Commissioners Pai and O’Rielly dissented from the NAL, but only Commissioner Pai offered a statement explaining the dissent. In his dissent, Commissioner Pai criticized the NAL for being beyond the 1-year statute of limitation. He repeated his long-standing rejection of the “continuing violation” theory applied to Universal Service forms (which holds that an erroneous form is a violation until the form is corrected). Absent the continuing violation theory, Pai asserted, the violations last occurred, at the latest, on June 1, 2015 – 56 days beyond the FCC’s statute of limitations for an order issued in late July 2016.

Lastly, following a recent trend, the NAL also directs AT&T to file a report thirty days after the NAL’s release providing certain information about its E-rate practices and its intended changes to those practices. Specifically, the Commission ordered AT&T to provide a report to the FCC within 30 days. The report must identify all non-residential customers who were “similarly situated” to the school districts, describe how AT&T intends to update an internal procedure [the details of which were redacted] to ensure that sales agents offer only LCP-compliant prices, and how it intends to identify the similarly situated customers for any given school or library customer. This report must be accompanied by “detailed factual statements” with “appropriate documentation” and affidavits to support the report. The notion that AT&T, in essence, should demonstrate how it is going to “fix” a violation proposed in the NAL, despite AT&T’s challenge to that finding, is similar to an instruction contained in the Data Throttling NAL issued last June, which sparked a vigorous dissent by Commissioner O’Rielly at the time.

Turning to the LCP analysis itself, the NAL offers insight into the Commission’s view of the LCP requirement. First, the FCC limited the analysis to customers in the same state (although it warned that it could compare across states in future orders). Second, the FCC compared the rates AT&T charged to several alternatives available to E-rate subscribers. Finally, the FCC compared the rates AT&T charged to rates it charged business customers in the state.

It is difficult to follow the FCC’s analysis completely due to the heavy redactions of AT&T rates and pricing strategies that appear in the public version of the NAL. (And, in any event, AT&T apparently challenges the factual conclusions drawn.) Nevertheless, what is instructive for other providers is the FCC’s general approach. Notably, when comparing AT&T rates to those available to other E-rate subscribers, the FCC had two principal criticisms: (1) AT&T did not give the customers the 1-year term plan rates, even though it found that the school districts implicitly requested a 1-year term, and (2) AT&T did not offer rates that the schools qualified for under a state-wide contract, even though the schools did not purchase under that contract and were not billed under that contract. The lesson seems to be that E-rate service providers should “shop around” for favorable rates that the schools may qualify for.

More broadly, the FCC appeared to suggest that AT&T violated the rules because its policies did not examine corresponding prices (or did not do so adequately). That is, separate and apart from the actual price that was charged, the FCC suggested that AT&T failed to show that it had analyzed corresponding prices at the time it was offering service to the school districts. In a warning to the industry as a whole, the NAL asserts, “compliance with the LCP Requirement necessarily requires an ongoing, real-time process that evaluates the rates offered and charged for services provided to (or requested by) E-rate applicants with the rates to other similarly situated customers” (emphasis added). AT&T’s process failures, as much as its outcome, seemed to trouble the Commission.

The specific facts relating to AT&T’s charges will take some time to play out. In the meantime, E-rate service providers should examine their own pricing practices in light of the FCC’s approach above. Service providers should ensure that they have a process in place to review comparable prices at the time of the bids, and also that they have access to data showing comparable rates in order to demonstrate compliance with the LCP rule. While this is the first enforcement action under that rule, it surely will not be the last.

July’s E-rate Modernization Order aimed to close the Wi-Fi gap by creating a $1 billion annual target for promoting broadband development and encouraging digital learning in the nation’s schools and libraries. The Modernization Order also sought to increase the transparency and efficiency of the E-rate program.

Chairman Wheeler’s draft order will be in line with the policy goals of the July Order and perhaps most notably, the draft order will include a proposal to raise the E-rate program cap by $1.5 billion. If approved, this increase will bring the total E-rate program cap to $3.9 billion, up from $2.4 billion. According to the Chairman’s Office, more than half of the $1.5 billion increase accounts for inflation since the E-rate program began in 1997, while the remaining amount reflects the Commission’s commitment to building much needed bandwidth.

For more details on the July E-rate Order, check out our Study Guide. The FCC also has prepared a Fact Sheet and an E-rate Data Update with additional information.

The E-rate Map of Fiber Connectivity is broken down into two sections, “School Districts” and “Libraries.” The “School District” map allows users to mouse-over a geographic area and see the total number of students in a particular school district as well as the percentage of schools with or without fiber access. The “Libraries” map allows users to mouse-over a geographic area and see the total number of annual visits to a particular library system.

We encourage service providers to take a look at the available data and to review the FCC’s recently released Staff Report which was jointly authored by the Wireline Competition Bureau and the Office of Strategic Planning & Policy Analysis. For additional information about the E-rate Modernization Order, please visit our previous blog post.

Eligible Services. The Order makes big changes to the services that may be funded. High-capacity broadband – which has always been fundable – will be the focus of the new rules. To free up funding for such broadband services, effective in funding year 2015, the FCC will phase-out or eliminate support for “legacy” and “non-broadband” services, including:

• telephone service (wired, wireless and VoIP),
• paging,
• text messaging,
• directory assistance,
• custom calling features, 900/976 blocking,
• inside wire maintenance,
• e-mail,
• voicemail and
• web-hosting.

Finally, wireless data plans and air cards, while not eliminated entirely, are subject to additional scrutiny: A school or library must demonstrate that these services are the most cost effective alternative, taking into account available broadband pricing and other factors. From the Order’s description, it appears that only mobile uses such as library bookmobiles will be considered the most cost effective alternative.

Even with these eliminations, the Order estimates the savings from eliminating services to be only $350 million in the first year. That’s not enough to offset the $1 billion in new money for Wi-Fi. In other words, something else needs to be done to make this a sustainable effort beyond the first two years. Note: The Order essentially maintains the priority funding structure, but renames the groups of services “Category 1” and “Category 2” (instead of Priority 1 and Priority 2).

Discount Rates. For Category 1 services, the existing discount structure is maintained. The Commission will simplify the discount rate, by using a district-wide discount rate and modernizes its definition of “rural” and “urban” areas as used in determining the rates. The Commission also modified its eligibility calculations based on the United States Department of Agriculture’s (USDA) National School Lunch Program (NSLP) to mirror changes in the NSLP program eligibility standards. On balance, we don’t expect these changes to have a significant effect on an individual school or library’s Category 1 discount.

For Category 2 services, the new rules lower the maximum discount rate by five percent, meaning that schools and libraries will be eligible for a maximum discount of 85% rather than the previous 90%.

Competitive Bidding. The Order maintains competitive bidding as the central method for ordering E-rate services, but it makes several important changes to the process. First, starting with FY15 bids, USAC will make available information on the winning prices achieved in the competitive bidding process. (This price information will follow the categories and level of detail currently provided by the Item 21 attachments.)

Second, the Wireline Competition Bureau will be granted authority to designate “preferred master contracts” for Category 2 services. Schools and libraries will be permitted to select a service provider from the preferred master contract without engaging in competitive bidding. Moreover, where competitive bidding is conducted, schools and libraries will be required to consider the preferred master contract rate as if it were one of the bidders in response to the Form 470.

Finally, business class Internet services costing less than $300 per month ($3,600 per year) may be selected without competitive bidding. To qualify, the Internet access service must be commercially available and must meet FCC-prescribed minimum download and upload speeds.

Enforcement Issues. For service providers, one thing to watch will be the FCC’s enforcement of the “lowest corresponding price” (“LCP”) rule. The LCP rule prohibits an E-rate provider from charging an E-rate applicant more than the lowest price that the provider charges a non-residential customer that is similarly situated to the individual school or library that is buying the service. Under the rules, service providers cannot submit bids at prices above their “lowest corresponding price” and they cannot charge applicants a fee above their “lowest corresponding price.” This rule has been in place since the inception of the E-rate program, but enforcement of the rule has been lax. That will change with this order, which clearly signaled the Enforcement Bureau to investigate – and bring enforcement actions – where it learns of a violation of the “LCP” rule. We expect greater attention to LCP issues in audits and independent investigations as a result. (Perhaps the new USF "strike force" will target LCP issues.)

Other Recordkeeping Issues. In a move that (like the LCP issue above) will increase, not decrease, burdens on participants, the FCC increased the record retention period to 10 years from the end of the funding year or the service delivery deadline. This doubles the record retention period, and requires both applicants and service providers to keep many more records than they previously were required to keep. In addition, the Commission mandated that applicants and service providers permit on-premises access to auditors and investigators, upon request.

Finally, the Commission mandates that appeals of initial decisions (which typically are issued by the Schools and Libraries Division) be filed with the USAC Board of Directors first. Only after the USAC Board addresses the appeal may the applicant (or service provider) file an appeal with the FCC. While this provision is sure to delay appeals to the FCC, it is not clear that it will lead to fewer appeals overall.

E-rate 2.1? The Order contains a Further Notice of Proposed Rulemaking (FNPRM) on three principal issues. First, and likely to receive the most attention, the FNPRM asks whether the cap on E-rate expenditures should be raised. No specific increase is proposed, but the concept of raising the cap has already generated strong opposition from the Republican commissioners.

Second, the FNPRM proposes to establish a maximum contract length of 5 years, except for certain infrastructure arrangements, for which a 20 year contract would be authorized.

Finally, the FNPRM proposes rule changes to encourage greater participation in consortia by schools and libraries. The Commission proposes several changes, such as shifting to weighted averages of the eligible discounts for consortia members in order not to penalize high-discount schools or districts that join a consortium. The Commission also proposes to extend an additional discount to a consortium as a means of promoting participation in group buying activities.

There will be much more to digest in the Order as we move forward. As we note additional interesting issues, we will post further in this space.

According to the Commission's press release, the new E-rate rules will bring digital learning benefits to 10 million students across the country in 2015 alone. The new rules also phase-out support for voice services and lower the maximum discount for schools from 90% to 80%, meaning that for every $1 that is spent by a school, $4 will be contributed by the USF. As of this writing, the full order has not been released. Based on statements and the Commission's press release, some other notable portions of the E-rate decision include:

• The annual cap on E-rate expenditures will remain at $2.4 billion, pending a Further Notice of Proposed Rulemaking to consider "long term program funding needs."
• $1 billion per year will be made available for Wi-Fi expansion over the next two years. This increase will come entirely from USAC reserve funds, arising from previous E-rate funding that was approved but never spent. This increase is consistent with the overall amount that has been estimated for months. In an apparent bow to Commissioner Pai's objections expressed earlier this week, the Commission drops a promise to fund Wi-Fi beyond the availability of the reserve funds, which would cover only the next two years of the program. Instead, the Wi-Fi funding methodology was described in Commissioner statements as a "test."
• Under the new rules, funding for non-broadband support will be phased out, in favor of Wi-Fi and wired internal connections. We understand that some services will be eliminated immediately (paging was the only one mentioned specifically), and others over a five year period (voice services, and, apparently, web hosting services).
• The Commission appears to maintain the "Priority 1" and "Priority 2" funding categories, but under new names. The order changes these designations from "Priority 1" and "Priority 2" to "Category 1" and "Category 2." Under the old rules, all "Priority 1" services had to be fully funded before the Commission would begin funding "Priority 2" services. Prior to the meeting today, it appeared that the new rules would allow “Category 2” services such as eligible local area networks, wide area networks, and private branch exchanges to be funded even if all of the former “Priority 1” projects were not fully funded. “Category 1” services (the former "Priority 1") include basic telephone service, long distance service, cable modem services, DSL, and wireless internet access. At the last minute, the Commission backed away from eliminating the priorities altogether, with two Commissioners stating that Category 1 broadband internet requests would be fully funded before any Wi-Fi requests were. (It was not clear from the statements or the press release whether this protection applied only to internet access requests in Category 1, or to all Category 1 requests). Thus, though there has been a shift in terminology of the two categories of requests, it seems the prioritized funding scheme will remain the same for at least the next two years.
• The Commission will accept multi-year applications and require electronic filings. The E-rate application process will be streamlined, making it faster and easier for schools and libraries.
• Schools will be able to use GSA pricing so schools can buy services for less. The new rules give schools and libraries the opportunity to take advantage of GSA’s front-loaded discount pricing and reverse-auction approach to bidding, apparently (we believe) without use of competitive bidding. (We will know for sure when the order is released).
• The Commission is committed to increasing transparency throughout the e-rate program. Specifically, the order will require disclosure of the prices charged for all "supported services." This, the Commission said, will allow schools and libraries to know what prices are being offered to other applicants in their area and with similar characteristics.

The bulk of the money for this reform likely would come from other savings in the USF program. If implemented, this proposal means that the USF program will not shrink -- and USF contribution rates likely will stay around their current 15-17% range -- but the share of the pie devoted to E-rate will increase.

This reform is needed in part because the E-rate program is pressing against its current cap. For the second year in a row, the FCC authorized USAC to use undisbursed funds from previous years to supplement current funding (a so-called "carry forward"). With this approval, the FY 13 E-rate program will have enough funding to meet expected Priority 1 demand (telecom and internet access services). It is not clear whether there will be enough money left over to fund Priority 2 services (internal connections and maintenance).

Obama's announcement was met with immediate pledges of support from Acting FCC Chair Mignon Clyburn and from FCC Commissioner Jessica Rosenworcel. Obama's proposal is similar to the "E-rate 2.0" proposal that Commissioner Jessica Rosenworcel proposed a few months ago. Commissioner Rosenworcel will be a key player in moving the proposal forward.

The Caroline County Library petition is very brief. Caroline County Library (the Library) states that it posted an FCC Form 470 for telephone service for its four telephone lines. (A Form 470 is essentially an RFP for e-rate eligible services). After waiting the required 28 days to receive bids, the Library "elected to continue to receive telephone service from Vonage." The Library does not state whether other providers responded to its Form 470 and if so, at what price. Nevertheless, the Library wants to receive service from Vonage, but Vonage is not registered as an eligible service provider with the USF administrator (USAC). Because Vonage has not registered (a process that requires designation by the relevant state(s) and carries with it several regulatory and reporting obligations), the Library is not eligible to receive federal subsidies for its purchase of telephone service.

The relief that the Library seeks is extraordinary. For starters, the Library seeks to force the FCC to decide a question it has refused to decide since 1998. Specifically, it asks the FCC to declare that Vonage -- an interconnected VoIP provider -- offers telecommunications services on a common carrier basis. It claims that Vonage generally advertises "telephone" service to the public and that it derives substantial revenues from the provision of telephony services, so it should be classified as a common carrier. Although the differences between regulatory obligations of telecommunications carriers and interconnected VoIP providers have been narrowing, the Library's petition, if granted, would establish a landmark and would resolve many pending disputes about VoIP services.

But classification as a common carrier is not enough for the Library. It also wants to compel Vonage to register as an Eligible Telecommunications Carrier so the Library may apply for discounts from the federal e-rate fund. Participation in the E-rate program is voluntary, however, and there is no precedent for compelling a provider to subject itself to the program's obligations. More importantly, Vonage does not need to be a common carrier to participate in the e-rate program. Schools and libraries may obtain interconnected VoIP services from non-telephone providers -- if the entity registers as an ETC (which Vonage has not). So, the core problem is not the classification of VoIP, it is that the Library has chosen a service provider that does not participate in the subsidy program it seeks.

Not surprisingly, the FCC has not sought comment on the Caroline County Library petition, and it probably will not do so. To me, the solution is obvious. Apparently, no other provider bid to serve the Library's four telephone lines. But many providers -- both telecommunications carriers and interconnected VoIP providers -- offer solutions for the voice and data needs of small entities like the Caroline County Library. Many of those providers voluntarily register for the e-rate program. One of those providers should contact the Library. Any takers out there?