While the final rules will not be available until a final order is adopted, which is expected by January 14, 2022, the program will launch on December 31, 2021. Here’s what we know now – a roadmap for current Lifeline and Emergency Broadband Benefit ("EBB") providers, as well as for fixed or wireless broadband providers seeking to participate in the ACP.

Click here to read our full advisory on the ACP.

EBB Program Overview

The EBB Program was authorized by Section 904 of the CAA, which was designed to provide affordable broadband services to low-income households on an emergency basis. Congress allocated $3.2 billion to the EBB Program to reimburse participating providers for providing discounts on qualifying internet service offerings to qualifying low-income households. The EBB Program will provide discounts of up to $50 per month ($75 for residents of Tribal lands) to subsidize broadband services for eligible households. Eligible consumers can also receive a one-time discount of up to $100 for a desktop or laptop computer, or tablet (no smartphones) supplied by a participating provider. The EBB benefit is limited to one monthly service discount and one device discount per eligible household. To qualify for the EBB program, households must prove that at least one member of their household meets one of the following criteria:

• qualifies for the FCC’s Lifeline program (including those who are receiving Medicaid or SNAP benefits);
• approved for the free or reduced-price school lunch program (including through the USDA Community Eligibility Provision);
• experienced substantial and documented loss of income since February 29, 2020 and the household had a total income in 2020 below $99,000 for single filers and $198,000 for joint filers;
• received a federal Pell Grant in the current award year; or
• qualifies for a participating provider’s existing low-income or COVID relief program (subject to FCC approval of that provider’s eligibility process).

Next Steps

The Order includes many specifics for the implementation of the EBB Program, but also delegates liberally to the Wireline Competition Bureau (“Bureau”) for additional details and processes. On Thursday, March 4, the Bureau issued additional guidance on the timeline for participating provider elections and applications. ETCs are automatically eligible as participating providers in the EBB Program and therefore need only submit an election to participate. The inbox for election notices will open on March 11, 2021. Non-ETC broadband providers that had existing low-income support programs as of April 1, 2020 can apply to be participating providers and will be automatically approved by providing certain information. Non-ETCs without such programs can also apply to be participating providers, but must submit an application to the Bureau for approval before they can elect to participate. The application window opened on March 8, 2021 and all application submitted by March 22, 2021 will be reviewed and acted on by the EBB service commencement date. Applications submitted after March 22 will be reviewed on a rolling basis.

For service providers to be eligible, they must file an election notice to the Universal Service Administrative Company (“USAC”), and non-ETCs must submit an application for either automatic or expedited approval by the Bureau.

Existing ETCs:

Existing ETCs need only submit an election notice to USAC. The following information must be included in election notices:

• a list of states in which the provider plans to participate in the EBB Program;
• a statement that, in each of the listed states, the provider is a “broadband provider” as of December 1, 2020;
• a statement identifying where the provider is an existing ETC;
• a statement identifying where the provider received FCC approval to participate in the EBB Program (this is primarily for providers that are seeking approvals outside of states where they are existing ETCs);
• a statement confirming whether the provider intends to distribute connected devices under the EBB Program; and
• a description and documentation of the Internet service offerings for which the provider plans to seek reimbursement from the EBB Program in each state.

Non-ETCs must file an application with the Wireline Competition Bureau (“Bureau”) that must be approved to participate in the EBB Program. Non-ETCs with an existing low-income support program must file an application describing:

• the jurisdictions in which it plans to participate,
• the service areas in which the provider has the authority, if needed, to operate in each state, and
• a description, supported by documentation, of the established program with which the provider seeks to qualify for automatic admission to the EBB Program.

Non-ETCs without pre-existing low-income support programs must first submit an application for Bureau approval describing:

• the states in which it plans to participate,
• the service areas in which the provider has the authority, if needed, to operate in each state but has not been designated as an ETC, and
• documentation of the provider’s plan to combat waste, fraud, and abuse.

The FCC has set the expectation that the EBB Program will begin within 60 days of the adoption of the Order. Therefore, participation providers should start providing EBB discounted services by the end of April. For more information on the EBB and related programs, join us on March 22, 2021 for Kelley Drye’s annual webinar discussing the state of the federal Universal Service Fund ("USF"). This year will feature segments on how the ongoing pandemic has influenced the importance of the USF and related policy decisions.

The February meeting begins what is expected to be a busy 2021 for the FCC’s agenda. You will find more information about the meeting items after the break.

Emergency Broadband Benefit Program: On December 27, 2020, President Trump signed the Consolidated Appropriations Act ("CAA"), 2021, which included Section 904 authorizing the $3.2 billion Emergency Broadband Benefit (EBB) Program. The Program will reimburse up to $50 per month per eligible low-income household to discount broadband service and certain connected devices during an emergency period. To participate, providers must have offered broadband internet access service as of December 1, 2020 and must either be an Eligible Telecommunications Carrier or be approved by the FCC pursuant to an expedited approval process. Congress gave the FCC 60 days to promulgate regulations to implement the EBB program and the FCC released a Public Notice establishing a comment cycle on January 4, 2021. Comments were filed on or before January 25, 2021 and reply comments are due by February 16, 2021. The Commission is also holding a roundtable discussion on the EBB implementation on February 12, 2021.

COVID-19 Telehealth Program: The FCC will hear a presentation about the agency’s plans for the next stage of the COVID-19 Telehealth program. The agency already approved $200 million in funding under the program for health care providers in 2020, exhausting the initial funding appropriated by Congress to support connected care services to patients. But Congress recently provided an additional $249.95 million for the program and the FCC already has sought comment on the appropriate metrics for evaluating requests for this funding and potential program improvements and taken action to streamline the process for disbursing future funding.

Improving Broadband Mapping Data: The FCC will hear a presentation on the agency’s work to improve its broadband maps, including through the Digital Opportunity Data Collection (DODC) that will require service providers to submit granular data regarding their current and potential broadband service territories. Among other things, the FCC will use this information to determine the areas eligible for the second round of support under the Rural Digital Opportunity Fund, which will provide at least $4.4 billion over ten years to spur broadband deployment in unserved areas. The DODC enjoys bipartisan support at the FCC, but has received criticism for its complex reporting requirements, crowdsourcing and challenge processes, enforcement standards, and lack of exceptions for smaller providers.

Supply Chain Security: The draft Further Notice of Proposed Rulemaking (“FNPRM”) would align the FCC’s supply chain security rules with the recently-enacted CAA, which allocated $1.9 billion to reimburse providers for the costs of removing, replacing, and disposing of network equipment and services posing a national security risk. In particular, the FCC plans to: (1) raise the cap on reimbursement eligibility to encompass providers with 10 million or fewer customers; (2) seek comment on allowing providers to use reimbursement funds to cover the removal, replacement, and disposal of all network equipment and services provided by Chinese telecommunications companies Huawei and ZTE that were deemed a national security threat last year; (3) request input on allowing providers to use reimbursement funds to cover the removal, replacement, and disposal of unsecure network equipment and services obtained on or before June 30, 2020; (4) prioritize reimbursement funding to smaller providers with two million or fewer customers and non-commercial educational broadband service (“EBS”) providers as well as “core” network transition costs; and (5) expand the definition of advance communications service providers eligible for reimbursement to explicitly include EBS providers, libraries, and health care providers, in line with the CAA.

911 Fee Diversion: The draft Notice of Proposed Rulemaking (“NPRM”) would implement section 902 of the Don’t Break Up the T-Band Act of 2020, which requires the FCC to take action to address the diversion of 911 fees by states and other jurisdictions for purposes unrelated to 911 operations. Section 902 specifically directs the FCC to issue final rules within 180 days of defining what uses of 911 fees by states and taxing jurisdictions constitute 911 fee diversion. The NPRM seeks comment on proposed rules to implement these provisions. Notably, fee diversion was a key focus area for former FCC Commissioner O’Rielly and remains a controversial issue within the agency.

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.

When the FCC proposed the 5G Fund last May, the biggest sticking point concerned when the Commission would aim to start the auction, which hinged on a decision about what data the FCC would use to identify the areas eligible for support. In the 5G Fund NPRM, the Commission set forth two options. Under the first option, the FCC would initiate Phase I of the auction in 2021 using 10-year old data – primarily census information – to determine rural areas eligible for funding by population (i.e., less than 2,500 people), and then prioritize support to those areas “unlikely” to see 5G deployment absent such investment. Under the second option, the FCC would postpone Phase I until at least 2023 so that it could develop the Digital Opportunity Data Collection (DODC) to collect more granular deployment data. Option 1 had the potential to be both over and under inclusive of eligible areas while option 2 would significantly delay the auction start date. During the proceeding, some commenters urged the Commission to use new Form 477 self-reported data from carriers, as it had tried to do for Mobility Fund Phase II. Ultimately, the Commission selected option 2, prioritizing accuracy and efficient use of funds over speed and declining to use new Form 477 data because the Commission was not convinced it could ensure the data was reliable in a shorter timeframe than using the DODC information.

The Report and Order also places a few other conditions on the selection of eligible areas. First, an area will only be eligible for Phase I of the auction if the DODC shows that there is not already at least one service provider offering unsubsidized 4G LTE or 5G broadband service. Given existing market competition, the Commission thinks that providing support to areas with unsubsidized 4G LTE service could preempt near-term 5G deployments that would already be expected in those areas. Second, the 5G Fund will exclude areas covered by the T-Mobile/Sprint merger. Since new T-Mobile committed to serve 90% of rural Americans within six years as part of the merger agreement, the Commission said providing support to those same areas would be a waste of the limited funds. As a related limitation, while T-Mobile can participate in the auction, it cannot use any 5G Fund awards to support 5G buildouts in areas where it has already committed to deploy under the merger agreement.

Other key elements of the Report and Order include:

Auction Procedures – The FCC will award the funds using a two-phase reverse auction, where the provider offering to serve an area for the least amount of funding is the winner. Phase I would provide up to $8 billion in support, with $680 million reserved for deployments on Tribal lands. Phase II would provide up to $1 billion, plus any funding remaining after Phase I, for deployments for precision agriculture and particularly hard-to-serve areas like farms and ranches. Geographic bidding areas will range from census block groups to census tracts, with the exact grouping of eligible areas to be determined during the pre-auction process. The FCC also adopted an “adjustment factor” that will assign weights and increase support for geographic areas with difficult terrain and other characteristics that make them more costly or less profitable to serve. The exact application of the adjustment factor will also be decided during the pre-auction process.

Performance Requirements – 5G Fund recipients will be required to deploy networks that meet 5G-NR (New Radio) technology standards and provide median speeds of at least 35/3 Mbps. Minimum cell edge speeds must be at least 7/1 Mbps. Round-trip latency on supported services cannot exceed 100 milliseconds. In addition, support recipients would be required to offer at least one service plan with a monthly data allowance equaling the average U.S. subscriber’s data usage. As with prior high-cost programs, support recipients will be required to offer their services at rates “reasonably comparable” to those offered in urban areas and be subject to collocation and roaming obligations.

Deployment Milestones – The FCC adopting escalating deployment milestones for 5G Fund support recipients. Specifically, support recipients will need to offer service meeting the performance requirements to 40% of their service area by the end of the third full calendar year of funding, 60% by year four, 80% by year five, and a final milestone of 85% by year six. To avoid a repeat of the Mobility Fund Phase II coverage data issues, the FCC has imposed strict reporting requirements on 5G Fund support recipients that include on-the-ground testing for each milestone.

ETC Designation and Application Requirements – Like the RDOF, service providers will be able to participate in the 5G Fund auction without first being designated as an eligible telecommunications carrier (ETC), but winning bidders will need to secure such designations in their supported service areas with 180 days to receive funding. The 5G Fund application process also mirrors the RDOF procedures, with service providers initially required to submit a short-form application that includes basic business, financial, and technical information followed by a long-form application for winning bidders with detailed network information and deployment timeframes. Winning bidders also will have to meet letter of credit requirements that are eased as providers hit deployment milestones.

Transitioning Legacy Support – All competitive ETCs receiving legacy high-cost support for 4G LTE mobile wireless service will be required to use an increasing percentage of their support toward the deployment, maintenance, and operation of 5G networks that meet 5G-NR standards. The change will be phased in, with one-third of the support required for 5G in 2021 and two-thirds in 2022. These competitive ETCs will also be required to meet the same speed, latency, data allowance, and “reasonably comparable” rate requirements as 5G Fund recipients.

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

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

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 Eases Lifeline Application Process for Tribal Consumers, Extends Previous Waivers

On June 1, the FCC’s Wireline Competition Bureau (“WCB”) released an Order (DA 20-577) aimed at easing the Lifeline program application and enrollment process for consumers who reside in rural areas on Tribal lands and qualify for Lifeline benefits. Specifically, the WCB FCC’s Wireline issued a temporary waiver to allow Lifeline carriers to begin providing Lifeline service to consumers in rural Tribal areas even if those consumers have not yet submitted certain documentation to complete their application. The FCC noted that consumers living in rural areas on Tribal lands already face difficulties in providing this documentation, and the pandemic has added to these hardships.

Under the June 1 waiver, until August 31, 2020, a Lifeline eligible telecommunications carrier (“ETC”) may choose to immediately begin providing Lifeline service to a consumer living in a rural Tribal area who applies for Lifeline but is unable to provide the necessary documentation to resolve a failed automated eligibility check at the time of application. The consumer will have 45 days from the time of application to submit the documentation. If the applicant then does provide the necessary documentation within 45 days and is determined to qualify for Lifeline service, the Lifeline provider can go back and claim reimbursement for the discounted service provided during the 45-day period.

In addition, in the Order, WCB also extended its recent waivers of the Lifeline program’s recertification, reverification, general de-enrollment, usage requirements, and three-month documentation requirements for income verification through August 31, 2020. Those waivers were set to expire at the end of June.

FCC Approves Latest Set of COVID-19 Telehealth Applications

On May 28, 2020, the WCB approved 53 funding applications for the COVID-19 Telehealth program. Under the latest funding round, $18.22 million in funding will go to health care providers across 24 states. With this latest set of approvals, the FCC’s COVID-19 Telehealth Program has funded 185 health care providers in 38 states, plus Washington D.C., for a total of $68.22 million in funding awarded. Read the latest issue of Kelley Drye’s USF Tracker for details on awards granted.

FCC Grants Washington Tribe’s Temporary Spectrum Access Request

On May 29, 2020, the FCC’s Wireless Telecommunications Bureau (“WTB”) granted the Makah Tribe emergency Special Temporary Authority (“STA”) request to operate in the 2.5 GHz band in Washington State. This is the latest action in the FCC’s continued effort to improve communications and broadband service in rural and other hard-to-serve areas during the crisis.

The main sticking point among the Commissioners is over when Phase I should begin, and on what basis. The NPRM seeks comment on two options. Under the first option, the FCC would initiate Phase I in 2021 and use existing data sources – primarily census information – to determine rural areas eligible for funding by population (i.e., less than 2,500 people), and then prioritize support to those areas “unlikely” to see 5G deployment on their own. The FCC seeks comment on whether alternative data sources exist and whether a population density threshold may be more appropriate. The FCC plans to prioritize support to areas historically lacking 4G LTE (or even 3G) service. However, recognizing the deficiencies in existing wireless coverage data, the FCC asks for input on relevant information sources to make this historical determination. Under the second option, the FCC would postpone Phase I until at least 2023 in order to use more granular deployment data developed through its upcoming Digital Opportunity Data Collection. The NPRM asserts that the delay stems from a lack of appropriations under the recent Broadband DATA Act, which requires the FCC to significantly improve its broadband coverage maps. Without such appropriations, the FCC contends that it would need time to reallocate existing resources to broadband mapping that it would eventually use to determine rural areas lacking 5G service eligible for funding. Both options have their detractors, with critics of the first option noting that available census data already are almost ten years old as well as the importance of ensuring funding goes to areas actually lacking 5G service, and with detractors of the second option warning that funding delays would only widen the urban/rural digital divide. At the April Open Meeting, the two Democratic Commissioners dissented in part, suggesting that the NPRM presents a false choice between speed and accuracy.

Other key elements of the FCC’s 5G Fund proposal include:

• Auction Procedures: As with the RDOF, the FCC plans to award 5G Fund support through a “reverse” auction, where the provider offering to serve an area for the least amount of funding is the winner. Auction participants would bid by census tract (or a potentially larger area) and the FCC’s proposes applying an “adjustment” factor to increase the funding available for tracts with difficult terrain and other characteristics increasing service costs. The FCC plans to issue proposed adjustment factor criteria and seek comment on such criteria at a later date.
• Performance Requirements: The FCC proposes requiring 5G Fund support recipients to provide speeds of at least 35/3 Mbps, with potential increases over time to reflect service advancements. Support recipients would be required to provide a minimum cell-edge download speed of 7/1 Mbps, with a 90% coverage probability and 50% cell loading factor. The FCC also would cap supported service latency at 100 milliseconds per round trip. In addition, support recipients would be required to offer at least one service plan with a data allowance equaling the average U.S. subscriber’s data usage. As with prior high-cost programs, support recipients would be required to offer their services at rates “reasonably comparable” to those offered in urban areas and be subject to collocation and roaming obligations.
• Deployment Milestones: The FCC anticipates adopting escalating deployment milestones for 5G Fund support recipients. Specifically, support recipients would be required to offer service meeting the performance requirements to 40% of their service area by the end of the third full calendar year of funding, with the deployment requirement increasing to 60% by year four, 80% by year five, and 85% by year six as the final milestone. To avoid a repeat of the Mobility Fund Phase II coverage data issues, the FCC plans to impose strict reporting requirements on 5G Fund support recipients that include significant on-the-ground testing and standardized propagation modeling.
• Transitioning Legacy Support: The FCC seeks comment on how best to transition existing high-cost support to 5G Fund auction winners. In particular, the FCC proposes phasing down all legacy high-cost support over no more than five years, with legacy support recipients required to meet the same performance requirements as 5G Fund auction winners on an accelerated schedule to receive transition funding.
• ETC Designation and Application Requirements: Like the RDOF, the FCC plans to permit service providers to participate in the 5G Fund auction without first being designated as an eligible telecommunications carrier ("ETC"). However, winning bidders would be required to obtain an ETC designation in their supported service areas before receiving any funding. The 5G Fund application process also would mirror RDOF procedures, with service providers initially submitting a short-form application including basic information on their identity, ownership, and financial/technical qualifications followed by a long-form application for winning bidders providing detailed network information and deployment timeframes. Winning bidders also would be required to meet letter of credit requirements, which could be eased as the providers hit deployment milestones.

Deregulating and Detariffing End-User Access Charges

The Commission’s proposal would eliminate ex ante price regulation of all five remaining access charges that incumbent local exchange carriers ("ILECs") can assess on end users and require both ILECs and competitive local exchange carriers ("CLECs") to detariff all such charges. (The FCC does not regulate CLECs access charges so long as they are just and reasonable.) The five end-user charges on the regulatory chopping block are:

• Subscriber Line Charge – A flat per-line fee, capped by the FCC, that ILECs can assess on customers to recover a portion of the costs associated with transporting calls on the ILEC’s local facilities. This charge, also referred to as the “SLC” (pronounced “slick”) or the End User Common Line Charge ("EUCL"), stemmed from the earliest access charge orders as a way to recover non-recurring charges associated with providing the ability to make interstate calls.
• Access Recovery Charge – An end-user charge created by the FCC in 2011 as a mechanism to mitigate reduced ILEC intercarrier compensation revenues from charges assessed on IXCs as a result of the transition to the intercarrier bill-and-keep regime. The ARC allowed ILECs to recoup some of the costs no longer collected from other carriers through per-minute access charges.
• Presubscribed Interexchange Carrier Charge – A fee that price cap ILECs can assess on multi-line business subscribers who do not presubscribe an IXC to recover a portion of the ILECs’ local transport costs. The PICC (pronounced “Pick-C”) was introduced shortly after the Telecommunications Act of 1996 with the advent of competitive local service.
• Line Port Charge – A monthly charge ILECs can assess to recover the cost associated with porting digital subscriber lines to the switch in the ILEC’s central office if it exceeds the cost for porting analog lines.
• Special Access Surcharge – A monthly charge to recover transit costs for calls that “leak” out of a private branch exchanges ("PBXs") onto the public network, such as when large business customers allow employees to use a PBX to make long-distance calls without incurring access charges. This charge has been in place since the early days of telephone access charges.

Notwithstanding the Commission’s proposed approach, the NPRM invites comments on “alternative approaches to determining where and under what circumstances [it] should eliminate” price and tariff controls. One such proposal it offers is a case-by-case assessment finding rate regulation is unnecessary if: (1) a competing voice provider serves 75% of the census blocks in the same area as the ILEC; (2) the Eligible Telecommunications Carrier in the area is subject to the reasonable comparability benchmark; or (3) the state has deregulated intrastate rates. The Commission also seeks comment on the whether it should mandatorily detariff other charges related to federal programs, such as pass-through fees for USF contributions.

USF Reporting Impact

The Commission’s proposed action may impact how carriers allocate revenues between interstate and intrastate jurisdictions for the purpose of determining USF contribution amounts. To prevent carriers from gaming the system to reduce their contributions, the FCC is seeking comment on two alternative proposals for allocating revenues: a 25% safe harbor, where 25% of revenues would be allocated to interstate services, or bright-line rules for how carriers allocate revenues.

Prohibiting Line Item Charges on Customer Bills

The second major piece of the NPRM is a proposal to prohibit all carriers (ILECs and competitive carriers) from assessing end-user access charges as separate line items on customer bills, which they are currently permitted to do. The FCC said that the carrier descriptions for these charges vary significantly and unnecessarily complicate customer bills. The Commission states that it has sought to reduce the ambiguity of carriers’ advertised rates and simplify customer bills using its Truth-In-Billing rules, and its proposed action here would be consistent with those goals. Prohibiting carriers from listing end-user access charges separately, the NPRM asserts, would result in advertised prices that are closer to the total prices that appear on customer bills. This would increase transparency for consumers by removing the inconsistent line item descriptions and enable consumers to more easily compare voice service offerings by different providers.

Comments on the proposed access charge reforms are due 30 days after the NPRM is published in the Federal Register, with reply comments due 15 days later.

Because this proposal would affect both incumbent and competitive carriers, and may impact federal USF reporting, telecommunications service providers should review the NPRM carefully. Now would be a good time to review the line item and surcharge structure of a carrier’s services to determine if any changes should be made.

First, the Order adopts rules prohibiting the use of USF support to purchase services and equipment from “Covered Companies” deemed to present national security threats and initially designates Huawei and ZTE as Covered Companies. Second, the Further Notice of Proposed Rulemaking (“FNPRM”) solicits comments on a proposal to require eligible telecommunications carriers (“ETCs”) – and possibly all communications providers – to remove and replace Huawei and ZTE services and equipment subject to the FCC establishing a reimbursement program providing financial assistance. Third, the Order establishes an information collection and requires ETCs to submit information regarding their use of Huawei and ZTE equipment and services as well as the costs associated with removing and replacing such services and equipment from communications networks.

The new rules will take effect immediately upon publication in the Federal Register rather than providing the standard thirty-day post-publication waiting period. Federal Register publication of the Order also initiates a thirty-day comment period regarding the initial designations of Huawei and ZTE. The Public Safety Homeland and Security Bureau will issue a “final designation” on Huawei and ZTE – we fully expect that Huawei and ZTE will be designated as Covered Companies – and set a compliance effective date. In light of the potentially short timeframe before the rules and compliance requirements take effect, USF support recipients should be sure to review the Order/FNPRM carefully and assess whether and how the rules will affect the recipient’s specific circumstances.

A Focus on China

Pulling no punches, the FCC made clear its concern about the potential for the Chinese government to engage in industrial and economic espionage and other malicious acts by exploiting Huawei’s and ZTE’s access to U.S. communications networks. Chairman Pai (here and here), Commissioner O’Rielly, and Commissioner Starks, among others, have spoken out regarding the need to protect U.S. communications networks from security threats. Prohibiting USF recipients from using USF support for Huawei and ZTE services and equipment was an easily foreseeable next step.

While the Order received unanimous support from the FCC, Commissioner O’Rielly expressed some reservation regarding the likely significant equipment replacement costs and advocated for a process to challenge future designations of Covered Companies should there be concern that a designation was mistaken. Interestingly, and suggesting the FCC anticipates that the Order will be appealed, the Order appears to methodically respond to Huawei arguments and provide further support for the FCC’s decision.

We highlight below a few of the key takeaways from the Order.

The Order – USF Support Usage Prohibitions

First, the USF support use prohibitions are broad. The new rules prohibit USF support recipients from using USF support to “purchase, obtain, maintain, improve, modify, or otherwise support any equipment or services [including software] provided or manufactured by a covered company.” The FCC defines a “Covered Company” as including not only the particular company at issue but also the company’s affiliates, subsidiaries, and parents. Consequently, USF support recipients will need to understand a Covered Company’s “family” of companies to avoid inadvertently violating the FCC’s rules.

The rules do not bar USF support recipients from using Covered Company services and equipment, although, in practice, the restrictions may have that effect. While the FCC appears to prefer that Covered Company services and equipment not be used at all, the rules are based on the FCC’s authority over the USF program and, therefore, the restrictions are limited to the use of USF support. USF support recipients are permitted to use Covered Company services and equipment but must self-fund purchases, including ongoing maintenance for existing services and equipment. USF support recipients will need to assess whether they are able to completely self-fund ongoing Covered Company equipment and service maintenance, upgrades, etc. or if they will need to replace the services and equipment.

Second, USF support recipients may find compliance with the new rules challenging. For example, the Order dismisses concerns about compliance difficulties where USF support recipients are unaware that their underlying providers are reselling, such as under “white labeling” arrangements, the services and equipment of Covered Companies. Parties to multiyear contracts for Covered Company services and equipment also could face difficulties because, although the rules apply prospectively only, such contracts are not exempted from the new rules, potentially exposing USF support recipients to early termination or other contract modification costs.

Third, USF support recipients will be required to certify compliance with the new rules once the Wireline Competition Bureau (“WCB”) and USAC develop the specific certifications and information collection revisions for the USF programs. USAC audits will be used to confirm compliance and, unless the WCB or USAC provide guidance on acceptable compliance support, USF support recipients will need to consider what records may best support compliance should they be audited. USAC will seek recovery from the entity that violated the rule, potentially including entities such as schools, healthcare providers, or consortiums, rather than a service provider.

The FNPRM – Potential Replacement and Reimbursement of Covered Company Equipment

The FNPRM seeks comment on a wide range of questions related to removing and replacing Covered Company services and equipment from U.S. telecommunications networks. While the initial draft of the FNPRM limited the removal and replacement proposals to ETCs, the final FNPRM takes a much broader approach. The FCC now questions whether the prohibition on the purchase, maintenance, improvement, etc. of Covered Company services and equipment, as well as the remove and replace requirement, should extend to all communications companies, not just those receiving USF support.

The FNPRM proposes conditioning future USF support on an ETC’s agreement not to use Covered Company services and equipment and requiring such services and equipment be removed and replaced, contingent on the FCC’s establishment of a reimbursement fund to aid ETCs with costs of complying with the changes. The FNPRM seeks comment on a variety of issues related to this proposal, including, but not limited to, the scope of the remove and replace requirement, what costs should be reimbursed, who should be eligible for reimbursement, and the timing of compliance with the proposal. Carriers should note that the FCC also seeks comment on whether Huawei and ZTE handsets should be prohibited even though not supported by the USF program.

The FNPRM also seeks comment on the scope, as well as the authority for, a possible expansion of the Covered Company services and equipment remove and replace requirement to all communications networks. The FNPRM also queries how the FCC should treat entities such as interconnected VoIP providers and facilities-based ISPs for purposes of the proposed service and equipment prohibitions.

ETC Information Collection

The final component of the Order requires an information collection to determine the scope of Huawei and ZTE services and equipment currently in use on ETC networks and the cost of removing and replacing the equipment. The information collection is mandatory for ETCs, including their affiliates and subsidiaries, and ETCs should be prepared for the information collection to proceed quickly as the FCC directed the WCB to request emergency collection approval from the Office of Management and Budget if necessary. While not required, USF recipients that are not ETCs voluntarily may participate in the information collection, particularly should they have pending ETC applications or intend to seek ETC designation in the future.

Kelley Drye will be following these rules and proceedings so check back for further updates.

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

Mid-Band Spectrum Auction: The draft Order would set the stage for a 2.5 GHz Band auction by eliminating rules that prevented non-educational institutions from obtaining licenses, allowing commercial providers to enter the Band. New licensees would no longer be required to use the spectrum for educational purposes and would possess more flexibility in leasing spectrum to others. The auction would not affect existing contracts or leases for 2.5 GHz Band spectrum, which would remain in place. The FCC plans to provide rural Tribal organizations with a priority filing window for new 2.5 GHz Band licenses, but would not implement a similar window for educational institutions. After the close of the priority filing window, the FCC would auction the remaining 2.5 GHz Band spectrum in 100 megahertz or 16.5 megahertz blocks at the county level.

High-Band Spectrum Auction: The draft Public Notice would establish rules for the auction of Upper 37 GHz Band, 39 GHz Band, and 47 GHz Band spectrum for commercial mobile use. Auction participants would first bid on generic spectrum blocks covering partial economic areas. The bid amounts in this round would determine the size of the incentive payments received by incumbent 39 GHz Band licensees. Following the generic bidding round, auction participants would bid on frequency-specific spectrum blocks, with the aim of creating contiguous block assignments. The FCC plans to provide bidding credits to small businesses and rural service providers to encourage auction participation. The FCC would accept applications to participate in the auction beginning August 2, 2019, with the auction scheduled to start on December 10, 2019.

Connected Care Pilot Program: The draft Notice of Proposed Rulemaking (“NPRM”) would seek input on the eligibility requirements, application processes, goals, and evaluation metrics for the proposed Connected Care Pilot Program. The FCC anticipates operating the Connected Care Pilot Program as a new program within the Universal Service Fund (“USF”), supported by an additional assessment on telecommunications providers to be added to the contribution factor that will slightly increase USF contributions. The FCC therefore says it does not plan on diverting resources from existing USF programs to support the Connected Care Pilot Program. Moreover, in a reversal from its initial inquiry last year on the Connected Care Pilot Program, the FCC is no longer considering restricting program participation only to facilities-based eligible telecommunications carriers (“ETCs”); rather, service providers do not even have to be ETCs. Comments on the NPRM will be due 30 days after Federal Register publication of the NPRM, with reply comments due 30 days later.

Transport Services Reform: The draft Orders would relieve price cap carriers from pricing regulation of their lower-speed, legacy transport services known as Time Division Multiplexing (“TDM”) transport. The FCC would find that sufficient competition exists in the provision of TDM transport services to justify eliminating the pricing controls. Although the FCC already voted to eliminate TDM transport service pricing controls in 2017, a federal court subsequently returned the issue to the agency to allow for full notice and comment on the issue. The FCC also would forbear from enforcing its unbundling requirements for legacy transport services known as DS1 and DS3 transport, subject to certain conditions and a multi-year transition period. The forbearance would free price cap carriers from providing such legacy transport services based on regulated rates.

The FCC’s current review will look at rules adopted in 2005-2006 and covers a number of major regulatory areas. For example, the FCC asked for comment on certain USF rules, including:

• the agency’s definition of “rural area” in the Rural Health Care Program;
• certain eligibility requirements for carriers to qualify to receive high cost or Lifeline USF support, including the demonstration of compliance with consumer protection and service quality standards, the public interest standard, and the requirement to provide a copy of any eligible telecommunications carrier (“ETC”) petitions to affected Tribal governments;
• certain annual reporting obligations for high cost fund recipients; and
• the certifications that must be made by schools and libraries to obtain E-Rate funds.

The FCC also will review its equipment authorization procedures, particularly the testing and certification requirements for software defined radios. As we previously highlighted, the FCC has taken a number of recent enforcement actions against small- to medium-sized manufacturers for equipment marketing violations, which often involve complex testing and disclosure obligations.

Disabilities access rules will be reevaluated as well, such as the technical standards and carrier contribution mechanisms for the Telecommunications Relay Service that helps facilitate communications by persons with hearing or speech disabilities. Moreover, the FCC will re-assess the requirements on wireless providers and mobile device manufacturers to offer a sufficient selection of hearing aid-compatible handsets.

The range of topics covered by the FCC’s review is indeed wide and presents an opportunity for all stakeholders to submit their thoughts over the coming months on how these rules should be expanded, contracted, or eliminated. The FCC will accept comments until October 29, 2018.

In addition to expanding Lifeline support to Broadband Internet Access Services, the Order:

• sets phased-in minimum service standards for fixed and mobile voice and broadband services to support “robust” service offerings and phases in requirements for Wi-Fi and hotspot-enabled devices provided to Lifeline subscribers

• establishes a National Lifeline Eligibility Verifier (National Verifier) to make eligibility determinations and perform a variety of other functions, including providing support payments to providers and conducting annual recertification

• creates a streamlined federal Lifeline Broadband Provider (LBP) designation process as an alternative to the current ETC designation processes by interpreting and forbearing from parts of the Communications Act of 1934, as amended (Act)

• streamlines the programs that qualify consumers for Lifeline, by adding the Veterans Pension benefit and Survivors Pension benefit to the list of programs through which a consumer can demonstrate and removing the Low-Income Home Energy Assistance Program (LIHEAP); National School Lunch Program's free lunch program (NSLP); and Temporary Assistance for Needy Families (TANF) from the list of Lifeline-qualifying assistance programs

• establishes a $2.25 billion annual budget for the program with a trigger for the Bureau to submit a report to the Commission when the program reaches 90 percent of the budget

• modifies the non-usage rules, establishes a 12-month benefit port freeze for supported broadband offerings, and allows the Wireline Competition Bureau to modify program forms

If you are interested in learning more about the Order, or have questions about providing Lifeline services, please contact the authors of this post or your regular Kelley Drye attorney at any time.