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.

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.

Nearly a year after it ordered sweeping deregulation of the business data services (“BDS”) market, the Federal Communications Commission (“FCC”) proposed new rules that would allow certain small rural carriers to move from longstanding rate-of-return regulation to price cap regulation for their BDS offerings. The transition would reduce the regulatory obligations of such carriers, including the need to prepare and file complex cost studies, which the FCC stated would allow carriers to rededicate resources to building and maintaining networks in underserved areas. The FCC also proposed removing pricing restrictions on lower-speed BDS offerings in areas with sufficient competition and sought input on whether pricing restrictions for higher-speed DBS offerings also should be eliminated.

Unlike prior BDS actions, where the issue was hotly contested for years and deregulation passed on a party-line vote, the proposed rulemaking was supported by all five Commissioners, at least for purposes of gathering a record. It’s not clear if this unanimity will hold throughout the proceeding, but the FCC may be on the verge of turning a page in its focus on these services, which are a bedrock for both retail offerings and for competitive carriers extending their networks.

BDS are dedicated point-to-point transmissions at guaranteed speeds over high-capacity connections used by major businesses, governments, and other large institutions to move their data. Last year, the FCC generally deregulated BDS and eliminated price controls in areas that satisfied a new competitive market test. However, these actions did not extend to the more than 200 smaller carriers predominately located in rural areas that received universal service funding under the Alternative Connect America Model (“A-CAM”). A-CAM carriers previously operated under rate-of-return regulation, where they reported costs annually to the FCC and received a specified return based on those costs. This system required the carriers to prepare and submit complex cost studies to the FCC to justify their returns. However, these carriers elected in 2016 to move to price cap regulation under the A-CAM, which sets the price that the carriers can charge for services. With a cap on prices, the A-CAM carriers possessed strong incentives to become more efficient and reduce costs to increase profits. However, the price cap regulation of A-CAM carriers did not cover their BDS offerings and these carriers continued to be obligated to conduct cost studies for BDS.

The FCC’s proposed rules eliminate this disparity and take additional steps to lessen the regulatory oversight of A-CAM carriers and other BDS providers:

First, the FCC proposed allowing all A-CAM carriers to move their BDS offerings to price cap incentive-based regulation, creating regulatory uniformity among their services and eliminating the time and resources spent on annual cost studies. The FCC proposed that carriers would move to incentive regulation at the holding company level in all states where they receive A-CAM support. Under the proposal, the election would take effect on the July 1st following the FCC’s adoption of a final order setting out the incentive regulation transition rules. As a result, it is likely that the move to incentive regulation may not take place until next year. The FCC intends to use A-CAM carriers’ current rates and demand levels as the basis for the initial DBS rates under incentive regulation, but sought comment on alternative price-setting methodologies.

Second, the FCC proposed eliminating price restrictions for lower-speed DBS offerings in areas with sufficient competition. As with its BDS reforms last year, the FCC plans to adopt a competitive market test that dictates, on a county-by-county basis, whether a carrier will still be subject to price cap restrictions and tariffing obligations. The FCC sought comment on the specifics of the competitive market test and asked whether it should apply the two-pronged test it adopted last year, which looked at whether 50 percent of the locations with BDS demand in a county were within a half mile of a location served by a competing provider or, alternatively, whether a cable provider offered sufficiently fast broadband service in 75 percent of the census blocks in the county. The competitive market test adopted last year drew considerable fire from critics alleging that it deregulated BDS offerings in areas lacking meaningful consumer choice. These concerns certainly will be raised again, especially because the A-CAM carriers generally serve rural areas with limited competition. The FCC also asked whether it should remove pricing restrictions from higher speed BDS offerings and whether it should allow other carriers still operating under rate-of-return regulation to move their services to incentive regulation.

The FCC requested input on how to best transition A-CAM carriers to incentive regulation and ensure consumers do not see a flash cut to increased prices. Specifically, the FCC proposed a three-year transition period during which carriers may (but are not required to) de-tariff their BDS offerings, a six-month freeze of tariffed rates in areas newly deregulated under the competitive market test, and a grandfathering of existing contractual or other long-term BDS arrangements. Consequently, the FCC’s proposed rules mark just the first step in what potentially will be a years-long transition of the BDS offerings of A-CAM carriers.

Comments on the FCC’s planned BDS reforms will be due 30 days after publication of the proposed rulemaking in the Federal Register, with reply comments due 45 days after the proposed rulemaking’s publication.

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.

Grants may be used to finance the "construction, acquisition or leasing of facilities, including spectrum, land or buildings" as well as the "improvement, expansions, construction or acquisition of a Community Center" that offers free internet access and the cost of bandwidth to provide free service to Critical Community Facilities (e.g. public schools, public libraries, public medical clinics, public hospitals, community colleges, public universities, law enforcement, and fire and ambulance stations).

Incorporated organizations, Indian tribes, state and local governments, cooperatives, private corporations, and for profit and not-for-profit LLCs are eligible to apply.

Community Connect requires the following:

• Matching Funds: Community Connect requires a matching contribution by the applicant of at least 15% of the total amount requested.
• Speeds. Applicants must propose to deliver to every residential and business customer in their proposed funded service area (PFSA) a minimum of 10 MB downstream and 1MB upstream for both fixed and mobile service.
• Rural Areas. Applicants must serve rural areas, which Community Connect defines as any area not located within) a city, town, or incorporated area with a population of more than 20,000 inhabitants; or 2) an urbanized area contiguous and adjacent to a city or town that has a population of greater than 50,000 inhabitants. Funding is available only for contiguous geographic areas within an eligible rural area where broadband service, defined as s 4 MB downstream and 1 MB upstream for both fixed and mobile broadband service, does not exist.
• No Overlap. A PFSA may not overlap with area of current RUS loan borrowers and grantees.
• Critical Community Facilities. Community connect also requires that applicants propose to offer service, free of charge to users, to all Critical Community Facilities located within the PFSA for at least two years.
• Community Center. Further, applicants must propose to provide a Community Center with at least two Computer Access Points and wireless access at speeds of 10/1 free of charge to users for at least two years,

A list of prior awardees is available at: http://www.rd.usda.gov/files/UTP-CCProjectSummaries2015.pdf

For more information about Community Connect or other federal broadband programs, contact Jennifer Holtz at [email protected]

The FCC will invite carriers and other providers to submit proposals to provide IP-based services in discrete geographic areas and for particular services. Following the proposals, the FCC will solicit comments from interested parties (due March 31, 2014) and confer with state regulators and tribal leaders, with a decision on which experiments will be accepted to be issued at the FCC’s May 15, 2014 meeting. Commissioner Rosenworcel likened the trials to a separate “sandbox” within a playground, where carriers and providers could test services and IP-based networks without interfering with the existing networks within a geographic region. The Commissioners and staff emphasized that the trials would focus on impact to consumer expectations and the FCC’s core values of public safety, universal service, consumer protection, and competition.

To better understand the transition to all-IP networks, the FCC also announced that it will be conducting a series of workshops in the spring to examine issues on rural broadband, numbering, broadband access to persons with disabilities, and public safety. For example, the FCC announced it will hold a workshop in April 2014 to examine how IP networks can be used to deliver next generation 911 services, taking into account the differences between TDM networks and fiber networks. The Chief of the Public Safety and Homeland Security Bureau, Admiral David Simpson, noted that his office is also focusing on the ability of all IP-networks to deliver continuity of communications during crises.

As a component of today’s actions separate from the experiments described above, the Commission announced it would conduct rural broadband trials funded by the Connect America Fund (“CAF”) that would be held in parallel, and would not interfere, with the allocation of Phase II CAF funds to price cap LECs in unserved areas. The Commissioners announced that all Americans must benefit from the transition. The rural trails would focus on connecting anchor community institutions to their neighboring communities. Non-binding expressions of interest for the rural experiments will be due on March 7, 2014. There will be a further notice from the FCC addressing budget matters and selection criteria, and additional actions leading to an order later in the year adopting the final framework for this component of today’s actions.

The actions taken today will also address telephone number assignment in all-IP environments, improvement of the TRS system – the FCC announced $3 million in research funding -- and access for persons with disabilities in an all-IP world.

The text of the order, notice of proposed rulemaking, and a notice of inquiry in this matter adopted today are expected tomorrow or early next week.