Connect America Fund; Universal Service Reform-Mobility Fund, 15422-15456 [2017-05665]
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Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Rules and Regulations
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Parts 1 and 54
[WC Docket No. 10–90, WT Docket No. 10–
208; FCC 17–11]
Connect America Fund; Universal
Service Reform—Mobility Fund
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the Federal
Communications Commission
(Commission) adopts the framework to
allocate funds to assist in the
deployment of 4G LTE to areas that are
so costly that the private sector has not
yet deployed there and to preserve such
service where it might not otherwise
exist. This framework redirects funding
from legacy subsidies and distributes
them through the Mobility Fund Phase
II and Tribal Mobility Fund Phase II,
using market-based, multi-round reverse
auctions, and contains defined, concrete
compliance requirements to help ensure
rural consumers will be adequately
served by mobile carriers receiving
universal support.
DATES: Effective April 27, 2017 except
for additions of §§ 54.1013, 54.1014,
54.1015(a) through (e), 54.1016(a) and
(b), 54.1017, 54.1019, 54.1020, and
54.1021, which contain new or modified
information collection requirements that
require approval by the Office of
Management and Budget (OMB). The
Commission will publish a document in
the Federal Register announcing the
effective date of those additions.
FOR FURTHER INFORMATION CONTACT:
Wireless Telecommunications Bureau,
Auction and Spectrum Access Division,
Mark Montano, at (202) 418–0660. For
further information concerning the
Paperwork Reduction Act information
collection requirements contained in
this document, contact Cathy Williams
at (202) 418–2918, or via the Internet at
PRA@fcc.gov.
ADDRESSES: Federal Communications
Commission, 445 12th Street SW.,
Washington, DC 20554.
SUPPLEMENTARY INFORMATION: This is a
summary of the Report and Order and
Further Notice of Proposed Rulemaking
(MF–II Order), WC Docket No. 10–90,
WT Docket No. 10–208, FCC 17–11,
adopted on February 23, 2017 and
released on March 7, 2017. The
complete text of this document is
available for public inspection and
copying from 8:00 a.m. to 4:30 p.m.
Eastern Time (ET) Monday through
Thursday or from 8:00 a.m. to 11:30 a.m.
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SUMMARY:
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ET on Fridays in the FCC Reference
Information Center, 445 12th Street SW.,
Room CY–A257, Washington, DC 20554.
The complete text is also available on
the Commission’s Web site at https://
transition.fcc.gov/Daily_Releases/
Daily_Business/2017/db0309/FCC-1711A1.pdf. Alternative formats are
available to persons with disabilities by
sending an email to FCC504@fcc.gov or
by calling the Consumer &
Governmental Affairs Bureau at (202)
418–0530 (voice), (202) 418–0432
(TTY).
Regulatory Flexibility Analysis
As required by the Regulatory
Flexibility Act of 1980, the Commission
has prepared a Final Regulatory
Flexibility Analysis (FRFA) of the
possible significant economic impact on
small entities of the policies and rules
adopted in this document. The FRFA is
set forth in an appendix to the MF–II
Order, and is summarized below. The
Commission’s Consumer and
Governmental Affairs Bureau, Reference
Information Center, will send a copy of
this MF–II Order, including the FRFA, to
the Chief Counsel for Advocacy of the
Small Business Administration (SBA).
Paperwork Reduction Act
The MF–II Order contains new and
modified information collection
requirements subject to the Paperwork
Reduction Act of 1995 (PRA), Public
Law 104–13. It will be submitted to the
Office of Management and Budget
(OMB) for review under section 3507(d)
of the PRA. OMB, the general public,
and other Federal agencies will be
invited to comment on the new and
modified information collection
requirements contained in this
proceeding.
Congressional Review Act
The Commission will send a copy of
this MF–II Order in a report to be sent
to Congress and the Government
Accountability Office pursuant to the
Congressional Review Act (CRA), see 5
U.S.C. 801(a)(1)(A).
I. Introduction
1. In the MF–II Order, the Commission
adopts the framework for moving
forward with the Mobility Fund Phase
II (MF–II) and Tribal Mobility Fund
Phase II (Tribal MF–II), which will
allocate up to $4.53 billion over the next
decade to advance the deployment of 4G
LTE service to areas that are so costly
that the private sector has not yet
deployed there and to preserve such
service where it might not otherwise
exist. The funding for this effort will
come from the redirection of legacy
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subsidies and distributed using a
market-based, multi-round reverse
auction and will come with defined,
concrete compliance requirements so
that rural consumers will be adequately
served by the mobile carriers receiving
universal service support.
2. The Commission expects to release
a list of presumptively eligible areas
shortly, to finalize the challenge process
in the coming months, and to conclude
the challenge process by January 31,
2018. The Commission expects to
commence the auction shortly
thereafter. The phase-down of legacy
support is scheduled to commence in
the first month following the close of
the MF–II auction.
II. Background
3. In the USF/ICC Transformation
Order, 76 FR 73829, November 29, 2011,
the Commission sought to achieve the
universal availability of ‘‘mobile
networks capable of delivering mobile
broadband and voice service in areas
where Americans live, work, or travel.’’
This goal was ‘‘designed to help ensure
that all Americans in all parts of the
nation, including those in rural, insular,
and high-cost areas, have access to
affordable technologies that will
empower them to learn, work, create,
and innovate.’’ At the same time, the
Commission recognized the importance
of minimizing the universal service
contribution burden on consumers and
businesses. The Commission sought to
balance the objective of ‘‘providing
support that is sufficient but not
excessive so as to not impose an
excessive burden on consumers and
businesses who ultimately pay to
support the Fund.’’
4. Applying those goals, the
Commission targeted funding to expand
mobile coverage, while ensuring that the
funding is ‘‘cost-effective and targeted to
areas that require public funding to
receive the benefits of mobility.’’ As a
result, the Commission eliminated the
‘‘identical support rule,’’ which
previously had set the level of support
for competitive eligible
telecommunications carriers (CETCs),
including those providing mobile
services, at the level received by the
incumbent local exchange carrier, and
had limited CETC support to those areas
where wireline providers received
support because of their high costs. The
Commission concluded that ‘‘[t]he
support levels generated by the identical
support rule bear no relation to the
efficient cost of providing mobile voice
service in a particular geography,’’ and
established the Mobility Fund to assure
that universal service support for mobile
service would be targeted in a more cost
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effective manner. The Mobility Fund
included two phases. For Mobility Fund
Phase I (MF–I), the Commission
provided up to $300 million in one-time
support payments, to be awarded
through a reverse auction. The
Commission also provided an additional
$50 million in one-time support
dedicated to Tribal lands. For MF–II, the
Commission decided it would provide
up to $500 million per year in ongoing
support—including support to Tribal
lands—and sought comment in the
USF/ICC Transformation FNPRM, 76 FR
78383, December 16, 2011, on the
structure and operational details of that
fund.
5. To minimize ‘‘shocks to service
providers that may result in service
disruptions for consumers,’’ the USF/
ICC Transformation Order provided for
a five-year transition period during
which legacy support going to CETCs
would phase down 20 percent per year
beginning July 1, 2012. The Commission
noted that, during the transition period,
mobile carriers would have the
opportunity to seek one-time MF–I
support to expand 3G or better service
to areas where such service was
unavailable while also receiving phasedown legacy support. The Commission
also provided that if MF–II were not
operational by July 1, 2014, the phase
down of legacy support for CETCs
would pause at the 60 percent level in
effect on that date. The Commission also
provided that the phase-down of legacy
support for CETCs serving Tribal lands
would pause at that time if Phase II of
the Tribal Mobility Fund were not
implemented.
6. Following the comments filed in
response to the USF/ICC
Transformation Order FNPRM
accompanying the USF/ICC
Transformation Order, the Wireless
Telecommunications Bureau and the
Wireline Competition Bureau (the
Bureaus) issued a Public Notice in
November 2012, 77 FR 73586, December
11, 2012, seeking to develop a more
comprehensive, robust record on certain
issues related to the award of ongoing
support for advanced mobile services.
The Bureaus sought to build upon their
experience in implementing a reverse
auction to distribute universal service
support and the experiences of carriers
that participated in MF–I. In particular,
among other things, the Bureaus sought
further feedback on issues pertaining to
the method for identifying the
geographic areas that are eligible for
MF–II support and establishing the base
unit for bidding and measuring
coverage, performance obligations, and
the term of support.
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7. In April 2014, the Commission in
the 2014 CAF Further Notice, 79 FR
39195, July 9, 2014, again took the
opportunity to expand upon what it had
learned from its efforts to modernize
universal service as well as the
considerable developments in the
marketplace for mobile wireless services
that had occurred since adoption of the
USF/ICC Transformation Order. Given
the significant commercial deployment
of 4G LTE, the Commission proposed to
retarget the focus of MF–II to address
those areas of the country where LTE
would not be available absent support
and existing mobile voice and
broadband service would not be
preserved without support.
8. In September 2016, the Wireless
Telecommunications Bureau released its
analysis of mobile broadband providers’
December 2015 Form 477 submissions
in order to identify and quantify the
areas in the country that may require
support on an ongoing basis in order to
have 4G LTE coverage. In addition to
identifying the specific areas of the
country without 4G LTE coverage,
Wireless Telecommunications Bureau
staff examined the current distribution
of high-cost support to assess the
efficacy of that support. That analysis
reveals that 4G LTE is absent from or
only provided with support in one-fifth
of the area of the United States
excluding Alaska and that a
conservative estimate is that threequarters of support currently distributed
to mobile providers is being directed to
areas where it is not needed. In other
words, carriers are receiving
approximately $300 million or more
each year in subsidies to provide service
even though such subsidies are
unnecessary and may deter investment
by unsubsidized competitors from
increasing competition in those areas.
III. Goals of the Mobility Fund Phase II
9. The Commission reaffirms the
following goals for Phase II of the
Mobility Fund.
10. First, the Commission reaffirms
that universal service funding for the
preservation and advancement of highspeed advanced services such as 4G LTE
is an appropriate and necessary use of
universal service funds. Because they
are unmoored from a fixed point, mobile
devices empower Americans to make
calls and access the web and web-based
applications while on the go.
11. Second, the Commission reaffirms
that it should target universal service
funding to support the deployment of
the highest level of mobile service
available today—4G LTE. In the 2014
CAF Further Notice, the Commission
observed that two major wireless
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providers had widely deployed 4G LTE
throughout the country. Since that time,
consumers increasingly demand 4G LTE
service in order to take advantage of the
significantly better performance
characteristics, including faster data
transfer speeds that 4G LTE provides
while using the web or web-based
applications. Targeting MF–II support to
expand and preserve 4G LTE coverage
will ensure that the Commission does
not relegate rural areas to substandard
service.
12. Third, the Commission reaffirms
that it should target universal service
funding to coverage gaps, not areas
already built out by private capital.
Despite a surge in private investment in
mobile deployment, recent analysis
shows that at least 575,000 square miles
(approximately 750,000 road miles and
3 million people) either lack 4G LTE
service or are being served only by
subsidized 4G LTE providers. Virtually
all commenters agree that proceeding
with MF–II is critically important to
supporting mobile voice and broadband
coverage. Thus, by proceeding to MF–II,
the Commission seeks to assure that 4G
LTE service is preserved and advanced
to those areas of the country where there
is no unsubsidized service, all
consonant with the Commission’s goal
of ‘‘ubiquitous availability of mobile
services.’’
13. Fourth, the Commission reaffirms
that it is committed to minimizing the
overall burden of universal service
contributions on consumers and
businesses by expending the finite
funds it has available in the most
efficient and cost effective manner. The
Wireless Telecommunications Bureau’s
latest analysis indicates that a
substantial majority of current ongoing
legacy CETC support is allocated to
census blocks that already have
complete 4G LTE coverage from one or
more unsubsidized competitors.
IV. Framework for Mobility Fund Phase
II
14. The Commission adopts a reverse
auction to distribute high-cost support
for mobile services to areas that lack
unsubsidized 4G LTE service, while
completing the phase-down of legacy
support going to mobile CETCs, thereby
eliminating duplicative and
unnecessary CETC support, and better
managing its finite financial resources.
Utilizing an annual budget of $453
million for a term of ten years, the
Commission will provide ongoing
support for provision of service in areas
that would lack mobile voice and
broadband coverage absent government
subsidies. Likewise, consistent with the
Commission’s decision in the USF/ICC
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Transformation Order to abandon the
identical support rule and to depart
from duplicative investments in
multiple CETCs in the same geographic
area, the Commission will award
support to one provider per eligible
geographic area. This section describes
this basic framework for MF–II and its
conclusions on these issues. The
Commission intends before the
commencement of the MF–II auction to
supplement the performance goals and
measures for the program.
A. Reverse Auction To Award Mobility
Fund Phase II Support
15. The Commission adopts a
nationwide, multi-round reverse auction
with competition within and across
geographic areas to award MF–II
support. Utilizing an auction
mechanism will allow the Commission
to distribute support consistent with its
policy goals and priorities in a
transparent, speedy, and efficient
manner. An auction provides a
straightforward means of identifying
those providers that are willing to
provide 4G LTE service at the lowest
cost to the budget, targeting support to
prioritized areas, and determining
support levels that awardees are willing
to accept in exchange for the obligations
the Commission imposes. Moreover, a
reverse auction is consistent with the
Commission’s decision to provide
support to at most one provider per
area. While auction alternatives
suggested by commenters may address
some of these objectives—for example, a
cost model could theoretically
determine appropriate support amounts
for an area—the Commission is not
persuaded that there is an alternative
approach that would achieve all its core
policy objectives that could be
implemented in a timely manner.
Furthermore, the Commission’s
experience in administering Auction
901 for MF–I funding was a new
endeavor in 2012, and it can apply the
lessons learned to the MF–II auction.
16. The Commission finds that those
parties advocating for use of a model do
not acknowledge or resolve the myriad
policy goals that are addressed by the
Commission’s reverse auction proposal,
and therefore do not offer a realistic
alternative—consistent with its
decisions—to the proposed auction
mechanism. This determination is
substantiated by the fact that the
Commission has not received a fully
developed cost model for ongoing
support since it first sought comment on
the issue in 2011. The Commission
received a developed model regarding
Alaska, but it recently adopted a
different approach for mobile carriers
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there. The Alaska Mobile Plan is a
consensus plan among the mobile
providers in remote areas of Alaska that
provides predictable, stable high-cost
support to those providers, frozen at
2014 levels for a term of ten years.
Because the Commission adopted the
Alaska Plan for mobile carriers as an
Alaska-specific comprehensive
substitute mechanism for mobile highcost support, the Commission decided
that no support provided under MF–II
or Tribal MF–II will be provided for
mobile service within Alaska. In the
absence of a workable, nationwide
model to award ongoing support that
addresses all of the Commission’s core
policy objectives, the Commission
adopts its proposal to use a reverse
auction mechanism to distribute MF–II
support.
17. The Commission declines to adopt
a federal-state broadband mobile grant
program in lieu of an auction as
proposed earlier this year by one
commenter. This proposal would
impose significant responsibilities on
the states that choose to participate,
including an obligation to contribute
funds (that the Commission would
match), review service providers’
applications and subsequently award
grants, and verify providers’ compliance
with the Commission’s performance
requirements. It would require
significant Commission coordination
and oversight to implement such a
proposal, which is inconsistent with the
Commission’s desire to act quickly so
that providers can expand to those areas
lacking 4G LTE coverage and the
Commission can take fiscally
responsible measures to redistribute
current support from those areas with
unsubsidized 4G LTE. Based on the
record before the Commission, as well
as its experience in MF–I, the
Commission is not convinced that this
approach would be a more efficient or
effective means of awarding MF–II
support than using a reverse auction.
B. Mobility Fund Phase II Budget
18. The Commission adopts a budget
of $4.53 billion for MF–II over ten
years—the amount of legacy support
mobile carriers outside Alaska would
receive over the next decade less the
funding needed to phase-down support
in census blocks fully built with private
capital. Current legacy high-cost support
received by wireless providers is
approximately $483 million per year,
excluding Alaska, and around $300
million of that amount is being provided
to census blocks fully covered with
unsubsidized 4G LTE. In the MF–II
Order, the Commission is phasing down
the support it pays for those areas over
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two years, with these phase-down
payments totaling one year’s support,
i.e., approximately $300 million. In
keeping with its obligation to be fiscally
responsible, the Commission arrives at
an annual MF–II budget by taking $483
million (representing current CETC
support), minus $30 million
(representing the estimated $300 million
phase-down payments for those areas,
evenly apportioned over the ten-year
term), for a total each year of $453
million. Given the need to preserve and
advance 4G LTE service revealed by its
staff analysis, the Commission
concludes that retargeting existing funds
is appropriate.
19. The cost of universal service
programs is ultimately borne by the
consumers and businesses that pay to
fund these programs, and the
Commission has a corresponding
obligation to exercise fiscal
responsibility by avoiding excessive
subsidization and overburdening
communications consumers. The courts
have recognized that over-subsidizing
universal service programs can actually
undermine the statutory principles set
forth in section 254(b) of the
Communications Act of 1934, as
amended (Communications Act), 47
U.S.C. 254. The Commission adopts an
MF–II budget to balance the various
competing objectives in section 254 of
the Communications Act, including the
objective of providing support that is
sufficient, but not so excessive so as to
impose an undue burden on consumers
and businesses. The Commission further
notes that MF–II is only one component
of its broader reform efforts, and the
MF–II annual budget also reflects a
careful analysis of the respective needs
and objectives of all aspects of the
universal service program.
20. The Commission finds that this
level of support over the next ten years
will allow MF–II to achieve its
objectives in a fiscally responsible
manner. The Commission recognizes
that the currently unserved areas are
likely the most expensive areas in the
country to serve; however, its budget—
when distributed cost-effectively—
should make meaningful progress in
eliminating the lingering coverage gaps.
The Commission also remains free, after
the auction has concluded, to assess its
results and determine whether
additional funding is needed to advance
the deployment of advanced mobile
services throughout rural America.
21. The Commission declines to adopt
the proposal in the 2014 CAF Further
Notice to significantly reduce the budget
for MF–II. The proposal to reduce the
budget in the 2014 CAF Further Notice
was made in the context of awarding
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support for service based on uncovered
population, rather than land areas
where mobile broadband is absent.
Because the Commission has decided to
award support to cover square miles, its
projected funding requirements in 2014
are inapplicable.
22. The Commission declines to adopt
two separate budgets—one to fund
operating expenses for preservation of
service and one to fund capital expenses
for expansion of service—as proposed
by one commenter. This proposal would
require two separate auctions to award
support from two funds, which would
be administratively less efficient and
risk duplicative funding to eligible
areas. Moreover, two funds would
require the Commission to decide in
advance the levels of support for each,
and would require the Commission to
monitor and enforce restrictions on the
purposes for which these two types of
support can be used. By contrast, a
single fund allows reverse auction
bidders to make their own efficiency
tradeoffs between operating and capital
expenses.
23. In establishing the MF–II annual
budget, the Commission affirms its
commitment to fiscal responsibility, and
takes steps herein to ensure that the
support awarded is not excessive. The
Commission makes clear that there is
discretion to set reserve prices as part of
the procedures for the reverse auction,
which will provide a backstop in the
event there is insufficient competition
to act as a restraint on the price of the
support to be provided in particular
cases. To safeguard the monies
dedicated to this budget, the
Commission adopts requirements to
ensure that MF–II support recipients are
meeting the service obligations and
conditions associated with the ongoing
award of such annual support. The
Commission retains the discretion to
distribute less than the total amount
authorized in a given year if support
recipients fail to meet performance or
other program obligations.
24. The Commission denies the
Petition for Declaratory Ruling filed by
United States Cellular Corporation,
requesting that the Commission award
to ‘‘next-in-line’’ bidders in Auction 901
more than $68 million of undisbursed
MF–I support on which the winning
bidders in that auction defaulted. The
Commission will not award the
unclaimed MF–I support to the next-inline bidders in Auction 901. As the
petitioner recognizes, the Commission
addressed undisbursed support
payments in the USF/ICC
Transformation Order. Among the goals
and purposes of the Universal Service
program is the goal to award support in
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a fiscally responsible manner, thereby
minimizing the universal service
contribution burden on consumers and
businesses. In its decision, the
Commission adopts ongoing support
with an annual budget of $453 million
for MF–II and target support to areas
where it is most needed, i.e., areas that
lack 4G LTE service and areas where
service only exists due to a subsidy. The
Commission finds this is a better use of
universal service funds than allocating
funds to the next-in-line bidders in
Auction 901, based on the outdated
standards for eligible areas used in 2012
for MF–I.
C. Tribal Mobility Fund Phase II
25. The Commission reserves support
to Tribal lands (excluding Alaska) as
part of the overall MF–II budget. The
Commission will calculate this budget
by applying the ratio of square miles in
eligible Tribal lands to square miles of
all eligible areas (adjusting for a terrain
factor) to the total budget it has chosen
for MF–II. The Commission expects that
Tribal lands likely will be more
expensive to serve than non-Tribal
lands due to their lower population
density and income levels, as well as
the lack of power or roads in some parts
of Indian country and the need for
federal approval (such as from the
Bureau of Indian Affairs) before
broadband can be deployed there. The
Commission concludes that reserving
this support within MF–II is a fair
means and reasonable metric to ensure
that Tribal lands are not left behind in
the auction. Current estimates are that
this ratio would be about 7%, so the
Commission expects to reserve at least
$340 million from the MF–II budget as
support for Tribal Lands. The definitive
budget will be set when the final set of
eligible areas is determined after the
challenge process.
26. The Commission concludes that it
is appropriate to freshly consider the
size of the Tribal MF–II budget rather
than seek to simplistically follow earlier
Commission decisions pre-dating
several important developments. The
Commission originally proposed to set
aside up to $100 million annually for
Tribal lands, but then later dedicated
$96 million annually to Tribal lands in
remote areas of Alaska. Subtracting the
latter from the former would leave a
Tribal MF–II budget of only $4 million.
If the Commission looked to the Tribal
Mobility Fund Phase I auction as a way
of apportioning the Commission’s initial
estimate, it would see that the vast
majority of those funds (81 percent)
were won by Alaskan bidders.
Subtracting that proportion for the
Commission’s initial $100 million
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proposal would leave mainland Tribal
lands with only $19 million. The
Commission believes that premising the
Tribal MF–II budget on the
Commission’s earlier actions is likely
insufficient to reflect the need for
funding to advance 4G LTE services on
Tribal lands in 2017 and beyond.
Rather, the Commission finds that the
methodology described in the MF–II
Order will better serve the public
interest.
27. Providers of service to eligible
areas within Tribal lands will also be
able to bid for general support in MF–
II—so, with sufficient auction
participation, the funds reserved as part
of the Tribal Mobility Fund will be a
floor, not a ceiling, on support for Tribal
lands.
28. The Commission adopts the
proposal to award MF–II support for
Tribal lands subject to the same terms
and conditions as are applicable to all
eligible areas in MF–II. The Commission
declines to adopt the rules proposed in
the USF/ICC Transformation FNPRM
regarding special ETC designation
treatment for Tribal MF–II participants
because the Commission is revising the
timing of its ETC designation
requirement for all MF–II participants.
The Commission declines to adopt
separate coverage units for Tribal MF–
II. The Commission declines to pursue
the suggestion of one commenter that
carriers serving Tribal lands be allowed
to participate in an opt-in funding plan
similar to the Alaska Plan. The unique
basis for the Commission’s adoption of
the Alaska plan was not the existence of
Tribal lands in Alaska, but rather its
concerns about the need for support to
be flexible enough to accommodate
Alaska’s unique conditions, including
its ‘‘remoteness, lack of roads,
challenges and costs associated with
transporting fuel, lack of scalability per
community, satellite and backhaul
availability, extreme weather
conditions, challenging topography, and
short construction season.’’ The Alaska
Plan is limited to addressing these
unique challenges.
29. The Commission will establish
procedures for MF–II in consultation
and coordination with the
Commission’s Office of Native Affairs
and Policy. This will allow funds
reserved for Tribal lands to be included
as part of the MF–II auction. The
Commission believes this path of
conducting Tribal MF–II as a
component of MF–II is best for quickly
initiating support for mobile networks
on tribal areas.
30. The Commission declines to adopt
a formal Tribal engagement obligation or
a bidding credit preference for Tribally-
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owned-and-controlled entities. The
Commission agrees with commenters
that a tribal engagement obligation is
not necessary because it could create an
excessive administrative burden,
without a material countervailing
benefit, when many carriers already
have established relationships with
Tribes. In addition, adopting formal
Tribal engagement requirements could
deter participation in Tribal lands and
would likely divert providers’ resources,
thus potentially delaying their
deployment of service to Tribal lands.
The Commission expects carriers
participating in the Tribal MF–II to
work with Tribes to facilitate the
deployment of the highest quality
service to the people living on Tribal
lands. The Commission finds that a
bidding credit preference for Triballyowned-and-controlled entities is
unnecessary for the MF–II auction.
Although several commenters assert that
a bidding credit preference would create
an incentive for bids and increase the
likelihood of service to Tribal lands, the
Commission finds that setting aside
funds specifically to serve Tribal lands
is likely to accomplish the
Commission’s goal of ensuring greater
coverage on Tribal lands. The
Commission also finds that layering an
additional bidding credit for Tribal
carriers on top of the funding
exclusively available for service to
Tribal lands could deter other entities
from bidding to serve Tribal lands,
reducing both the competitiveness of
the auction and the potential reach of
the Commission’s finite funds for MF–
II. Furthermore, commenters fail to
demonstrate that the benefits of a
bidding credit preference outweigh the
costs of potentially depriving other
eligible areas of MF–II support.
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D. Identifying Geographic Areas Eligible
for Support
1. Geographic Area as the Metric for
Assessing Mobile Coverage
31. The Commission will use
geographic area expressed in square
miles as the metric for measuring
coverage, comparing bids, and assessing
compliance with the corresponding
coverage requirement for winning bids
in MF–II. The Commission will only
award support for those geographic
areas without 4G LTE from an
unsubsidized provider. The
Commission will be making eligible for
support only the unserved geographic
areas within a census block, rather than
the entire area within the block.
32. Requiring coverage of a geographic
area most closely reflects the
Commission’s goal to have mobile
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services available everywhere people
live, work, and travel. A geographic area
is a broad measure that encompasses all
the alternative metrics proposed in the
record, such as roads, population, farm
land, and areas remote from roads or
significant population centers. Targeting
support for mobile broadband service
based solely on where people may live
or where roads of certain sizes may be
located is not enough. Those narrower
approaches would not direct support
everywhere consumers need and use a
mobile service. Basing the award of MF–
II support on a bid for square miles
takes into account many of the other
areas where mobile service is important
but for which standardized data are less
available—such as business locations,
recreation areas, work sites, and
agricultural spaces. For example,
precision agriculture relies on mobile
networks for connectivity, so the value
of having coverage in farmland is not
directly related to the number of people
or number of roads there.
33. Using geographic areas as the
metric for MF–II will be relatively
simple to administer. The Commission
will examine the areas that do not
appear in the coverage shapefiles from
providers’ Form 477 data. There will be
no need to obtain and validate the
accuracy of another data source (e.g.,
road maps or population data) and then
overlay those data on the shapefiles.
Although the Commission utilized road
miles for MF–I, there were drawbacks to
that approach. In particular, the
Commission found that roads may not
be consistently categorized by states
into TIGER categories for which support
is provided and that there are different
opinions regarding the specific TIGER
categories of roads that should be
included. With respect to population,
standardized data are available
regarding total population per census
block, but not with respect to where
population is located within a census
block. The difficulties in measuring
compliance based on population stem
from the fact that, while the
Commission knows how many people
are in a given census block, it does not
know where in that census block they
are located. While this challenge could
be overcome by a 100 percent coverage
requirement, commenters generally
oppose such a coverage requirement.
2. Minimum Geographic Area for
Bidding and Support
34. The Commission concludes that
the minimum geographic area for
bidding should be census block groups
or census tracts containing one or more
census blocks with eligible areas for
bidding and support for MF–II. The
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Commission expressed its intent to
employ this same approach in the
Connect America Phase II Auction
Order, 81 FR 44413, July 7, 2016. The
full Commission will make the final
decision on minimum geographic area
in the pre-auction process. The
Commission refers generally to the ‘‘preauction process’’ in the MF–II Order,
which is the process through which
final auction procedures will be
implemented and the final list of
eligible areas will be determined. The
Commission may seek comment on,
and/or resolve, certain final auction
procedures in separate public notices if
doing so better conduces to the proper
dispatch of business. Any such public
notices will be released during the preauction process and well in advance of
the auction.
35. Although the Commission
continues to recognize that using census
blocks allows it to target support to
specific areas thereby providing bidders
the ability to tailor their bids to their
business plans, its experience with the
MF–I auction demonstrates the need to
limit the number of discrete biddable
units. The Commission concludes it is
best to set performance requirements
based on an area larger than a census
block. The Commission adopts a
broader, more manageable approach that
will combine one or more census blocks
containing eligible areas into census
block groups or census tracts.
3. Identifying Areas That Need Mobility
Fund Phase II Support
36. The Commission reaffirms its
goals and now seeks to promote the
deployment of 4G LTE in all areas
where it would not be offered by the
private sector in the absence of
universal service support. The
Communications Act directs the
Commission to fund ‘‘reasonably
comparable’’ services in rural areas to
those commonly available in urban
areas. Looking to the mobile speeds
generally reported by nationwide
carriers on their Form 477 submissions,
the Commission finds that such carriers
are generally reporting the deployment
of 4G LTE reported at minimum
advertised download speeds of at least
5 Mbps. The Commission will use this
speed benchmark to identify areas
eligible for MF–II. The Commission
rejects requests to use the same 10/1
Mbps thresholds for determining area
eligibility that it requires of MF–II
support recipients for determining
compliance with performance
requirements.
37. The Commission concludes that
any census block that is not fully
covered by unsubsidized 4G LTE will
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contain areas that are eligible for
support in the MF–II auction. This subcensus block approach to eligibility
addresses long-standing concerns that
current methods used to estimate
network coverage may classify whole
census blocks as served notwithstanding
that they contain significant areas that
remain unserved.
4. Source of Coverage and Subsidy Data
38. The Commission concludes that
Form 477 data is the most reliable data
currently available for the purpose of
determining the coverage levels of
existing mobile services, including
unserved areas, and areas served by the
various technologies that provide 2G,
3G, 4G, and 4G LTE services. The
Commission will use Form 477 mobile
wireless coverage data and high-cost
disbursement data available from the
Universal Service Administrative
Company (USAC) to determine coverage
levels in individual census blocks and
whether high-cost support is being
awarded. Prior to an MF–II auction, the
Commission will compile the list of
potentially eligible areas from the data
submissions that are most recently
available for this purpose.
39. In the 477 Report and Order, 78
FR 49126, August 13, 2013, the
Commission made clear that the
enhanced deployment data collection
requirements it adopted were ‘‘needed
to fulfill [its] universal service
mandate.’’ The 477 Report and Order
significantly enhanced the reliability of
the data the Commission collects by
requiring the submission of deployment
shapefiles that depict ‘‘the coverage
boundaries where, according to
providers, users should expect the
minimum advertised upload and
download data speeds associated with
[a] network technology,’’ such as LTE.
Specifically, for each mobile broadband
network technology (e.g., EV–DO,
WCDMA, HSPA+, LTE, WiMAX)
deployed in each frequency band (e.g.,
700 MHz, Cellular, AWS, PCS, BRS/
EBS), every facilities-based mobile
broadband provider must submit
polygons representing its nationwide
coverage area (including U.S. territories)
of that technology. While these coverage
data provide the most accurate
depiction the Commission has on the
deployment of mobile networks, they do
not indicate the extent to which
providers affirmatively offer service to
residents in the covered areas. By
requiring a single, uniform filing format
for the shapefiles, the Commission
reduces the potential for distortion or
misleading comparisons of the data. The
Commission requires all facilities-based
broadband providers to file Form 477
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twice a year, and the Commission
requires that the providers certify as to
the accuracy of the data submitted. As
Wireless Telecommunications Bureau
staff has demonstrated, Form 477 data
along with USAC CETC support data
can provide sufficiently granular
information to identify those areas of
the country that lack 4G LTE service or
where such service is only provided by
a subsidized provider.
40. The Commission has recently
concluded that ‘‘data from the Form 477
. . . help [it] better analyze mobile
broadband deployment than in years
past.’’ The Wireless
Telecommunications Bureau
determined that the Form 477 coverage
data ‘‘provide the most accurate
depiction the Commission has on the
deployment of mobile networks,’’ and
none of the commenters criticizing the
Form 477 data has identified a better
data source for moving forward
expeditiously to implement MF–II.
Recognizing that no data source—
including Form 477—will be perfectly
accurate, the Commission will utilize a
challenge process to improve the
accuracy of the coverage analysis
underlying eligibility determinations
reached in reliance on Form 477 data.
41. Finally, one public service
commission urges the Commission to
seek input from states that have
instituted programs to identify areas
lacking coverage. The Commission
recognizes that some state commissions
have acquired detailed information
about coverage within their states, and
encourage states to submit information
that is probative for determining
eligibility during the challenge process.
However, because individual state and
territory information may not be
uniform throughout the nation, the
Commission declines to rely on such
data to the exclusion of other sources
and will continue to rely primarily on
Form 477 data certified by providers.
Nonetheless, the Commission will
consider coverage data from states and
other sources in its challenge process.
5. Applying Coverage and Subsidy Data
to Census Blocks
42. The Commission concludes that it
will apply an actual coverage analysis to
determine presumptive eligible areas for
MF–II support, in lieu of the centroid
method employed in MF–I. In the time
that has passed since the Commission
first proposed using the centroid
method in MF–II, the Commission has
been able to gather much more robust
information about service coverage areas
from the certified Form 477 data that
providers are required to submit twice
a year. The Commission can now more
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15427
reliably identify those areas within
census blocks that do not today have
unsubsidized 4G LTE coverage; use
high-cost support data to determine
where 4G LTE is provided without
subsidy; and by overlaying the coverage
and the support data, identify the areas
presumptively lacking unsubsidized 4G
LTE. The resulting analysis presents the
most accurate data currently available
on which areas should be eligible for
MF–II. The Wireless
Telecommunications Bureau staff
released its analysis using providers’
Form 477 data last fall and will publish
a preliminary list of eligible areas as
part of the pre-auction process. The data
released on eligible square miles will be
grouped by census blocks, which in turn
will be grouped by census block group
or census tract as the minimum
geographic area for bidding, and include
the total eligible square miles in each
census block and the location of each
eligible area. As explained in the MF–II
Order, these groupings will be
announced by public notice as part of
the pre-auction process. The location of
each presumptively eligible area will be
necessary to define the service areas
being auctioned and to define coverage
obligations.
43. In response to the USF/ICC
Transformation FNPRM and Further
Inquiry Public Notice, 77 FR 73586,
December 11, 2012, some carriers
express concern that the centroid
method may not accurately reflect
coverage. Some rural commenters note,
for example, that in some cases the
centroid of a block may be covered, but
large areas outside the centroid are not
and that such blocks may be unfairly
excluded from support. Many of those
commenters support the proportional
method, which determines eligibility for
support based on whether each census
block’s coverage percentage is below a
certain threshold, as an alternative. Like
the proportional method, the approach
the Commission adopts in the MF–II
Order examines coverage at the subcensus block level, thereby remedying
the chief concern with the centroid
method. Because it can identify specific
areas within each census block where
4G LTE coverage is absent, the actual
area coverage approach is a significant
improvement over the centroid method
in reaching the Commission’s universal
service goals. It is a far more precise
way to target the MF–II budget.
6. Challenge Process
44. Consistent with the general
approach adopted for MF–I and more
recently, for Connect America Fund
Phase II (CAF–II), the Commission
concludes that it will provide a robust
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process for interested parties to
challenge the list of presumptively
eligible areas for MF–II support. The
challenge process will address
challenges to coverage determinations
only and will not address challenges to
the allocation of legacy CETC support
within study area geographies. To
provide interested parties the
opportunity to review the coverage
analysis on which eligible areas are
identified, the Commission directs the
Bureaus to make an initial
determination of eligible areas by
census block as part of the pre-auction
process. Subsequently, the Bureaus
shall implement a process consistent
with the decisions the Commission will
make after review of the record received
in response to the Further Notice of
Proposed Rulemaking adopted along
with the MF–II Order. The Commission
defers making further decisions
regarding the challenge process in the
MF–II Order because, while commenters
generally support a challenge process,
they have different views with respect
to how such a process should work, and
the Commission finds that seeking
further comment will be helpful in
reaching decisions.
45. The Commission expects that the
challenge process will conclude by the
end of January 2018. At the conclusion
of the challenge process, the
Commission directs the Bureaus to
make a final determination of areas
eligible for MF–II support.
E. Transition of CETC Support to MF–
II Support and Preservation of Service
46. The Commission amends its rules
for the phase-down of identical support
in order to smoothly transition to the
Commission’s provision of MF–II
support, as well as to provide
continuing support to those eligible
areas that do not receive MF–II support.
The Commission’s phase-down rules
have been designed so as not to be
inconsistent with the provisions in 47
CFR 54.307(e)(5)–(6) (2015), unless and
until the restrictions in Consolidated
Appropriations Act, 2016, Public Law
114–113, Div. E, Title VI, section 631,
129 Stat. 2242, 2470 (2015), are no
longer in effect. The Commission adopts
differing phase-down schedules for
CETC support in ineligible and eligible
areas.
47. First, as part of the pre-auction
process, the Commission directs the
Bureaus to disaggregate each CETC’s
legacy support among the census blocks
it serves using that support. Currently,
legacy support is provided to a CETC’s
entire study area (SAC), with no
attribution to particular sub-areas
within the SAC. That creates a problem
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for comparing support among CETCs to
serve a given area and for determining
how much support is being used to
compete with private capital. The
Commission faced a similar problem
when it decided to disaggregate support
for legacy rate-of-return carriers last year
and retarget that support to areas
unserved by unsubsidized competitors.
48. In choosing a disaggregation
method, the Commission is persuaded
that it should account for the relative
costs of deploying a coverage-based
network given the differing terrain
throughout the United States.
Specifically, the Commission declines
to adopt a disaggregation method that
assumes that support is allocated
uniformly throughout a provider’s
SAC—doing so would specifically
ignore the additional costs that wireless
providers incur to deploy service in
more difficult terrain. Instead, the
Bureaus shall apply a more-refined
methodology that uses a terrain factor as
a proxy for determining higher cost
areas. For example, more mountainous
terrains with greater variations in slope
are areas that tend to be more costly to
serve than level plains. The terrain
factor would be used to weight the area
of a block such that eligible areas in
more mountainous areas would be
allocated a greater amount of a CETC’s
total legacy support to reflect the higher
costs of serving such areas.
49. Second, the Commission
establishes the following schedule for
the phase-down of legacy support and
commencement of auction payments. In
census blocks determined (after the
completion of the challenge process) not
to be eligible for MF–II support, legacy
support will be phased down starting
the first day of the month following
release of a public notice announcing
the close of the MF–II auction. On that
same date, legacy support for current
recipients in eligible census blocks shall
either be converted to MF–II support
(for the winning bidder), maintained
(for one CETC in areas without a
winning bidder), or subject to phase
down (for all other CETCs). The
Commission concludes that this
schedule is fully consonant with its
rules, which require that CETCs
continue to receive support at current
levels until MF–II and Tribal MF–II are
implemented. MF–II and Tribal MF–II
will be implemented when the public
notice announcing the close of the MF–
II auction and identifying the winning
bidders has been released. This
schedule will apply only to the
recipients of legacy support. A different
schedule will apply to winning bidders
that do not receive legacy support in the
areas of their winning bids.
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50. More specifically, in census
blocks determined (after the completion
of the challenge process) not to be
eligible for MF–II, legacy support will
be phased down starting the first day of
the month following the close of the
MF–II auction. For the first 12 months
thereafter, phase-down support shall be
2⁄3 of the legacy support for each CETC
associated with that area. For the next
12 months, phase-down support shall be
1⁄3 of the legacy support for each CETC
associated with that area. All legacy
support shall end thereafter.
51. For a winning bidder that is a
CETC receiving legacy support in the
area of its bid, MF–II support shall
commence on the first day of the month
after the auction concludes. To ensure a
smooth transition to MF–II support, and
to the extent the Commission authorizes
a winning bidder to receive MF–II
support after that date, a winning bidder
will receive support payments at the
current legacy support level until such
Commission action. A winning bidder
that is also entitled to legacy support for
an area subject to its winning bid will
not be entitled to receive MF–II support
until the Commission issues a public
notice authorizing support to that
bidder. In the public notice, the
Commission will direct and authorize
USAC to disburse monthly MF–II
payments to the winning bidder and to
cease paying it at the legacy support
level. Furthermore, to ensure that the
winning bidder receives the appropriate
amount of MF–II support, the
Commission will direct USAC to adjust,
on a going-forward basis, the amount of
the monthly MF–II payments for a
limited period of time to account for the
difference between the payments at the
legacy support level and the MF–II
payments in the amounts to which the
winning bidder has committed at
auction, for the period between the
close of the auction and the issuance of
the public notice.
52. If the Commission does not
authorize the bidder to receive MF–II
support, it will direct USAC to adjust
the amount of the bidder’s preservationof-service or phase-down support under
the MF–II rules, on a going-forward
basis, to account for the difference
between the payments at the legacy
support level and the preservation-ofservice or phase-down payments for the
period between the close of the auction
and the Commission’s denial of
authorization. As an additional
mechanism to prevent perverse
incentives, however, the Commission
finds that, in applying these rules, a
winning bidder committing an auction
default will be considered as having
received support in the amount of its
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winning MF–II bid if that bid is less
than its level of CETC support for this
area. In light of the Commission’s
experience with the MF–I auctions, it
also adopts a contingency plan to
address the possibility that such a
winning bidder might default on its bid
prior to the authorization of support or
be denied such authorization. Under
this contingency plan, no MF–II support
will be awarded for the area. In that
event, the Commission will, however, to
the extent applicable, provide legacy
support to CETCs under the
preservation-of-service rule and the
phase-down rule. The Commission
concludes that this schedule is fully
consonant with its rules, which
mandate that a winning bidder ‘‘cease to
be eligible for phase-down support in
the first month for which it receives
Mobility Fund Phase II support.’’
53. The Commission adopts a
different schedule for winning bidders
that are not CETCs in the areas of their
winning bids. Because non-CETC
winning bidders must meet the same
construction deadlines as CETC
winning bidders, the Commission will
provide an initial balloon payment of
MF–II support to non-CETC winning
bidders to place non-CETC winning
bidders on approximately the same
footing as other winning bidders. The
balloon payment will consist of the nonCETC winning bidder’s monthly MF–II
payment amount multiplied by the
number of whole months between the
first day of the month after the close of
the auction and the issuance of the
public notice authorizing support.
Unlike other winning bidders, a nonCETC winning bidder will not receive
MF–II support for the area of its
winning bid on the first day of the
month after the auction concludes
because it would not necessarily be
designated as an ETC in that area. A
non-CETC winning bidder instead will
receive MF–II support once the
Commission issues a public notice
authorizing MF–II support to the bidder.
Based on this schedule, there is no need
to adjust payments to account for the
continued payments at the legacy
support level. The remainder of the
discussion in this section concerns the
phase down of legacy support for
mobile CETCs.
54. In eligible areas where there is no
winning bidder in MF–II, the CETC
receiving the minimum level of
sustainable support will continue to
receive such support until further
Commission action, but for no more
than five years from the first day of the
month following the close of the MF–II
auction. The Commission defines the
minimum level of sustainable support to
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be the lowest amount of legacy support
among CETCs that have deployed the
highest technology for that area. The
Commission concludes maintaining
such support is necessary to preserve
service for consumers in such areas
pending further Commission action.
55. For CETCs receiving support in
areas eligible for MF–II that do not
either win MF–II support or receive the
minimum level of sustainable support,
the phase-down of support shall
commence on the first day of the month
after the auction concludes. For the first
12 months, phase-down support shall be
2⁄3 of the legacy support for each CETC
associated with that area. For the next
12 months thereafter, phase-down
support shall be 1⁄3 of the legacy support
for each CETC associated with that area.
All legacy support shall end thereafter.
The Commission concludes that this
two-year phase-down schedule will
ensure that the affected CETCs will have
a smooth transition in areas that are too
costly to serve absent universal service
subsidies.
56. The Commission adopts this
phase-down schedule to fund new
service obligations undertaken by new
MF–II auction winners, protect
customers of current support recipients
from a potential loss of service, and
minimize the disruption to legacy
support providers from a loss of
funding. The Commission balances the
concerns recipients of legacy support
express regarding a rapid termination of
legacy support with its need to preserve
its finite universal service funds and
begin funding service under the terms
and amounts established by winning
bids in its MF–II reverse auction.
Accordingly, in the Commission’s
implementation of MF–II support, it
now establishes a certain path toward
no longer paying such legacy support,
except to preserve service where it
exists on a subsidized basis in eligible
areas where there is no winning bidder
in the MF–II auction.
57. Finally, in light of the phase down
schedules the Commission is adopting,
it sees no need to treat differently the
phase down of support going to any
mobile CETC for which high-cost
support represents one percent or less of
its wireless revenues. As a result, legacy
CETC support to these providers will
proceed on the same phase-down
schedule as for other providers.
F. One Provider per Eligible Area
58. The Commission limits support to
a single provider for a given geographic
area going forward. The Commission
has a statutory obligation to ensure
access to advanced telecommunications
and information service in all regions of
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the country at reasonably comparable
rates, and a related obligation to ensure
that public funding is used effectively
and efficiently in furtherance of the
Commission’s statutory mandate. It is
therefore incumbent upon the
Commission to adopt a structure for
awarding universal service support that
ensures the finite public funds available
are directed in a way that sustains and
expands the availability of mobile
services to maximize consumer benefits.
V. Public Interest Obligations
59. Having established the framework
of MF–II, the Commission now
addresses the public interest obligations
that must be met by recipients of MF–
II support, including performance
metrics for minimum data speeds,
maximum latency measurements, and
minimum usage allowances, consistent
with the provision of 4G LTE service.
These performance requirements will be
used to measure compliance with
established benchmarks during the tenyear term of support.
A. Performance Metrics
60. The Commission will require
recipients of MF–II support to deploy
4G LTE. Around 84 percent of the
nation’s square miles (excluding Alaska)
are covered by 4G LTE networks, as of
December 2015. As the transition to 4G
LTE service and the transition of voice
to voice over LTE technology become
widespread, the Commission anticipates
that older devices will be retired and
future devices will be LTE capable.
With the nearly universal deployment of
4G LTE comes a broad record consensus
that the network technology for any new
deployment the Commission funds in
MF–II should be 4G LTE. Targeting MF–
II support to 4G LTE will ensure that the
Commission does not relegate rural
areas to substandard service that is not
comparable to urban LTE service, and
that the supported service is
technologically capable of supporting
roaming on the industry LTE standard,
including the networks of the four
nationwide mobile wireless service
providers. The Commission’s standards
for supported service should ensure that
its finite universal service funds are
used efficiently to provide consumers
access to robust mobile broadband
service that is comparable to the 4G LTE
service being offered today in urban
areas. By requiring the deployment of
4G LTE with on-going MF–II support,
the Commission can better utilize
universal service support to reach the
approximately 575,000 square miles that
either lack 4G LTE coverage or only
have coverage because of subsidized
service.
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61. The Commission requires
recipients of MF–II support to offer
voice service, and it adopts minimum
requirements for network performance
and an offered service plan that,
together with the 4G LTE requirement,
will define the baseline 4G LTE
performance standard for MF–II
recipients. Recipients of MF–II funding
will be required to meet minimum
baseline performance requirements for
data speeds, data latency, and data
allowances in areas that receive support
for at least one plan that they offer. The
median data speed of the network for
the supported area must be 10 Mbps
download speed or greater and 1 Mbps
upload speed or greater, with at least 90
percent of the required download speed
measurements being not less than a
certain threshold speed. For latency, at
least 90 percent of the required
measurements must have a data latency
of 100 milliseconds or less round trip.
Support recipients must offer at least
one service plan that includes a data
allowance comparable to mid-level
service plans offered by nationwide
providers. Currently, mid-level plans
offer a data allowance of at least 2 GB
of data per month. Because industry and
consumer practices may evolve over
time, the Commission will consider,
after an opportunity for comment,
whether to require a larger data
allowance, initially or during the term
of support, based on then-available midlevel plans and/or the average per
subscriber data usage. The Commission
will conduct the initial consideration of
these issues, with subsequent
consideration occurring by the Bureaus
on delegated authority. A support
recipient’s service plan with the
required data allowance must be offered
to consumers at a rate that is within a
reasonable range of rates for similar
service plans offered by mobile wireless
providers in urban areas. These
conditions will be defined more
precisely in the pre-auction process.
The Commission will retain its
authority to look behind recipients’
performance certifications and take
action to address any violations that
develop.
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B. Term of Support
62. The Commission adopts a ten-year
term for MF–II support, which will
begin on the first day of the month after
the MF–II auction concludes. As the
Commission approaches the end of the
ten-year term, it can reassess the
marketplace and determine whether a
mechanism to provide future support
for mobile services is needed. In
addition, the Commission declines to
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adopt a renewal expectancy for winning
bidders.
63. A ten-year term of support is
consistent with the term adopted by the
Commission for Connect America Phase
II support. As the Commission
recognized in the 2014 CAF Order, 79
FR 39163, July 9, 2014 providing
support for a period of ten years is
appropriate as it may stimulate greater
interest in the competitive bidding
process. Consequently, that ‘‘[i]ncreased
participation in the competitive bidding
process will help ensure that funding is
targeted efficiently to expand
broadband-capable infrastructure
throughout the country.’’ The
Commission is mindful of using the
lessons learned from CAF in its
implementation of MF–II.
64. The Commission further agrees
with commenters that a ten-year term of
support is appropriate in light of the
significant capital and effort needed to
deploy and upgrade broadband
networks and is consistent with the
timeframe used by rural carriers to plan
and schedule network upgrades. The
certainty provided by a term of this
length will help encourage more
bidders—particularly smaller wireless
carriers—to participate in the auction.
65. Although the Commission does
expect the marketplace to evolve over
the next ten years, it will not adopt
performance metrics that increase over
the term of support. The Commission
concludes that the disincentives to
auction participation potentially created
by evolving performance standards and
the administrative complexity of
establishing such standards outweigh
the performance benefits to consumers
during the latter portion of the support
period. Winning bidders are required
under section 254(e) of the
Communications Act to use their
support throughout their term for ‘‘the
provision, maintenance, and upgrading
of facilities and services,’’ and the
Commission expects winning bidders,
to the extent possible, to upgrade their
networks to increase capacity and offer
better services over time.
66. The Commission declines to adopt
any renewal expectancy or similar
preference for winning bidders after
their ten-year term of support expires.
Although a few parties support a
renewal that is based on whether a
carrier has met its deployment and
service obligations, a renewal
expectancy might undermine the
Commission’s ability to satisfy fiscal
management principles, such as the
Anti-Deficiency Act. The Commission
therefore declines to adopt a renewal
expectancy, because to do so may
undermine its ability to target future
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universal service support where it is
most needed.
C. Construction Requirements/
Benchmarks
67. Consistent with the approach the
Commission adopted in the Connect
America Phase II Auction Order, the
Commission adopts interim benchmarks
as well as a final benchmark for
deployment of service that meets the
performance metrics detailed in the MF–
II Order. Specifically, the Commission
defines the starting point for the interim
benchmarks as six months from the first
day of the month that follows the month
in which the MF–II auction closes. The
Commission requires a winning bidder
to demonstrate coverage of at least 40
percent by three years after the starting
point, 60 percent by four years after the
starting point, 80 percent by five years
after the starting point, and 85 percent
by six years after the starting point
across all areas for which it receives
MF–II support in a state.
68. The Commission concludes that
the benchmarks serve as an appropriate
construction schedule for MF–II
recipients. Interim milestones ensure
that sufficient progress is being made
with the finite funds it has available.
Aligning the MF–II deployment
requirements with the CAF–II
requirements not only strikes an
appropriate balance among carriers’
competing concerns, but also increases
efficiency and eases administration by
leveraging the knowledge and
experience the Commission gained
during the CAF–II process. The
Commission finds that by setting these
benchmarks, it will ensure that support
recipients make consistent progress
towards providing 4G LTE service to
unserved areas of our nation, while still
allowing winning bidders flexibility to
address unforeseen problems or delays
in reaching their overall coverage
obligations. The Commission observes
that while several commenters sought
only a 75 percent coverage requirement
with the expectation of providing 4G
LTE mobile broadband within three
years, the Commission concludes that
its 85 percent coverage requirement is
more consistent with its policy objective
of ubiquitous mobile coverage.
69. Recipients that fail to meet and
maintain these performance obligations
within the time provided to submit their
representative data and to certify to
coverage requirements will be subject to
defined measures, and must cure these
failures to meet the deployment
requirements or they will be in
performance default.
70. Consistent with the Commission’s
CAF–II framework, support recipients
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must meet their required benchmarks
across all areas for which they receive
MF–II in a state. For the final
benchmark, every census block group or
census tract in a state (depending on
minimum bidding unit) must also be at
least 75 percent covered. This
requirement will help ensure that the
Commission’s coverage requirements
are meaningful for all consumers in
supported areas.
71. In accordance with the data the
Commission will ultimately require for
a successful challenge of the eligibility
of an area, it will require parties
awarded MF–II support to submit data
sufficient to demonstrate compliance
with its coverage requirements. Parties’
demonstrations shall be consistent with
the evidence the Commission
determines to be necessary to be
submitted in the challenge process.
Concurrent with their submissions of
data, recipients of support will have to
certify that they have met the
Commission’s deployment benchmarks.
The Commission directs the Bureaus to
precisely define these requirements in
the pre-auction process. This is
consistent with the USF/ICC
Transformation Order in which the
Commission directed the Bureaus and
the Office of Engineering and
Technology to refine the methodology
for broadband performance testing. The
Commission is entrusted with
distributing significant amounts of
universal service contributions from
consumers and businesses, and it must
ensure that there is actual coverage for
consumers in areas where it is paying
support recipients.
D. Collocation and Voice and Data
Roaming
72. The Commission adopts the same
collocation and voice and data roaming
obligations for MF–II winning bidders
as the Commission adopted for MF–I,
with certain minor, non-substantive
changes. With respect to collocation
obligations, the Commission requires
that recipients of MF–II support allow
for reasonable collocation by other
providers on all towers that they own or
manage in the areas for which they
receive support. The Commission also
requires that support recipients comply
with its voice and data roaming
requirements on networks that receive
MF–II support. Specifically, consistent
with the approach adopted for MF–I, the
Commission requires that recipients of
MF–II support provide roaming
pursuant to 47 CFR 20.12 and comply
with any modifications of the roaming
rules that it makes during the period
MF–II support is provided throughout
networks that receive MF–II support.
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73. The Commission declines to
expand the data roaming obligations as
some commenters suggest, as the
Commission’s experience in MF–I
indicates that the rules it adopted there
provide sufficient safeguards. Violations
of these obligations by support
recipients could result in the
withholding of monthly universal
service support, a finding of
performance default, and losing
eligibility for future Mobility Fund or
USF participation. The Commission’s
general enforcement tools are also
available to redress any violation of its
rules.
E. Reasonably Comparable Rates
74. To implement the statutory
principle for MF–II, the Commission
adopts the proposed rules and will
require recipients to certify in their
long-form applications and annually
that in areas where they receive support
they offer service at rates that are within
a reasonable range of rates for similar
service plans offered by mobile wireless
providers in urban areas. Recipients’
service offerings will be subject to this
requirement until the end of the term of
support.
75. The Commission adopts a
presumption that if a given provider is
offering the same rates, terms and
conditions (including usage allowances,
if any, for a specified rate) to both urban
and rural customers, then that is
sufficient to meet the statutory
requirement that services be reasonably
comparable.
76. The Commission further
concludes that a recipient can
demonstrate compliance with the
required certification if its stand-alone
voice plan and one service plan that
offers data services is substantially
similar to a service plan offered by that
provider, if the provider has urban
service areas, or by at least one mobile
wireless provider in an urban area and
is offered for the same or lower rate than
the matching urban service plan. During
the pre-auction process, the
Commission may define more precisely
the circumstances under which a
provider can demonstrate compliance
with this certification. The Bureaus will
conduct any subsequent consideration
of possible revisions regarding
compliance with this requirement. The
Commission retains its authority to look
behind recipients’ certifications and
take action to address any violations
that develop.
VI. Provider Eligibility Requirements
77. The requirements the Commission
adopts are essentially the same as those
adopted for MF–I, with the limited
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15431
exception that for MF–II, an applicant
seeking to participate in the auction will
be permitted to be designated as an ETC
after it is announced as a winning
bidder for a particular area in
accordance with procedures it
implements. Consistent with the
eligibility requirements for MF–I, a
qualified MF–II applicant must
demonstrate access to spectrum capable
of the appropriate level of service in the
geographic areas to be served, and
certify as to its financial and technical
capability to provide service within the
specified timeframe. The Commission
concludes that it will not impose any
additional eligibility requirements to
participate in MF–II.
A. Designation as an ETC
78. The Commission will permit a
winning bidder in the MF–II auction to
obtain its ETC designation after the
close of the auction, provided it submits
proof of its ETC designation within 180
days of the public notice identifying
winning bidders. Before MF–II support
is disbursed to a winning bidder, it must
demonstrate that it has been designated
an ETC covering each of the geographic
areas for which it seeks to be authorized
for support and that its ETC designation
allows it to fully comply with the
Commission’s coverage requirements.
The Commission declines to disturb the
current system of state jurisdiction over
ETC designations, even as the
Commission permits winning bidders to
obtain ETC status after being announced
as winners in the MF–II auction.
79. Although the Commission initially
proposed to follow the approach it
adopted for MF–I and require all
applicants to demonstrate ETC
designations prior to the auction, its
experience after Auction 901 and
Auction 902, and its most recent
conclusions regarding ETC designations
in the CAF–II context, weigh in favor of
a more flexible approach for MF–II.
80. As the Commission concluded in
the CAF–II context, permitting postauction ETC designations for MF–II may
improve applicant participation in the
auction. It will also conserve
participants’ resources by avoiding
obligations for auction participants who
do not win any coverage areas in the
auction, as well as safeguarding
potential bidding strategies of
applicants seeking ETC designation
before an auction. The Commission will
not provide any support until a winning
bidder has obtained and demonstrated
ETC designation for its entire winning
bid area, and is not persuaded by the
concerns raised by one commenter,
which argues that allowing applicants to
seek ETC designation after winning
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would encourage speculation by carriers
seeking to obtain federal funding to
serve areas that are unfamiliar to them.
81. Similar to the process adopted for
CAF–II support, the Commission
requires winning bidders of MF–II
support to submit proof of their ETC
designations within 180 days of the
public notice announcing them as
winning bidders. Failure to obtain ETC
status and submit the required
documentation by the deadline will be
considered an auction default, though
the Commission will consider
applications for waiver of the 180-day
deadline from entities who are
diligently pursuing ETC designation.
82. Based on what the Commission
observed in the rural broadband
experiments, when considering waivers
of the 180-day timeframe for obtaining
ETC designation, the Commission will
presume that an entity will have acted
in good faith if the entity files its ETC
application within 30 days of the release
of the public notice announcing that it
is a winning bidder. Consistent with the
rural broadband experiments, where the
Commission delegated authority to the
Wireline Competition Bureau to act on
waivers, here, the Commission directs
the Wireless Telecommunications
Bureau to act on any such waivers.
83. Any circumstances where a state
will need more time due to procedural
requirements or resource issues can be
dealt with through the waiver process.
Accordingly, to preserve the primary
role that Congress gave the states in
designating ETCs, the Commission
reaffirms that it will act on an ETC
designation petition pursuant to 47
U.S.C. 214(e)(6) ‘‘only in those
situations where the carrier can provide
the Commission with an affirmative
statement from the state commission or
a court of competent jurisdiction that
the carrier is not subject to the state
commission’s jurisdiction.’’
B. Forbearance From Service Area
Redefinition Process
84. The Commission concludes that
forbearance from the 47 U.S.C. 214(e)(5)
service area conformance requirement
for recipients of the MF–II competitive
bidding process serves the public
interest. The Commission has decided
that providing MF–II support to only
one provider in a given geographic area
in exchange for its commitment to offer
service that meets its requirements
throughout the funded area achieves its
objectives for fiscal responsibility.
85. For those entities that obtain ETC
designations as a result of being selected
as winning bidders for the MF–II
auction, the Commission forbears from
applying 47 U.S.C. 214(e)(5) and 47 CFR
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54.207(b). Forbearing from the service
area conformance requirement
eliminates the need for redefinition of
any rural telephone company service
areas in the context of the MF–II
auction. Accordingly, Commission rules
regarding the redefinition process are
inapplicable to petitions that are subject
to this order. However, if an existing
ETC seeks support through the MF–II
auction for areas within its existing
service area, this forbearance will not
have any impact on the ETC’s preexisting obligations with respect to
other support mechanisms and the
existing service area.
86. The Commission concludes that
forbearance is warranted in these
limited circumstances. The
Commission’s objective is to distribute
support to winning bidders as soon as
possible so that they can begin the
process of deploying mobile service to
consumers in those areas. Case-by-case
forbearance would likely delay the
Commission’s post-auction review of
entities once they are announced as
winning bidders. The Communications
Act requires the Commission to forbear
from applying any of its requirements or
the Commission’s regulations to a
telecommunications carrier if it
determines that: (1) Enforcement of the
requirement is not necessary to ensure
that the charges, practices,
classifications, or regulations by, for, or
in connection with that
telecommunications carrier or
telecommunications service are just and
reasonable and are not unjustly or
unreasonably discriminatory; (2)
enforcement of that requirement is not
necessary for the protection of
consumers; and (3) forbearance from
applying that requirement is consistent
with the public interest. The
Commission’s experience in MF–I has
shown that service area conformance
forbearance was just and reasonable in
accomplishing the goals of the Mobility
Fund, did not harm consumer
protections, and was in the public
interest in the Mobility Fund context.
The Commission concludes that each of
these statutory criteria is met for
winning bidders of the MF–II
competitive bidding process, and the
Commission incorporates by reference
here the analysis of these forbearance
factors that it considered and found
warranted forbearance in MF–I and
CAF–II.
C. Spectrum Access
87. The Commission requires that an
applicant for an MF–II auction have
access to spectrum necessary to fulfill
any obligations related to support. An
MF–II applicant must describe its
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required spectrum access and certify
that the description is accurate and that
the applicant will retain such access for
at least ten years from the date on which
it is authorized to receive support.
Specifically, an applicant will be
required to disclose whether it currently
holds or leases the spectrum, including
any necessary renewal expectancy, and
whether such spectrum access is
contingent on obtaining support in a
MF–II auction. The Commission
specifies that any other contingency will
render the relevant spectrum access
insufficient for the party to meet the
Commission’s requirements for
participation. For the described
spectrum access to be sufficient, the
Commission further concludes that the
applicant must obtain any necessary
approvals from the Commission prior to
filing its short-form application.
88. Because it would be inconsistent
with the level of commitment the
Commission thinks a serious applicant
should demonstrate, the Commission
declines to adopt the suggestion of some
commenters to allow for a substantially
more relaxed standard that would
permit entities to seek to acquire access
to spectrum on a ‘‘fill-in’’ basis after the
short-form filing deadline.
89. Consistent with the Commission’s
decision in MF–I, the Commission
concludes that an applicant seeking
MF–II support must have access to
spectrum necessary to fulfill any MF–II
obligations prior to participating in the
MF–II auction because allowing
otherwise would be inconsistent with
the serious undertakings implicit in
bidding for ongoing support. The
Commission therefore requires
applicants to ensure that if they become
winning bidders, they will have the
spectrum to meet their obligations as
quickly and successfully as possible,
and adopts the spectrum access rule
proposed in the 2014 CAF Further
Notice.
90. The Commission will require that
applicants identify the particular
frequency bands and the nature of the
access on which they assert their
spectrum access necessary to
demonstrate eligibility for support. The
Commission will assess the
reasonableness of those eligibility
certifications based on information it
will require to be submitted in shortand long-form applications. The
Commission cautions applicants that if
they make this certification and do not
have or maintain access to the
appropriate level of spectrum, they will
be subject to the auction or performance
default rules.
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D. Financial and Technical Capability
91. In MF–I, the Commission
concluded that it would require a party
to be financially and technically capable
of satisfying the performance
requirements of providing service
within the specified timeframe in the
geographic areas for which it sought
support. In proposing that parties
seeking MF–II support satisfy this same
eligibility requirement, the Commission
proposed to require an entity to certify,
in the pre-auction short-form
application and in the post-auction
long-form application, that it is
financially and technically capable of
providing service within the specified
timeframe in the geographic areas for
which it seeks support. The
Commission’s experience with MF–I
indicates that requiring these
certifications is a reasonable protection
for the auction process and to safeguard
the award of universal service funds.
The Commission adopts its proposed
requirement and the proposed rule, with
the clarification that the applicant must
certify that it is financially and
technically qualified to provide the
services supported by MF–II within the
specified timeframe in the geographic
areas for which it sought support.
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E. Encouraging Participation
92. The Commission will permit all
qualified eligible applicants to
participate in the MF–II auction. In so
doing, the Commission seeks to
encourage participation by the widest
possible range of applicants possible,
regardless of their size. The
Commission’s commitment to fiscal
responsibility requires that it distributes
its finite budget to the provider that
submits the superior, most cost-effective
bid in the MF–II auction. The
Commission will not limit eligibility for
MF–II to smaller providers thereby
potentially limiting the Commission’s
ability to further close the 4G LTE
coverage gap. The Commission therefore
declines to adopt the proposals of some
small, rural providers that suggest that
it should restrict the participation of
certain classes of carriers in order to
facilitate participation. Furthermore, as
the Commission concluded in MF–I, it
will not bar any party from seeking MF–
II support based solely on the party’s
past decision to relinquish Universal
Service Funds provided on another
basis. Consistent with its approach in
spectrum auctions, the Commission
expects that its general auction rules
and procedures will provide the basis
for an auction process that will promote
the Commission’s objectives for MF–II
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and provide a fair opportunity for all
serious, interested parties to participate.
support to a mobile provider in any area
where it has awarded MF–II support.
F. Inter-Relationship With Other
Universal Service Mechanisms and
Obligations
93. Consistent with the record, the
Commission will allow recipients of
MF–I support to participate in an MF–
II auction. While the Commission does
not anticipate that it will prohibit MF–
II winning bidders from seeking support
through other universal service
mechanisms merely because they have
received MF–II support, the
Commission notes that the goals of
Phase II of the Mobility Fund are to help
ensure the availability of mobile voice
and broadband services across the
country. The Commission emphasizes
that in establishing rules for each
separate universal service funding
mechanism, it is including rules to
prevent the disbursement of redundant
support.
94. The Commission stresses that
because Phase I provided strictly nonrecurring support, the Commission
required an MF–I participant to certify
at the pre-auction, short-form stage that
it was financially and technically
capable of providing 3G or better service
within the specified timeframe in the
geographic areas for which it sought
support without any assurance of
ongoing support, but it did not foreclose
the potential of such an entity
subsequently receiving ongoing support
to maintain that service after the fiveyear time frame expired. Insofar as it
furthers the Commission’s policy goals
to expand and preserve service to areas
that would not be covered absent
government subsidies, the Commission
concludes that a winning bidder in MF–
I may participate in the auction to seek
ongoing support in MF–II for any area
deemed eligible.
95. On the issue of the
interrelationship of MF–II and the
Remote Areas Fund (RAF), the
Commission has not limited the
availability of MF–II support based on
the existence of the RAF, which is a
concern for several commenters. Rather,
the Commission has set the budget
based on the reasons discussed in the
MF–II Order. The Commission reaffirms
the commitment to the RAF framework
and rules adopted in the Connect
America Phase II Auction Order. The
Commission also concludes that it
would not make sense to fund a mobile
provider in an eligible area through MF–
II and fund yet another such provider
(or possibly the same one) in that same
area in the RAF. Accordingly, the
Commission decides that it shall
structure the RAF so as not to award
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96. The Commission concludes that
the rules it is adopting for MF–II are
sufficiently flexible to allow recipients
of MF–II to fulfill their public interest
obligations associated with MF–II. The
Commission is committed to preserving
and expanding mobile voice and
broadband coverage to those areas that
lack services without subsidies, and
concludes that allowing support
recipients to reach agreements with
other providers for this purpose may
further that objective. The Commission
recognizes based on its experience with
MF–I that providers are best suited to
determine the most efficient and cost
effective manner to fulfill their public
interest obligations, and the
Commission has designed rules that
should afford them the flexibility to
consider arrangements that meet their
individual business needs without
prescribing any particular solutions or
limitations, provided that such
agreements otherwise comply with
relevant statutory and regulatory
requirements. The Commission cautions
applicants seeking support, however,
that regardless of any agreements they
may enter, the winning bidder is the
entity responsible for maintaining its
eligibility, including but not limited to
its ETC status, and meeting its
performance obligations for MF–II
support. Similarly, all monies awarded
through the auction process must flow
directly to the winning bidder as that is
the entity upon which the Commission
has assessed compliance with all
support requirements, including its ETC
status.
H. Bidding Preference for Small
Businesses
97. The Commission declines to adopt
a bidding preference for small
businesses for MF–II. In view of the
Commission’s experience with MF–I,
where numerous smaller carriers placed
winning bids to receive funding for
service without the aid of bidding
credits, the Commission concludes that
it is unnecessary to adopt small
business bidding credits for a MF–II
auction. Also, a bidding credit for small
businesses would potentially reduce the
reach of the Commission’s finite funds.
The Commission is unwilling to forgo
additional coverage expansion or
preservation in order to favor smaller
providers, particularly in light of the
participation and success of small and
rural businesses in MF–I.
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VII. Auction Rules and Process
98. The Commission adopts rules that
govern the auction process for MF–II,
including pre-auction requirements and
general rules for auction design and the
bidding process. These rules provide the
basic framework and requirements for
participating in an auction for MF–II
support. Consistent with past practice,
the specific procedures will be
established as part of the pre-auction
process, including determining auctionrelated timing and dates, identifying
areas eligible for support, and
establishing detailed bidding
procedures consistent with the MF–II
Order as well as any issues resolved
following the Further Notice of
Proposed Rulemaking adopted at the
same time as the MF–II Order. This preauction process will be similar to those
the Commission has used for spectrum
auctions and to those used in Auction
901 to distribute MF–I support.
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A. Pre-Auction Application Process
99. Based on the Commission’s
experience with MF–I and the process it
adopted in CAF–II, the Commission
adopts a two-stage application process
for an applicant seeking to participate in
the MF–II auction. Under this process,
interested parties will submit a preauction ‘‘short-form’’ application,
providing basic information and
certifications regarding their eligibility
to receive support. After the application
deadline, Commission staff will review
the short-form applications to determine
whether applicants have provided
sufficient information required at the
short-form stage to be eligible to
participate in a MF–II auction. Once
review is complete, Commission staff
will release a public notice indicating
which short-form applications are
deemed complete and which are
deemed incomplete. Applicants whose
short-form applications are deemed
incomplete will be given a limited
opportunity to cure defects and to
resubmit correct applications. Only
minor modifications to an applicant’s
short-form application will be
permitted. Major modifications would
include, for example, changes in
ownership of the applicant that would
constitute an assignment or transfer of
control. The Commission will then
release a second public notice
designating the applicants that are
qualified to participate in the MF–II
auction. After the close of the auction,
winning bidders will be required to
submit ‘‘long-form’’ applications with
more extensive information to allow for
an in-depth review of their
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qualifications prior to authorization of
support.
100. The Commission also adopts the
proposals, with certain amendments, in
the USF/ICC Transformation FNPRM
regarding the types of information
bidders will be required to disclose in
their MF–II auction short-form
applications. The Commission
concludes that, based on its experience
with MF–I, this approach strikes an
appropriate balance in ensuring that
entities are legally, technically, and
financially qualified, while at the same
time minimizing the burden on
applicants and Commission staff. Thus,
the Commission will require that each
auction applicant provide information
to establish its identity, including
disclosure of parties with ownership
interests, consistent with the ownership
interest disclosure required in Part 1 of
the Commission’s rules for applicants
for spectrum licenses, as well as any
agreements the applicant may have
relating to the support to be sought
through the auction. Applicants will
only be able to make minor
modifications to their short-form
applications. Major amendments, for
example, changes in an applicant’s
ownership that constitute an assignment
or transfer of control, will make the
applicant ineligible to bid.
101. Each applicant will be required
to disclose and certify its ETC status,
although, the Commission does not
require an applicant to obtain an ETC
designation prior to bidding in MF–II.
With respect to eligibility requirements
relating to spectrum access, applicants
will be required to disclose and certify
the source of the spectrum they plan to
use to meet Mobility Fund obligations
in the particular area(s) for which they
plan to bid. Specifically, applicants will
be required to disclose whether they
currently hold a license or lease the
spectrum, including any necessary
renewal expectancy, and whether such
spectrum access is contingent on
obtaining support in an MF–II auction.
Applicants must have secured any
Commission approvals necessary for the
required spectrum access prior to
submitting an auction application.
Moreover, applicants will be required to
certify that they will retain their access
to the spectrum for at least ten years
from the date support is authorized. The
Commission notes that no commenters
addressed the Commission’s proposed
pre-auction application process for MF–
II, and therefore concludes that the rules
it adopted will best serve the
Commission’s ability to hold a fair and
efficient auction.
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B. Bidding Process
1. Auction Design and Competitive
Bidding Mechanisms and Procedures
102. The Commission adopts, with
certain minor non-substantive changes,
the existing 47 CFR part 1 rules on
competitive bidding for universal
service support contained in Subpart
AA. The high-level auction rules for
competitive bidding procedures for
universal service support that the
Commission adopts set out a range of
options and mechanisms that the
Commission may use for such purposes.
The Commission takes the opportunity
to reorganize the way it articulates
certain of the relevant rules, without
altering the substance, to be consistent
with the latest developments regarding
the Commission’s approach to
competitive bidding in other contexts.
Specifically, the Commission
restructures the rules to present them in
terms of auction procedures governing
bid collection, assignment of winning
bids, determination of support payment
amounts, as well as particular
mechanisms for conducting the
auctions. The reorganized competitive
bidding procedures rules will facilitate
the development of procedures for the
MF–II auction that are consistent with
the universal service support technical
requirements and policies generally and
that address the needs of the
Commission and interested bidders. The
bidding procedures for the MF–II
auction will include, among other
things, details pertaining to multiple
round bidding and package bidding.
2. Information and Communications
103. To maximize competition and
promote fairness, the Commission
proposed to retain for MF–II its usual
auction policies regarding permissible
communications during the auction and
the public release of certain auctionrelated information. The Commission
adopts the proposed rules prohibiting
auction applicants from communicating
with one another regarding the
substance of their bids or bidding
strategies, and providing for limited
public disclosure of auction-related
information as appropriate.
C. Auction Cancellation
104. In the USF/ICC Transformation
FNPRM, the Commission proposed,
consistent with its approach in
spectrum auctions and Mobility Fund
Phase I, that its rules provide discretion
to delay, suspend, or cancel bidding
before or after a reverse auction begins
under a variety of circumstances,
including natural disasters, technical
failures, administrative necessity, or any
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other reason that affects the fair and
efficient conduct of the bidding. Based
on its experience with spectrum license
auctions and Mobility Fund Phase I, the
Commission concludes that such a rule
is necessary and adopts it.
VIII. Post-Auction Process and Support
105. The Commission adopts rules to
govern the post-auction process and the
authorization of support for MF–II.
These rules provide the basic framework
and requirements for winning bidders to
demonstrate their qualifications for MF–
II support. This post-auction process
will be similar to that used for MF–I
support. Shortly after bidding has
ended, the Bureaus will issue a public
notice declaring the auction closed,
identifying the winning bidders, and
establishing details and deadlines for
next steps, beginning with the long-form
application.
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A. Long-Form Application
106. In the USF/ICC Transformation
FNPRM, the Commission proposed to
apply the same long-form application
process for MF–II as it adopted for MF–
I. Under this process, applicants for
MF–II support would be required to
demonstrate in their long-form
applications that they are legally,
technically, and financially qualified to
receive MF–II support. The Commission
concludes that winning bidders for MF–
II support will be required to comply
with the same long-form application
process it adopted for MF–I, and adopts
a rule to govern this process, modified
from that originally proposed consistent
with the Commission’s stance on ETC
designation timing and other rules
adopted in the MF–II Order. Consistent
with the Commission’s standard
practices, upon close of an MF–II
auction, the Bureaus will release a
public notice, which will provide
further details regarding the submission
and processing of the long-form
application.
1. Ownership Disclosure
107. The Commission also adopts the
ownership disclosure requirements
proposed in the USF/ICC
Transformation Order for MF–II.
Specifically, the Commission will
require the same Part 1 ownership
disclosure requirements that already
apply in the spectrum license context,
and therefore adopts the related
proposed rule. Pursuant to these
requirements, an applicant for MF–II
support must fully disclose its
ownership structure as well as
information regarding the real party- or
parties-in-interest of the applicant or
application. The Commission
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anticipates that wireless providers that
have participated in spectrum license
auctions will already be familiar with
the disclosure requirements. These
companies will also have ownership
disclosure reports (in the short-form
application or FCC Form 602) on file
with the Commission, which may
simply need to be updated, minimizing
the reporting burden on winning
bidders.
2. ETC Eligibility
108. Consistent with the eligibility
requirements adopted in the MF–II
Order, the Commission will permit a
winning bidder in the MF–II auction to
obtain its ETC designation after the
close of the auction, provided that it
submits proof of its ETC designation
within 180 days of the public notice
identifying winning bidders.
109. Before MF–II support is
authorized, a winning bidder must
demonstrate that it has been designated
an ETC covering each of the geographic
areas for which it seeks to be authorized
for support and that its ETC designation
allows it to fully comply with the
Commission’s coverage requirements
within the time provided to meet this
requirement. A winning bidder must
submit appropriate documentation of its
ETC designation in all the areas for
which it will receive support in its long
form application or certify that it will do
so within 180 days of the public notice
identifying winning bidders.
Appropriate documentation should
include the original designation order,
any relevant modifications (e.g.,
expansion of service area or inclusion of
wireless), along with any name-change
orders. Each winning bidder should
connect the designations to the winning
bids so that it is clear that the bidder has
ETC status in each winning area. This
obligation may be satisfied by providing
maps of the recipient’s ETC designation
area, map overlays of the MF–II support
areas, and narrative explanations
explaining the connections between the
ETC designations and MF–II support
areas.
3. Financial and Technical Capability
Certification
110. As in the pre-auction short-form
application stage, a long-form applicant
must certify that it is financially and
technically capable of providing the
required coverage and performance
levels within the specified timeframe in
the geographic areas in which it won
support. An applicant should take care
to review its resources and its plans
before making the required certification
and be prepared to document its review,
if necessary. Thus, the Commission
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15435
adopts the proposed rule regarding
financial and technical capability
certification, as amended.
4. Network Coverage Plan
111. For winning bids, the applicant
must submit a project description that
describes the network to be built or
upgraded; identifies the proposed
technology; demonstrates that the
project is technically feasible; discloses
the complete project budget; and
discusses each specific phase of the
project (e.g., network design,
construction, deployment, and
maintenance). A complete project
schedule, including timelines,
milestones, and costs, must also be
provided. Milestones should include the
start and end date for network design;
start and end date for drafting and
posting requests for proposal (RFPs);
start and end date for selecting vendors
and negotiating contracts; and start date
for commencing construction and end
date for completing construction.
Winning bidders may file as separate
documents a public/redacted version of
their project descriptions and a
confidential version of their project
descriptions, if necessary, accompanied
by a Request for Confidentiality that
aligns with existing Commission rules.
Project descriptions must align project
schedules with the required buildout
milestones.
5. Spectrum Access
112. The Commission adopts its
proposed rule to require applicants to
provide a description of the spectrum
access that the applicant will use to
meet its obligations in areas for which
it is the winning bidder, including
whether it currently holds a license or
leases the spectrum, along with any
necessary renewal expectancy, and
certify that the description is accurate
and that the applicant will retain such
access for the entire ten year support
term. The description should identify
the license applicable to the spectrum to
be accessed. The description of the
license must include the type of service
(e.g., AWS, 700 MHz, BRS, PCS, etc.),
the particular frequency bands and the
call sign. This information should be
verifiable in the Commission’s
Universal Licensing System. Reference
to other Commission data repositories
should not be necessary, as the
complete information needed to
determine on what licenses the
applicant intends to rely should be
included in the MF–II long-form
application. Applications will be
reviewed to assess the reasonableness of
the certification.
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6. Certifications as to Program
Requirements
113. With regard to certifications of
program requirements, the Commission
concludes that an applicant must certify
in its long-form application that it has
the funds available for all project costs
that exceed the amount of support to be
received, and that it will comply with
all program requirements. These
requirements include the public interest
obligations contained in the
Commission’s rules and set forth in the
MF–II Order. Applicants must certify
that they will meet the applicable
deadlines and requirements for
demonstrating interim and final
performance benchmarks set forth in the
rules, and that they will comply with
the MF–II collocation, voice and data
roaming, and reasonably comparable
rate obligations. The Commission will
retain its authority to look behind
recipients’ certifications and take action
to address any violations that develop.
7. Other Information
114. Any additional information that
is required to establish whether an
applicant is eligible for MF–II support
will be announced by public notice.
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8. Transfers and Assignments
115. The award of MF–II support is
based upon the eligibility and
performance of the winning bidder.
Therefore, a recipient of MF–II support
that later seeks to transfer control or
assign its licenses in the winning bid
area to another carrier should be aware
that, if the buyer or assignee carrier is
not eligible to receive MF–II funds or is
uninterested in remaining in the
program, the winning bidder will
remain liable for its winning bid
obligations and will be considered to
have committed a performance default if
it can no longer fulfill those obligations
after completing the transfer or
assignment. All assignees seeking to
receive MF–II support will become
subject to the eligibility, certification,
and disclosure requirements included in
the MF–II rules.
B. Authorization Requirements and
Steps
116. In the USF/ICC Transformation
FNPRM, the Commission proposed to
apply the same process for authorization
of release of awarded funds for MF–II
support as was adopted in Phase I. The
Commission concludes that before being
authorized for support, a winning
bidder must submit an irrevocable
standby letter of credit (LOC), which
shall be acceptable in all respects to the
Commission. Additionally, winning
bidders must supply a legal counsel’s
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opinion letter stating that the funds
secured by the LOC will not be
considered to be part of the recipient’s
bankruptcy estate in the event of a
bankruptcy proceeding under section
541 of the Bankruptcy Code. These
safeguards will allow us to utilize an
LOC to resolve a performance default.
Accordingly, the following
authorization requirements must be
satisfied in order for MF–II support to
be authorized.
1. Letters of Credit
117. In MF–I, the Commission
required all winning bidders to obtain
LOCs ensuring the successful
fulfillment of each winning bid and
protecting the Commission’s investment
of universal service funds. In the CAF–
II auction context, the Commission
adopted LOC requirements with
standards that initially cover the first
year of support of a recipient’s winning
bid, and that are adjusted annually
thereafter, reasoning that LOCs were an
effective means for fulfilling the
Commission’s role as stewards of public
funds.
118. Consistent with the rules
governing MF–I and CAF–II auctions,
the Commission adopts a rule for MF–
II requiring that, prior to the
authorization of support, all winning
bidders for support must provide us
with an irrevocable standby LOC by a
bank that is acceptable to the
Commission in substantially the same
form as the model Letter of Credit set
forth in the appendix to the MF–II
Order, and, in any event, must be
acceptable in all respects to the
Commission. Specifically, the
Commission adopts requirements for a
bank to be acceptable to the
Commission to issue the LOC that are
similar to the requirements adopted for
MF–I, with the exception of the
expansion of the acceptable banks noted
below.
119. The Commission concludes that
an LOC meeting the requirements set
out below is neither unreasonably
burdensome nor excessively costly for a
winning bidder to obtain in light of the
benefit to the universal service program.
While obtaining an LOC incurs costs,
the Commission anticipates that bidders
can incorporate these costs when
determining their bids. As the
Commission found in MF–I, and in
considering this issue in other aspects of
the Connect America Fund, companies
with existing lending relationships often
use LOCs in the normal course of
operating their businesses and,
generally, are able to maintain multiple
forms of financing for varying purposes.
Therefore, on balance, the Commission
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concludes that the government’s need to
safeguard the disbursement of these
monies outweighs the limited burden
incurred by winning bidders.
120. In reaching this conclusion, the
Commission carefully weighed the
comments it received on whether it
should require LOCs for MF–II. While
the concerns expressed by some
commenters do not warrant abandoning
an LOC requirement altogether, they do
support the Commission’s decision to
depart from the LOC provisions utilized
in MF–I, and to instead adopt LOC
provisions that closely align with the
CAF–II LOC process and MF–II
performance requirements. For instance,
allowing the LOC to decrease over time
as a support recipient satisfies its
minimum coverage and service
requirements, as the Commission
allowed in the CAF–II context, should
effectively protect public funds under
less onerous terms than were applied in
the MF–I auction. Moreover, the
Commission can also incorporate other
terms and processes adopted in the
CAF–II auction context to address the
concerns of commenters to achieve
greater efficiencies in the MF–II LOC
requirements. The Commission
therefore requires an LOC for MF–II
winning bids that will remain in place
until USAC, in conjunction with the
Commission, verifies that a MF–II
winning bidder has met its minimum
coverage and service requirements at the
end of the six-year milestone.
121. Consistent with the approach
utilized in CAF–II, the Commission will
require that the initial value of the LOC
to be set to at least the amount of
authorized MF–II support for the first
year. Before the winning bidder can
receive its next year’s MF–II support, it
must modify, renew, or obtain a new
letter of credit to ensure that it is valued
at a minimum at the total amount of
money that has already been disbursed
plus the amount of money that is going
to be provided in the next year.
122. Moreover, similar to the process
adopted in CAF–II, the Commission will
allow a support recipient to modestly
reduce its LOC as it meets its interim
benchmarks. The LOC must be
maintained for 100 percent of the total
support amount disbursed plus the
amount to be disbursed in the next year
until USAC, in coordination with the
Commission, has determined that the
recipient has met its interim benchmark
for deployment to 60 percent of the
required coverage area; and subject to
USAC’s consent, the amount of the LOC
may decrease to an amount equal to 90
percent of the total support amount
already disbursed plus the amount that
will be disbursed in the coming year.
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Once USAC, in coordination with the
Commission, has determined that the
recipient has met its interim benchmark
for deployment to 80 percent of the
required coverage area, and subject to
USAC’s consent, the amount of the LOC
may decrease to an amount equal to 80
percent of the total support amount
already disbursed plus the amount that
will be disbursed in the coming year.
After USAC, in coordination with the
Commission, has determined that the
recipient has met its final benchmark for
deployment to a minimum of 85 percent
of the required coverage area by state
and at least 75 percent by each census
block group or census tract in a state
included in the LOC, the recipient may
relinquish its LOC. Recognizing that the
risk of a default will lessen as a
recipient makes progress towards
building its network, the Commission
finds that it is appropriate to modestly
reduce the value of the letter of credit
in an effort to reduce the cost of
maintaining a letter of credit as the
recipient meets certain service
milestones. Such a system of modest
reductions in the value of the LOC
aligns with the LOC procedure adopted
in CAF–II.
123. These LOC requirements should
help to achieve the Commission’s goal
of fiscal responsibility and should
protect the disbursement of universal
service funds while also being
responsive to concerns expressed in the
record that MF–II LOC requirements
should not be onerous. The reporting
and performance requirements that it
has adopted for MF–II together with
these LOC provisions, which are
consistent with the CAF–II auction LOC
requirements previously adopted by the
Commission, should ensure that in the
event of a performance default, monies
are in place to satisfy a recipient’s
obligations for failing to comply with
the terms of support. All MF–II
recipients, along with the federal
government, should bear the
responsibilities of safeguarding these
funds. However, the Commission
nonetheless recognizes that there may
be a need for greater flexibility regarding
LOCs for Tribally-owned and controlled
winning bidders. Thus, if any Triballyowned and -controlled MF–II winning
bidder is unable to obtain a LOC, it may
file a petition for a waiver of the LOC
requirement. Waiver applicants must
show, with evidence acceptable to the
Commission, that the Tribally-owned
and -controlled winning bidder is
unable to obtain a LOC.
124. In addition to providing greater
flexibility on the amount of support the
LOC will cover, the Commission
concludes that there are additional
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specific measures it can take to provide
MF–II recipients greater flexibility in
obtaining their LOCs. For instance, to
reduce the number of LOCs that a
winning bidder may need, the
Commission will allow winning bidders
to provide a single LOC covering all its
winning bids within a single state. The
Commission therefore directs the
Bureaus to establish a reasonable means
to permit a winning bidder to provide
a single LOC that covers all its winning
bids within a single state in the amount
specified in the MF–II Order, if the
recipient so desires. Moreover,
consistent with the Commission’s
decision in the CAF–II context, if a
winning bidder chooses to obtain a
letter of credit for each of its bids that
are located in a state and defaults after
its failure to pay the recoupment
calculation for non-compliance, the
Bureaus will authorize a draw on all of
the letters of credit covering all of the
bids in that state.
125. Furthermore, consistent with the
acceptable bank standards recently
adopted for the CAF–II auction process,
the Commission amends and expands
the definition of an ‘‘acceptable bank’’
for the purposes of MF–II LOC
requirements. By expanding the list of
banks eligible to provide LOCs, the
Commission seeks to lower barriers for
entities, particularly small and rural
businesses that might otherwise face
obstacles in obtaining an LOC from a
smaller pool of banks, while still
ensuring that there are adequate
considerations given to the soundness of
the bank issuing a letter of credit.
126. Accordingly, the Commission
will require that, for U.S. banks, the
bank must be insured by the Federal
Deposit Insurance Corporation (FDIC)
and have a Weiss bank safety rating of
B¥ or higher. This modification to the
definition of acceptable banks expands
the number of eligible U.S. banks from
fewer than 70 banks, as were allowed in
MF–I, to approximately 3,600 banks for
MF–II winning bidders. These
provisions together should help to
ensure that LOCs are secured by
financially sound institutions.
Moreover, unlike credit ratings obtained
by banks in the commercial markets,
Weiss rates all banks that report
sufficient data for Weiss to analyze and,
more importantly, is a subscription
service and is not compensated by the
banks that it rates. Weiss therefore offers
an independent and objective
perspective of the safety of the banks it
rates based on capitalization, asset
quality, profitability, liquidity, and
stability indexes. Requiring that the
banks have a Weiss rating of at least B¥
ensures that the bank has a rating that
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at a minimum demonstrates that the
bank offers good financial security and
has the resources to deal with a variety
of adverse economic conditions. And
requiring that U.S. issuing banks also be
FDIC-insured has the added benefit of
relying on the oversight of the FDIC and
its protections. The Commission
therefore concludes that this more
expansive definition of acceptable banks
achieves an appropriate balance
between reducing burdens for winning
bidders, particularly small and rural
entities, while still protecting the public
funds.
127. For similar reasons, the
Commission will also permit entities to
obtain letters of credit from CoBank,
ACB (CoBank) or the National Rural
Utilities Cooperative Finance
Corporation (CFC) as long as each of
these two entities maintains assets that
place them among the top-100 U.S.
banks in terms of the amount of assets,
and they maintain a credit rating of
BBB¥ or better from Standard & Poor’s
(or the equivalent from a nationallyrecognized credit rating agency). The
entity’s assets will be determined on the
basis of total assets as of the end of the
calendar year immediately preceding
the issuance of the letter of credit,
determined on a U.S. dollar equivalent
basis as of such date. The Commission
has recognized that these entities are not
traditional banks in that they do not
accept deposits from members of the
public. Thus, these entities do not have
a Weiss bank safety rating and are not
FDIC-insured. However, CFC and
CoBank can be considered banks in the
context of the Commission’s program
because they use their capital resources
to make loans. Accordingly, the
Commission finds these two entities to
be sufficiently comparable to
commercial depository banks to issue
letters of credit in the MF–II program.
128. CoBank has met the more
stringent issuing bank eligibility
requirements for MF–I and rural
broadband experiments, and has issued
a number of letters of credit for these
programs. Although CoBank is not
FDIC-insured, it is insured by the Farm
Credit System Insurance Corporation,
which the Commission found provides
protections that are equivalent to those
indicated by holding FDIC-insured
deposits. As long as CoBank retains its
standing with assets equivalent to a top100 U.S. bank and a qualified credit
rating, the Commission sees no reason
to depart from its conclusion not to
exclude CoBank from eligibility simply
because CoBank is not rated by Weiss.
129. CFC’s assets also make it
comparable to commercial depository
banks that are in the top 100 based on
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total assets, and it has a credit rating
from Standard & Poor’s of A. But
because CFC is not a depository
institution and it is not part of the Farm
Credit System, it is not FDIC or FCSICinsured. Nevertheless, CFC is uniquely
situated and should be made eligible to
the extent it retains its standing with
assets equivalent to a top-100 U.S. bank
and a qualified credit rating. CFC is
‘‘owned by, and exclusively serves’’
rural utility providers, and CFC
manages and funds its affiliate, the
Rural Telephone Finance Cooperative
(RTFC), which lends primarily to
telecommunications providers and
affiliates across the nation. As the
largest non-governmental lender for
rural utilities, CFC has specialized
institutional knowledge regarding the
types of entities expected to participate
in universal service competitive bidding
to serve fixed locations and has
demonstrated that it has significant and
long-term experience in financing the
deployment of rural networks. This
unique and long-standing role in rural
network deployment coupled with
CFC’s qualifications, provides the
Commission with sufficient assurance
that CFC has the qualifications to assess
the financial health of winning bidders
and honor the LOCs that it issues,
without the need for the independent
oversight of CFC’s safety and soundness
that would be offered by FDIC or FCSIC
insurance or a Weiss safety rating. The
Commission concludes that, based on
the totality of these circumstances, CFC
is eligible to issue LOCs despite the fact
that it does not meet the FDIC and
Weiss rating requirements. The decision
to make CFC an eligible issuer is
conditioned on CFC notifying the
Commission of any significant change to
any of the showings it has made to the
Commission.
130. The Commission further notes
that it is not adopting alternative
eligibility requirements that would
permit banks that are not FDIC or
FCSIC-insured or that do not have a
Weiss bank safety rating to issue letters
of credit. Instead, the Commission
concludes that, for purposes of
providing security for winning bidders,
an LOC from CFC provides assurances
that are equivalent to those provided by
banks meeting the Commission’s general
criteria, due to CFC’s uniquely extensive
experience in financing rural networks,
its significant participation in other
federal government programs, and its
long-standing relationship with many
entities that may become MF–II winning
bidders.
131. If a recipient seeks to obtain its
LOC from a non-U.S. bank, the
Commission requires that the bank be
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among the 100 largest non-U.S. banks in
the world (determined on the basis of
total assets as of the end of the calendar
year immediately preceding the
issuance of the letter of credit,
determined on a U.S. dollar equivalent
basis as of such date) and maintain a
credit rating of BBB¥ or better from
Standard & Poor’s (or the equivalent
from a nationally-recognized credit
rating agency). The bank must also have
a branch in the District of Columbia or
such other branch office as agreed to by
the Commission and must issue the
letter of credit payable in United States
dollars.
132. As in the process permitted in
the CAF–II rules and also followed in
MF–I, if the winning bidder is not
prepared to present its LOC at the time
of the long-form application filing, the
Commission will allow the submission
of a commitment letter from the bank
issuing the LOC in the long-form
application filing. A winning bidder
will, however, be required to have its
LOC in place and approved by USAC
before it is authorized to receive MF–II
support.
2. Opinion Letters
133. Consistent with the rules for MF–
I and CAF–II, at the time a winning
bidder for MF–II support submits its
LOC, it also will be required to provide
an opinion letter from legal counsel
clearly stating, subject only to
customary assumptions, limitations and
qualifications, that, in a proceeding
under the Bankruptcy Code, the
bankruptcy court would not treat the
LOC or proceeds of the LOC as property
of the winning bidder’s bankruptcy
estate, or the bankruptcy estate of any
other bidder-related entity requesting
issuance of the LOC, under 11 U.S.C.
541. A winning bidder will be required
to have its opinion letter in place before
it is authorized to receive MF–II support
and before any support is disbursed.
C. Disbursements
134. Consistent with the process
adopted in the CAF–II auction context,
the Commission concludes that MF–II
support should be disbursed in monthly
installments over the course of the tenyear support term. For MF–II, support
recipients will have made winning bids
to provide service at established
performance requirements to at least 85
percent of the eligible square miles
across all winning bid areas for which
they win MF–II support in a state by the
final milestone, to provide service to at
least 75 percent of every census block
group or census tract in a state
(depending on minimum bidding unit),
and to continue to provide service
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throughout the ten-year support term.
During the ten-year support term,
provided that the winning bidder files
acceptable, complete, and timely annual
and milestone reports, fulfills the
milestone coverage requirements, and
does not otherwise have a performance
default, the recipient will receive
monthly disbursements of 100 percent
of the total winning bid(s).
135. This approach provides MF–II
recipients with reliable and predictable
support payments that conform to a
variety of business cycles and
correspond to suggestions in the record.
The Commission is mindful that some
carriers might incur higher up-front
project costs prior to their ability to
commence the provision of service to
the targeted area because infrastructure
expansion projects might require larger
payments in the earlier years of the
disbursement term. The Commission
concludes that MF–II monthly
disbursements will best accommodate
carriers’ project schedules or ongoing
expenses of providing service in a
manner that is efficient from an
administrative prospective. Moreover,
because the Commission decides that
support payments should be regular and
predictable over the entire course of the
ten-year term for all recipients, and
because the Commission seeks to not
exceed the budget in any one year of the
term, recipients will not be able to
receive accelerated payment of their
support for attaining the interim
milestones early. This determination
aligns with the decision to reject
accelerated payments in CAF–II as well.
136. All MF–II recipients have a
continuing obligation to maintain the
accuracy and completeness of the
information provided in their long-form
applications and their annual and
milestone reports. All winning bidders
shall provide information about any
substantial change that may be of
decisional significance regarding their
eligibility for MF–II support and
compliance with MF–II requirements.
137. The Commission reserves the
right for USAC to cease monthly
disbursements immediately should the
winning bidder have a performance
default, or if it fails to comply with any
of the terms or conditions for the receipt
of the support under any of the
Commission’s rules. In addition, the
Commission directs the Bureaus and the
Office of Managing Director to postpone
disbursements and/or the incurrence of
additional obligations, to preclude an
ADA violation if the USF’s current
exemption expires or is repealed.
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IX. Accountability and Oversight
138. As the Commission recognized
from the outset of this proceeding, the
monies used to achieve the Mobility
Fund goals come from American
consumers and businesses, and
therefore it is critical for the success of
the program that support recipients
meet their obligations. This task
requires ongoing vigilance and oversight
by the Commission together with the
Fund administrator, USAC. As the
Commission noted in the CAF–II
proceeding, reporting obligations serve
the public interest by enhancing the
ability to monitor the use of Connect
America Fund support and ensure its
use for intended purposes.
139. In the USF/ICC Transformation
FNPRM, the Commission proposed
applying the same general rules for
accountability and oversight to MF–II as
were applied to recipients of MF–I
support, including reporting, audit, and
record retention requirements. The
reporting requirements the Commission
adopted for MF–I, and adopts here for
MF–II, differ in certain respects from
those adopted for CAF and CAF–II due
to the specific requirements of the
provision of mobile service. Therefore,
the Commission excluded MF–I from
the application of 47 CFR 54.313(k),
which applies generally to recipients of
high cost support, and now also
excludes that provision for MF–II
support recipients.
140. The Commission also proposed
that MF–II support recipients should be
required to include in their annual
reports the same information required of
MF–I support recipients. The
Commission adopts certification and
reporting requirements relating to the
performance obligations adopted in the
MF–II Order. It also addresses
consequences for failure to meet
program reporting rules and discusses
its record retention rules.
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A. Mobile Reporting, Mobility Fund
Phase II Annual Reports, and Mobility
Fund Phase II Milestone Reports
141. Annual Reports. The
Commission adopts an annual reporting
requirement that will enable the
Commission and USAC to monitor the
ongoing progress and performance of all
MF–II recipients, similar to the annual
reporting obligations of all other
recipients of federal high-cost universal
service support. Winning bidders of
MF–II support will be subject to the
annual reporting requirement, and
recipients will be required to file their
reports each year following the year in
which the auction closes by July 1,
including all the certifications required
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under the MF–II rules, and in which the
recipient will update information, as
required for the following year.
142. Milestone Reports. In order to
ensure that ongoing payment of MF–II
support is warranted, and in alignment
with the similar progress reporting
system instituted for CAF–II, the
Commission will require recipients to
file a Milestone Report on or before its
third, fourth, fifth, and sixth year
performance deadline. These Milestone
Reports will be where MF–II recipients
report the data that demonstrates that
they have met their interim benchmarks
for deployment and their minimum
final deployment requirement at the end
of the construction term necessary to
support the disbursements of MF–II
funds. Reports should be filed via the
portal that USAC is creating to receive
filings by universal service support
recipients. The Commission directs the
Bureaus to define more precisely the
content and format of the information,
including substantiation that recipients
are required to include in their
Milestone Reports, such that it is
consistent with the evidence that will be
required in the challenge process.
143. All recipients of MF–II support
will also be subject generally to the
same audit requirements as recipients of
CAF–II support and all other high-cost
support.
144. Moreover, in line with the
procedures adopted in CAF–II to
address missed filing deadlines, the
Commission adopts a rule to reduce the
support for recipients that miss
reporting, certification, and milestone
filing deadlines. The Commission will
impose a minimum reduction of seven
days of total statewide support for a
winning bid in any state for which a
filing deadline is missed, given the
importance of recipients meeting filing
deadlines. In addition to the reduction
of the initial seven days of support,
support will be reduced further statewide on a pro-rata daily basis until the
MF–II recipient files the required report
or certification. Reducing support on a
day-by-day basis plus an additional
seven-day reduction is an appropriate
measure to create incentives for MF–II
recipients to make their filings as soon
as they have determined that they have
missed the applicable deadlines.
145. The Commission recognizes that
despite its best efforts, a recipient may
miss a deadline due to an administrative
oversight but still file within a few days
of the deadline. For a late filer, the
Commission finds that it is appropriate
to provide a one-time grace period of
three days so that a recipient that
quickly rectifies its error within three
days of the deadline will not be subject
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15439
to the seven-day minimum loss of
support. The Commission directs USAC
to send a letter to such a recipient
notifying it that its filing was late but
cured within the grace period. If the
recipient again files any filing late, the
grace period will not be available.
Repeated mistakes, even inadvertent,
are indicative of a lack of adequate
policies and procedures to ensure
timely filing. If a recipient misses a
filing deadline more than once due to its
inadvertence, the support reductions
that the Commission adopts should
provide an incentive to recipients to
revise their procedures to ensure that
such inadvertence does not become a
pattern.
146. Maintaining the Accuracy of
Filings. To additionally safeguard the
government’s monthly disbursement of
support, the Commission will require
recipients to maintain the accuracy and
completeness of the information they
furnish in their long-form applications
and their annual and milestone reports.
Accordingly, the Commission will
require recipients to update their annual
reports and milestone reports to provide
information about any substantial
change that may be of decisional
significance regarding their eligibility
for MF–II support and compliance with
MF–II requirements. Such notification
of a substantial change, including any
reduction in the percentage of eligible
square miles being served or any failure
to comply with any of the MF–II
requirements, shall be submitted within
10 business days after the reportable
event occurs, as is also required in
CAF–II. A recipient that is required to
provide such updated or supplemental
information prior to having filed its first
annual report, may nevertheless comply
with the 10-day filing requirement by
submitting that information to the
entities listed in 47 CFR 54.1019(c).
Moreover, while the Commission
expects that it will be a rare occurrence,
if a support recipient drops below the
level of service to which it has certified
in a milestone report or an annual report
during the six-year deployment period,
it will be subject to the provisions set
out in the MF–II Order for noncompliance.
B. Defaults
147. In MF–I, the Commission
adopted two types of default payment
obligations for MF–I winning bidders:
An auction default payment owed by
winning bidders if they failed to satisfy
their auction obligations prior to being
authorized to receive support, and a
performance default payment owed by
winning bidders authorized for support
who subsequently failed to meet their
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public interest obligations or other
terms and conditions of MF–I support.
As summarized below, for ease of
administration, the Commission
modifies its proposal and adopts default
rules for MF–II that more closely
parallel the CAF–II rules.
1. Forfeiture in the Event of an Auction
Default
148. MF–I winning bidders, like all
winning bidders in Commission
spectrum auctions, had a binding
obligation to file a post-auction longform application—by the applicable
deadline and consistent with other
requirements of the long-form
application process—and failure to do
so constituted an auction default. For
MF–II, the Commission proposed that a
winning bidder for MF–II support
would be subject to the same auction
default payment obligations adopted for
winning bidders of MF–I support,
including a default on a winning bid
before authorizations, the failure to
timely file a long-form application,
being found ineligible or unqualified to
be a recipient of MF–II support, or if a
long-form application is dismissed for
any reason after the close of the auction.
For CAF–II, the Commission concluded
that any entity that files a short-form
application to participate in the CAF–II
competitive bidding process will be
subject to a forfeiture in the event of a
default before it is authorized to begin
receiving support.
149. The Commission concludes that
it will align the MF–II rules with its
approach in CAF–II and adopts a rule
that subjects a MF–II winning bidder to
a forfeiture payment if it defaults on its
bid(s) before it is authorized to begin
receiving support. This forfeiture
payment shall satisfy the requirements
of 47 CFR 1.21004(b) with respect to
default payments. The Commission
holds that such an approach will ensure
that each violation has a relationship to
the area affected by the auction default,
but will not be unduly punitive.
Moreover, such an approach will also
ensure that the total forfeiture for a
default is generally proportionate to the
overall scope of the winning bidder’s
bid. The Commission will determine the
minimum geographic unit to be census
block groups or census tracts in the preauction process. A winning bidder that
fails to become authorized to receive
MF–II support will then have violated
the Commission’s rules for each of the
census block groups or census tracts
included in its defaulted bid. If a
winning bidder defaults on a bid that
includes 10 census block groups/census
tracts, that entity could be subject to a
base forfeiture of $30,000 (10 census
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block groups/census tracts multiplied
by the base forfeiture of $3,000).
150. An entity will be considered to
have an auction default and will be
subject to forfeiture if it fails to timely
file a long-form application or meet the
document submission deadlines
outlined in the MF–II Order or is found
ineligible or unqualified to receive
Phase II support by the Bureaus, or
otherwise defaults on its bid or is
disqualified for any reason prior to the
authorization of support. Specifically, as
the Commission found in the CAF–II
context, it is reasonable to subject all
bidders to the same $3,000 base
forfeiture per violation, subject to
adjustment based on the criteria set
forth in the Commission’s forfeiture
guidelines. A winning bidder will be
subject to the base forfeiture for each
separate violation of the Commission’s
rules.
151. For MF–II competitive bidding
purposes, the Commission defines a
violation as any form of default with
respect to each geographic unit subject
to a bid. However, to ensure that the
amount of the base forfeiture is not
disproportionate to the amount of an
entity’s bid, the Commission limits the
total base forfeiture that could be owed
by a winning bidder to five percent of
its total bid amount for the entire tenyear support term. This would occur in
situations where the dollar amount
associated with the bid is low. As an
example, assume Bidder A bids to serve
100 census block groups (CBGs) for
$100,000 over the ten-year support term.
The Commission would impose a base
forfeiture of $5,000 (5 percent of
$100,000) because otherwise the base
forfeiture would be $300,000 ($3,000 ×
100 CBGs), which is three times the
entire bid amount. In contrast, if Bidder
B bids to serve 100 census block groups
for $7,000,000 over the support term,
the Commission would impose a base
forfeiture of $300,000 ($3,000 × 100
CBGs), which is 4.3 percent of the total
bid.
152. By adopting such a forfeiture, the
Commission impresses upon recipients
the importance of being prepared to
meet all requirements for the postselection review process, and
emphasizes the requirement that the
recipients conduct a due diligence
review to ensure that they are qualified
to participate in the MF–II competitive
bidding process and meet its terms and
conditions.
153. Failures by MF–II bidders to
fulfill their auction obligations will
undermine the stability and
predictability of the auction process,
and impose costs on the Commission
and higher support costs for USF. The
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Commission therefore finds that
subjecting entities to a forfeiture for an
auction default is appropriate to ensure
the integrity of the auction process and
to safeguard against costs to the
Commission and the USF. Thus, as a
condition of participating in an MF–II
auction, entities acknowledge that they
are subject to a forfeiture in the event of
an auction default.
154. The Commission distinguishes
between an MF–II winning bidder that
is subject to an auction default, and a
winning bidder whose long-form
application is approved but
subsequently has a performance default
or otherwise fails to comply with the
terms and conditions of receiving MF–
II support.
2. Measures for Non-Compliance
155. In the USF/ICC Transformation
FNPRM, the Commission proposed that
a recipient of MF–II support would be
subject to the same performance default
payment provisions as recipients of
MF–I support. For MF–I, the
Commission required that in the event
of a default, a recipient would be
required to repay all the support that it
had received plus an additional
performance default of 10 percent of
total support for which the recipient is
eligible.
156. In CAF–II, the Commission
adopted a framework for reporting and
support reductions for all CAF–II
recipients that fail to meet the requisite
service milestones. Specifically, the
framework was adopted to calibrate
support reductions to the extent of an
ETC’s non-compliance with service
milestones. The Commission
subsequently extended that framework
to rate-of-return carriers.
157. Given the policy goals
underlying MF–II support, the public
interest benefit of establishing
procedures for MF–II that are
substantially the same as those adopted
for CAF–II, and the record gathered on
this issue, the Commission concludes
that it should adopt a more measured
approach to recouping payment in the
event of default than the Commission
employed in the MF–I auction.
Accordingly, the Commission adopts a
process by which the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will
authorize USAC to draw on the LOC(s)
to recover all the support that has been
disbursed in a state in the event that the
MF–II recipient does not meet the
relevant service milestones and does not
cure its compliance gap pursuant to the
steps outlined below. For CAF–II, the
Commission determined that USAC
would recover support from ETCs
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associated with their compliance gap in
three separate circumstances. The
Commission will adopt a corresponding
approach for MF–II recipients. If, after
six months, the ETC fails to repay in
full, either the Wireline Competition
Bureau or the Wireless
Telecommunications Bureau will issue
a letter authorizing USAC to draw on
the letter of credit to recover 100
percent of the support that has been
disbursed to the ETC within the state.
158. First, for interim milestones, if
the ETC has a compliance gap of 50
percent or more of the eligible square
miles that the ETC is required to have
covered by the relevant interim
milestone (i.e., Tier 4 status) at the state
level, USAC will withhold 50 percent of
the ETC’s monthly support for that state,
and the ETC will be required to file
quarterly reports. If, after having 50
percent of support withheld for six
months, the ETC has not reported that
it has a compliance gap of less than 50
percent at the state level (i.e., the ETC
is eligible for Tier 3 or lower or is in
compliance), USAC will withhold 100
percent of the ETC’s support for the
state and will commence recovery
action for a percentage of support that
is equal to the ETC’s compliance gap
plus 10 percent of the ETC’s support
that has been paid to that point. At this
point, this ETC will have six months to
pay back the amount of support that
USAC seeks to recover. An ETC is
encouraged to continue building out its
MF–II projects during and after any
recovery of funds by USAC. If, at any
point during the six-year period for
deployment, the ETC reports that it is
eligible for Tier 1 status, and USAC is
able to substantiate that report, the ETC
will have its support fully restored
including any support that had been
withheld, USAC will repay any funds
that were recovered, and the ETC will
move to Tier 1 status. If, at the end of
six months the ETC has not fully paid
back the support, the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter to that effect and USAC will
draw on the letter of credit to recover all
of the support that has been disbursed
to the ETC. Consistent with CAF–II, the
Commission will review compliance
with build-out milestones on a statewide basis. Accordingly, if a winning
bidder chooses to obtain multiple letters
of credit for separate bids that are
located in a state and defaults, either of
the Bureaus will authorize a draw on all
the letters of credit covering all the bids
in that state.
159. Second, if an ETC misses the
final milestone(s), it must identify by
what percentage the milestone has been
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missed at the state level and/or any of
the census block group(s) or census
tract(s) in the state. The ETC will then
have 12 months from that date to come
into full compliance with both of those
milestones. If it does not come into full
compliance within 12 months because it
fails to meet the 85 percent benchmark
(even if it meets the 75 percent
benchmark for some or all the census
block group(s) or census tract(s)), the
Wireline Competition Bureau or the
Wireless Telecommunications Bureau
will issue a letter, and USAC will
recover disbursement(s) in an amount of
support that is equal to 1.89 multiplied
by the average amount of support the
ETC received per eligible square mile in
the state over the six-year period
multiplied by the number of square
miles unserved in the ETC’s winning
areas in the state that would be required
to meet the 85 percent benchmark, plus
10 percent of the ETC’s total MF–II
support received in the state over the
six-year period for deployment. It is
reasonable to assume that many of the
areas left unserved would have higher
than the average cost per area of the
winning bid. Therefore, a higher amount
per area than the average is appropriate.
Moreover, the Commission wants to
provide more incentive to carriers to
complete the build out for their winning
bid. Thus, the Commission finds that
the administrative simplicity and
predictability of using one factor for all
bidders outweighs the precision that
would come from applying a factor
specific to each winning bidder and
area. This multiplier was adopted by the
Commission for CAF–II.
160. After the ETC has paid the
calculated recovery amount for failure
to comply with the final deployment
milestone, the Bureaus will calculate a
reduced support payment for the
remaining support term based on the
percentage of deployment coverage
completed. The reduced ongoing annual
support amount will be the total of the
ETC’s original winning bid amounts for
annual support in the state multiplied
by the sum of the actual deployment
percentage plus 15 percent (i.e., the
difference between 100 percent coverage
and the required 85 percent minimum
coverage), or (annual support) *
(percentage covered + 0.15).
161. If at the end of six months the
ETC has not fully paid back the support
for missing the relevant 85 percent
benchmark, the ETC shall be liable for
repayment of all the support that has
been disbursed to the ETC for that state,
the Wireline Competition Bureau or the
Wireless Telecommunications Bureau
will issue a letter to that effect, and
USAC will draw on the LOC(s) to
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15441
recover all the support that has been
disbursed to the ETC for that state.
162. A similar approach will apply if
the ETC meets the 85 percent statewide
benchmark but misses the 75 percent
benchmark(s) for any census block
group(s) or census tract(s) in the state at
the final milestone and the ETC does
not come into full compliance by
meeting the 75 percent benchmark
within 12 months. The Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter for any such census block
group(s) or census tract(s), and USAC
will recover disbursement(s) in an
amount of support that is equal to 1.89
multiplied by the average amount of
support the ETC received per eligible
square mile in the census block group(s)
or census tract(s) in the state over the
six-year period multiplied by the
number of square miles unserved in
each of the ETC’s winning census block
group(s) or census tract(s) in the state
that would be required to meet their
respective 75 percent benchmarks, plus
10 percent of the ETC’s total MF–II
support received in the relevant census
block group(s) or census tract(s) over the
six-year period for deployment. At this
point, the ETC will have six months to
repay the support USAC seeks to
recover. After the ETC has paid the
calculated recovery amount, the
Bureaus will calculate a reduced
support payment for the remaining
support term. The reduced ongoing
annual support amount will be the
ETC’s original winning bid amount for
annual support in any such census
block group or census tract, multiplied
by the sum of the actual deployment
percentage plus 25 percent (i.e., the
difference between 100 percent coverage
and the required 75 percent minimum
coverage), or (annual support) *
(percentage covered + 0.25). If at the end
of six months the ETC has not fully paid
back the support for missing the
relevant 75 percent benchmark(s), the
ETC shall be liable for repayment of all
the support that has been disbursed to
the ETC for that state, the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter to that effect, and USAC will
draw on the LOC(s) to recover all the
support that has been disbursed to the
ETC for that state. In the event that
USAC draws on a letter of credit to
recover all the support that has been
disbursed to the ETC for a state, the
ETC’s participation in MF–II in that
state will immediately end and no
further support will be paid.
163. Third, after compliance with the
final build-out milestones has been
verified and the ETC closes its letter of
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credit, if at any point during the
remainder of the 10-year term of support
it is determined that the ETC does not
have sufficient evidence to demonstrate
that it is offering the requisite service to
the required percentage of square miles
by census block group or census tract,
or state, USAC will withhold support
for a period not to exceed six months
until the ETC demonstrates that it is
again providing the requisite service to
the required percentage of square miles.
When the ETC’s demonstration of
coverage has been verified by USAC,
USAC will pay any withheld support
and resume ongoing disbursements. If
the ETC cannot provide a verifiable
demonstration of coverage within the
permitted six-month period, USAC will
recover an amount of support that is
equal to 1.89 times the average amount
of support per square mile received in
the winning bid area over the six-year
deployment period for the relevant
number of square miles for which the
ETC has failed to produce sufficient
evidence, plus 10 percent of the ETC’s
total support received in that winning
bid area over the six-year deployment
time period, and will reduce ongoing
annual support as described in the MF–
II Order. Because the ETC’s build-out
will have already been verified before it
may close its letter of credit, the
Commission does not find it necessary
to require that the ETC continue to keep
its letter of credit open in the event that
the ETC does not repay the Commission
after it is found to be lacking evidence
of continued service deployment.
Instead, if the ETC does not repay the
Commission after a six-month period
permitted for repayment, it may be
subject to additional non-compliance
measures, including the reduction of
support payments for the remaining
support term as discussed in the MF–II
Order, and forfeitures.
164. Drawing on the letter of credit in
the event that the ETC fails to repay the
support that USAC is instructed to
recover will ensure that the Commission
will be able to recover the support in the
event that the ETC is unable to pay.
Through the support reduction
framework the Commission adopted for
CAF–II, the ETC will have a number of
opportunities to cure before the
Commission will seek to recover the
support that is associated with the
compliance gap. And the Commission
will only recover 100 percent of the
support that has been disbursed via the
LOC in those cases where the ETC is
unable to repay the support associated
with its compliance gap. Because an
ETC that is unable to repay the support
is also unlikely to be able to meet its
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obligations to use the support disbursed
to offer service meeting the
Commission’s requirements, recovering
100 percent of the support will allow
the Commission to re-award the support
through an alternative mechanism to an
ETC that will be able to meet its
obligations. This decision is consistent
with the conclusions reached by the
Commission in the CAF II context, that
if an entity fails to repay the support
amount associated with its compliance
gap, the risk becomes greater that the
entity will be unable to continue to
serve its customers or may go into
bankruptcy, and thus it is necessary to
ensure that the Commission can recover
the entire amount of support that it has
disbursed.
165. If an ETC has a performance
default for reasons other than
compliance with its construction
milestones, such as the failure to
maintain its spectrum access, its LOC,
or its ETC eligibility, these performance
defaults are incurable. The ETC must
report its incurable performance default
within 10 days to the Commission,
USAC will cease disbursing MF–II
support payments in the following
month for the affected area (whether one
or more census block groups or a state),
the ETC’s participation in MF–II in the
affected census block group(s) or census
tract(s) will immediately end, and the
amount of support subject to
recoupment for the ETC’s noncompliance will then be calculated
based upon the final six-year milestone
for either the relevant census block
group(s) or census tract(s) or the entire
state, depending upon the
circumstances of the performance
default. Specifically, the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter for any census block group(s) or
census tract(s) or the entire state in
which there has been an incurable
performance default. If the incurable
performance default is only for some of
the ETC’s census block group(s) or
census tract(s), USAC will recover
disbursement(s) in an amount of
support that is equal to 1.89 multiplied
by the average amount of support the
ETC received per eligible square mile in
the census block group(s) or census
tract(s) in the state over the time period
it has received MF–II disbursements
multiplied by the number of square
miles unserved in each of the ETC’s
winning census block group(s) or census
tract(s) in the state that would be
required to meet its respective 75
percent benchmarks, plus 10 percent of
the ETC’s total MF–II support received
in the relevant census block group(s) or
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census tract(s) over the relevant period
for deployment. If the incurable
performance default is for an entire
state, USAC will recover
disbursement(s) in an amount of
support that is equal to 1.89 multiplied
by the average amount of support the
ETC received per eligible square mile in
the state over the time period it has
received MF–II disbursements
multiplied by the number of square
miles unserved in the ETC’s winning
areas in the state that would be required
to meet the 85 percent benchmark, plus
10 percent of the ETC’s total MF–II
support received in the state over the
relevant period for deployment. At this
point, the ETC will have six months to
repay the support USAC seeks to
recover. If at the end of six months the
ETC has not fully paid back the support
for missing the relevant benchmark, the
ETC shall be liable for repayment of all
the support that has been disbursed to
the ETC for that state, the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter to that effect, and USAC will
draw on the LOC(s) to recover all of the
support that has been disbursed to the
ETC for that state. After the ETC has
paid the calculated recovery amount for
an incurable performance default in a
portion of a state, the Bureaus will
calculate a reduced support payment for
the remaining support term as set out in
the MF–II Order.
166. Finally, the Commission notes
that MF–II recipients may also be
subject to other sanctions for noncompliance with the terms and
conditions of high-cost funding,
including, but not limited to potential
revocation of ETC designation and
suspension or debarment.
C. Record Retention
167. In the USF/ICC Transformation
FNPRM, the Commission proposed that
a recipient of MF–II support would be
subject to the same rules for
accountability and oversight (including
reporting, audit, and record retention
requirements) that apply to all
recipients of CAF support. The
Commission also proposed that
recipients of MF–II support be required
to include in their annual reports the
same types of additional information
that are required of recipients of MF–I
support. In MF–I, the Commission
adopted requirements that the record
retention requirements for recipients of
support apply to all agents of the
recipient, and any documentation
prepared for or in connection with the
recipient’s MF–I support. The
Commission also adopted revised
requirements that extend the record
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retention period to 10 years for all
recipients of high-cost and CAF support,
including recipients of Mobility Fund
support. The retention period runs from
the date of the receipt of the final
disbursement of Mobility Fund funds.
The Commission concludes that MF–II
recipients are subject to the same
accountability and oversight
requirements in 47 CFR 54.320,
including the same audit and record
retention requirements as all other
recipients of high-cost support.
X. Procedural Matters
A. Final Regulatory Flexibility Analysis
168. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), an Initial Regulatory Flexibility
Analysis (IRFA) was incorporated in the
USF/ICC Transformation FNPRM and
the 2014 CAF Further Notice. The
Commission sought written public
comment on the proposals in the USF/
ICC Transformation FNPRM and 2014
CAF Further Notice, including comment
on the IRFAs. The Commission did not
receive any comments in response to
these IRFAs. The Final Regulatory
Flexibility Analysis (FRFA) in the MF–
II Order conforms to the RFA.
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1. Need for, and Objectives of, the
Report and Order
169. Despite the growing expansion of
4G Long Term Evolution (LTE) service,
rural and high-cost areas of our country
have been left behind. At the same time,
the Universal Service Fund spends $25
million a month (a conservative
estimate) distributing legacy subsidies
to mobile carriers that compete with
private capital and millions more
distributing duplicative subsidies to
multiple carriers in the same area.
170. In the MF–II Order, the
Commission adopts the framework for
moving forward with the Mobility Fund
Phase II (MF–II) and Tribal Mobility
Fund Phase II (Tribal MF–II), which will
allocate up to $4.53 billion over the next
decade to advance the deployment of 4G
LTE service to areas that are so costly
that the private sector has not yet
deployed there and to preserve such
service where it might not otherwise
exist. The funding for this effort will
come from the redirection of legacy
subsidies and be distributed using a
market-based, multi-round reverse
auction and will come with defined,
concrete compliance requirements so
that rural consumers will be adequately
served by the mobile carriers receiving
universal service support.
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B. Summary of Significant Issues Raised
by Public Comments in Response to the
IRFA
171. There were no comments filed
that specifically addressed the rules and
policies proposed in the USF/ICC
Transformation FNPRM IRFA or the
2014 CAF Further Notice IRFA.
C. Response to Comments by the Chief
Counsel for Advocacy of the Small
Business Administration
172. Pursuant to the Small Business
Jobs Act of 2010, which amended the
RFA, the Commission is required to
respond to any comments filed by the
Chief Counsel of the Small Business
Administration (SBA), and to provide a
detailed statement of any change made
to the proposed rule(s) as a result of
those comments.
173. The Chief Counsel did not file
any comments in response to the
proposed rules in this proceeding.
D. Description and Estimate of the
Number of Small Entities To Which the
Proposed Rules Will Apply
174. The RFA directs agencies to
provide a description of, and where
feasible, an estimate of the number of
small entities that may be affected by
the rules adopted herein. The RFA
generally defines the term ‘‘small
entity’’ as having the same meaning as
the terms ‘‘small business,’’ ‘‘small
organization,’’ and ‘‘small governmental
jurisdiction.’’ In addition, the term
‘‘small business’’ has the same meaning
as the term ‘‘small-business concern’’
under the Small Business Act. A ‘‘smallbusiness concern’’ is one which: (1) Is
independently owned and operated; (2)
is not dominant in its field of operation;
and (3) satisfies any additional criteria
established by the SBA.
175. Small Entities, Small
Organizations, Small Governmental
Jurisdictions. The Commission’s actions,
over time, may affect small entities that
are not easily categorized at present.
The Commission therefore describes
here, at the outset, three comprehensive
small entity size standards that could be
directly affected herein. As of 2014,
according to the SBA, there were 28.2
million small businesses in the U.S.,
which represented 99.7% of all
businesses in the United States.
Additionally, a ‘‘small organization’’ is
generally ‘‘any not-for-profit enterprise
which is independently owned and
operated and is not dominant in its
field.’’ Nationwide, as of 2007, there
were approximately 1,621,215 small
organizations. Finally, the term ‘‘small
governmental jurisdiction’’ is defined
generally as ‘‘governments of cities,
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15443
towns, townships, villages, school
districts, or special districts, with a
population of less than fifty thousand.’’
Census Bureau data for 2012 indicate
that there were 89,476 local
governmental jurisdictions in the
United States. The Commission
estimates that, of this total, as many as
88,761 entities may qualify as ‘‘small
governmental jurisdictions.’’ Thus, the
Commission estimates that most
governmental jurisdictions are small.
176. Wireless Telecommunications
Carriers (except Satellite). This industry
comprises establishments engaged in
operating and maintaining switching
and transmission facilities to provide
communications via the airwaves.
Establishments in this industry have
spectrum licenses and provide services
using that spectrum, such as cellular
services, paging services, wireless
internet access, and wireless video
services. The appropriate size standard
under SBA rules is that such a business
is small if it has 1,500 or fewer
employees. For this industry, census
data for 2012 show that there were 967
firms that operated for the entire year.
Of this total, 955 firms had employment
of 999 or fewer employees and 12 had
employment of 1000 employees or
more. Thus under this category and the
associated size standard, the
Commission estimates that the majority
of wireless telecommunications carriers
(except satellite) are small entities.
Similarly, according to internally
developed Commission data, 413
carriers reported that they were engaged
in the provision of wireless telephony,
including cellular service, Personal
Communications Service, and
Specialized Mobile Radio Telephony
services. Of this total, an estimated 261
have 1,500 or fewer employees, and 152
have more than 1,500 employees. Thus,
using available data, the Commission
estimates that the majority of wireless
firms can be considered small.
177. Internet Service Providers. Since
2007, these services have been defined
within the broad economic census
category of Wired Telecommunications
Carriers; that category is defined as
follows: ‘‘This industry comprises
establishments primarily engaged in
operating and/or providing access to
transmission facilities and infrastructure
that they own and/or lease for the
transmission of voice, data, text, sound,
and video using wired
telecommunications networks.
Transmission facilities may be based on
a single technology or a combination of
technologies.’’ The SBA has developed
a small business size standard for Wired
Telecommunications Carriers, which
consists of all such firms having 1,500
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percent of the required download speed
measurements being not less than a
certain threshold speed. For latency, at
least 90 percent of the required
measurements must have a data latency
of 100 milliseconds or less round trip.
For data allowances, support recipients
must offer at least one service plan that
includes a data allowance comparable to
mid-level service plans offered by
nationwide providers—currently at least
2 GB of data per month—and that is at
a rate that is within a reasonable range
of rates for similar service plans offered
by mobile wireless providers in urban
areas. These conditions will be defined
more precisely in the pre-auction
process.
180. MF–II support recipients will be
given a ten-year term of support with no
renewal expectancy, which will begin
on the first day of the month after the
MF–II auction concludes. The
Commission adopts interim benchmarks
as well as a final benchmark for
deployment of service that meets the
performance metrics. The starting point
for the interim benchmarks is defined as
six months from the first day of the
E. Description of Projected Reporting,
month that follows the month in which
Recordkeeping, and Other Compliance
the MF–II auction closes. The
Requirements
Commission requires a winning bidder
178. In the MF–II Order, the
to demonstrate coverage of at least 40
Commission adopts the framework for
percent by three years after the starting
moving forward with MF–II and Tribal
point, 60 percent by four years after the
MF–II, which will allocate up to $4.53
starting point, 80 percent by five years
billion over the next decade to advance
after the starting point, and 85 percent
the deployment of 4G LTE service to
by six years after the starting point
areas that are so costly that the private
across all areas for which they receive
sector has not yet deployed there and to MF–II support in a state. Support
preserve such service where it might not recipients must meet their required
otherwise exist. The funding for this
benchmarks across all areas for which
effort will come from the redirection of
they receive MF–II support in a state.
legacy subsidies and distributed using a However, for the final benchmark, every
market-based, multi-round reverse
census block group or census tract in a
auction and will come with defined,
state (depending on minimum bidding
concrete compliance requirements so
unit) must also be at least 75 percent
that rural consumers will be adequately covered. Recipients that fail to meet and
served by the mobile carriers receiving
maintain the performance obligations
universal service support. The
within the time provided to submit their
recordkeeping and other obligations of
representative data and to certify to
MF–II established in the MF–II Order are coverage requirements will be subject to
summarized in this FRFA. Additional
defined measures, and must cure these
information on each of these
failures to meet the deployment
requirements can be found in the MF–
requirements or they will be in
II Order.
performance default.
179. Recipients of MF–II support will
181. Entities that are interested in
be required to deploy 4G LTE and to
participating in the MF–II auction will
offer voice service. Recipients of MF–II
be required to file a short-form
funding will be required to meet
application in order to establish their
minimum baseline performance
eligibility to participate. Each auction
requirements for data speeds, data
applicant will be required to provide
latency, and data allowances in areas
information to establish its identity,
that receive support for at least one plan including disclosure of parties with
that they offer. Specifically, the median
ownership interests, consistent with the
data speed of the network for the
ownership interest disclosure required
in 47 CFR part 1 for applicants for
supported area must be 10 Mbps
spectrum licenses, as well as any
download speed or greater and 1 Mbps
upload speed or greater, with at least 90 agreements the applicant may have
sradovich on DSK3GMQ082PROD with RULES2
or fewer employees. Census Bureau data
for 2012 shows that there were 3,117
firms that operated for the entire year.
Of this total, 3,083 firms had
employment of 999 or fewer employees,
and 34 firms had employment of 1,000
employees or more. Thus, under this
size standard, the majority of firms in
this industry can be considered small.
In addition, while Internet Service
Providers (broadband) are a subcategory
of the broader category of Wired
Telecommunications Carrier, there is
Census Bureau data specific to Internet
Service Providers (broadband). For
2012, Census Bureau data shows there
were a total of 1,180 firms in the
subcategory of Internet Service
Providers (broadband) that operated for
the entire year. Of this total, 1,178 firms
had employment of 999 or fewer
employees, and two firms had
employment of 1000 employees or
more. Consequently, the Commission
estimates that the majority of these firms
are small entities that may be affected
by rules adopted pursuant to the MF–II
Order.
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relating to the support to be sought
through the auction. Each applicant will
also be required to disclose and certify
its ETC status, although an applicant
will not be required to obtain an ETC
designation prior to bidding in MF–II.
Applicants will be required to disclose
and certify the source of the spectrum
they plan to use to meet Mobility Fund
obligations in the particular area(s) for
which they plan to bid. Specifically,
applicants will be required to disclose
whether they currently hold a license or
lease the spectrum, including any
necessary renewal expectancy, and
whether such spectrum access is
contingent on obtaining support in an
MF–II auction. Applicants must have
secured any Commission approvals
necessary for the required spectrum
access prior to submitting an auction
application. Moreover, applicants will
be required to certify that they will
retain their access to the spectrum for at
least ten years from the date support is
authorized. The short-form application
may also include additional
certifications or requirements that are
adopted in a public notice.
182. Within a specified number of
days of the release of a public notice
identifying an entity as a winning
bidder, that winning bidder will be
required to file a long-form application.
In this long-form application, an
applicant for MF–II support will be
required to fully disclose its ownership
structure as well as information
regarding the real party- or parties-ininterest of the applicant or application.
An applicant will also be required to
submit with its long-form application
appropriate documentation of its ETC
designation, including the original
designation order and any relevant
modifications or name-change orders, in
all the areas for which it will receive
support or certify that it will do so
within 180 days of the public notice
identifying winning bidders. An
applicant will be required to certify that
it is financially and technically capable
of providing the required coverage and
performance levels within the specified
timeframe in the geographic areas in
which it won support.
183. For winning bids, the applicant
must submit a project description that
describes the network to be built or
upgraded; identifies the proposed
technology; demonstrates that the
project is technically feasible; discloses
the complete project budget; and
discusses each specific phase of the
project (e.g., network design,
construction, deployment, and
maintenance). A complete project
schedule, including timelines,
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milestones, and costs, must also be
provided.
184. In addition, each applicant must
provide in its long-form application a
description of the spectrum access that
it will use to meet its obligations in
areas for which it is the winning bidder,
including whether it currently holds a
license or leases the spectrum, along
with any necessary renewal expectancy,
and certify that the description is
accurate and that the applicant will
retain such access for the entire ten-year
support term. Each applicant must
certify in its long-form application that
it has the funds available for all project
costs that exceed the amount of support
to be received, and that it will comply
with all program requirements, which
include the public interest obligations
contained in the Commission’s rules.
Each applicant must also certify that it
will offer service in supported areas at
rates that are within a reasonable range
of rates for similar service plans offered
by mobile wireless providers in urban
areas during the term of support the
applicant seeks.
185. Applicants must certify that they
will meet the applicable deadlines and
requirements for demonstrating interim
and final performance benchmarks set
forth in the rules, and that they will
comply with the MF–II collocation,
voice and data roaming, and reasonably
comparable rate obligations. The longform application may also include
additional certifications or requirements
that are adopted in a public notice.
186. Prior to the authorization of
support, all winning bidders must
provide the Commission with an
irrevocable standby letter of credit
(LOC) by a bank that is acceptable to the
Commission in substantially the same
form as the model Letter of Credit set
forth in an appendix to the MF–II Order.
The initial value of the LOC must be set
to at least the amount of authorized MF–
II support for the first year. Before the
winning bidder can receive its next
year’s MF–II support, it must modify,
renew, or obtain a new LOC to ensure
that it is valued at a minimum at the
total amount of money that has already
been disbursed plus the amount of
money that is going to be provided in
the next year. The LOC must be
maintained for 100 percent of the total
support amount disbursed plus the
amount to be disbursed in the next year
until the Universal Service
Administrative Company (USAC), in
coordination with the Commission, has
determined that the recipient has met its
interim benchmark for deployment to 60
percent of the required coverage area;
and subject to USAC’s consent, the
amount of the LOC may decrease to an
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amount equal to 90 percent of the total
support amount already disbursed plus
the amount that will be disbursed in the
coming year. Once USAC, in
coordination with the Commission, has
determined that the recipient has met its
interim benchmark for deployment to 80
percent of the required coverage area;
and subject to USAC’s consent, the
amount of the LOC may decrease to an
amount equal to 80 percent of the total
support amount already disbursed plus
the amount that will be disbursed in the
coming year. After USAC, in
coordination with the Commission, has
determined that the recipient has met its
final benchmark for deployment to a
minimum of 85 percent of the required
coverage area by state and at least 75
percent by each census block group or
census tract in a state included in the
LOC, the recipient may relinquish its
LOC. Each winning bidder will be
allowed to provide a single LOC
covering all its winning bids within a
single state.
187. At the time a winning bidder in
MF–II submits its LOC, it also will be
required to provide an opinion letter
from legal counsel clearly stating,
subject only to customary assumptions,
limitations and qualifications, that in a
proceeding under the Bankruptcy Code,
the bankruptcy court would not treat the
LOC or proceeds of the LOC as property
of the winning bidder’s bankruptcy
estate, or the bankruptcy estate of any
other bidder-related entity requesting
issuance of the LOC, under 11 U.S.C.
541. If the winning bidder is not
prepared to present its LOC at the time
of the long-form application filing, it
may submit a commitment letter from
the bank issuing the LOC in the longform application filing.
188. An entity will be considered to
have an auction default and will be
subject to a forfeiture payment if it fails
to timely file a long-form application or
meet the document submission
deadlines, or is found ineligible or
unqualified to receive MF–II support, or
otherwise defaults on its bid or is
disqualified for any reason prior to the
authorization of support. All bidders
will be subject to the same $3,000 base
forfeiture per violation, subject to
adjustment based on the criteria set
forth in the Commission’s forfeiture
guidelines. A violation is defined as any
form of default with respect to each
geographic unit subject to a bid.
However, the total base forfeiture that
could be owed by a winning bidder is
limited to five percent of its total bid
amount for the entire ten-year support
term.
189. The Wireline Competition
Bureau or the Wireless
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15445
Telecommunications Bureau will
authorize USAC to draw on the LOC(s)
to recover all the support that has been
disbursed in a state in the event that the
MF–II recipient does not meet the
relevant service milestones and does not
cure its compliance gap. USAC will
recover support from ETCs associated
with their compliance gap in three
separate circumstances. First, for
interim milestones, if the ETC has a
compliance gap of 50 percent or more of
the eligible square miles that the ETC is
required to have covered by the relevant
interim milestone (i.e., Tier 4 status) at
the state level, USAC will withhold 50
percent of the ETC’s monthly support
for that state, and the ETC will be
required to file quarterly reports. If, after
having 50 percent of support withheld
for six months, the ETC has not reported
that it has a compliance gap of less than
50 percent at the state level (i.e., the
ETC is eligible for Tier 3 or lower or is
in compliance), USAC will withhold
100 percent of the ETC’s support for the
state and will commence recovery
action for a percentage of support that
is equal to the ETC’s compliance gap
plus 10 percent of the ETC’s support
that has been paid to that point. At this
point, this ETC will have six months to
pay back the amount of support that
USAC seeks to recover. If, at any point
during the six-year period for
deployment the ETC reports that it is
eligible for Tier 1 status, and USAC is
able to substantiate that report, the ETC
will have its support fully restored
including any support that had been
withheld, USAC will repay any funds
that were recovered, and the ETC will
move to Tier 1 status. If, at the end of
six months the ETC has not fully paid
back the support, the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter to that effect and USAC will
draw on the letter of credit to recover all
the support that has been disbursed to
the ETC.
190. Second, if an ETC misses the
final milestone(s), it must identify by
what percentage the milestone has been
missed at the state level and/or any of
the census block group(s) or census
tract(s) in the state. The ETC will then
have 12 months from that date to come
into full compliance with both of those
milestones. If it does not come into full
compliance within 12 months because it
fails to meet the 85 percent benchmark
(even if it meets the 75 percent
benchmark for some or all the census
block group(s) or census tract(s)), the
Wireline Competition Bureau or the
Wireless Telecommunications Bureau
will issue a letter, and USAC will
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recover disbursement(s) in an amount of
support that is equal to 1.89 multiplied
by the average amount of support the
ETC received per eligible square mile in
the state over the six-year period
multiplied by the number of square
miles unserved in the ETC’s winning
areas in the state that would be required
to meet the 85 percent benchmark, plus
10 percent of the ETC’s total MF–II
support received in the state over the
six-year period for deployment. After
the ETC has paid the calculated
recovery amount for failure to comply
with the final deployment milestone,
the Bureaus will calculate a reduced
support payment for the remaining
support term based on the percentage of
deployment coverage completed. If, at
the end of six months the ETC has not
fully paid back the support for missing
the relevant 85 percent benchmark, the
ETC shall be liable for repayment of all
the support that has been disbursed to
the ETC for that state, the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter to that effect, and USAC will
draw on the LOC(s) to recover all the
support that has been disbursed to the
ETC for that state. A similar approach
will apply if the ETC meets the 85
percent statewide benchmark but misses
the 75 percent benchmark(s) for any
census block group(s) or census tract(s)
in the state at the final milestone and
the ETC does not come into full
compliance by meeting the 75 percent
benchmark within 12 months. At this
point, the ETC will have six months to
repay the support USAC seeks to
recover. After the ETC has paid the
calculated recovery amount, the
Bureaus will calculate a reduced
support payment for the remaining
support term. If, at the end of six
months the ETC has not fully paid back
the support for missing the relevant 75
percent benchmark(s), the ETC shall be
liable for repayment of all the support
that has been disbursed to the ETC for
that state, the Wireline Competition
Bureau or the Wireless
Telecommunications Bureau will issue
a letter to that effect, and USAC will
draw on the LOC(s) to recover all the
support that has been disbursed to the
ETC for that state. In the event that
USAC draws on a letter of credit to
recover all the support that has been
disbursed to the ETC for a state, the
ETC’s participation in MF–II in that
state will immediately end and no
further support will be paid.
191. Third, after compliance with the
final build-out milestones has been
verified and the ETC closes its letter of
credit, if at any point during the
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remainder of the 10-year term of support
it is determined that the ETC does not
have sufficient evidence to demonstrate
that it is offering the requisite service to
the required percentage of square miles
by census block group or census tract,
or state, USAC will withhold support
for a period not to exceed six months
until the ETC demonstrates that it is
again providing the requisite service to
the required percentage of square miles.
When the ETC’s demonstration of
coverage has been verified by USAC,
USAC will pay any withheld support
and resume ongoing disbursements. If
the ETC cannot provide a verifiable
demonstration of coverage within the
permitted six-month period, USAC will
recover an amount of support that is
equal to 1.89 times the average amount
of support per square mile received in
the winning bid area over the six-year
deployment period for the relevant
number of square miles for which the
ETC has failed to produce sufficient
evidence, plus 10 percent of the ETC’s
total support received in that winning
bid over the six-year deployment time
period and will reduce ongoing annual
support. If the ETC does not repay the
Commission after a six-month period
permitted for repayment, it may be
subject to additional non-compliance
measures, including the reduction of
support payments for the remaining
support term and forfeitures. MF–II
recipients may also be subject to other
sanctions for non-compliance with the
terms and conditions of high-cost
funding, including, but not limited to
potential revocation of ETC designation
and suspension or debarment.
192. Once an MF–II recipient has
been authorized to begin receiving
support, it will be required to report
certain information so that the
Commission and USAC can track the
progress of MF–II recipients and
monitor their use of the public’s funds
before and after they meet service
milestones. All MF–II recipients will be
required to file annual reports.
Recipients will be required to file their
reports each year following the year in
which the auction closes by July 1,
including all the certifications required
under the MF–II rules, and in which the
recipient will update information, as
required for the following year.
193. MF–II recipients will be required
to file a Milestone Report on or before
its third, fourth, fifth, and sixth year
performance deadline. The Bureaus will
define more precisely the content and
format of the information, including
substantiation that recipients are
required to include in their Milestone
Reports, such that it is consistent with
the evidence that will be required from
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challenging parties in the challenge
process. Reports should be filed via the
portal that USAC is creating to receive
filings by universal service support
recipients.
194. Support will be reduced for
recipients that miss reporting,
certification, and milestone filing
deadlines. A minimum reduction of
support of seven days of total statewide
support for a winning bid in any state
for which a filing deadline is missed
will be imposed. In addition to the
reduction of the initial seven days of
support, support will be reduced further
state-wide on a pro-rata daily basis until
the MF–II recipient files the required
report or certification. For a late filer, a
one-time grace period of three days will
be provided so that a recipient that
quickly rectifies its error within three
days of the deadline will not be subject
to the seven-day minimum loss of
support. USAC will send a letter to such
a recipient notifying it that its filing was
late but cured within the grace period.
If the recipient again files any filing late,
the grace period will not be available.
195. Each recipient will be required to
maintain the accuracy and completeness
of the information it furnishes in its
long-form application and its annual
and milestone reports. Recipients must
update their annual reports and
milestone reports to provide
information about any substantial
change that may be of decisional
significance regarding their eligibility
for MF–II support and compliance with
MF–II requirements. Such notification
of a substantial change, including any
reduction in the percentage of eligible
square miles being served or any failure
to comply with any of the MF–II
requirements, must be submitted within
10 business days after the reportable
event occurs. If a support recipient
drops below the level of service to
which it has certified in a milestone
report or an annual report during the
six-year deployment period, it will be
subject to the Commission rules for noncompliance.
F. Steps Taken To Minimize Significant
Economic Impact on Small Entities, and
Significant Alternatives Considered
196. The RFA requires an agency to
describe any significant alternatives that
it has considered in reaching its
approach, which may include the
following four alternatives, among
others: ‘‘(1) the establishment of
differing compliance or reporting
requirements or timetables that take into
account the resources available to small
entities; (2) the clarification,
consolidation, or simplification of
compliance or reporting requirements
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under the rule for small entities; (3) the
use of performance, rather than design,
standards; and (4) an exemption from
coverage of the rule, or any part thereof,
for small entities.’’
197. The Commission has considered
the economic impact on small entities
in reaching its final conclusions and
taking action in this proceeding. The
rules adopted in the MF–II Order will
provide greater certainty and flexibility
for all carriers, including small entities.
For example, the Commission concludes
that the minimum geographic area for
bidding should be census block groups
or census tracts containing one or more
census blocks with eligible areas for
bidding and support for MF–II. The
Commission found that adopting a
smaller geographic area would allow it
to target support more efficiently to
specific areas and provide bidders,
including small entities, the ability to
tailor their bids to their business plans.
The Commission expects that the
auction design will similarly account for
the needs of small entities.
198. To determine coverage levels in
individual census blocks and whether
MF–II support is being awarded, the
Commission has decided to rely on
Form 477 and high-cost disbursement
data available from USAC. Not only is
this information the most reliable data
currently available for the purpose of
determining the coverage levels of
existing mobile services, but it can also
provide sufficiently granular
information to identify those areas of
the country that lack 4G LTE service or
where such service is only provided by
a subsidized provider. Moreover, the
Commission will utilize a streamlined
challenge process to provide interested
parties, including small entities, with an
opportunity to challenge the coverage
analysis and improve its accuracy. The
Bureaus will make an initial
determination of eligible areas by
census block as part of the pre-auction
process. Subsequently, the Bureaus will
implement a process consistent with the
decisions the Commission will make
after review of the record received in
response to the Further Notice of
Proposed Rulemaking included with the
MF–II Order. The Commission
anticipates that this challenge process
will be more streamlined for all parties,
including small entities, as it will be
based on Form 477 data, which use a
uniform filing format.
199. The Commission amends its
rules for the phase-down of identical
support to account for the relative costs
of deploying a coverage-based network
given the differing terrain throughout
the United States. Wireless providers,
including smaller providers, incur
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additional costs to deploy service in
more difficult terrain. Accordingly, the
Bureaus will apply a more-refined
methodology that uses a terrain factor as
a proxy for determining higher cost
areas. In census blocks determined (after
the completion of the challenge process)
not to be eligible for MF–II support,
legacy support will be phased down
starting the first day of the month
following release of a public notice
announcing the close of the MF–II
auction. On that same date, legacy
support for current recipients in eligible
census blocks shall either be converted
to MF–II support (for the winning
bidder), maintained (for one CETC in
areas without a winning bidder), or
subject to phase down (for all other
CETCs). More specifically, in census
blocks determined (after the completion
of the challenge process) not to be
eligible for MF–II, legacy support will
be phased down starting the first day of
the month following the close of the
MF–II auction. For the first 12 months
thereafter, phase-down support shall be
2⁄3 of the legacy support for each CETC
associated with that area. For the next
12 months, phase-down support shall be
1⁄3 of the legacy support for each CETC
associated with that area. All legacy
support shall end thereafter. For a
winning bidder that is a CETC receiving
legacy support in the area of its bid,
MF–II support shall commence on the
first day of the month after the auction
concludes. To ensure a smooth
transition to MF–II support, and to the
extent the Commission authorizes a
winning bidder to receive MF–II
support after that date, a winning bidder
will receive support payments at the
current legacy support level until such
Commission action. A non-CETC
winning bidder will receive MF–II
support once the Commission issues a
public notice authorizing MF–II support
to the bidder. In eligible areas where
there is no winning bidder in MF–II, the
CETC receiving the minimum level of
sustainable support will continue to
receive such support until further
Commission action, but for no more
than five years from the first day of the
month following the close of the MF–II
auction. For CETCs receiving support in
areas eligible for MF–II that do not
either win MF–II support or receive the
minimum level of sustainable support,
the phase-down of support shall
commence on the first day of the month
after the auction concludes. For the first
12 months, phase-down support shall be
2⁄3 of the legacy support for each CETC
associated with that area. For the next
12 months thereafter, phase-down
support shall be 1⁄3 of the legacy support
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for each CETC associated with that area.
All legacy support shall end thereafter.
The Commission concludes that this
two-year phase-down schedule will
ensure that affected CETCs, including
smaller providers, will have a smooth
transition in areas that are too costly to
serve absent universal service subsidies.
200. The Commission has taken a
number of steps to ensure that small
entities have the opportunity to
participate in the MF–II auction. For
example, the Commission adopts more
flexible eligibility requirements by
permitting a winning bidder in the MF–
II auction to obtain its ETC designation
after the close of the auction, provided
that it submits proof of its ETC
designation within 180 days of the
public notice identifying winning
bidders. The Commission found that the
benefits of encouraging greater
participation in the competitive bidding
process by all interested parties,
including small entities, outweigh the
possible risk that a winning bidder will
not meet the necessary requirements to
be designated as an ETC. The
Commission also recognized that some
qualified bidders, including small
entities, may be hesitant to invest
resources to apply for an ETC
designation prior to the competitive
bidding process without any sense of
whether they are likely to be awarded
MF–II support.
201. While the Commission requested
comment on whether to adopt a bidding
credit preference for Tribally-ownedand-controlled entities, it finds that
such a bidding credit preference is
unnecessary for the MF–II auction.
Setting aside funds specifically to serve
Tribal lands is likely to accomplish the
Commission’s goal of ensuring greater
coverage on Tribal lands. The
Commission also finds that layering an
additional bidding credit for Tribal
carriers on top of the funding
exclusively available for service to
Tribal lands could deter other entities
from bidding to serve Tribal lands,
reducing both the competitiveness of
the auction and the potential reach of
the Commission’s finite funds for MF–
II. Furthermore, commenters fail to
demonstrate that the benefits of a
bidding credit preference outweigh the
costs of potentially depriving other
eligible areas of MF–II support.
202. The Commission requested
comment on the adoption of a small
business bidding preference and the
small business definition that should
apply if it adopts such a bidding
preference for MF–II. The Commission,
however, declines to adopt a bidding
preference for small businesses for MF–
II. It agrees with commenters that
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oppose a bidding preference for small
businesses, concluding that such credits
are unnecessary for an MF–II auction
and would not further the objective of
MF–II of encouraging the efficient use of
universal support funds because a
bidding credit for small businesses
could potentially reduce the reach of the
Commission’s finite funds.
203. The Commission adopts
requirements for the short-form and
long-form applications that will
maximize the number and types of
entities that can participate. For
example, it adopts a two-stage
application process for an applicant
seeking to participate in the MF–II
auction under which interested parties
will submit a pre-auction ‘‘short-form’’
application, providing basic information
and certifications regarding their
eligibility to receive support, and then
a long-form application, fully disclosing
its ownership structure, information and
certifications regarding applicant
eligibility, and plans to meet
performance requirements. This process
is similar to that used in spectrum
license auctions and for Mobility Fund
Phase I. Since the Commission
anticipates that many interested parties,
including small entities, will already be
familiar with these requirements, it
expects that the application procedures
will minimize burdens on applicants
and encourage a wide variety of parties
to participate.
204. In light of concerns expressed by
commenters, including small entities,
the Commission adopts more flexible
provisions for MF–II LOCs to help ease
the administrative burden for support
recipients. For example, the
Commission adopts LOC provisions that
closely align with the CAF–II LOC
process and the MF–II performance
requirements, allowing the LOC to
decrease over time as a support
recipient satisfies its minimum coverage
and service requirements. The
Commission also allows winning
bidders to provide a single LOC
covering all its winning bids within a
single state, reducing the number of
LOCs that a winning bidder may need.
Moreover, the Commission amends and
expands the definition of an ‘‘acceptable
bank’’ for the purposes of MF–II LOC
requirements, which will lower barriers
for entities, particularly small and rural
businesses that might otherwise face
obstacles in obtaining an LOC from a
smaller pool of banks. The Commission
also allows the submission of a
commitment letter from the bank
issuing the LOC in the long-form
application filing, if the winning bidder
is not prepared to present its LOC at the
time of the long-form application filing.
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206, 214, 218–220, 251, 252, 254, 256,
303(r), 332, 403, 405, 503, 1302, and
sections 1.1, 1.427, and 1.429 of the
Commission’s rules, 47 CFR 1.1, 1.427,
and 1.429, that the MF–II Order is
adopted. It is the Commission’s
intention in adopting these rules that if
any of the rules that it retains, modifies,
or adopts, or the application thereof to
any person or circumstance, are held to
be unlawful, the remaining portions of
the rules not deemed unlawful, and the
application of such rules to other
persons or circumstances, shall remain
in effect to the fullest extent permitted
by law.
209. It is further ordered that Parts 1
and 54 of the Commission’s rules, 47
CFR 1 and 54, are amended as set forth
in Appendix A of the MF–II Order, and
such rule amendments shall be effective
thirty (30) days after publication in the
Federal Register, except to the extent
they contain new or modified
information collection requirements that
require approval by the Office of
Management and Budget under the
Paperwork Reduction Act. The rules
that contain new and modified
information collection requirement
subject to PRA review shall become
effective after the Commission publishes
a notice in the Federal Register
announcing such approval and the
relevant effective date.
210. It is further ordered that the
Petition for Declaratory Ruling filed by
United States Cellular Corporation on
March 21, 2014 is denied.
211. It is further ordered that the
Commission shall send a copy of the
MF–II Order to Congress and the
Government Accountability Office
pursuant to the Congressional Review
Act, see 5 U.S.C. 801(a)(1)(A).
G. Report to Congress
212. It is further ordered, that the
207. The Commission will send a
Commission’s Consumer and
copy of the MF–II Order, including the
Governmental Affairs Bureau, Reference
FRFA, in a report to be sent to Congress
Information Center, shall send a copy of
and the Government Accountability
the MF–II Order, including the Final
Office pursuant to the Congressional
Regulatory Flexibility Analysis, to the
Review Act. In addition, the
Chief Counsel for Advocacy of the Small
Commission will send a copy of the MF–
Business Administration.
II Order, including the FRFA, to the
Chief Counsel for Advocacy of the Small List of Subjects
Business Administration.
47 CFR Part 1
XI. Ordering Clauses
Administrative practice and
208. Accordingly, it is ordered,
procedures, Reporting and
pursuant to the authority contained in
recordkeeping requirements,
sections 1, 2, 4(i), 5, 10, 201–206, 214,
218–220, 251, 252, 254, 256, 303(r), 332, Telecommunications.
403, 405, and 503 of the
47 CFR Part 54
Communications Act of 1934, as
Communications common carriers,
amended, and section 706 of the
Internet, Reporting and recordkeeping
Telecommunications Act of 1996, 47
requirements, Telecommunications.
U.S.C. 151, 152, 154(i), 155, 160, 201–
205. Similarly, the Commission
adopts more flexible measures for noncompliance that will better enable
support recipients, including small
entities, to meet the MF–II goals of
preserving and expanding service. For
example, the Commission adopts a more
measured approach to recouping
payment in the event of default than the
Commission employed in the MF–I
auction. The Commission also limits
when USAC will be permitted to
recover support from ETCs associated
with their compliance gap and conclude
that only if the ETC fails to repay in full
after six months, USAC will be
authorized to draw on the letter of credit
to recover 100 percent of the support
that has been disbursed to the ETC
within the state.
206. The Commission notes that the
reporting requirements it adopts are
tailored to ensuring that support is used
for its intended purposes and so that the
Commission and USAC can monitor the
ongoing progress and performance of all
MF–II recipients. The Commission finds
the benefits in establishing annual and
milestone reporting obligations
outweigh any potential burdens on the
recipients in filing these reports because
the targeted information required will
be the type of data that MF–II recipients
will be already collecting for their own
business purposes and will help to
ensure that program goals are met.
Nevertheless, to help minimize the
burden of reporting requirements,
including the burden on small
businesses, the Commission has
adopted annual and milestone reporting
requirements that are consistent with
the reporting requirements for MF–I and
CAF–II support recipients, including
grace periods for missed filing
deadlines.
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Federal Register / Vol. 82, No. 58 / Tuesday, March 28, 2017 / Rules and Regulations
Federal Communications Commission.
Katura Howard,
Federal Register Liaison Officer. Office of the
Secretary.
Final Rules
For the reasons discussed in the
preamble, the Federal Communications
Commission amends 47 CFR parts 1 and
54 as follows:
PART 1—PRACTICE AND
PROCEDURE
1. The authority citation for part 1
continues to read as follows:
■
Authority: 15 U.S.C. 79, et seq.; 47 U.S.C.
151, 154(i), 154(j), 155, 157, 160, 201, 225,
227, 303, 309, 310, 332, 1403, 1404, 1451,
1452, and 1455.
2. In § 1.21003, redesignate
paragraphs (c) and (d) as paragraphs (d)
and (e), remove paragraph (b), and add
new paragraphs (b) and (c) to read as
follows:
■
§ 1.21003
Competitive bidding process.
sradovich on DSK3GMQ082PROD with RULES2
*
*
*
*
*
(b) Competitive Bidding Procedures—
Design Options. The public notice
detailing competitive bidding
procedures may establish the design of
the competitive bidding utilizing any of
the following options, without
limitation:
(1) Procedures for Collecting Bids. (i)
Procedures for collecting bids in a single
round or in multiple rounds.
(ii) Procedures for collecting bids on
an item-by-item basis, or using various
aggregation specifications.
(iii) Procedures for collecting bids that
specify contingencies linking bids on
the same item and/or for multiple items.
(iv) Procedures allowing for bids that
specify a support level, indicate demand
at a specified support level, or provide
other information as specified by the
Commission.
(v) Procedures to collect bids in one
or more stage or stages, including for
transitions between stages.
(2) Procedures for Assigning Winning
Bids. (i) Procedures for scoring bids by
factors in addition to bid amount, such
as population coverage or geographic
contour, or other relevant measurable
factors.
(ii) Procedures to incorporate public
interest considerations into the process
for assigning winning bids.
(3) Procedures for Determining
Payments. (i) Procedures to determine
the amount of any support for which
winning bidders may become
authorized, consistent with other
auction design choices.
(ii) Procedures that provide for
support amounts based on the amount
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as bid or on other pricing rules, either
uniform or discriminatory.
(c) Competitive Bidding Procedures—
Mechanisms. The public notice
detailing competitive bidding
procedures may establish any of the
following mechanisms, without
limitation:
(1) Limits on Available Information.
Procedures establishing limits on the
public availability of information
regarding applicants, applications, and
bids during a period of time covering
the competitive bidding process, as well
as procedures for parties to report the
receipt of non-public information
during such periods.
(2) Sequencing. Procedures
establishing one or more groups of
eligible areas and if more than one, the
sequence of groups for which bids will
be accepted.
(3) Reserve Price. Procedures
establishing reserve prices, either
disclosed or undisclosed, above which
bids would not win in the auction. The
reserve prices may apply individually,
in combination, or in the aggregate.
(4) Timing and Method of Placing
Bids. Procedures establishing methods
and times for submission of bids,
whether remotely, by telephonic or
electronic transmission, or in person.
(5) Opening Bids and Bid Increments.
Procedures establishing maximum or
minimum opening bids and, by
announcement before or during the
auction, maximum or minimum bid
increments in dollar or percentage
terms.
(6) Withdrawals. Procedures by which
bidders may withdraw bids, if
withdrawals are allowed.
(7) Stopping Procedures. Procedures
regarding when bidding will stop for a
round, a stage, or an entire auction, in
order to terminate the auction within a
reasonable time and in accordance with
public interest considerations and the
goals, statutory requirements, rules, and
procedures for the auction, including
any reserve price or prices.
(8) Activity Rules. Procedures for
activity rules that require a minimum
amount of bidding activity.
(9) Auction Delay, Suspension, or
Cancellation. Procedures for
announcing by public notice or by
announcement during the reverse
auction, delay, suspension, or
cancellation of the auction in the event
of a natural disaster, technical obstacle,
network disruption, evidence of an
auction security breach or unlawful
bidding activity, administrative or
weather necessity, or for any other
reason that affects the fair and efficient
conduct of the competitive bidding, and
procedures for resuming the competitive
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bidding starting from the beginning of
the current or some previous round or
cancelling the competitive bidding in its
entirety.
*
*
*
*
*
PART 54—UNIVERSAL SERVICE
3. The authority citation for part 54
continues to read as follows:
■
Authority: 47 U.S.C. 151, 154(i), 155, 201,
205, 214, 219, 220, 254, 303(r), 403, and 1302
unless otherwise noted.
4. In § 54.307, revise paragraph (e)(5)
and remove and reserve paragraph
(e)(6).
The revision reads as follows:
■
§ 54.307 Support to a competitive eligible
telecommunications carrier.
*
*
*
*
*
(e) * * *
(5) Eligibility for Support after
Mobility Fund Phase II Auction. (i) A
mobile competitive eligible
telecommunications carrier that receives
monthly baseline support pursuant to
this section and is a winning bidder in
the Mobility Fund Phase II auction shall
receive support at the same level as
described in paragraph (e)(2)(iii) of this
section for such area until the Wireless
Telecommunications and Wireline
Competition Bureaus determine
whether to authorize the carrier to
receive Mobility Fund Phase II support.
(A) Upon the Wireless
Telecommunications and Wireline
Competition Bureaus’ release of a public
notice approving a mobile competitive
eligible telecommunications carrier’s
application submitted pursuant to
§ 54.104(b) and authorizing the carrier
to receive Mobility Fund Phase II
support, the carrier shall no longer
receive support at the level of monthly
baseline support pursuant to this
section for such area. Thereafter, the
carrier shall receive monthly support in
the amount of its Mobility Fund Phase
II winning bid, provided that USAC
shall adjust the amount of the carrier’s
support to the extent necessary to
account for any difference in support
the carrier received during the period
between the close of the Mobility Fund
Phase II auction and the release of the
public notice authorizing the carrier to
receive Mobility Fund Phase II support.
(B) A mobile competitive eligible
telecommunications carrier that is a
winning bidder in the Mobility Fund
Phase II auction but is not authorized to
receive Mobility Fund Phase II support
shall receive monthly support as set
forth in paragraphs (e)(5)(iii) and (iv) of
this section for such area, as applicable,
provided that USAC shall decrease such
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amounts to account for support
payments received prior to the Wireless
Telecommunications and Wireline
Competition Bureaus’ authorization
determination that exceed the amount of
support for such area as set forth in
paragraphs (e)(5)(iii) and (iv), and the
monthly support in the mobile
competitive eligible
telecommunications carrier’s winning
Mobility Fund Phase II, which USAC
shall treat as the carrier’s monthly
baseline support for purposes of
paragraphs (e)(5)(iii) and (iv) to the
extent the carrier’s winning bid is below
that amount.
(ii) A mobile competitive eligible
telecommunications carrier that receives
monthly baseline support pursuant to
this section shall receive the following
monthly support amounts for areas that
are ineligible for Mobility Fund Phase II
support, as determined by the Wireless
Telecommunications and Wireline
Competition Bureaus:
(A) For 12 months starting the first
day of the month following the close of
the Mobility Fund Phase II auction, each
mobile competitive eligible
telecommunications carrier shall receive
two-thirds (2⁄3) of the carrier’s support
pursuant to paragraph (e)(2)(iii) of this
section for the ineligible area.
(B) For 12 months starting the month
following the period described in
paragraph (e)(5)(ii)(A) of this section,
each mobile competitive eligible
telecommunications carrier shall receive
one-third (1⁄3) of the carrier’s support
pursuant to paragraph (e)(2)(iii) of this
section for the ineligible area.
(C) Following the period described in
paragraph (e)(5)(ii)(B) of this section, no
mobile competitive eligible
telecommunications carrier shall receive
monthly baseline support for the
ineligible area pursuant to this section.
(iii) Except as provided in paragraph
(e)(3) of this section, to the extent
Mobility Fund Phase II support is not
awarded at auction for an eligible area,
as determined by the Wireless
Telecommunications and Wireline
Competition Bureaus, the mobile
competitive eligible
telecommunications carrier receiving
the minimum level of sustainable
support for the eligible area shall
continue to receive support at the level
described in paragraph (e)(2)(iii) of this
section until further Commission action,
but such support shall not extend for
more than 60 months from the first day
of the month following the close of the
Mobility Fund Phase II auction. The
‘‘minimum level of sustainable support’’
is the lowest monthly baseline support
received by a mobile competitive
eligible telecommunications carrier that
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deploys the highest technology for the
eligible area.
(iv) All other mobile competitive
eligible telecommunications carriers
shall receive the following monthly
support amounts for areas that are
eligible for Mobility Fund Phase II
support, as determined by the Wireless
Telecommunications and Wireline
Competition Bureaus:
(A) For 12 months starting the first
day of the month following the close of
the Mobility Fund Phase II auction, each
mobile competitive eligible
telecommunications carrier shall receive
two-thirds (2⁄3) of the carrier’s support
pursuant to paragraph (e)(2)(iii) of this
section for the eligible area.
(B) For 12 months starting the month
following the period described in
paragraph (e)(5)(iv)(A) of this section,
each mobile competitive eligible
telecommunications carrier shall receive
one-third (1⁄3) of the carrier’s support
pursuant to paragraph (e)(2)(iii) of this
section for the eligible area.
(C) Following the period described in
paragraph (e)(5)(iv)(B) of this section, no
mobile competitive eligible
telecommunications carrier shall receive
monthly baseline support for the
eligible area pursuant to this section.
(v) Notwithstanding the foregoing
schedule, the phase-down of identical
support below the level described in
paragraph (e)(2)(iii) of this section shall
be subject to the restrictions in
Consolidated Appropriations Act, 2016,
Public Law 114–113, Div. E, Title VI,
section 631, 129 Stat. 2242, 2470 (2015),
unless and until such restrictions are no
longer in effect.
*
*
*
*
*
■ 5. In § 54.313, revise paragraph (k) to
read as follows:
§ 54.313 Annual reporting requirements
for high-cost recipients.
*
*
*
*
*
(k) This section does not apply to
recipients that solely receive support
from Phase I and Phase II of the
Mobility Fund.
*
*
*
*
*
■ 6. Amend subpart L by adding
§§ 54.1011 through 54.1021 to read as
follows:
Subpart L—Mobility Fund
Sec.
*
*
*
*
*
54.1011 Mobility Fund—Phase II.
54.1012 Geographic areas eligible for
support.
54.1013 Provider eligibility.
54.1014 Application process.
54.1015 Public interest obligations.
54.1016 Letter of credit.
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54.1017 Compliance for Mobility Fund
Phase II.
54.1018 Mobility Fund Phase II
disbursements.
54.1019 Annual reports.
54.1020 Milestone reports.
54.1021 Record retention for Mobility Fund
Phase II.
§ 54.1011
Mobility Fund—Phase II.
The Commission will use competitive
bidding, as provided in part 1, subpart
AA of this chapter, to determine the
recipients of support available through
Phase II of the Mobility Fund and the
amount(s) of support that they may
receive for specific geographic areas,
subject to applicable post-auction
procedures.
§ 54.1012
support.
Geographic areas eligible for
(a) Mobility Fund Phase II support
may be made available for eligible
geographic areas as identified by public
notice prior to auction.
(b) Coverage units for purposes of
conducting competitive bidding and
disbursing support based on designated
square miles in a geographic area will be
identified by public notice for each area
eligible for support prior to auction.
§ 54.1013
Provider eligibility.
(a) An applicant shall be an Eligible
Telecommunications Carrier in an area
in order to receive Mobility Fund Phase
II support for that area. An applicant
may obtain its designation as an Eligible
Telecommunications Carrier after the
close of the Mobility Fund Phase II
auction, provided that the applicant
submits proof of its designation within
180 days of the public notice identifying
the applicant as a winning bidder. An
applicant shall not receive Mobility
Fund Phase II support prior to the
submission of proof of its designation as
an Eligible Telecommunications Carrier.
After such submission, the Eligible
Telecommunications Carrier shall
receive a balloon payment that will
consist of the carrier’s monthly Mobility
Fund Phase II payment amount
multiplied by the number of whole
months between the first day of the
month after the close of the auction and
the issuance of the public notice
authorizing the carrier to receive
Mobility Fund Phase II support.
(b) An applicant shall have access to
spectrum in an area that enables it to
satisfy the applicable performance
requirements in order to receive
Mobility Fund Phase II support for that
area. The applicant shall describe its
access to spectrum and certify, in a form
acceptable to the Commission, that it
has such access at the time it applies to
participate in competitive bidding and
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at the time that it applies for support
and that it will retain such access for at
least ten (10) years after the date on
which it is authorized to receive
support.
(c) An applicant shall certify that it is
financially and technically qualified to
provide the services supported by
Mobility Fund Phase II within the
specified timeframe in the geographic
areas for which it seeks support in order
to receive such support.
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§ 54.1014
Application process.
(a) Application to Participate in
Competitive Bidding for Mobility Fund
Phase II Support. In addition to
providing information specified in
§ 1.21001(b) of this chapter and any
other information required by the
Commission, an applicant to participate
in competitive bidding for Mobility
Fund Phase II support shall:
(1) Provide ownership information as
set forth in § 1.2112(a) of this chapter as
well as information on any agreement
the applicant may have relating to the
support to be sought through the
auction;
(2) Certify that the applicant is
financially and technically capable of
meeting the public interest obligations
of § 54.1015 in each area for which it
seeks support;
(3) Disclose its status as an Eligible
Telecommunications Carrier in any area
for which it will seek support or as an
entity that will file an application to
become an Eligible Telecommunications
Carrier in any such area after winning
support in Mobility Fund Phase II, and
certify that the disclosure is accurate;
and
(4) Describe the spectrum access that
the applicant plans to use to meet
obligations in areas for which it will bid
for support, including whether the
applicant currently holds or leases the
spectrum, including any necessary
renewal expectancy, and whether such
spectrum access is contingent upon
receiving support in a Mobility Fund
Phase II auction, and certify that the
description is accurate and that the
applicant will retain such access for the
entire ten (10) year Mobility Fund Phase
II support term.
(b) Application by Winning Bidders
for Mobility Fund Phase II Support—(1)
Deadline. Unless otherwise provided by
public notice, winning bidders for
Mobility Fund Phase II support shall file
an application for Mobility Fund Phase
II support no later than ten (10) business
days after the public notice identifying
them as winning bidders.
(2) Application contents. An
application for Mobility Fund Phase II
support must contain:
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(i) Identification of the party seeking
the support, including ownership
information as set forth in § 1.2112(a) of
this chapter;
(ii) Certification that the applicant is
financially and technically capable of
providing the required coverage and
performance levels within the specified
timeframe in the geographic areas in
which it won support;
(iii) Proof of the applicant’s status as
an Eligible Telecommunications Carrier,
or a statement that the applicant will
become an Eligible Telecommunications
Carrier in any area for which it seeks
support within 180 days of the public
notice identifying them as winning
bidders, and certification that the proof
is accurate;
(iv) A description of the spectrum
access that the applicant plans to use to
meet obligations in areas for which it is
winning bidder for support, including
whether the applicant currently holds or
leases the spectrum, along with any
necessary renewal expectancy, and
certification that the description is
accurate and that the applicant will
retain such access for the entire ten (10)
year Mobility Fund Phase II support
term;
(v) A detailed project description that
describes the network to be built or
upgraded, identifies the proposed
technology, demonstrates that the
project is technically feasible, discloses
the complete project budget, and
discusses each specific phase of the
project (e.g., network design,
construction, deployment, and
maintenance), as well as a complete
project schedule, including timelines,
milestones, and costs;
(vi) Certifications that the applicant
has available funds for all project costs
that exceed the amount of support to be
received from Mobility Fund Phase II
and that the applicant will comply with
all program requirements, including the
public interest obligations set forth in
§ 54.1015;
(vii) Any guarantee of performance
that the Commission may require by
public notice or other proceedings,
including but not limited to the letters
of credit required in § 54.1016, or a
written commitment from an acceptable
bank, as defined in § 54.1016(a)(2), to
issue such a letter of credit;
(viii) Certification that the applicant
will offer service in supported areas at
rates that are within a reasonable range
of rates for similar service plans offered
by mobile wireless providers in urban
areas during the term of support the
applicant seeks;
(ix) Certification that the party
submitting the application is authorized
to do so on behalf of the applicant; and
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15451
(x) Such additional information as the
Commission may require.
(3) Application processing. (i) No
application will be considered unless it
has been submitted in an acceptable
form during the period specified by
public notice. No applications
submitted or demonstrations made at
any other time shall be accepted or
considered.
(ii) Any application that, as of the
submission deadline, either does not
identify the applicant seeking support
as specified in the public notice
announcing application procedures, or
does not include required certifications,
shall be denied.
(iii) An applicant may be afforded an
opportunity to make minor
modifications to amend its application
or correct defects noted by the
applicant, the Commission, the
Administrator, or other parties. Minor
modifications include correcting
typographical errors in the application
and supplying non-material information
that was inadvertently omitted or was
not available at the time the application
was submitted.
(iv) Applications to which major
modifications are made after the
deadline for submitting applications
shall be denied. Major modifications
include, but are not limited to, any
changes in the ownership of the
applicant that constitute an assignment
or change of control, or the identity of
the applicant, or the certifications
required in the application.
(v) After receipt and review of the
applications, a public notice shall
identify each winning bidder that may
be authorized to receive Mobility Fund
Phase II support, after the winning
bidder submits a Letter of Credit and an
accompanying opinion letter as required
by § 54.1016, in a form acceptable to the
Commission, and any final designation
as an Eligible Telecommunications
Carrier that any applicant may still
require. Each such winning bidder shall
submit a Letter of Credit and an
accompanying opinion letter as required
by § 54.1016, in a form acceptable to the
Commission, and any required final
designation as an Eligible
Telecommunications Carrier no later
than ten (10) business days following
the release of the public notice.
(vi) After receipt of all necessary
information, a public notice will
identify each winning bidder that is
authorized to receive Mobility Fund
Phase II support.
§ 54.1015
Public interest obligations.
(a) First interim deadline for
construction. A winning bidder
authorized to receive Mobility Fund
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Phase II support shall, no later than 42
months from the first day of the month
that follows the month in which the
Mobility Fund Phase II auction closes,
submit to the entities listed in
§ 54.1020(c) any required data covering
all areas for which they receive support
in a state demonstrating mobile
transmissions supporting voice and data
to and from the network covering at
least 40 percent of the square miles
associated with the eligible areas and
meeting or exceeding the following:
(1) Outdoor median data transmission
rates of 1 Mbps upload and 10 Mbps
download, with at least 90 percent of
the required download speed
measurements not less than a certain
threshold speed that will be defined
prior to the Mobility Fund Phase II
auction; and
(2) Transmission latency of 100 ms or
less round trip for at least 90 percent of
the measurements.
(b) Second interim deadline for
construction. A winning bidder
authorized to receive Mobility Fund
Phase II support shall, no later than 54
months from the first day of the month
that follows the month in which the
Mobility Fund Phase II auction closes,
submit to the entities listed in
§ 54.1020(c) any required data covering
all areas for which they receive support
in a state demonstrating mobile
transmissions supporting voice and data
to and from the network covering at
least 60 percent of the square miles
associated with the eligible areas and
meeting or exceeding the thresholds in
paragraphs (a)(1) and (2) of this section.
(c) Third interim deadline for
construction. A winning bidder
authorized to receive Mobility Fund
Phase II support shall, no later than 66
months from the first day of the month
that follows the month in which the
Mobility Fund Phase II auction closes,
submit to the entities listed in
§ 54.1020(c) any required data covering
all areas for which they receive support
in a state demonstrating mobile
transmissions supporting voice and data
to and from the network covering at
least 80 percent of the square miles
associated with the eligible areas and
meeting or exceeding the thresholds in
paragraphs (a)(1) and (2) of this section.
(d) Final deadline for construction. A
winning bidder authorized to receive
Mobility Fund Phase II support shall, no
later than 78 months from the first day
of the month that follows the month in
which the Mobility Fund Phase II
auction closes, submit to the entities
listed in § 54.1020(c) any required data
covering all areas for which they receive
support in a state demonstrating mobile
transmissions supporting voice and data
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to and from the network covering at
least 85 percent of the square miles
associated with the eligible areas and
meeting or exceeding the thresholds in
paragraphs (a)(1) and (2) of this section.
A winning bidder shall also submit
representative data demonstrating that
its network covers at least 75 percent of
every census block group or census tract
for which it receives support in a state.
(e) Coverage data. Coverage data
submitted in compliance with a
recipient’s public interest obligations
shall demonstrate coverage of the square
miles designated in the public notice
announcing the final list of eligible
areas for the competitive bidding that is
the basis of the recipient’s support. Any
data submitted in compliance with a
recipient’s public interest obligations
shall be in compliance with standards
set forth in the applicable public notice.
(f) Collocation obligations. During the
period when a recipient shall file
annual reports pursuant to § 54.1019,
the recipient shall allow for reasonable
collocation by other providers of
services that would meet the
technological requirements of Mobility
Fund Phase II on all towers it owns or
manages in the area for which it
receives support. In addition, during
this period, the recipient may not enter
into facilities access arrangements that
restrict any party to the arrangement
from allowing others to collocate on the
facilities.
(g) Voice and data roaming
obligations. During the period when a
recipient shall file annual reports
pursuant to § 54.1019, the recipient
shall comply with the Commission’s
voice and data roaming requirements
that are currently in effect on networks
that are built through Mobility Fund
Phase II support.
(h) Reasonably comparable rates
obligations. Beginning no later than the
deadline set forth in paragraph (a) of
this section and continuing throughout
the remaining period when a recipient
shall file annual reports pursuant to
§ 54.1019, the recipient shall offer
service in supported areas at rates that
are within a reasonable range of rates for
similar service plans offered by mobile
wireless providers in urban areas.
(i) Data allowance obligations.
Beginning no later than the deadline set
forth in paragraph (a) of this section and
continuing throughout the remaining
period when a recipient shall file
annual reports pursuant to § 54.1019,
recipient shall offer at least one service
plan in supported areas that includes a
data allowance comparable to mid-level
service plans offered by nationwide
providers.
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(j) Liability for failing to satisfy public
interest obligations. A Mobility Fund
Phase II support recipient’s failure to
comply with the public interest
obligations in this paragraph or any
other terms and conditions of the
Mobility Fund Phase II support
constitutes a performance default.
§ 54.1016
Letter of credit.
(a) Before being authorized to receive
Mobility Fund Phase II support, a
winning bidder shall obtain an
irrevocable standby letter of credit
which shall be acceptable in all respects
to the Commission.
(1) Each recipient authorized to
receive Mobility Fund Phase II support
shall maintain the standby letter of
credit or multiple standby letters of
credit in an amount equal to at a
minimum the amount of Mobility Fund
Phase II auction support that has been
disbursed and that will be disbursed in
the coming year, until the Universal
Service Administrative Company has
verified that the recipient met the final
service milestone as described in
§ 54.1015(d) of this chapter.
(i) Once the recipient has met its 60
percent service milestone as described
in § 54.1015(b) of this chapter, it may,
subject to the consent of the Universal
Service Administrative Company,
obtain a new letter of credit or renew its
existing letter of credit so that it is
valued at a minimum at 90 percent of
the total support amount already
disbursed plus the amount that will be
disbursed in the coming year.
(ii) Once the recipient has met its 80
percent service milestone as described
in § 54.1015(c) of this chapter, it may,
subject to the consent of the Universal
Service Administrative Company,
obtain a new letter of credit or renew its
existing letter of credit so that it is
valued at a minimum at 80 percent of
the total support amount already
disbursed plus the amount that will be
disbursed in the coming year.
(2) Acceptability. The bank issuing
the letter of credit shall be acceptable to
the Commission. A bank that is
acceptable to the Commission is:
(i) Any United States Bank—
(A) Whose deposits are insured by the
Federal Deposit Insurance Corporation;
and
(B) That has a Weiss bank safety
rating of B¥ or higher, or
(ii) CoBank, ACB—
(A) As long as it maintains assets that
would place it among the top-100 U.S.
banks in terms of the amount of assets,
determined on the basis of total assets
as of the end of the calendar year
immediately preceding the issuance of
the letter of credit;
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(B) Its obligations are insured by the
Farm Credit System Insurance
Corporation; and
(C) It has a long-term unsecured credit
rating of BBB¥ or better from Standard
& Poor’s (or the equivalent from a
nationally-recognized credit rating
agency); or
(iii) The National Rural Utilities
Cooperative Finance Corporation—
(A) As long as it maintains assets that
would place it among the top-100 U.S.
banks in terms of the amount of assets,
determined on the basis of total assets
as of the end of the calendar year
immediately preceding the issuance of
the letter of credit; and
(B) It has a long-term unsecured credit
rating of BBB¥ or better from Standard
& Poor’s (or the equivalent from a
nationally-recognized credit rating
agency); or
(iv) Any non-U.S. bank that—
(A) Is among the 100 largest non-U.S.
banks in the world, determined on the
basis of total assets as of the end of the
calendar year immediately preceding
the issuance of the letter of credit
(determined on a U.S. dollar equivalent
basis as of such date);
(B) Has a branch office in the District
of Columbia or such other branch office
agreed to by the Commission;
(C) Maintains a credit rating of BBB¥
or better from Standard & Poor’s (or the
equivalent from a nationally-recognized
credit rating agency); and
(D) Issues the letter of credit payable
in United States dollars.
(b) Before being authorized to receive
Mobility Fund Phase II support, a
winning bidder shall provide with its
letter of credit an opinion letter from
legal counsel clearly stating, subject
only to customary assumptions,
limitations, and qualifications, that in a
proceeding under Title 11 of the United
States Code, 11 U.S.C. 101 et seq. (the
‘‘Bankruptcy Code’’), the bankruptcy
court would not treat the letter of credit
or proceeds of the letter of credit as
property of the winning bidder’s
bankruptcy estate, or the bankruptcy
estate of any other bidder-related entity
requesting issuance of the letter of
credit, under section 541 of the
Bankruptcy Code.
(c) Authorization to receive Mobility
Fund Phase II support is conditioned
upon full and timely performance of all
the requirements set forth in this
section, § 54.1015, and any additional
terms and conditions upon which the
support was granted.
(1) If a Mobility Fund Phase II
recipient has triggered a recovery action
by USAC as set out in § 54.1017 and has
failed to repay the requisite amount of
support within six (6) months, USAC
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will be entitled to draw the entire
amount of the letter of credit and may
disqualify the Mobility Fund Phase II
recipient from the receipt of Mobility
Fund Phase II auction support or
additional universal service support.
(2) The default will be evidenced by
a letter issued by the Chief of either the
Wireless Telecommunications Bureau or
Wireline Competition Bureau or their
respective designees, which letter,
describing the performance default and
attached to a standby letter of credit
draw certificate, shall be sufficient for a
draw on the standby letter of credit.
15453
deployed facilities capable of meeting
the requisite Mobility Fund Phase II
requirements at the state level in the
previous quarter. Mobile eligible
telecommunications carriers that do not
file these quarterly reports on time will
be subject to support reductions as
specified in § 54.1019(f). The mobile
eligible telecommunications carrier
must continue to file quarterly reports
until the mobile eligible
telecommunications carrier reports that
it has reduced the compliance gap to
less than five (5) percent of the eligible
square miles for that interim milestone
at the state level and the Wireline
§ 54.1017 Compliance for Mobility Fund
Competition Bureau or Wireless
Phase II.
Telecommunications Bureau issues a
(a) Mobile eligible
letter to that effect.
telecommunications carriers subject to
(ii) Tier 2. If a mobile eligible
defined build-out milestones in
telecommunications carrier has a
§ 54.1015 must notify the Commission
compliance gap of at least 15 percent
and USAC, and the relevant state, U.S.
but less than 25 percent of the eligible
Territory, or Tribal government, if
square miles that the mobile eligible
applicable, within ten (10) business
telecommunications carrier is required
days after the applicable deadline if
to have covered by the interim
they have failed to meet a build-out
milestone at the state level, USAC will
milestone.
withhold 15 percent of the mobile
(1) Interim build-out milestones. Upon eligible telecommunications carrier’s
notification that a mobile eligible
monthly support for that state and the
telecommunications carrier has
mobile eligible telecommunications
defaulted on an interim build-out
carrier will be required to file quarterly
milestone after it has begun receiving
reports. Once the mobile eligible
Mobility Fund Phase II support, the
telecommunications carrier has reported
Wireline Competition Bureau or
that it has reduced the compliance gap
Wireless Telecommunications Bureau
to less than 15 percent of the eligible
will issue a letter evidencing the
square miles for that interim milestone
default. For purposes of determining
at the state level, the Wireline
whether a default has occurred, any
Competition Bureau or Wireless
service a mobile eligible
Telecommunications Bureau will issue
telecommunications carrier offers must
a letter to that effect, and the mobile
meet the performance obligations in
eligible telecommunications carrier will
§ 54.1015(a)(1) and (2). The issuance of
then move to Tier 1 status.
this letter shall initiate reporting
(iii) Tier 3. If a mobile eligible
obligations and withholding of a
telecommunications carrier has a
percentage of the mobile eligible
compliance gap of at least 25 percent
telecommunication carrier’s total
but less than 50 percent of the eligible
monthly Mobility Fund Phase II
square miles that the mobile eligible
support, if applicable, starting the
telecommunications carrier is required
month following the issuance of the
to have covered by the interim
letter:
milestone at the state level, USAC will
(i) Tier 1. If a mobile eligible
withhold 25 percent of the mobile
telecommunications carrier has a
eligible telecommunications carrier’s
compliance gap of at least five (5)
monthly support for that state and the
percent but less than 15 percent of the
mobile eligible telecommunications
eligible square miles that the mobile
carrier will be required to file quarterly
eligible telecommunications carrier is
reports. Once the mobile eligible
required to have covered by the relevant telecommunications carrier has reported
interim milestone at the state level, the
that it has reduced the compliance gap
Wireline Competition Bureau or
to less than 25 percent of the eligible
Wireless Telecommunications Bureau
square miles for that interim milestone
will issue a letter to that effect. Starting
at the state level, the Wireline
three (3) months after the issuance of
Competition Bureau or Wireless
this letter, the mobile eligible
Telecommunications Bureau will issue
telecommunications carrier will be
a letter to that effect, and the mobile
required to file a report every three (3)
eligible telecommunications carrier will
months identifying the eligible square
move to Tier 2 status.
(iv) Tier 4. If a mobile eligible
miles to which the mobile eligible
telecommunications carrier has a
telecommunications carrier has newly
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compliance gap of 50 percent or more of
the eligible square miles that the mobile
eligible telecommunications carrier is
required to have covered by the interim
milestone at the state level:
(A) USAC will withhold 50 percent of
the mobile eligible telecommunications
carrier’s monthly support for that state,
and the mobile eligible
telecommunications carrier will be
required to file quarterly reports. As
with the other tiers, as the mobile
eligible telecommunications carrier
reports that it has lessened the extent of
its non-compliance, and the Wireline
Competition Bureau or Wireless
Telecommunications Bureau issues a
letter to that effect, it will move down
the tiers until it reaches Tier 1 (or no
longer is out of compliance with the
relevant interim milestone).
(B) If, after having 50 percent of its
support withheld for six (6) months, the
mobile eligible telecommunications
carrier has not reported that it has a
compliance gap of less than 50 percent,
USAC will withhold 100 percent of the
mobile eligible telecommunications
carrier’s monthly support for the state
and will commence a recovery action
for a percentage of support that is equal
to the mobile eligible
telecommunications carrier’s
compliance gap plus 10 percent of the
mobile eligible telecommunications
carrier’s support that has been disbursed
to that date.
(v) Restoration of full support. If at
any point during the support term, the
mobile eligible telecommunications
carrier reports that it is eligible for Tier
1 status, it will have its support fully
restored, USAC will repay any funds
that were recovered or withheld, and it
will move to Tier 1 status.
(2) Final milestone. Upon notification
that the mobile eligible
telecommunications carrier has not met
a final milestone, the mobile eligible
telecommunications carrier will have
twelve (12) months from the date of the
final milestone deadline to come into
full compliance with this milestone.
(i) If the mobile eligible
telecommunications carrier does not
report that it has come into full
compliance with this milestone within
twelve (12) months because it fails to
meet the 85 percent benchmark (even if
it meets the 75 percent benchmark for
some or all the census block group(s) or
census tract(s)), the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter, and USAC will recover
disbursement(s) in an amount of
support that is equal to 1.89 multiplied
by the average amount of support the
mobile eligible telecommunications
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carrier received per eligible square mile
in the state over the six year period
multiplied by the number of square
miles unserved in the mobile eligible
telecommunications carrier’s winning
areas in the state that would be required
to meet the 85 percent benchmark, plus
10 percent of the mobile eligible
telecommunications carrier’s total
Mobility Fund Phase II support received
in the state over the six-year period for
deployment. After the mobile eligible
telecommunications carrier has paid the
calculated recovery amount for failure
to comply with the final deployment
milestone, the Bureaus will calculate a
reduced support payment for the
remaining support term based on the
percentage of deployment coverage
completed. The reduced ongoing annual
support amount will be the total of the
mobile eligible telecommunications
carrier’s original winning bid amounts
for annual support in the state
multiplied by the sum of the actual
deployment percentage plus 15 percent
(i.e., the difference between 100 percent
coverage and the required 85 percent
minimum coverage), or (annual support)
* (percentage covered + 0.15). If at the
end of six months the mobile eligible
telecommunications carrier has not fully
paid back the support for missing the
relevant 85 percent benchmark, the
mobile eligible telecommunications
carrier shall be liable for repayment of
all the support that has been disbursed
to the mobile eligible
telecommunications carrier for that
state, the Wireline Competition Bureau
or the Wireless Telecommunications
Bureau will issue a letter to that effect,
and USAC will draw on the letter(s) of
credit to recover all the support that has
been disbursed to the mobile eligible
telecommunications carrier for that
state.
(ii) If the mobile eligible
telecommunications carrier does not
report that it has come into full
compliance with this milestone within
twelve (12) months because it fails to
meet the 75 percent benchmark(s) for
any census block group(s) or census
tract(s) in the state at the final milestone
(even if it meets the 85 percent
statewide benchmark), the Wireline
Competition Bureau or the Wireless
Telecommunications Bureau will issue
a letter for any such census block
group(s) or census tract(s), and USAC
will recover disbursement(s) in an
amount of support that is equal to 1.89
multiplied by the average amount of
support the mobile eligible
telecommunications carrier received per
eligible square mile in the census block
group(s) or census tract(s) in the state
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Fmt 4701
Sfmt 4700
over the six year period multiplied by
the number of square miles unserved in
each of the mobile eligible
telecommunications carrier’s winning
census block group(s) or census tract(s)
in the state that would be required to
meet their respective 75 percent
benchmarks, plus 10 percent of the
mobile eligible telecommunications
carrier’s total Mobility Fund Phase II
support received in the relevant census
block group(s) or census tract(s) over the
six-year period for deployment. The
mobile eligible telecommunications
carrier will have six months to repay the
support USAC seeks to recover. After
the mobile eligible telecommunications
carrier has paid the calculated recovery
amount, the Bureaus will calculate a
reduced support payment for the
remaining support term. The reduced
ongoing annual support amount will be
the mobile eligible telecommunications
carrier’s original winning bid amount
for annual support in any such census
block group or census tract, multiplied
by the sum of the actual deployment
percentage plus 25 percent (i.e., the
difference between 100 percent coverage
and the required 75 percent minimum
coverage), or (annual support) *
(percentage covered + 0.25). If at the end
of six months the mobile eligible
telecommunications carrier has not fully
paid back the support for missing the
relevant 75 percent benchmark(s), the
mobile eligible telecommunications
carrier shall be liable for repayment of
all the support that has been disbursed
to the mobile eligible
telecommunications carrier for that
state, the Wireline Competition Bureau
or the Wireless Telecommunications
Bureau will issue a letter to that effect,
and USAC will draw on the letter(s) of
credit to recover all the support that has
been disbursed to the mobile eligible
telecommunications carrier for that
state. In the event that USAC draws on
a letter of credit to recover all the
support that has been disbursed to the
mobile eligible telecommunications
carrier for a state, the mobile eligible
telecommunications carrier’s
participation in Mobility Fund Phase II
in that state will immediately end and
no further support will be paid.
(3) Compliance reviews. If, subsequent
to the mobile eligible
telecommunications carrier’s final
milestone but during the remaining
support term, USAC determines in the
course of a compliance review that the
mobile eligible telecommunications
carrier does not have sufficient evidence
to demonstrate that it is offering service
to the required percentage of square
miles by census block group or census
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tract, or state, USAC shall withhold
support for a period not to exceed six
months until the mobile eligible
telecommunications carrier
demonstrates that it is again providing
the requisite service to the required
percentage of square miles. Once the
mobile eligible telecommunications
carrier demonstrates that it is providing
the requisite service to the required
percentage of square miles and USAC
has verified the demonstration, USAC
will pay any withheld support and
resume ongoing disbursements. If the
mobile eligible telecommunications
carrier does not provide a verifiable
demonstration of coverage within the
permitted six-month period, USAC shall
recover an amount of support that is
equal to 1.89 times the average amount
of support per square mile received in
the winning bid area over the six-year
deployment period for the relevant
number of square miles for which the
mobile eligible telecommunications
carrier has failed to produce sufficient
evidence, plus 10 percent of the mobile
eligible telecommunications carrier’s
total support received in that winning
bid area over the six-year deployment
time period, and will calculate a
reduced ongoing annual support
amount as set out in paragraphs (a)(2)(i)
and (ii) of this section, as appropriate.
(b) [Reserved].
§ 54.1018 Mobility Fund Phase II
disbursements.
(a) A winning bidder for Mobility
Fund Phase II support will be advised
by public notice whether it has been
authorized to receive such support. The
public notice will detail how
disbursements will be made.
(b) Mobility Fund Phase II support
will be available for monthly
disbursement to a winning bidder
authorized to receive such support for
ten years from the first day of the month
that follows the month in which the
Mobility Fund Phase II auction closes.
sradovich on DSK3GMQ082PROD with RULES2
§ 54.1019
Annual reports.
(a) A winning bidder authorized to
receive Mobility Fund Phase II support
shall submit an annual report no later
than July 1 in each year for the ten (10)
years after it is so authorized.
(b) The party submitting the annual
report must certify that it has been
authorized to do so by the winning
bidder.
(c) Each annual report shall be
submitted to the Office of the Secretary
of the Commission, clearly referencing
the appropriate docket for Mobility
Fund Phase II reporting; the
Administrator; and the relevant state
commissions, relevant authority in a
VerDate Sep<11>2014
17:22 Mar 27, 2017
Jkt 241001
U.S. Territory, or Tribal governments, as
appropriate, until such time that the
Administrator announces that annual
reports shall be filed solely via the
Administrator’s online portal.
(d) In each annual report, a recipient
of Mobility Fund Phase II support shall
certify that it is in compliance with all
requirements for receipt of such support
to continue receiving Mobility Fund
Phase II disbursements.
(e) Winning bidders have a continuing
obligation to maintain the accuracy and
completeness of the information
provided in their long-form applications
and their annual reports. All winning
bidders shall provide information about
any substantial change that may be of
decisional significance regarding their
eligibility for Mobility Fund Phase II
support and compliance with Mobility
Fund Phase II requirements as an
update to their annual report submitted
to the entities listed in § 54.1019(c).
Such notification of a substantial
change, including any reduction in the
percentage of eligible square miles being
served or any failure to comply with any
of the Mobility Fund Phase II
requirements, shall be submitted within
ten (10) business days after the
reportable event occurs.
(f) In order for a recipient of Mobility
Fund Phase II support to continue to
receive support for the following
calendar year, it must submit the annual
report required by this section annually
by July 1 of each year. Mobile eligible
telecommunications carriers that file
their reports after the July 1 deadline
shall receive a reduction in support
pursuant to the following schedule:
(1) A mobile eligible
telecommunications carrier that files
after the July 1 deadline, but by July 8,
will have its support reduced in an
amount equivalent to seven (7) days of
support;
(2) A mobile eligible
telecommunications carrier that files on
or after July 9 will have its support
reduced on a pro-rata daily basis
equivalent to the period of noncompliance, plus the minimum sevenday reduction.
(f) A mobile eligible
telecommunications carrier that submits
the annual reporting information
required by this section within three (3)
days of the July 1 deadline will not
receive a reduction in support if the
mobile eligible telecommunications
carrier has not missed the July 1
deadline in any prior year.
§ 54.1020
Milestone reports.
(a) A winning bidder authorized to
receive Mobility Fund Phase II support
shall submit the reports required in
PO 00000
Frm 00035
Fmt 4701
Sfmt 4700
15455
§ 54.1015(a) through (d) as well as
certifications that it has met the
construction requirements in
§ 54.1015(a) through (d).
(b) The party submitting the report
must certify that it has been authorized
to do so by the winning bidder.
(c) Each report shall be submitted to
the Office of the Secretary of the
Commission, clearly referencing the
appropriate docket for Mobility Fund
Phase II reporting; the Administrator;
and the relevant state commissions,
relevant authority in a U.S. Territory, or
Tribal governments, as appropriate,
until such time that the Administrator
announces that such reports shall be
filed solely via the Administrator’s
online portal.
(d) Winning bidders have a
continuing obligation to maintain the
accuracy and completeness of the
information provided in their long-form
applications and their milestone reports.
All winning bidders shall provide
information about any substantial
change that may be of decisional
significance regarding their eligibility
for Mobility Fund Phase II support and
compliance with Mobility Fund Phase II
requirements as an update to their
milestone report submitted to the
entities listed in paragraph (c) of this
section. Such notification of a
substantial change, including any
reduction in the percentage of eligible
square miles being served or any failure
to comply with any of the Mobility
Fund Phase II requirements, shall be
submitted within ten (10) business days
after the reportable event occurs.
(e) In order for a recipient of Mobility
Fund Phase II support to continue to
receive support for the following
calendar year, it must submit the
milestone reports required by this
section by the deadlines set forth in
§ 54.1015(a) through (d). Mobile eligible
telecommunications carriers that file
their reports after the relevant deadlines
shall receive a reduction in support
pursuant to the following schedule:
(1) A mobile eligible
telecommunications carrier that files
after the deadline, but within seven
days of the deadline, will have its
support reduced in an amount
equivalent to seven (7) days of support;
(2) A mobile eligible
telecommunications carrier that files on
or after the eighth day following the
deadline will have its support reduced
on a pro-rata daily basis equivalent to
the period of non-compliance, plus the
minimum seven-day reduction.
(g) A mobile eligible
telecommunications carrier that submits
the milestone reporting information
required by this section within three (3)
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sradovich on DSK3GMQ082PROD with RULES2
days of the deadline will not receive a
reduction in support if the mobile
eligible telecommunications carrier has
not missed the deadline in any prior
year.
VerDate Sep<11>2014
17:22 Mar 27, 2017
Jkt 241001
§ 54.1021 Record retention for Mobility
Fund Phase II.
and its agents are subject to the record
retention requirements in § 54.320.
A winning bidder authorized to
receive Mobility Fund Phase II support
[FR Doc. 2017–05665 Filed 3–27–17; 8:45 am]
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BILLING CODE 6712–01–P
E:\FR\FM\28MRR2.SGM
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Agencies
[Federal Register Volume 82, Number 58 (Tuesday, March 28, 2017)]
[Rules and Regulations]
[Pages 15422-15456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05665]
[[Page 15421]]
Vol. 82
Tuesday,
No. 58
March 28, 2017
Part II
Federal Communications Commission
-----------------------------------------------------------------------
47 CFR Parts 1 and 54
Connect America Fund; Universal Service Reform--Mobility Fund; Final
Rule
Federal Register / Vol. 82 , No. 58 / Tuesday, March 28, 2017 / Rules
and Regulations
[[Page 15422]]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1 and 54
[WC Docket No. 10-90, WT Docket No. 10-208; FCC 17-11]
Connect America Fund; Universal Service Reform--Mobility Fund
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
(Commission) adopts the framework to allocate funds to assist in the
deployment of 4G LTE to areas that are so costly that the private
sector has not yet deployed there and to preserve such service where it
might not otherwise exist. This framework redirects funding from legacy
subsidies and distributes them through the Mobility Fund Phase II and
Tribal Mobility Fund Phase II, using market-based, multi-round reverse
auctions, and contains defined, concrete compliance requirements to
help ensure rural consumers will be adequately served by mobile
carriers receiving universal support.
DATES: Effective April 27, 2017 except for additions of Sec. Sec.
54.1013, 54.1014, 54.1015(a) through (e), 54.1016(a) and (b), 54.1017,
54.1019, 54.1020, and 54.1021, which contain new or modified
information collection requirements that require approval by the Office
of Management and Budget (OMB). The Commission will publish a document
in the Federal Register announcing the effective date of those
additions.
FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau,
Auction and Spectrum Access Division, Mark Montano, at (202) 418-0660.
For further information concerning the Paperwork Reduction Act
information collection requirements contained in this document, contact
Cathy Williams at (202) 418-2918, or via the Internet at PRA@fcc.gov.
ADDRESSES: Federal Communications Commission, 445 12th Street SW.,
Washington, DC 20554.
SUPPLEMENTARY INFORMATION: This is a summary of the Report and Order
and Further Notice of Proposed Rulemaking (MF-II Order), WC Docket No.
10-90, WT Docket No. 10-208, FCC 17-11, adopted on February 23, 2017
and released on March 7, 2017. The complete text of this document is
available for public inspection and copying from 8:00 a.m. to 4:30 p.m.
Eastern Time (ET) Monday through Thursday or from 8:00 a.m. to 11:30
a.m. ET on Fridays in the FCC Reference Information Center, 445 12th
Street SW., Room CY-A257, Washington, DC 20554. The complete text is
also available on the Commission's Web site at https://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0309/FCC-17-11A1.pdf. Alternative formats are available to persons with
disabilities by sending an email to FCC504@fcc.gov or by calling the
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202)
418-0432 (TTY).
Regulatory Flexibility Analysis
As required by the Regulatory Flexibility Act of 1980, the
Commission has prepared a Final Regulatory Flexibility Analysis (FRFA)
of the possible significant economic impact on small entities of the
policies and rules adopted in this document. The FRFA is set forth in
an appendix to the MF-II Order, and is summarized below. The
Commission's Consumer and Governmental Affairs Bureau, Reference
Information Center, will send a copy of this MF-II Order, including the
FRFA, to the Chief Counsel for Advocacy of the Small Business
Administration (SBA).
Paperwork Reduction Act
The MF-II Order contains new and modified information collection
requirements subject to the Paperwork Reduction Act of 1995 (PRA),
Public Law 104-13. It will be submitted to the Office of Management and
Budget (OMB) for review under section 3507(d) of the PRA. OMB, the
general public, and other Federal agencies will be invited to comment
on the new and modified information collection requirements contained
in this proceeding.
Congressional Review Act
The Commission will send a copy of this MF-II Order in a report to
be sent to Congress and the Government Accountability Office pursuant
to the Congressional Review Act (CRA), see 5 U.S.C. 801(a)(1)(A).
I. Introduction
1. In the MF-II Order, the Commission adopts the framework for
moving forward with the Mobility Fund Phase II (MF-II) and Tribal
Mobility Fund Phase II (Tribal MF-II), which will allocate up to $4.53
billion over the next decade to advance the deployment of 4G LTE
service to areas that are so costly that the private sector has not yet
deployed there and to preserve such service where it might not
otherwise exist. The funding for this effort will come from the
redirection of legacy subsidies and distributed using a market-based,
multi-round reverse auction and will come with defined, concrete
compliance requirements so that rural consumers will be adequately
served by the mobile carriers receiving universal service support.
2. The Commission expects to release a list of presumptively
eligible areas shortly, to finalize the challenge process in the coming
months, and to conclude the challenge process by January 31, 2018. The
Commission expects to commence the auction shortly thereafter. The
phase-down of legacy support is scheduled to commence in the first
month following the close of the MF-II auction.
II. Background
3. In the USF/ICC Transformation Order, 76 FR 73829, November 29,
2011, the Commission sought to achieve the universal availability of
``mobile networks capable of delivering mobile broadband and voice
service in areas where Americans live, work, or travel.'' This goal was
``designed to help ensure that all Americans in all parts of the
nation, including those in rural, insular, and high-cost areas, have
access to affordable technologies that will empower them to learn,
work, create, and innovate.'' At the same time, the Commission
recognized the importance of minimizing the universal service
contribution burden on consumers and businesses. The Commission sought
to balance the objective of ``providing support that is sufficient but
not excessive so as to not impose an excessive burden on consumers and
businesses who ultimately pay to support the Fund.''
4. Applying those goals, the Commission targeted funding to expand
mobile coverage, while ensuring that the funding is ``cost-effective
and targeted to areas that require public funding to receive the
benefits of mobility.'' As a result, the Commission eliminated the
``identical support rule,'' which previously had set the level of
support for competitive eligible telecommunications carriers (CETCs),
including those providing mobile services, at the level received by the
incumbent local exchange carrier, and had limited CETC support to those
areas where wireline providers received support because of their high
costs. The Commission concluded that ``[t]he support levels generated
by the identical support rule bear no relation to the efficient cost of
providing mobile voice service in a particular geography,'' and
established the Mobility Fund to assure that universal service support
for mobile service would be targeted in a more cost
[[Page 15423]]
effective manner. The Mobility Fund included two phases. For Mobility
Fund Phase I (MF-I), the Commission provided up to $300 million in one-
time support payments, to be awarded through a reverse auction. The
Commission also provided an additional $50 million in one-time support
dedicated to Tribal lands. For MF-II, the Commission decided it would
provide up to $500 million per year in ongoing support--including
support to Tribal lands--and sought comment in the USF/ICC
Transformation FNPRM, 76 FR 78383, December 16, 2011, on the structure
and operational details of that fund.
5. To minimize ``shocks to service providers that may result in
service disruptions for consumers,'' the USF/ICC Transformation Order
provided for a five-year transition period during which legacy support
going to CETCs would phase down 20 percent per year beginning July 1,
2012. The Commission noted that, during the transition period, mobile
carriers would have the opportunity to seek one-time MF-I support to
expand 3G or better service to areas where such service was unavailable
while also receiving phase-down legacy support. The Commission also
provided that if MF-II were not operational by July 1, 2014, the phase
down of legacy support for CETCs would pause at the 60 percent level in
effect on that date. The Commission also provided that the phase-down
of legacy support for CETCs serving Tribal lands would pause at that
time if Phase II of the Tribal Mobility Fund were not implemented.
6. Following the comments filed in response to the USF/ICC
Transformation Order FNPRM accompanying the USF/ICC Transformation
Order, the Wireless Telecommunications Bureau and the Wireline
Competition Bureau (the Bureaus) issued a Public Notice in November
2012, 77 FR 73586, December 11, 2012, seeking to develop a more
comprehensive, robust record on certain issues related to the award of
ongoing support for advanced mobile services. The Bureaus sought to
build upon their experience in implementing a reverse auction to
distribute universal service support and the experiences of carriers
that participated in MF-I. In particular, among other things, the
Bureaus sought further feedback on issues pertaining to the method for
identifying the geographic areas that are eligible for MF-II support
and establishing the base unit for bidding and measuring coverage,
performance obligations, and the term of support.
7. In April 2014, the Commission in the 2014 CAF Further Notice, 79
FR 39195, July 9, 2014, again took the opportunity to expand upon what
it had learned from its efforts to modernize universal service as well
as the considerable developments in the marketplace for mobile wireless
services that had occurred since adoption of the USF/ICC Transformation
Order. Given the significant commercial deployment of 4G LTE, the
Commission proposed to retarget the focus of MF-II to address those
areas of the country where LTE would not be available absent support
and existing mobile voice and broadband service would not be preserved
without support.
8. In September 2016, the Wireless Telecommunications Bureau
released its analysis of mobile broadband providers' December 2015 Form
477 submissions in order to identify and quantify the areas in the
country that may require support on an ongoing basis in order to have
4G LTE coverage. In addition to identifying the specific areas of the
country without 4G LTE coverage, Wireless Telecommunications Bureau
staff examined the current distribution of high-cost support to assess
the efficacy of that support. That analysis reveals that 4G LTE is
absent from or only provided with support in one-fifth of the area of
the United States excluding Alaska and that a conservative estimate is
that three-quarters of support currently distributed to mobile
providers is being directed to areas where it is not needed. In other
words, carriers are receiving approximately $300 million or more each
year in subsidies to provide service even though such subsidies are
unnecessary and may deter investment by unsubsidized competitors from
increasing competition in those areas.
III. Goals of the Mobility Fund Phase II
9. The Commission reaffirms the following goals for Phase II of the
Mobility Fund.
10. First, the Commission reaffirms that universal service funding
for the preservation and advancement of high-speed advanced services
such as 4G LTE is an appropriate and necessary use of universal service
funds. Because they are unmoored from a fixed point, mobile devices
empower Americans to make calls and access the web and web-based
applications while on the go.
11. Second, the Commission reaffirms that it should target
universal service funding to support the deployment of the highest
level of mobile service available today--4G LTE. In the 2014 CAF
Further Notice, the Commission observed that two major wireless
providers had widely deployed 4G LTE throughout the country. Since that
time, consumers increasingly demand 4G LTE service in order to take
advantage of the significantly better performance characteristics,
including faster data transfer speeds that 4G LTE provides while using
the web or web-based applications. Targeting MF-II support to expand
and preserve 4G LTE coverage will ensure that the Commission does not
relegate rural areas to substandard service.
12. Third, the Commission reaffirms that it should target universal
service funding to coverage gaps, not areas already built out by
private capital. Despite a surge in private investment in mobile
deployment, recent analysis shows that at least 575,000 square miles
(approximately 750,000 road miles and 3 million people) either lack 4G
LTE service or are being served only by subsidized 4G LTE providers.
Virtually all commenters agree that proceeding with MF-II is critically
important to supporting mobile voice and broadband coverage. Thus, by
proceeding to MF-II, the Commission seeks to assure that 4G LTE service
is preserved and advanced to those areas of the country where there is
no unsubsidized service, all consonant with the Commission's goal of
``ubiquitous availability of mobile services.''
13. Fourth, the Commission reaffirms that it is committed to
minimizing the overall burden of universal service contributions on
consumers and businesses by expending the finite funds it has available
in the most efficient and cost effective manner. The Wireless
Telecommunications Bureau's latest analysis indicates that a
substantial majority of current ongoing legacy CETC support is
allocated to census blocks that already have complete 4G LTE coverage
from one or more unsubsidized competitors.
IV. Framework for Mobility Fund Phase II
14. The Commission adopts a reverse auction to distribute high-cost
support for mobile services to areas that lack unsubsidized 4G LTE
service, while completing the phase-down of legacy support going to
mobile CETCs, thereby eliminating duplicative and unnecessary CETC
support, and better managing its finite financial resources. Utilizing
an annual budget of $453 million for a term of ten years, the
Commission will provide ongoing support for provision of service in
areas that would lack mobile voice and broadband coverage absent
government subsidies. Likewise, consistent with the Commission's
decision in the USF/ICC
[[Page 15424]]
Transformation Order to abandon the identical support rule and to
depart from duplicative investments in multiple CETCs in the same
geographic area, the Commission will award support to one provider per
eligible geographic area. This section describes this basic framework
for MF-II and its conclusions on these issues. The Commission intends
before the commencement of the MF-II auction to supplement the
performance goals and measures for the program.
A. Reverse Auction To Award Mobility Fund Phase II Support
15. The Commission adopts a nationwide, multi-round reverse auction
with competition within and across geographic areas to award MF-II
support. Utilizing an auction mechanism will allow the Commission to
distribute support consistent with its policy goals and priorities in a
transparent, speedy, and efficient manner. An auction provides a
straightforward means of identifying those providers that are willing
to provide 4G LTE service at the lowest cost to the budget, targeting
support to prioritized areas, and determining support levels that
awardees are willing to accept in exchange for the obligations the
Commission imposes. Moreover, a reverse auction is consistent with the
Commission's decision to provide support to at most one provider per
area. While auction alternatives suggested by commenters may address
some of these objectives--for example, a cost model could theoretically
determine appropriate support amounts for an area--the Commission is
not persuaded that there is an alternative approach that would achieve
all its core policy objectives that could be implemented in a timely
manner. Furthermore, the Commission's experience in administering
Auction 901 for MF-I funding was a new endeavor in 2012, and it can
apply the lessons learned to the MF-II auction.
16. The Commission finds that those parties advocating for use of a
model do not acknowledge or resolve the myriad policy goals that are
addressed by the Commission's reverse auction proposal, and therefore
do not offer a realistic alternative--consistent with its decisions--to
the proposed auction mechanism. This determination is substantiated by
the fact that the Commission has not received a fully developed cost
model for ongoing support since it first sought comment on the issue in
2011. The Commission received a developed model regarding Alaska, but
it recently adopted a different approach for mobile carriers there. The
Alaska Mobile Plan is a consensus plan among the mobile providers in
remote areas of Alaska that provides predictable, stable high-cost
support to those providers, frozen at 2014 levels for a term of ten
years. Because the Commission adopted the Alaska Plan for mobile
carriers as an Alaska-specific comprehensive substitute mechanism for
mobile high-cost support, the Commission decided that no support
provided under MF-II or Tribal MF-II will be provided for mobile
service within Alaska. In the absence of a workable, nationwide model
to award ongoing support that addresses all of the Commission's core
policy objectives, the Commission adopts its proposal to use a reverse
auction mechanism to distribute MF-II support.
17. The Commission declines to adopt a federal-state broadband
mobile grant program in lieu of an auction as proposed earlier this
year by one commenter. This proposal would impose significant
responsibilities on the states that choose to participate, including an
obligation to contribute funds (that the Commission would match),
review service providers' applications and subsequently award grants,
and verify providers' compliance with the Commission's performance
requirements. It would require significant Commission coordination and
oversight to implement such a proposal, which is inconsistent with the
Commission's desire to act quickly so that providers can expand to
those areas lacking 4G LTE coverage and the Commission can take
fiscally responsible measures to redistribute current support from
those areas with unsubsidized 4G LTE. Based on the record before the
Commission, as well as its experience in MF-I, the Commission is not
convinced that this approach would be a more efficient or effective
means of awarding MF-II support than using a reverse auction.
B. Mobility Fund Phase II Budget
18. The Commission adopts a budget of $4.53 billion for MF-II over
ten years--the amount of legacy support mobile carriers outside Alaska
would receive over the next decade less the funding needed to phase-
down support in census blocks fully built with private capital. Current
legacy high-cost support received by wireless providers is
approximately $483 million per year, excluding Alaska, and around $300
million of that amount is being provided to census blocks fully covered
with unsubsidized 4G LTE. In the MF-II Order, the Commission is phasing
down the support it pays for those areas over two years, with these
phase-down payments totaling one year's support, i.e., approximately
$300 million. In keeping with its obligation to be fiscally
responsible, the Commission arrives at an annual MF-II budget by taking
$483 million (representing current CETC support), minus $30 million
(representing the estimated $300 million phase-down payments for those
areas, evenly apportioned over the ten-year term), for a total each
year of $453 million. Given the need to preserve and advance 4G LTE
service revealed by its staff analysis, the Commission concludes that
retargeting existing funds is appropriate.
19. The cost of universal service programs is ultimately borne by
the consumers and businesses that pay to fund these programs, and the
Commission has a corresponding obligation to exercise fiscal
responsibility by avoiding excessive subsidization and overburdening
communications consumers. The courts have recognized that over-
subsidizing universal service programs can actually undermine the
statutory principles set forth in section 254(b) of the Communications
Act of 1934, as amended (Communications Act), 47 U.S.C. 254. The
Commission adopts an MF-II budget to balance the various competing
objectives in section 254 of the Communications Act, including the
objective of providing support that is sufficient, but not so excessive
so as to impose an undue burden on consumers and businesses. The
Commission further notes that MF-II is only one component of its
broader reform efforts, and the MF-II annual budget also reflects a
careful analysis of the respective needs and objectives of all aspects
of the universal service program.
20. The Commission finds that this level of support over the next
ten years will allow MF-II to achieve its objectives in a fiscally
responsible manner. The Commission recognizes that the currently
unserved areas are likely the most expensive areas in the country to
serve; however, its budget--when distributed cost-effectively--should
make meaningful progress in eliminating the lingering coverage gaps.
The Commission also remains free, after the auction has concluded, to
assess its results and determine whether additional funding is needed
to advance the deployment of advanced mobile services throughout rural
America.
21. The Commission declines to adopt the proposal in the 2014 CAF
Further Notice to significantly reduce the budget for MF-II. The
proposal to reduce the budget in the 2014 CAF Further Notice was made
in the context of awarding
[[Page 15425]]
support for service based on uncovered population, rather than land
areas where mobile broadband is absent. Because the Commission has
decided to award support to cover square miles, its projected funding
requirements in 2014 are inapplicable.
22. The Commission declines to adopt two separate budgets--one to
fund operating expenses for preservation of service and one to fund
capital expenses for expansion of service--as proposed by one
commenter. This proposal would require two separate auctions to award
support from two funds, which would be administratively less efficient
and risk duplicative funding to eligible areas. Moreover, two funds
would require the Commission to decide in advance the levels of support
for each, and would require the Commission to monitor and enforce
restrictions on the purposes for which these two types of support can
be used. By contrast, a single fund allows reverse auction bidders to
make their own efficiency tradeoffs between operating and capital
expenses.
23. In establishing the MF-II annual budget, the Commission affirms
its commitment to fiscal responsibility, and takes steps herein to
ensure that the support awarded is not excessive. The Commission makes
clear that there is discretion to set reserve prices as part of the
procedures for the reverse auction, which will provide a backstop in
the event there is insufficient competition to act as a restraint on
the price of the support to be provided in particular cases. To
safeguard the monies dedicated to this budget, the Commission adopts
requirements to ensure that MF-II support recipients are meeting the
service obligations and conditions associated with the ongoing award of
such annual support. The Commission retains the discretion to
distribute less than the total amount authorized in a given year if
support recipients fail to meet performance or other program
obligations.
24. The Commission denies the Petition for Declaratory Ruling filed
by United States Cellular Corporation, requesting that the Commission
award to ``next-in-line'' bidders in Auction 901 more than $68 million
of undisbursed MF-I support on which the winning bidders in that
auction defaulted. The Commission will not award the unclaimed MF-I
support to the next-in-line bidders in Auction 901. As the petitioner
recognizes, the Commission addressed undisbursed support payments in
the USF/ICC Transformation Order. Among the goals and purposes of the
Universal Service program is the goal to award support in a fiscally
responsible manner, thereby minimizing the universal service
contribution burden on consumers and businesses. In its decision, the
Commission adopts ongoing support with an annual budget of $453 million
for MF-II and target support to areas where it is most needed, i.e.,
areas that lack 4G LTE service and areas where service only exists due
to a subsidy. The Commission finds this is a better use of universal
service funds than allocating funds to the next-in-line bidders in
Auction 901, based on the outdated standards for eligible areas used in
2012 for MF-I.
C. Tribal Mobility Fund Phase II
25. The Commission reserves support to Tribal lands (excluding
Alaska) as part of the overall MF-II budget. The Commission will
calculate this budget by applying the ratio of square miles in eligible
Tribal lands to square miles of all eligible areas (adjusting for a
terrain factor) to the total budget it has chosen for MF-II. The
Commission expects that Tribal lands likely will be more expensive to
serve than non-Tribal lands due to their lower population density and
income levels, as well as the lack of power or roads in some parts of
Indian country and the need for federal approval (such as from the
Bureau of Indian Affairs) before broadband can be deployed there. The
Commission concludes that reserving this support within MF-II is a fair
means and reasonable metric to ensure that Tribal lands are not left
behind in the auction. Current estimates are that this ratio would be
about 7%, so the Commission expects to reserve at least $340 million
from the MF-II budget as support for Tribal Lands. The definitive
budget will be set when the final set of eligible areas is determined
after the challenge process.
26. The Commission concludes that it is appropriate to freshly
consider the size of the Tribal MF-II budget rather than seek to
simplistically follow earlier Commission decisions pre-dating several
important developments. The Commission originally proposed to set aside
up to $100 million annually for Tribal lands, but then later dedicated
$96 million annually to Tribal lands in remote areas of Alaska.
Subtracting the latter from the former would leave a Tribal MF-II
budget of only $4 million. If the Commission looked to the Tribal
Mobility Fund Phase I auction as a way of apportioning the Commission's
initial estimate, it would see that the vast majority of those funds
(81 percent) were won by Alaskan bidders. Subtracting that proportion
for the Commission's initial $100 million proposal would leave mainland
Tribal lands with only $19 million. The Commission believes that
premising the Tribal MF-II budget on the Commission's earlier actions
is likely insufficient to reflect the need for funding to advance 4G
LTE services on Tribal lands in 2017 and beyond. Rather, the Commission
finds that the methodology described in the MF-II Order will better
serve the public interest.
27. Providers of service to eligible areas within Tribal lands will
also be able to bid for general support in MF-II--so, with sufficient
auction participation, the funds reserved as part of the Tribal
Mobility Fund will be a floor, not a ceiling, on support for Tribal
lands.
28. The Commission adopts the proposal to award MF-II support for
Tribal lands subject to the same terms and conditions as are applicable
to all eligible areas in MF-II. The Commission declines to adopt the
rules proposed in the USF/ICC Transformation FNPRM regarding special
ETC designation treatment for Tribal MF-II participants because the
Commission is revising the timing of its ETC designation requirement
for all MF-II participants. The Commission declines to adopt separate
coverage units for Tribal MF-II. The Commission declines to pursue the
suggestion of one commenter that carriers serving Tribal lands be
allowed to participate in an opt-in funding plan similar to the Alaska
Plan. The unique basis for the Commission's adoption of the Alaska plan
was not the existence of Tribal lands in Alaska, but rather its
concerns about the need for support to be flexible enough to
accommodate Alaska's unique conditions, including its ``remoteness,
lack of roads, challenges and costs associated with transporting fuel,
lack of scalability per community, satellite and backhaul availability,
extreme weather conditions, challenging topography, and short
construction season.'' The Alaska Plan is limited to addressing these
unique challenges.
29. The Commission will establish procedures for MF-II in
consultation and coordination with the Commission's Office of Native
Affairs and Policy. This will allow funds reserved for Tribal lands to
be included as part of the MF-II auction. The Commission believes this
path of conducting Tribal MF-II as a component of MF-II is best for
quickly initiating support for mobile networks on tribal areas.
30. The Commission declines to adopt a formal Tribal engagement
obligation or a bidding credit preference for Tribally-
[[Page 15426]]
owned-and-controlled entities. The Commission agrees with commenters
that a tribal engagement obligation is not necessary because it could
create an excessive administrative burden, without a material
countervailing benefit, when many carriers already have established
relationships with Tribes. In addition, adopting formal Tribal
engagement requirements could deter participation in Tribal lands and
would likely divert providers' resources, thus potentially delaying
their deployment of service to Tribal lands. The Commission expects
carriers participating in the Tribal MF-II to work with Tribes to
facilitate the deployment of the highest quality service to the people
living on Tribal lands. The Commission finds that a bidding credit
preference for Tribally-owned-and-controlled entities is unnecessary
for the MF-II auction. Although several commenters assert that a
bidding credit preference would create an incentive for bids and
increase the likelihood of service to Tribal lands, the Commission
finds that setting aside funds specifically to serve Tribal lands is
likely to accomplish the Commission's goal of ensuring greater coverage
on Tribal lands. The Commission also finds that layering an additional
bidding credit for Tribal carriers on top of the funding exclusively
available for service to Tribal lands could deter other entities from
bidding to serve Tribal lands, reducing both the competitiveness of the
auction and the potential reach of the Commission's finite funds for
MF-II. Furthermore, commenters fail to demonstrate that the benefits of
a bidding credit preference outweigh the costs of potentially depriving
other eligible areas of MF-II support.
D. Identifying Geographic Areas Eligible for Support
1. Geographic Area as the Metric for Assessing Mobile Coverage
31. The Commission will use geographic area expressed in square
miles as the metric for measuring coverage, comparing bids, and
assessing compliance with the corresponding coverage requirement for
winning bids in MF-II. The Commission will only award support for those
geographic areas without 4G LTE from an unsubsidized provider. The
Commission will be making eligible for support only the unserved
geographic areas within a census block, rather than the entire area
within the block.
32. Requiring coverage of a geographic area most closely reflects
the Commission's goal to have mobile services available everywhere
people live, work, and travel. A geographic area is a broad measure
that encompasses all the alternative metrics proposed in the record,
such as roads, population, farm land, and areas remote from roads or
significant population centers. Targeting support for mobile broadband
service based solely on where people may live or where roads of certain
sizes may be located is not enough. Those narrower approaches would not
direct support everywhere consumers need and use a mobile service.
Basing the award of MF-II support on a bid for square miles takes into
account many of the other areas where mobile service is important but
for which standardized data are less available--such as business
locations, recreation areas, work sites, and agricultural spaces. For
example, precision agriculture relies on mobile networks for
connectivity, so the value of having coverage in farmland is not
directly related to the number of people or number of roads there.
33. Using geographic areas as the metric for MF-II will be
relatively simple to administer. The Commission will examine the areas
that do not appear in the coverage shapefiles from providers' Form 477
data. There will be no need to obtain and validate the accuracy of
another data source (e.g., road maps or population data) and then
overlay those data on the shapefiles. Although the Commission utilized
road miles for MF-I, there were drawbacks to that approach. In
particular, the Commission found that roads may not be consistently
categorized by states into TIGER categories for which support is
provided and that there are different opinions regarding the specific
TIGER categories of roads that should be included. With respect to
population, standardized data are available regarding total population
per census block, but not with respect to where population is located
within a census block. The difficulties in measuring compliance based
on population stem from the fact that, while the Commission knows how
many people are in a given census block, it does not know where in that
census block they are located. While this challenge could be overcome
by a 100 percent coverage requirement, commenters generally oppose such
a coverage requirement.
2. Minimum Geographic Area for Bidding and Support
34. The Commission concludes that the minimum geographic area for
bidding should be census block groups or census tracts containing one
or more census blocks with eligible areas for bidding and support for
MF-II. The Commission expressed its intent to employ this same approach
in the Connect America Phase II Auction Order, 81 FR 44413, July 7,
2016. The full Commission will make the final decision on minimum
geographic area in the pre-auction process. The Commission refers
generally to the ``pre-auction process'' in the MF-II Order, which is
the process through which final auction procedures will be implemented
and the final list of eligible areas will be determined. The Commission
may seek comment on, and/or resolve, certain final auction procedures
in separate public notices if doing so better conduces to the proper
dispatch of business. Any such public notices will be released during
the pre-auction process and well in advance of the auction.
35. Although the Commission continues to recognize that using
census blocks allows it to target support to specific areas thereby
providing bidders the ability to tailor their bids to their business
plans, its experience with the MF-I auction demonstrates the need to
limit the number of discrete biddable units. The Commission concludes
it is best to set performance requirements based on an area larger than
a census block. The Commission adopts a broader, more manageable
approach that will combine one or more census blocks containing
eligible areas into census block groups or census tracts.
3. Identifying Areas That Need Mobility Fund Phase II Support
36. The Commission reaffirms its goals and now seeks to promote the
deployment of 4G LTE in all areas where it would not be offered by the
private sector in the absence of universal service support. The
Communications Act directs the Commission to fund ``reasonably
comparable'' services in rural areas to those commonly available in
urban areas. Looking to the mobile speeds generally reported by
nationwide carriers on their Form 477 submissions, the Commission finds
that such carriers are generally reporting the deployment of 4G LTE
reported at minimum advertised download speeds of at least 5 Mbps. The
Commission will use this speed benchmark to identify areas eligible for
MF-II. The Commission rejects requests to use the same 10/1 Mbps
thresholds for determining area eligibility that it requires of MF-II
support recipients for determining compliance with performance
requirements.
37. The Commission concludes that any census block that is not
fully covered by unsubsidized 4G LTE will
[[Page 15427]]
contain areas that are eligible for support in the MF-II auction. This
sub-census block approach to eligibility addresses long-standing
concerns that current methods used to estimate network coverage may
classify whole census blocks as served notwithstanding that they
contain significant areas that remain unserved.
4. Source of Coverage and Subsidy Data
38. The Commission concludes that Form 477 data is the most
reliable data currently available for the purpose of determining the
coverage levels of existing mobile services, including unserved areas,
and areas served by the various technologies that provide 2G, 3G, 4G,
and 4G LTE services. The Commission will use Form 477 mobile wireless
coverage data and high-cost disbursement data available from the
Universal Service Administrative Company (USAC) to determine coverage
levels in individual census blocks and whether high-cost support is
being awarded. Prior to an MF-II auction, the Commission will compile
the list of potentially eligible areas from the data submissions that
are most recently available for this purpose.
39. In the 477 Report and Order, 78 FR 49126, August 13, 2013, the
Commission made clear that the enhanced deployment data collection
requirements it adopted were ``needed to fulfill [its] universal
service mandate.'' The 477 Report and Order significantly enhanced the
reliability of the data the Commission collects by requiring the
submission of deployment shapefiles that depict ``the coverage
boundaries where, according to providers, users should expect the
minimum advertised upload and download data speeds associated with [a]
network technology,'' such as LTE. Specifically, for each mobile
broadband network technology (e.g., EV-DO, WCDMA, HSPA+, LTE, WiMAX)
deployed in each frequency band (e.g., 700 MHz, Cellular, AWS, PCS,
BRS/EBS), every facilities-based mobile broadband provider must submit
polygons representing its nationwide coverage area (including U.S.
territories) of that technology. While these coverage data provide the
most accurate depiction the Commission has on the deployment of mobile
networks, they do not indicate the extent to which providers
affirmatively offer service to residents in the covered areas. By
requiring a single, uniform filing format for the shapefiles, the
Commission reduces the potential for distortion or misleading
comparisons of the data. The Commission requires all facilities-based
broadband providers to file Form 477 twice a year, and the Commission
requires that the providers certify as to the accuracy of the data
submitted. As Wireless Telecommunications Bureau staff has
demonstrated, Form 477 data along with USAC CETC support data can
provide sufficiently granular information to identify those areas of
the country that lack 4G LTE service or where such service is only
provided by a subsidized provider.
40. The Commission has recently concluded that ``data from the Form
477 . . . help [it] better analyze mobile broadband deployment than in
years past.'' The Wireless Telecommunications Bureau determined that
the Form 477 coverage data ``provide the most accurate depiction the
Commission has on the deployment of mobile networks,'' and none of the
commenters criticizing the Form 477 data has identified a better data
source for moving forward expeditiously to implement MF-II. Recognizing
that no data source--including Form 477--will be perfectly accurate,
the Commission will utilize a challenge process to improve the accuracy
of the coverage analysis underlying eligibility determinations reached
in reliance on Form 477 data.
41. Finally, one public service commission urges the Commission to
seek input from states that have instituted programs to identify areas
lacking coverage. The Commission recognizes that some state commissions
have acquired detailed information about coverage within their states,
and encourage states to submit information that is probative for
determining eligibility during the challenge process. However, because
individual state and territory information may not be uniform
throughout the nation, the Commission declines to rely on such data to
the exclusion of other sources and will continue to rely primarily on
Form 477 data certified by providers. Nonetheless, the Commission will
consider coverage data from states and other sources in its challenge
process.
5. Applying Coverage and Subsidy Data to Census Blocks
42. The Commission concludes that it will apply an actual coverage
analysis to determine presumptive eligible areas for MF-II support, in
lieu of the centroid method employed in MF-I. In the time that has
passed since the Commission first proposed using the centroid method in
MF-II, the Commission has been able to gather much more robust
information about service coverage areas from the certified Form 477
data that providers are required to submit twice a year. The Commission
can now more reliably identify those areas within census blocks that do
not today have unsubsidized 4G LTE coverage; use high-cost support data
to determine where 4G LTE is provided without subsidy; and by
overlaying the coverage and the support data, identify the areas
presumptively lacking unsubsidized 4G LTE. The resulting analysis
presents the most accurate data currently available on which areas
should be eligible for MF-II. The Wireless Telecommunications Bureau
staff released its analysis using providers' Form 477 data last fall
and will publish a preliminary list of eligible areas as part of the
pre-auction process. The data released on eligible square miles will be
grouped by census blocks, which in turn will be grouped by census block
group or census tract as the minimum geographic area for bidding, and
include the total eligible square miles in each census block and the
location of each eligible area. As explained in the MF-II Order, these
groupings will be announced by public notice as part of the pre-auction
process. The location of each presumptively eligible area will be
necessary to define the service areas being auctioned and to define
coverage obligations.
43. In response to the USF/ICC Transformation FNPRM and Further
Inquiry Public Notice, 77 FR 73586, December 11, 2012, some carriers
express concern that the centroid method may not accurately reflect
coverage. Some rural commenters note, for example, that in some cases
the centroid of a block may be covered, but large areas outside the
centroid are not and that such blocks may be unfairly excluded from
support. Many of those commenters support the proportional method,
which determines eligibility for support based on whether each census
block's coverage percentage is below a certain threshold, as an
alternative. Like the proportional method, the approach the Commission
adopts in the MF-II Order examines coverage at the sub-census block
level, thereby remedying the chief concern with the centroid method.
Because it can identify specific areas within each census block where
4G LTE coverage is absent, the actual area coverage approach is a
significant improvement over the centroid method in reaching the
Commission's universal service goals. It is a far more precise way to
target the MF-II budget.
6. Challenge Process
44. Consistent with the general approach adopted for MF-I and more
recently, for Connect America Fund Phase II (CAF-II), the Commission
concludes that it will provide a robust
[[Page 15428]]
process for interested parties to challenge the list of presumptively
eligible areas for MF-II support. The challenge process will address
challenges to coverage determinations only and will not address
challenges to the allocation of legacy CETC support within study area
geographies. To provide interested parties the opportunity to review
the coverage analysis on which eligible areas are identified, the
Commission directs the Bureaus to make an initial determination of
eligible areas by census block as part of the pre-auction process.
Subsequently, the Bureaus shall implement a process consistent with the
decisions the Commission will make after review of the record received
in response to the Further Notice of Proposed Rulemaking adopted along
with the MF-II Order. The Commission defers making further decisions
regarding the challenge process in the MF-II Order because, while
commenters generally support a challenge process, they have different
views with respect to how such a process should work, and the
Commission finds that seeking further comment will be helpful in
reaching decisions.
45. The Commission expects that the challenge process will conclude
by the end of January 2018. At the conclusion of the challenge process,
the Commission directs the Bureaus to make a final determination of
areas eligible for MF-II support.
E. Transition of CETC Support to MF-II Support and Preservation of
Service
46. The Commission amends its rules for the phase-down of identical
support in order to smoothly transition to the Commission's provision
of MF-II support, as well as to provide continuing support to those
eligible areas that do not receive MF-II support. The Commission's
phase-down rules have been designed so as not to be inconsistent with
the provisions in 47 CFR 54.307(e)(5)-(6) (2015), unless and until the
restrictions in Consolidated Appropriations Act, 2016, Public Law 114-
113, Div. E, Title VI, section 631, 129 Stat. 2242, 2470 (2015), are no
longer in effect. The Commission adopts differing phase-down schedules
for CETC support in ineligible and eligible areas.
47. First, as part of the pre-auction process, the Commission
directs the Bureaus to disaggregate each CETC's legacy support among
the census blocks it serves using that support. Currently, legacy
support is provided to a CETC's entire study area (SAC), with no
attribution to particular sub-areas within the SAC. That creates a
problem for comparing support among CETCs to serve a given area and for
determining how much support is being used to compete with private
capital. The Commission faced a similar problem when it decided to
disaggregate support for legacy rate-of-return carriers last year and
retarget that support to areas unserved by unsubsidized competitors.
48. In choosing a disaggregation method, the Commission is
persuaded that it should account for the relative costs of deploying a
coverage-based network given the differing terrain throughout the
United States. Specifically, the Commission declines to adopt a
disaggregation method that assumes that support is allocated uniformly
throughout a provider's SAC--doing so would specifically ignore the
additional costs that wireless providers incur to deploy service in
more difficult terrain. Instead, the Bureaus shall apply a more-refined
methodology that uses a terrain factor as a proxy for determining
higher cost areas. For example, more mountainous terrains with greater
variations in slope are areas that tend to be more costly to serve than
level plains. The terrain factor would be used to weight the area of a
block such that eligible areas in more mountainous areas would be
allocated a greater amount of a CETC's total legacy support to reflect
the higher costs of serving such areas.
49. Second, the Commission establishes the following schedule for
the phase-down of legacy support and commencement of auction payments.
In census blocks determined (after the completion of the challenge
process) not to be eligible for MF-II support, legacy support will be
phased down starting the first day of the month following release of a
public notice announcing the close of the MF-II auction. On that same
date, legacy support for current recipients in eligible census blocks
shall either be converted to MF-II support (for the winning bidder),
maintained (for one CETC in areas without a winning bidder), or subject
to phase down (for all other CETCs). The Commission concludes that this
schedule is fully consonant with its rules, which require that CETCs
continue to receive support at current levels until MF-II and Tribal
MF-II are implemented. MF-II and Tribal MF-II will be implemented when
the public notice announcing the close of the MF-II auction and
identifying the winning bidders has been released. This schedule will
apply only to the recipients of legacy support. A different schedule
will apply to winning bidders that do not receive legacy support in the
areas of their winning bids.
50. More specifically, in census blocks determined (after the
completion of the challenge process) not to be eligible for MF-II,
legacy support will be phased down starting the first day of the month
following the close of the MF-II auction. For the first 12 months
thereafter, phase-down support shall be \2/3\ of the legacy support for
each CETC associated with that area. For the next 12 months, phase-down
support shall be \1/3\ of the legacy support for each CETC associated
with that area. All legacy support shall end thereafter.
51. For a winning bidder that is a CETC receiving legacy support in
the area of its bid, MF-II support shall commence on the first day of
the month after the auction concludes. To ensure a smooth transition to
MF-II support, and to the extent the Commission authorizes a winning
bidder to receive MF-II support after that date, a winning bidder will
receive support payments at the current legacy support level until such
Commission action. A winning bidder that is also entitled to legacy
support for an area subject to its winning bid will not be entitled to
receive MF-II support until the Commission issues a public notice
authorizing support to that bidder. In the public notice, the
Commission will direct and authorize USAC to disburse monthly MF-II
payments to the winning bidder and to cease paying it at the legacy
support level. Furthermore, to ensure that the winning bidder receives
the appropriate amount of MF-II support, the Commission will direct
USAC to adjust, on a going-forward basis, the amount of the monthly MF-
II payments for a limited period of time to account for the difference
between the payments at the legacy support level and the MF-II payments
in the amounts to which the winning bidder has committed at auction,
for the period between the close of the auction and the issuance of the
public notice.
52. If the Commission does not authorize the bidder to receive MF-
II support, it will direct USAC to adjust the amount of the bidder's
preservation-of-service or phase-down support under the MF-II rules, on
a going-forward basis, to account for the difference between the
payments at the legacy support level and the preservation-of-service or
phase-down payments for the period between the close of the auction and
the Commission's denial of authorization. As an additional mechanism to
prevent perverse incentives, however, the Commission finds that, in
applying these rules, a winning bidder committing an auction default
will be considered as having received support in the amount of its
[[Page 15429]]
winning MF-II bid if that bid is less than its level of CETC support
for this area. In light of the Commission's experience with the MF-I
auctions, it also adopts a contingency plan to address the possibility
that such a winning bidder might default on its bid prior to the
authorization of support or be denied such authorization. Under this
contingency plan, no MF-II support will be awarded for the area. In
that event, the Commission will, however, to the extent applicable,
provide legacy support to CETCs under the preservation-of-service rule
and the phase-down rule. The Commission concludes that this schedule is
fully consonant with its rules, which mandate that a winning bidder
``cease to be eligible for phase-down support in the first month for
which it receives Mobility Fund Phase II support.''
53. The Commission adopts a different schedule for winning bidders
that are not CETCs in the areas of their winning bids. Because non-CETC
winning bidders must meet the same construction deadlines as CETC
winning bidders, the Commission will provide an initial balloon payment
of MF-II support to non-CETC winning bidders to place non-CETC winning
bidders on approximately the same footing as other winning bidders. The
balloon payment will consist of the non-CETC winning bidder's monthly
MF-II payment amount multiplied by the number of whole months between
the first day of the month after the close of the auction and the
issuance of the public notice authorizing support. Unlike other winning
bidders, a non-CETC winning bidder will not receive MF-II support for
the area of its winning bid on the first day of the month after the
auction concludes because it would not necessarily be designated as an
ETC in that area. A non-CETC winning bidder instead will receive MF-II
support once the Commission issues a public notice authorizing MF-II
support to the bidder. Based on this schedule, there is no need to
adjust payments to account for the continued payments at the legacy
support level. The remainder of the discussion in this section concerns
the phase down of legacy support for mobile CETCs.
54. In eligible areas where there is no winning bidder in MF-II,
the CETC receiving the minimum level of sustainable support will
continue to receive such support until further Commission action, but
for no more than five years from the first day of the month following
the close of the MF-II auction. The Commission defines the minimum
level of sustainable support to be the lowest amount of legacy support
among CETCs that have deployed the highest technology for that area.
The Commission concludes maintaining such support is necessary to
preserve service for consumers in such areas pending further Commission
action.
55. For CETCs receiving support in areas eligible for MF-II that do
not either win MF-II support or receive the minimum level of
sustainable support, the phase-down of support shall commence on the
first day of the month after the auction concludes. For the first 12
months, phase-down support shall be \2/3\ of the legacy support for
each CETC associated with that area. For the next 12 months thereafter,
phase-down support shall be \1/3\ of the legacy support for each CETC
associated with that area. All legacy support shall end thereafter. The
Commission concludes that this two-year phase-down schedule will ensure
that the affected CETCs will have a smooth transition in areas that are
too costly to serve absent universal service subsidies.
56. The Commission adopts this phase-down schedule to fund new
service obligations undertaken by new MF-II auction winners, protect
customers of current support recipients from a potential loss of
service, and minimize the disruption to legacy support providers from a
loss of funding. The Commission balances the concerns recipients of
legacy support express regarding a rapid termination of legacy support
with its need to preserve its finite universal service funds and begin
funding service under the terms and amounts established by winning bids
in its MF-II reverse auction. Accordingly, in the Commission's
implementation of MF-II support, it now establishes a certain path
toward no longer paying such legacy support, except to preserve service
where it exists on a subsidized basis in eligible areas where there is
no winning bidder in the MF-II auction.
57. Finally, in light of the phase down schedules the Commission is
adopting, it sees no need to treat differently the phase down of
support going to any mobile CETC for which high-cost support represents
one percent or less of its wireless revenues. As a result, legacy CETC
support to these providers will proceed on the same phase-down schedule
as for other providers.
F. One Provider per Eligible Area
58. The Commission limits support to a single provider for a given
geographic area going forward. The Commission has a statutory
obligation to ensure access to advanced telecommunications and
information service in all regions of the country at reasonably
comparable rates, and a related obligation to ensure that public
funding is used effectively and efficiently in furtherance of the
Commission's statutory mandate. It is therefore incumbent upon the
Commission to adopt a structure for awarding universal service support
that ensures the finite public funds available are directed in a way
that sustains and expands the availability of mobile services to
maximize consumer benefits.
V. Public Interest Obligations
59. Having established the framework of MF-II, the Commission now
addresses the public interest obligations that must be met by
recipients of MF-II support, including performance metrics for minimum
data speeds, maximum latency measurements, and minimum usage
allowances, consistent with the provision of 4G LTE service. These
performance requirements will be used to measure compliance with
established benchmarks during the ten-year term of support.
A. Performance Metrics
60. The Commission will require recipients of MF-II support to
deploy 4G LTE. Around 84 percent of the nation's square miles
(excluding Alaska) are covered by 4G LTE networks, as of December 2015.
As the transition to 4G LTE service and the transition of voice to
voice over LTE technology become widespread, the Commission anticipates
that older devices will be retired and future devices will be LTE
capable. With the nearly universal deployment of 4G LTE comes a broad
record consensus that the network technology for any new deployment the
Commission funds in MF-II should be 4G LTE. Targeting MF-II support to
4G LTE will ensure that the Commission does not relegate rural areas to
substandard service that is not comparable to urban LTE service, and
that the supported service is technologically capable of supporting
roaming on the industry LTE standard, including the networks of the
four nationwide mobile wireless service providers. The Commission's
standards for supported service should ensure that its finite universal
service funds are used efficiently to provide consumers access to
robust mobile broadband service that is comparable to the 4G LTE
service being offered today in urban areas. By requiring the deployment
of 4G LTE with on-going MF-II support, the Commission can better
utilize universal service support to reach the approximately 575,000
square miles that either lack 4G LTE coverage or only have coverage
because of subsidized service.
[[Page 15430]]
61. The Commission requires recipients of MF-II support to offer
voice service, and it adopts minimum requirements for network
performance and an offered service plan that, together with the 4G LTE
requirement, will define the baseline 4G LTE performance standard for
MF-II recipients. Recipients of MF-II funding will be required to meet
minimum baseline performance requirements for data speeds, data
latency, and data allowances in areas that receive support for at least
one plan that they offer. The median data speed of the network for the
supported area must be 10 Mbps download speed or greater and 1 Mbps
upload speed or greater, with at least 90 percent of the required
download speed measurements being not less than a certain threshold
speed. For latency, at least 90 percent of the required measurements
must have a data latency of 100 milliseconds or less round trip.
Support recipients must offer at least one service plan that includes a
data allowance comparable to mid-level service plans offered by
nationwide providers. Currently, mid-level plans offer a data allowance
of at least 2 GB of data per month. Because industry and consumer
practices may evolve over time, the Commission will consider, after an
opportunity for comment, whether to require a larger data allowance,
initially or during the term of support, based on then-available mid-
level plans and/or the average per subscriber data usage. The
Commission will conduct the initial consideration of these issues, with
subsequent consideration occurring by the Bureaus on delegated
authority. A support recipient's service plan with the required data
allowance must be offered to consumers at a rate that is within a
reasonable range of rates for similar service plans offered by mobile
wireless providers in urban areas. These conditions will be defined
more precisely in the pre-auction process. The Commission will retain
its authority to look behind recipients' performance certifications and
take action to address any violations that develop.
B. Term of Support
62. The Commission adopts a ten-year term for MF-II support, which
will begin on the first day of the month after the MF-II auction
concludes. As the Commission approaches the end of the ten-year term,
it can reassess the marketplace and determine whether a mechanism to
provide future support for mobile services is needed. In addition, the
Commission declines to adopt a renewal expectancy for winning bidders.
63. A ten-year term of support is consistent with the term adopted
by the Commission for Connect America Phase II support. As the
Commission recognized in the 2014 CAF Order, 79 FR 39163, July 9, 2014
providing support for a period of ten years is appropriate as it may
stimulate greater interest in the competitive bidding process.
Consequently, that ``[i]ncreased participation in the competitive
bidding process will help ensure that funding is targeted efficiently
to expand broadband-capable infrastructure throughout the country.''
The Commission is mindful of using the lessons learned from CAF in its
implementation of MF-II.
64. The Commission further agrees with commenters that a ten-year
term of support is appropriate in light of the significant capital and
effort needed to deploy and upgrade broadband networks and is
consistent with the timeframe used by rural carriers to plan and
schedule network upgrades. The certainty provided by a term of this
length will help encourage more bidders--particularly smaller wireless
carriers--to participate in the auction.
65. Although the Commission does expect the marketplace to evolve
over the next ten years, it will not adopt performance metrics that
increase over the term of support. The Commission concludes that the
disincentives to auction participation potentially created by evolving
performance standards and the administrative complexity of establishing
such standards outweigh the performance benefits to consumers during
the latter portion of the support period. Winning bidders are required
under section 254(e) of the Communications Act to use their support
throughout their term for ``the provision, maintenance, and upgrading
of facilities and services,'' and the Commission expects winning
bidders, to the extent possible, to upgrade their networks to increase
capacity and offer better services over time.
66. The Commission declines to adopt any renewal expectancy or
similar preference for winning bidders after their ten-year term of
support expires. Although a few parties support a renewal that is based
on whether a carrier has met its deployment and service obligations, a
renewal expectancy might undermine the Commission's ability to satisfy
fiscal management principles, such as the Anti-Deficiency Act. The
Commission therefore declines to adopt a renewal expectancy, because to
do so may undermine its ability to target future universal service
support where it is most needed.
C. Construction Requirements/Benchmarks
67. Consistent with the approach the Commission adopted in the
Connect America Phase II Auction Order, the Commission adopts interim
benchmarks as well as a final benchmark for deployment of service that
meets the performance metrics detailed in the MF-II Order.
Specifically, the Commission defines the starting point for the interim
benchmarks as six months from the first day of the month that follows
the month in which the MF-II auction closes. The Commission requires a
winning bidder to demonstrate coverage of at least 40 percent by three
years after the starting point, 60 percent by four years after the
starting point, 80 percent by five years after the starting point, and
85 percent by six years after the starting point across all areas for
which it receives MF-II support in a state.
68. The Commission concludes that the benchmarks serve as an
appropriate construction schedule for MF-II recipients. Interim
milestones ensure that sufficient progress is being made with the
finite funds it has available. Aligning the MF-II deployment
requirements with the CAF-II requirements not only strikes an
appropriate balance among carriers' competing concerns, but also
increases efficiency and eases administration by leveraging the
knowledge and experience the Commission gained during the CAF-II
process. The Commission finds that by setting these benchmarks, it will
ensure that support recipients make consistent progress towards
providing 4G LTE service to unserved areas of our nation, while still
allowing winning bidders flexibility to address unforeseen problems or
delays in reaching their overall coverage obligations. The Commission
observes that while several commenters sought only a 75 percent
coverage requirement with the expectation of providing 4G LTE mobile
broadband within three years, the Commission concludes that its 85
percent coverage requirement is more consistent with its policy
objective of ubiquitous mobile coverage.
69. Recipients that fail to meet and maintain these performance
obligations within the time provided to submit their representative
data and to certify to coverage requirements will be subject to defined
measures, and must cure these failures to meet the deployment
requirements or they will be in performance default.
70. Consistent with the Commission's CAF-II framework, support
recipients
[[Page 15431]]
must meet their required benchmarks across all areas for which they
receive MF-II in a state. For the final benchmark, every census block
group or census tract in a state (depending on minimum bidding unit)
must also be at least 75 percent covered. This requirement will help
ensure that the Commission's coverage requirements are meaningful for
all consumers in supported areas.
71. In accordance with the data the Commission will ultimately
require for a successful challenge of the eligibility of an area, it
will require parties awarded MF-II support to submit data sufficient to
demonstrate compliance with its coverage requirements. Parties'
demonstrations shall be consistent with the evidence the Commission
determines to be necessary to be submitted in the challenge process.
Concurrent with their submissions of data, recipients of support will
have to certify that they have met the Commission's deployment
benchmarks. The Commission directs the Bureaus to precisely define
these requirements in the pre-auction process. This is consistent with
the USF/ICC Transformation Order in which the Commission directed the
Bureaus and the Office of Engineering and Technology to refine the
methodology for broadband performance testing. The Commission is
entrusted with distributing significant amounts of universal service
contributions from consumers and businesses, and it must ensure that
there is actual coverage for consumers in areas where it is paying
support recipients.
D. Collocation and Voice and Data Roaming
72. The Commission adopts the same collocation and voice and data
roaming obligations for MF-II winning bidders as the Commission adopted
for MF-I, with certain minor, non-substantive changes. With respect to
collocation obligations, the Commission requires that recipients of MF-
II support allow for reasonable collocation by other providers on all
towers that they own or manage in the areas for which they receive
support. The Commission also requires that support recipients comply
with its voice and data roaming requirements on networks that receive
MF-II support. Specifically, consistent with the approach adopted for
MF-I, the Commission requires that recipients of MF-II support provide
roaming pursuant to 47 CFR 20.12 and comply with any modifications of
the roaming rules that it makes during the period MF-II support is
provided throughout networks that receive MF-II support.
73. The Commission declines to expand the data roaming obligations
as some commenters suggest, as the Commission's experience in MF-I
indicates that the rules it adopted there provide sufficient
safeguards. Violations of these obligations by support recipients could
result in the withholding of monthly universal service support, a
finding of performance default, and losing eligibility for future
Mobility Fund or USF participation. The Commission's general
enforcement tools are also available to redress any violation of its
rules.
E. Reasonably Comparable Rates
74. To implement the statutory principle for MF-II, the Commission
adopts the proposed rules and will require recipients to certify in
their long-form applications and annually that in areas where they
receive support they offer service at rates that are within a
reasonable range of rates for similar service plans offered by mobile
wireless providers in urban areas. Recipients' service offerings will
be subject to this requirement until the end of the term of support.
75. The Commission adopts a presumption that if a given provider is
offering the same rates, terms and conditions (including usage
allowances, if any, for a specified rate) to both urban and rural
customers, then that is sufficient to meet the statutory requirement
that services be reasonably comparable.
76. The Commission further concludes that a recipient can
demonstrate compliance with the required certification if its stand-
alone voice plan and one service plan that offers data services is
substantially similar to a service plan offered by that provider, if
the provider has urban service areas, or by at least one mobile
wireless provider in an urban area and is offered for the same or lower
rate than the matching urban service plan. During the pre-auction
process, the Commission may define more precisely the circumstances
under which a provider can demonstrate compliance with this
certification. The Bureaus will conduct any subsequent consideration of
possible revisions regarding compliance with this requirement. The
Commission retains its authority to look behind recipients'
certifications and take action to address any violations that develop.
VI. Provider Eligibility Requirements
77. The requirements the Commission adopts are essentially the same
as those adopted for MF-I, with the limited exception that for MF-II,
an applicant seeking to participate in the auction will be permitted to
be designated as an ETC after it is announced as a winning bidder for a
particular area in accordance with procedures it implements. Consistent
with the eligibility requirements for MF-I, a qualified MF-II applicant
must demonstrate access to spectrum capable of the appropriate level of
service in the geographic areas to be served, and certify as to its
financial and technical capability to provide service within the
specified timeframe. The Commission concludes that it will not impose
any additional eligibility requirements to participate in MF-II.
A. Designation as an ETC
78. The Commission will permit a winning bidder in the MF-II
auction to obtain its ETC designation after the close of the auction,
provided it submits proof of its ETC designation within 180 days of the
public notice identifying winning bidders. Before MF-II support is
disbursed to a winning bidder, it must demonstrate that it has been
designated an ETC covering each of the geographic areas for which it
seeks to be authorized for support and that its ETC designation allows
it to fully comply with the Commission's coverage requirements. The
Commission declines to disturb the current system of state jurisdiction
over ETC designations, even as the Commission permits winning bidders
to obtain ETC status after being announced as winners in the MF-II
auction.
79. Although the Commission initially proposed to follow the
approach it adopted for MF-I and require all applicants to demonstrate
ETC designations prior to the auction, its experience after Auction 901
and Auction 902, and its most recent conclusions regarding ETC
designations in the CAF-II context, weigh in favor of a more flexible
approach for MF-II.
80. As the Commission concluded in the CAF-II context, permitting
post-auction ETC designations for MF-II may improve applicant
participation in the auction. It will also conserve participants'
resources by avoiding obligations for auction participants who do not
win any coverage areas in the auction, as well as safeguarding
potential bidding strategies of applicants seeking ETC designation
before an auction. The Commission will not provide any support until a
winning bidder has obtained and demonstrated ETC designation for its
entire winning bid area, and is not persuaded by the concerns raised by
one commenter, which argues that allowing applicants to seek ETC
designation after winning
[[Page 15432]]
would encourage speculation by carriers seeking to obtain federal
funding to serve areas that are unfamiliar to them.
81. Similar to the process adopted for CAF-II support, the
Commission requires winning bidders of MF-II support to submit proof of
their ETC designations within 180 days of the public notice announcing
them as winning bidders. Failure to obtain ETC status and submit the
required documentation by the deadline will be considered an auction
default, though the Commission will consider applications for waiver of
the 180-day deadline from entities who are diligently pursuing ETC
designation.
82. Based on what the Commission observed in the rural broadband
experiments, when considering waivers of the 180-day timeframe for
obtaining ETC designation, the Commission will presume that an entity
will have acted in good faith if the entity files its ETC application
within 30 days of the release of the public notice announcing that it
is a winning bidder. Consistent with the rural broadband experiments,
where the Commission delegated authority to the Wireline Competition
Bureau to act on waivers, here, the Commission directs the Wireless
Telecommunications Bureau to act on any such waivers.
83. Any circumstances where a state will need more time due to
procedural requirements or resource issues can be dealt with through
the waiver process. Accordingly, to preserve the primary role that
Congress gave the states in designating ETCs, the Commission reaffirms
that it will act on an ETC designation petition pursuant to 47 U.S.C.
214(e)(6) ``only in those situations where the carrier can provide the
Commission with an affirmative statement from the state commission or a
court of competent jurisdiction that the carrier is not subject to the
state commission's jurisdiction.''
B. Forbearance From Service Area Redefinition Process
84. The Commission concludes that forbearance from the 47 U.S.C.
214(e)(5) service area conformance requirement for recipients of the
MF-II competitive bidding process serves the public interest. The
Commission has decided that providing MF-II support to only one
provider in a given geographic area in exchange for its commitment to
offer service that meets its requirements throughout the funded area
achieves its objectives for fiscal responsibility.
85. For those entities that obtain ETC designations as a result of
being selected as winning bidders for the MF-II auction, the Commission
forbears from applying 47 U.S.C. 214(e)(5) and 47 CFR 54.207(b).
Forbearing from the service area conformance requirement eliminates the
need for redefinition of any rural telephone company service areas in
the context of the MF-II auction. Accordingly, Commission rules
regarding the redefinition process are inapplicable to petitions that
are subject to this order. However, if an existing ETC seeks support
through the MF-II auction for areas within its existing service area,
this forbearance will not have any impact on the ETC's pre-existing
obligations with respect to other support mechanisms and the existing
service area.
86. The Commission concludes that forbearance is warranted in these
limited circumstances. The Commission's objective is to distribute
support to winning bidders as soon as possible so that they can begin
the process of deploying mobile service to consumers in those areas.
Case-by-case forbearance would likely delay the Commission's post-
auction review of entities once they are announced as winning bidders.
The Communications Act requires the Commission to forbear from applying
any of its requirements or the Commission's regulations to a
telecommunications carrier if it determines that: (1) Enforcement of
the requirement is not necessary to ensure that the charges, practices,
classifications, or regulations by, for, or in connection with that
telecommunications carrier or telecommunications service are just and
reasonable and are not unjustly or unreasonably discriminatory; (2)
enforcement of that requirement is not necessary for the protection of
consumers; and (3) forbearance from applying that requirement is
consistent with the public interest. The Commission's experience in MF-
I has shown that service area conformance forbearance was just and
reasonable in accomplishing the goals of the Mobility Fund, did not
harm consumer protections, and was in the public interest in the
Mobility Fund context. The Commission concludes that each of these
statutory criteria is met for winning bidders of the MF-II competitive
bidding process, and the Commission incorporates by reference here the
analysis of these forbearance factors that it considered and found
warranted forbearance in MF-I and CAF-II.
C. Spectrum Access
87. The Commission requires that an applicant for an MF-II auction
have access to spectrum necessary to fulfill any obligations related to
support. An MF-II applicant must describe its required spectrum access
and certify that the description is accurate and that the applicant
will retain such access for at least ten years from the date on which
it is authorized to receive support. Specifically, an applicant will be
required to disclose whether it currently holds or leases the spectrum,
including any necessary renewal expectancy, and whether such spectrum
access is contingent on obtaining support in a MF-II auction. The
Commission specifies that any other contingency will render the
relevant spectrum access insufficient for the party to meet the
Commission's requirements for participation. For the described spectrum
access to be sufficient, the Commission further concludes that the
applicant must obtain any necessary approvals from the Commission prior
to filing its short-form application.
88. Because it would be inconsistent with the level of commitment
the Commission thinks a serious applicant should demonstrate, the
Commission declines to adopt the suggestion of some commenters to allow
for a substantially more relaxed standard that would permit entities to
seek to acquire access to spectrum on a ``fill-in'' basis after the
short-form filing deadline.
89. Consistent with the Commission's decision in MF-I, the
Commission concludes that an applicant seeking MF-II support must have
access to spectrum necessary to fulfill any MF-II obligations prior to
participating in the MF-II auction because allowing otherwise would be
inconsistent with the serious undertakings implicit in bidding for
ongoing support. The Commission therefore requires applicants to ensure
that if they become winning bidders, they will have the spectrum to
meet their obligations as quickly and successfully as possible, and
adopts the spectrum access rule proposed in the 2014 CAF Further
Notice.
90. The Commission will require that applicants identify the
particular frequency bands and the nature of the access on which they
assert their spectrum access necessary to demonstrate eligibility for
support. The Commission will assess the reasonableness of those
eligibility certifications based on information it will require to be
submitted in short- and long-form applications. The Commission cautions
applicants that if they make this certification and do not have or
maintain access to the appropriate level of spectrum, they will be
subject to the auction or performance default rules.
[[Page 15433]]
D. Financial and Technical Capability
91. In MF-I, the Commission concluded that it would require a party
to be financially and technically capable of satisfying the performance
requirements of providing service within the specified timeframe in the
geographic areas for which it sought support. In proposing that parties
seeking MF-II support satisfy this same eligibility requirement, the
Commission proposed to require an entity to certify, in the pre-auction
short-form application and in the post-auction long-form application,
that it is financially and technically capable of providing service
within the specified timeframe in the geographic areas for which it
seeks support. The Commission's experience with MF-I indicates that
requiring these certifications is a reasonable protection for the
auction process and to safeguard the award of universal service funds.
The Commission adopts its proposed requirement and the proposed rule,
with the clarification that the applicant must certify that it is
financially and technically qualified to provide the services supported
by MF-II within the specified timeframe in the geographic areas for
which it sought support.
E. Encouraging Participation
92. The Commission will permit all qualified eligible applicants to
participate in the MF-II auction. In so doing, the Commission seeks to
encourage participation by the widest possible range of applicants
possible, regardless of their size. The Commission's commitment to
fiscal responsibility requires that it distributes its finite budget to
the provider that submits the superior, most cost-effective bid in the
MF-II auction. The Commission will not limit eligibility for MF-II to
smaller providers thereby potentially limiting the Commission's ability
to further close the 4G LTE coverage gap. The Commission therefore
declines to adopt the proposals of some small, rural providers that
suggest that it should restrict the participation of certain classes of
carriers in order to facilitate participation. Furthermore, as the
Commission concluded in MF-I, it will not bar any party from seeking
MF-II support based solely on the party's past decision to relinquish
Universal Service Funds provided on another basis. Consistent with its
approach in spectrum auctions, the Commission expects that its general
auction rules and procedures will provide the basis for an auction
process that will promote the Commission's objectives for MF-II and
provide a fair opportunity for all serious, interested parties to
participate.
F. Inter-Relationship With Other Universal Service Mechanisms and
Obligations
93. Consistent with the record, the Commission will allow
recipients of MF-I support to participate in an MF-II auction. While
the Commission does not anticipate that it will prohibit MF-II winning
bidders from seeking support through other universal service mechanisms
merely because they have received MF-II support, the Commission notes
that the goals of Phase II of the Mobility Fund are to help ensure the
availability of mobile voice and broadband services across the country.
The Commission emphasizes that in establishing rules for each separate
universal service funding mechanism, it is including rules to prevent
the disbursement of redundant support.
94. The Commission stresses that because Phase I provided strictly
non-recurring support, the Commission required an MF-I participant to
certify at the pre-auction, short-form stage that it was financially
and technically capable of providing 3G or better service within the
specified timeframe in the geographic areas for which it sought support
without any assurance of ongoing support, but it did not foreclose the
potential of such an entity subsequently receiving ongoing support to
maintain that service after the five-year time frame expired. Insofar
as it furthers the Commission's policy goals to expand and preserve
service to areas that would not be covered absent government subsidies,
the Commission concludes that a winning bidder in MF-I may participate
in the auction to seek ongoing support in MF-II for any area deemed
eligible.
95. On the issue of the interrelationship of MF-II and the Remote
Areas Fund (RAF), the Commission has not limited the availability of
MF-II support based on the existence of the RAF, which is a concern for
several commenters. Rather, the Commission has set the budget based on
the reasons discussed in the MF-II Order. The Commission reaffirms the
commitment to the RAF framework and rules adopted in the Connect
America Phase II Auction Order. The Commission also concludes that it
would not make sense to fund a mobile provider in an eligible area
through MF-II and fund yet another such provider (or possibly the same
one) in that same area in the RAF. Accordingly, the Commission decides
that it shall structure the RAF so as not to award support to a mobile
provider in any area where it has awarded MF-II support.
G. Partnerships
96. The Commission concludes that the rules it is adopting for MF-
II are sufficiently flexible to allow recipients of MF-II to fulfill
their public interest obligations associated with MF-II. The Commission
is committed to preserving and expanding mobile voice and broadband
coverage to those areas that lack services without subsidies, and
concludes that allowing support recipients to reach agreements with
other providers for this purpose may further that objective. The
Commission recognizes based on its experience with MF-I that providers
are best suited to determine the most efficient and cost effective
manner to fulfill their public interest obligations, and the Commission
has designed rules that should afford them the flexibility to consider
arrangements that meet their individual business needs without
prescribing any particular solutions or limitations, provided that such
agreements otherwise comply with relevant statutory and regulatory
requirements. The Commission cautions applicants seeking support,
however, that regardless of any agreements they may enter, the winning
bidder is the entity responsible for maintaining its eligibility,
including but not limited to its ETC status, and meeting its
performance obligations for MF-II support. Similarly, all monies
awarded through the auction process must flow directly to the winning
bidder as that is the entity upon which the Commission has assessed
compliance with all support requirements, including its ETC status.
H. Bidding Preference for Small Businesses
97. The Commission declines to adopt a bidding preference for small
businesses for MF-II. In view of the Commission's experience with MF-I,
where numerous smaller carriers placed winning bids to receive funding
for service without the aid of bidding credits, the Commission
concludes that it is unnecessary to adopt small business bidding
credits for a MF-II auction. Also, a bidding credit for small
businesses would potentially reduce the reach of the Commission's
finite funds. The Commission is unwilling to forgo additional coverage
expansion or preservation in order to favor smaller providers,
particularly in light of the participation and success of small and
rural businesses in MF-I.
[[Page 15434]]
VII. Auction Rules and Process
98. The Commission adopts rules that govern the auction process for
MF-II, including pre-auction requirements and general rules for auction
design and the bidding process. These rules provide the basic framework
and requirements for participating in an auction for MF-II support.
Consistent with past practice, the specific procedures will be
established as part of the pre-auction process, including determining
auction-related timing and dates, identifying areas eligible for
support, and establishing detailed bidding procedures consistent with
the MF-II Order as well as any issues resolved following the Further
Notice of Proposed Rulemaking adopted at the same time as the MF-II
Order. This pre-auction process will be similar to those the Commission
has used for spectrum auctions and to those used in Auction 901 to
distribute MF-I support.
A. Pre-Auction Application Process
99. Based on the Commission's experience with MF-I and the process
it adopted in CAF-II, the Commission adopts a two-stage application
process for an applicant seeking to participate in the MF-II auction.
Under this process, interested parties will submit a pre-auction
``short-form'' application, providing basic information and
certifications regarding their eligibility to receive support. After
the application deadline, Commission staff will review the short-form
applications to determine whether applicants have provided sufficient
information required at the short-form stage to be eligible to
participate in a MF-II auction. Once review is complete, Commission
staff will release a public notice indicating which short-form
applications are deemed complete and which are deemed incomplete.
Applicants whose short-form applications are deemed incomplete will be
given a limited opportunity to cure defects and to resubmit correct
applications. Only minor modifications to an applicant's short-form
application will be permitted. Major modifications would include, for
example, changes in ownership of the applicant that would constitute an
assignment or transfer of control. The Commission will then release a
second public notice designating the applicants that are qualified to
participate in the MF-II auction. After the close of the auction,
winning bidders will be required to submit ``long-form'' applications
with more extensive information to allow for an in-depth review of
their qualifications prior to authorization of support.
100. The Commission also adopts the proposals, with certain
amendments, in the USF/ICC Transformation FNPRM regarding the types of
information bidders will be required to disclose in their MF-II auction
short-form applications. The Commission concludes that, based on its
experience with MF-I, this approach strikes an appropriate balance in
ensuring that entities are legally, technically, and financially
qualified, while at the same time minimizing the burden on applicants
and Commission staff. Thus, the Commission will require that each
auction applicant provide information to establish its identity,
including disclosure of parties with ownership interests, consistent
with the ownership interest disclosure required in Part 1 of the
Commission's rules for applicants for spectrum licenses, as well as any
agreements the applicant may have relating to the support to be sought
through the auction. Applicants will only be able to make minor
modifications to their short-form applications. Major amendments, for
example, changes in an applicant's ownership that constitute an
assignment or transfer of control, will make the applicant ineligible
to bid.
101. Each applicant will be required to disclose and certify its
ETC status, although, the Commission does not require an applicant to
obtain an ETC designation prior to bidding in MF-II. With respect to
eligibility requirements relating to spectrum access, applicants will
be required to disclose and certify the source of the spectrum they
plan to use to meet Mobility Fund obligations in the particular area(s)
for which they plan to bid. Specifically, applicants will be required
to disclose whether they currently hold a license or lease the
spectrum, including any necessary renewal expectancy, and whether such
spectrum access is contingent on obtaining support in an MF-II auction.
Applicants must have secured any Commission approvals necessary for the
required spectrum access prior to submitting an auction application.
Moreover, applicants will be required to certify that they will retain
their access to the spectrum for at least ten years from the date
support is authorized. The Commission notes that no commenters
addressed the Commission's proposed pre-auction application process for
MF-II, and therefore concludes that the rules it adopted will best
serve the Commission's ability to hold a fair and efficient auction.
B. Bidding Process
1. Auction Design and Competitive Bidding Mechanisms and Procedures
102. The Commission adopts, with certain minor non-substantive
changes, the existing 47 CFR part 1 rules on competitive bidding for
universal service support contained in Subpart AA. The high-level
auction rules for competitive bidding procedures for universal service
support that the Commission adopts set out a range of options and
mechanisms that the Commission may use for such purposes. The
Commission takes the opportunity to reorganize the way it articulates
certain of the relevant rules, without altering the substance, to be
consistent with the latest developments regarding the Commission's
approach to competitive bidding in other contexts. Specifically, the
Commission restructures the rules to present them in terms of auction
procedures governing bid collection, assignment of winning bids,
determination of support payment amounts, as well as particular
mechanisms for conducting the auctions. The reorganized competitive
bidding procedures rules will facilitate the development of procedures
for the MF-II auction that are consistent with the universal service
support technical requirements and policies generally and that address
the needs of the Commission and interested bidders. The bidding
procedures for the MF-II auction will include, among other things,
details pertaining to multiple round bidding and package bidding.
2. Information and Communications
103. To maximize competition and promote fairness, the Commission
proposed to retain for MF-II its usual auction policies regarding
permissible communications during the auction and the public release of
certain auction-related information. The Commission adopts the proposed
rules prohibiting auction applicants from communicating with one
another regarding the substance of their bids or bidding strategies,
and providing for limited public disclosure of auction-related
information as appropriate.
C. Auction Cancellation
104. In the USF/ICC Transformation FNPRM, the Commission proposed,
consistent with its approach in spectrum auctions and Mobility Fund
Phase I, that its rules provide discretion to delay, suspend, or cancel
bidding before or after a reverse auction begins under a variety of
circumstances, including natural disasters, technical failures,
administrative necessity, or any
[[Page 15435]]
other reason that affects the fair and efficient conduct of the
bidding. Based on its experience with spectrum license auctions and
Mobility Fund Phase I, the Commission concludes that such a rule is
necessary and adopts it.
VIII. Post-Auction Process and Support
105. The Commission adopts rules to govern the post-auction process
and the authorization of support for MF-II. These rules provide the
basic framework and requirements for winning bidders to demonstrate
their qualifications for MF-II support. This post-auction process will
be similar to that used for MF-I support. Shortly after bidding has
ended, the Bureaus will issue a public notice declaring the auction
closed, identifying the winning bidders, and establishing details and
deadlines for next steps, beginning with the long-form application.
A. Long-Form Application
106. In the USF/ICC Transformation FNPRM, the Commission proposed
to apply the same long-form application process for MF-II as it adopted
for MF-I. Under this process, applicants for MF-II support would be
required to demonstrate in their long-form applications that they are
legally, technically, and financially qualified to receive MF-II
support. The Commission concludes that winning bidders for MF-II
support will be required to comply with the same long-form application
process it adopted for MF-I, and adopts a rule to govern this process,
modified from that originally proposed consistent with the Commission's
stance on ETC designation timing and other rules adopted in the MF-II
Order. Consistent with the Commission's standard practices, upon close
of an MF-II auction, the Bureaus will release a public notice, which
will provide further details regarding the submission and processing of
the long-form application.
1. Ownership Disclosure
107. The Commission also adopts the ownership disclosure
requirements proposed in the USF/ICC Transformation Order for MF-II.
Specifically, the Commission will require the same Part 1 ownership
disclosure requirements that already apply in the spectrum license
context, and therefore adopts the related proposed rule. Pursuant to
these requirements, an applicant for MF-II support must fully disclose
its ownership structure as well as information regarding the real
party- or parties-in-interest of the applicant or application. The
Commission anticipates that wireless providers that have participated
in spectrum license auctions will already be familiar with the
disclosure requirements. These companies will also have ownership
disclosure reports (in the short-form application or FCC Form 602) on
file with the Commission, which may simply need to be updated,
minimizing the reporting burden on winning bidders.
2. ETC Eligibility
108. Consistent with the eligibility requirements adopted in the
MF-II Order, the Commission will permit a winning bidder in the MF-II
auction to obtain its ETC designation after the close of the auction,
provided that it submits proof of its ETC designation within 180 days
of the public notice identifying winning bidders.
109. Before MF-II support is authorized, a winning bidder must
demonstrate that it has been designated an ETC covering each of the
geographic areas for which it seeks to be authorized for support and
that its ETC designation allows it to fully comply with the
Commission's coverage requirements within the time provided to meet
this requirement. A winning bidder must submit appropriate
documentation of its ETC designation in all the areas for which it will
receive support in its long form application or certify that it will do
so within 180 days of the public notice identifying winning bidders.
Appropriate documentation should include the original designation
order, any relevant modifications (e.g., expansion of service area or
inclusion of wireless), along with any name-change orders. Each winning
bidder should connect the designations to the winning bids so that it
is clear that the bidder has ETC status in each winning area. This
obligation may be satisfied by providing maps of the recipient's ETC
designation area, map overlays of the MF-II support areas, and
narrative explanations explaining the connections between the ETC
designations and MF-II support areas.
3. Financial and Technical Capability Certification
110. As in the pre-auction short-form application stage, a long-
form applicant must certify that it is financially and technically
capable of providing the required coverage and performance levels
within the specified timeframe in the geographic areas in which it won
support. An applicant should take care to review its resources and its
plans before making the required certification and be prepared to
document its review, if necessary. Thus, the Commission adopts the
proposed rule regarding financial and technical capability
certification, as amended.
4. Network Coverage Plan
111. For winning bids, the applicant must submit a project
description that describes the network to be built or upgraded;
identifies the proposed technology; demonstrates that the project is
technically feasible; discloses the complete project budget; and
discusses each specific phase of the project (e.g., network design,
construction, deployment, and maintenance). A complete project
schedule, including timelines, milestones, and costs, must also be
provided. Milestones should include the start and end date for network
design; start and end date for drafting and posting requests for
proposal (RFPs); start and end date for selecting vendors and
negotiating contracts; and start date for commencing construction and
end date for completing construction. Winning bidders may file as
separate documents a public/redacted version of their project
descriptions and a confidential version of their project descriptions,
if necessary, accompanied by a Request for Confidentiality that aligns
with existing Commission rules. Project descriptions must align project
schedules with the required buildout milestones.
5. Spectrum Access
112. The Commission adopts its proposed rule to require applicants
to provide a description of the spectrum access that the applicant will
use to meet its obligations in areas for which it is the winning
bidder, including whether it currently holds a license or leases the
spectrum, along with any necessary renewal expectancy, and certify that
the description is accurate and that the applicant will retain such
access for the entire ten year support term. The description should
identify the license applicable to the spectrum to be accessed. The
description of the license must include the type of service (e.g., AWS,
700 MHz, BRS, PCS, etc.), the particular frequency bands and the call
sign. This information should be verifiable in the Commission's
Universal Licensing System. Reference to other Commission data
repositories should not be necessary, as the complete information
needed to determine on what licenses the applicant intends to rely
should be included in the MF-II long-form application. Applications
will be reviewed to assess the reasonableness of the certification.
[[Page 15436]]
6. Certifications as to Program Requirements
113. With regard to certifications of program requirements, the
Commission concludes that an applicant must certify in its long-form
application that it has the funds available for all project costs that
exceed the amount of support to be received, and that it will comply
with all program requirements. These requirements include the public
interest obligations contained in the Commission's rules and set forth
in the MF-II Order. Applicants must certify that they will meet the
applicable deadlines and requirements for demonstrating interim and
final performance benchmarks set forth in the rules, and that they will
comply with the MF-II collocation, voice and data roaming, and
reasonably comparable rate obligations. The Commission will retain its
authority to look behind recipients' certifications and take action to
address any violations that develop.
7. Other Information
114. Any additional information that is required to establish
whether an applicant is eligible for MF-II support will be announced by
public notice.
8. Transfers and Assignments
115. The award of MF-II support is based upon the eligibility and
performance of the winning bidder. Therefore, a recipient of MF-II
support that later seeks to transfer control or assign its licenses in
the winning bid area to another carrier should be aware that, if the
buyer or assignee carrier is not eligible to receive MF-II funds or is
uninterested in remaining in the program, the winning bidder will
remain liable for its winning bid obligations and will be considered to
have committed a performance default if it can no longer fulfill those
obligations after completing the transfer or assignment. All assignees
seeking to receive MF-II support will become subject to the
eligibility, certification, and disclosure requirements included in the
MF-II rules.
B. Authorization Requirements and Steps
116. In the USF/ICC Transformation FNPRM, the Commission proposed
to apply the same process for authorization of release of awarded funds
for MF-II support as was adopted in Phase I. The Commission concludes
that before being authorized for support, a winning bidder must submit
an irrevocable standby letter of credit (LOC), which shall be
acceptable in all respects to the Commission. Additionally, winning
bidders must supply a legal counsel's opinion letter stating that the
funds secured by the LOC will not be considered to be part of the
recipient's bankruptcy estate in the event of a bankruptcy proceeding
under section 541 of the Bankruptcy Code. These safeguards will allow
us to utilize an LOC to resolve a performance default. Accordingly, the
following authorization requirements must be satisfied in order for MF-
II support to be authorized.
1. Letters of Credit
117. In MF-I, the Commission required all winning bidders to obtain
LOCs ensuring the successful fulfillment of each winning bid and
protecting the Commission's investment of universal service funds. In
the CAF-II auction context, the Commission adopted LOC requirements
with standards that initially cover the first year of support of a
recipient's winning bid, and that are adjusted annually thereafter,
reasoning that LOCs were an effective means for fulfilling the
Commission's role as stewards of public funds.
118. Consistent with the rules governing MF-I and CAF-II auctions,
the Commission adopts a rule for MF-II requiring that, prior to the
authorization of support, all winning bidders for support must provide
us with an irrevocable standby LOC by a bank that is acceptable to the
Commission in substantially the same form as the model Letter of Credit
set forth in the appendix to the MF-II Order, and, in any event, must
be acceptable in all respects to the Commission. Specifically, the
Commission adopts requirements for a bank to be acceptable to the
Commission to issue the LOC that are similar to the requirements
adopted for MF-I, with the exception of the expansion of the acceptable
banks noted below.
119. The Commission concludes that an LOC meeting the requirements
set out below is neither unreasonably burdensome nor excessively costly
for a winning bidder to obtain in light of the benefit to the universal
service program. While obtaining an LOC incurs costs, the Commission
anticipates that bidders can incorporate these costs when determining
their bids. As the Commission found in MF-I, and in considering this
issue in other aspects of the Connect America Fund, companies with
existing lending relationships often use LOCs in the normal course of
operating their businesses and, generally, are able to maintain
multiple forms of financing for varying purposes. Therefore, on
balance, the Commission concludes that the government's need to
safeguard the disbursement of these monies outweighs the limited burden
incurred by winning bidders.
120. In reaching this conclusion, the Commission carefully weighed
the comments it received on whether it should require LOCs for MF-II.
While the concerns expressed by some commenters do not warrant
abandoning an LOC requirement altogether, they do support the
Commission's decision to depart from the LOC provisions utilized in MF-
I, and to instead adopt LOC provisions that closely align with the CAF-
II LOC process and MF-II performance requirements. For instance,
allowing the LOC to decrease over time as a support recipient satisfies
its minimum coverage and service requirements, as the Commission
allowed in the CAF-II context, should effectively protect public funds
under less onerous terms than were applied in the MF-I auction.
Moreover, the Commission can also incorporate other terms and processes
adopted in the CAF-II auction context to address the concerns of
commenters to achieve greater efficiencies in the MF-II LOC
requirements. The Commission therefore requires an LOC for MF-II
winning bids that will remain in place until USAC, in conjunction with
the Commission, verifies that a MF-II winning bidder has met its
minimum coverage and service requirements at the end of the six-year
milestone.
121. Consistent with the approach utilized in CAF-II, the
Commission will require that the initial value of the LOC to be set to
at least the amount of authorized MF-II support for the first year.
Before the winning bidder can receive its next year's MF-II support, it
must modify, renew, or obtain a new letter of credit to ensure that it
is valued at a minimum at the total amount of money that has already
been disbursed plus the amount of money that is going to be provided in
the next year.
122. Moreover, similar to the process adopted in CAF-II, the
Commission will allow a support recipient to modestly reduce its LOC as
it meets its interim benchmarks. The LOC must be maintained for 100
percent of the total support amount disbursed plus the amount to be
disbursed in the next year until USAC, in coordination with the
Commission, has determined that the recipient has met its interim
benchmark for deployment to 60 percent of the required coverage area;
and subject to USAC's consent, the amount of the LOC may decrease to an
amount equal to 90 percent of the total support amount already
disbursed plus the amount that will be disbursed in the coming year.
[[Page 15437]]
Once USAC, in coordination with the Commission, has determined that the
recipient has met its interim benchmark for deployment to 80 percent of
the required coverage area, and subject to USAC's consent, the amount
of the LOC may decrease to an amount equal to 80 percent of the total
support amount already disbursed plus the amount that will be disbursed
in the coming year. After USAC, in coordination with the Commission,
has determined that the recipient has met its final benchmark for
deployment to a minimum of 85 percent of the required coverage area by
state and at least 75 percent by each census block group or census
tract in a state included in the LOC, the recipient may relinquish its
LOC. Recognizing that the risk of a default will lessen as a recipient
makes progress towards building its network, the Commission finds that
it is appropriate to modestly reduce the value of the letter of credit
in an effort to reduce the cost of maintaining a letter of credit as
the recipient meets certain service milestones. Such a system of modest
reductions in the value of the LOC aligns with the LOC procedure
adopted in CAF-II.
123. These LOC requirements should help to achieve the Commission's
goal of fiscal responsibility and should protect the disbursement of
universal service funds while also being responsive to concerns
expressed in the record that MF-II LOC requirements should not be
onerous. The reporting and performance requirements that it has adopted
for MF-II together with these LOC provisions, which are consistent with
the CAF-II auction LOC requirements previously adopted by the
Commission, should ensure that in the event of a performance default,
monies are in place to satisfy a recipient's obligations for failing to
comply with the terms of support. All MF-II recipients, along with the
federal government, should bear the responsibilities of safeguarding
these funds. However, the Commission nonetheless recognizes that there
may be a need for greater flexibility regarding LOCs for Tribally-owned
and controlled winning bidders. Thus, if any Tribally-owned and -
controlled MF-II winning bidder is unable to obtain a LOC, it may file
a petition for a waiver of the LOC requirement. Waiver applicants must
show, with evidence acceptable to the Commission, that the Tribally-
owned and -controlled winning bidder is unable to obtain a LOC.
124. In addition to providing greater flexibility on the amount of
support the LOC will cover, the Commission concludes that there are
additional specific measures it can take to provide MF-II recipients
greater flexibility in obtaining their LOCs. For instance, to reduce
the number of LOCs that a winning bidder may need, the Commission will
allow winning bidders to provide a single LOC covering all its winning
bids within a single state. The Commission therefore directs the
Bureaus to establish a reasonable means to permit a winning bidder to
provide a single LOC that covers all its winning bids within a single
state in the amount specified in the MF-II Order, if the recipient so
desires. Moreover, consistent with the Commission's decision in the
CAF-II context, if a winning bidder chooses to obtain a letter of
credit for each of its bids that are located in a state and defaults
after its failure to pay the recoupment calculation for non-compliance,
the Bureaus will authorize a draw on all of the letters of credit
covering all of the bids in that state.
125. Furthermore, consistent with the acceptable bank standards
recently adopted for the CAF-II auction process, the Commission amends
and expands the definition of an ``acceptable bank'' for the purposes
of MF-II LOC requirements. By expanding the list of banks eligible to
provide LOCs, the Commission seeks to lower barriers for entities,
particularly small and rural businesses that might otherwise face
obstacles in obtaining an LOC from a smaller pool of banks, while still
ensuring that there are adequate considerations given to the soundness
of the bank issuing a letter of credit.
126. Accordingly, the Commission will require that, for U.S. banks,
the bank must be insured by the Federal Deposit Insurance Corporation
(FDIC) and have a Weiss bank safety rating of B- or higher. This
modification to the definition of acceptable banks expands the number
of eligible U.S. banks from fewer than 70 banks, as were allowed in MF-
I, to approximately 3,600 banks for MF-II winning bidders. These
provisions together should help to ensure that LOCs are secured by
financially sound institutions. Moreover, unlike credit ratings
obtained by banks in the commercial markets, Weiss rates all banks that
report sufficient data for Weiss to analyze and, more importantly, is a
subscription service and is not compensated by the banks that it rates.
Weiss therefore offers an independent and objective perspective of the
safety of the banks it rates based on capitalization, asset quality,
profitability, liquidity, and stability indexes. Requiring that the
banks have a Weiss rating of at least B- ensures that the bank has a
rating that at a minimum demonstrates that the bank offers good
financial security and has the resources to deal with a variety of
adverse economic conditions. And requiring that U.S. issuing banks also
be FDIC-insured has the added benefit of relying on the oversight of
the FDIC and its protections. The Commission therefore concludes that
this more expansive definition of acceptable banks achieves an
appropriate balance between reducing burdens for winning bidders,
particularly small and rural entities, while still protecting the
public funds.
127. For similar reasons, the Commission will also permit entities
to obtain letters of credit from CoBank, ACB (CoBank) or the National
Rural Utilities Cooperative Finance Corporation (CFC) as long as each
of these two entities maintains assets that place them among the top-
100 U.S. banks in terms of the amount of assets, and they maintain a
credit rating of BBB- or better from Standard & Poor's (or the
equivalent from a nationally-recognized credit rating agency). The
entity's assets will be determined on the basis of total assets as of
the end of the calendar year immediately preceding the issuance of the
letter of credit, determined on a U.S. dollar equivalent basis as of
such date. The Commission has recognized that these entities are not
traditional banks in that they do not accept deposits from members of
the public. Thus, these entities do not have a Weiss bank safety rating
and are not FDIC-insured. However, CFC and CoBank can be considered
banks in the context of the Commission's program because they use their
capital resources to make loans. Accordingly, the Commission finds
these two entities to be sufficiently comparable to commercial
depository banks to issue letters of credit in the MF-II program.
128. CoBank has met the more stringent issuing bank eligibility
requirements for MF-I and rural broadband experiments, and has issued a
number of letters of credit for these programs. Although CoBank is not
FDIC-insured, it is insured by the Farm Credit System Insurance
Corporation, which the Commission found provides protections that are
equivalent to those indicated by holding FDIC-insured deposits. As long
as CoBank retains its standing with assets equivalent to a top-100 U.S.
bank and a qualified credit rating, the Commission sees no reason to
depart from its conclusion not to exclude CoBank from eligibility
simply because CoBank is not rated by Weiss.
129. CFC's assets also make it comparable to commercial depository
banks that are in the top 100 based on
[[Page 15438]]
total assets, and it has a credit rating from Standard & Poor's of A.
But because CFC is not a depository institution and it is not part of
the Farm Credit System, it is not FDIC or FCSIC-insured. Nevertheless,
CFC is uniquely situated and should be made eligible to the extent it
retains its standing with assets equivalent to a top-100 U.S. bank and
a qualified credit rating. CFC is ``owned by, and exclusively serves''
rural utility providers, and CFC manages and funds its affiliate, the
Rural Telephone Finance Cooperative (RTFC), which lends primarily to
telecommunications providers and affiliates across the nation. As the
largest non-governmental lender for rural utilities, CFC has
specialized institutional knowledge regarding the types of entities
expected to participate in universal service competitive bidding to
serve fixed locations and has demonstrated that it has significant and
long-term experience in financing the deployment of rural networks.
This unique and long-standing role in rural network deployment coupled
with CFC's qualifications, provides the Commission with sufficient
assurance that CFC has the qualifications to assess the financial
health of winning bidders and honor the LOCs that it issues, without
the need for the independent oversight of CFC's safety and soundness
that would be offered by FDIC or FCSIC insurance or a Weiss safety
rating. The Commission concludes that, based on the totality of these
circumstances, CFC is eligible to issue LOCs despite the fact that it
does not meet the FDIC and Weiss rating requirements. The decision to
make CFC an eligible issuer is conditioned on CFC notifying the
Commission of any significant change to any of the showings it has made
to the Commission.
130. The Commission further notes that it is not adopting
alternative eligibility requirements that would permit banks that are
not FDIC or FCSIC-insured or that do not have a Weiss bank safety
rating to issue letters of credit. Instead, the Commission concludes
that, for purposes of providing security for winning bidders, an LOC
from CFC provides assurances that are equivalent to those provided by
banks meeting the Commission's general criteria, due to CFC's uniquely
extensive experience in financing rural networks, its significant
participation in other federal government programs, and its long-
standing relationship with many entities that may become MF-II winning
bidders.
131. If a recipient seeks to obtain its LOC from a non-U.S. bank,
the Commission requires that the bank be among the 100 largest non-U.S.
banks in the world (determined on the basis of total assets as of the
end of the calendar year immediately preceding the issuance of the
letter of credit, determined on a U.S. dollar equivalent basis as of
such date) and maintain a credit rating of BBB- or better from Standard
& Poor's (or the equivalent from a nationally-recognized credit rating
agency). The bank must also have a branch in the District of Columbia
or such other branch office as agreed to by the Commission and must
issue the letter of credit payable in United States dollars.
132. As in the process permitted in the CAF-II rules and also
followed in MF-I, if the winning bidder is not prepared to present its
LOC at the time of the long-form application filing, the Commission
will allow the submission of a commitment letter from the bank issuing
the LOC in the long-form application filing. A winning bidder will,
however, be required to have its LOC in place and approved by USAC
before it is authorized to receive MF-II support.
2. Opinion Letters
133. Consistent with the rules for MF-I and CAF-II, at the time a
winning bidder for MF-II support submits its LOC, it also will be
required to provide an opinion letter from legal counsel clearly
stating, subject only to customary assumptions, limitations and
qualifications, that, in a proceeding under the Bankruptcy Code, the
bankruptcy court would not treat the LOC or proceeds of the LOC as
property of the winning bidder's bankruptcy estate, or the bankruptcy
estate of any other bidder-related entity requesting issuance of the
LOC, under 11 U.S.C. 541. A winning bidder will be required to have its
opinion letter in place before it is authorized to receive MF-II
support and before any support is disbursed.
C. Disbursements
134. Consistent with the process adopted in the CAF-II auction
context, the Commission concludes that MF-II support should be
disbursed in monthly installments over the course of the ten-year
support term. For MF-II, support recipients will have made winning bids
to provide service at established performance requirements to at least
85 percent of the eligible square miles across all winning bid areas
for which they win MF-II support in a state by the final milestone, to
provide service to at least 75 percent of every census block group or
census tract in a state (depending on minimum bidding unit), and to
continue to provide service throughout the ten-year support term.
During the ten-year support term, provided that the winning bidder
files acceptable, complete, and timely annual and milestone reports,
fulfills the milestone coverage requirements, and does not otherwise
have a performance default, the recipient will receive monthly
disbursements of 100 percent of the total winning bid(s).
135. This approach provides MF-II recipients with reliable and
predictable support payments that conform to a variety of business
cycles and correspond to suggestions in the record. The Commission is
mindful that some carriers might incur higher up-front project costs
prior to their ability to commence the provision of service to the
targeted area because infrastructure expansion projects might require
larger payments in the earlier years of the disbursement term. The
Commission concludes that MF-II monthly disbursements will best
accommodate carriers' project schedules or ongoing expenses of
providing service in a manner that is efficient from an administrative
prospective. Moreover, because the Commission decides that support
payments should be regular and predictable over the entire course of
the ten-year term for all recipients, and because the Commission seeks
to not exceed the budget in any one year of the term, recipients will
not be able to receive accelerated payment of their support for
attaining the interim milestones early. This determination aligns with
the decision to reject accelerated payments in CAF-II as well.
136. All MF-II recipients have a continuing obligation to maintain
the accuracy and completeness of the information provided in their
long-form applications and their annual and milestone reports. All
winning bidders shall provide information about any substantial change
that may be of decisional significance regarding their eligibility for
MF-II support and compliance with MF-II requirements.
137. The Commission reserves the right for USAC to cease monthly
disbursements immediately should the winning bidder have a performance
default, or if it fails to comply with any of the terms or conditions
for the receipt of the support under any of the Commission's rules. In
addition, the Commission directs the Bureaus and the Office of Managing
Director to postpone disbursements and/or the incurrence of additional
obligations, to preclude an ADA violation if the USF's current
exemption expires or is repealed.
[[Page 15439]]
IX. Accountability and Oversight
138. As the Commission recognized from the outset of this
proceeding, the monies used to achieve the Mobility Fund goals come
from American consumers and businesses, and therefore it is critical
for the success of the program that support recipients meet their
obligations. This task requires ongoing vigilance and oversight by the
Commission together with the Fund administrator, USAC. As the
Commission noted in the CAF-II proceeding, reporting obligations serve
the public interest by enhancing the ability to monitor the use of
Connect America Fund support and ensure its use for intended purposes.
139. In the USF/ICC Transformation FNPRM, the Commission proposed
applying the same general rules for accountability and oversight to MF-
II as were applied to recipients of MF-I support, including reporting,
audit, and record retention requirements. The reporting requirements
the Commission adopted for MF-I, and adopts here for MF-II, differ in
certain respects from those adopted for CAF and CAF-II due to the
specific requirements of the provision of mobile service. Therefore,
the Commission excluded MF-I from the application of 47 CFR 54.313(k),
which applies generally to recipients of high cost support, and now
also excludes that provision for MF-II support recipients.
140. The Commission also proposed that MF-II support recipients
should be required to include in their annual reports the same
information required of MF-I support recipients. The Commission adopts
certification and reporting requirements relating to the performance
obligations adopted in the MF-II Order. It also addresses consequences
for failure to meet program reporting rules and discusses its record
retention rules.
A. Mobile Reporting, Mobility Fund Phase II Annual Reports, and
Mobility Fund Phase II Milestone Reports
141. Annual Reports. The Commission adopts an annual reporting
requirement that will enable the Commission and USAC to monitor the
ongoing progress and performance of all MF-II recipients, similar to
the annual reporting obligations of all other recipients of federal
high-cost universal service support. Winning bidders of MF-II support
will be subject to the annual reporting requirement, and recipients
will be required to file their reports each year following the year in
which the auction closes by July 1, including all the certifications
required under the MF-II rules, and in which the recipient will update
information, as required for the following year.
142. Milestone Reports. In order to ensure that ongoing payment of
MF-II support is warranted, and in alignment with the similar progress
reporting system instituted for CAF-II, the Commission will require
recipients to file a Milestone Report on or before its third, fourth,
fifth, and sixth year performance deadline. These Milestone Reports
will be where MF-II recipients report the data that demonstrates that
they have met their interim benchmarks for deployment and their minimum
final deployment requirement at the end of the construction term
necessary to support the disbursements of MF-II funds. Reports should
be filed via the portal that USAC is creating to receive filings by
universal service support recipients. The Commission directs the
Bureaus to define more precisely the content and format of the
information, including substantiation that recipients are required to
include in their Milestone Reports, such that it is consistent with the
evidence that will be required in the challenge process.
143. All recipients of MF-II support will also be subject generally
to the same audit requirements as recipients of CAF-II support and all
other high-cost support.
144. Moreover, in line with the procedures adopted in CAF-II to
address missed filing deadlines, the Commission adopts a rule to reduce
the support for recipients that miss reporting, certification, and
milestone filing deadlines. The Commission will impose a minimum
reduction of seven days of total statewide support for a winning bid in
any state for which a filing deadline is missed, given the importance
of recipients meeting filing deadlines. In addition to the reduction of
the initial seven days of support, support will be reduced further
state-wide on a pro-rata daily basis until the MF-II recipient files
the required report or certification. Reducing support on a day-by-day
basis plus an additional seven-day reduction is an appropriate measure
to create incentives for MF-II recipients to make their filings as soon
as they have determined that they have missed the applicable deadlines.
145. The Commission recognizes that despite its best efforts, a
recipient may miss a deadline due to an administrative oversight but
still file within a few days of the deadline. For a late filer, the
Commission finds that it is appropriate to provide a one-time grace
period of three days so that a recipient that quickly rectifies its
error within three days of the deadline will not be subject to the
seven-day minimum loss of support. The Commission directs USAC to send
a letter to such a recipient notifying it that its filing was late but
cured within the grace period. If the recipient again files any filing
late, the grace period will not be available. Repeated mistakes, even
inadvertent, are indicative of a lack of adequate policies and
procedures to ensure timely filing. If a recipient misses a filing
deadline more than once due to its inadvertence, the support reductions
that the Commission adopts should provide an incentive to recipients to
revise their procedures to ensure that such inadvertence does not
become a pattern.
146. Maintaining the Accuracy of Filings. To additionally safeguard
the government's monthly disbursement of support, the Commission will
require recipients to maintain the accuracy and completeness of the
information they furnish in their long-form applications and their
annual and milestone reports. Accordingly, the Commission will require
recipients to update their annual reports and milestone reports to
provide information about any substantial change that may be of
decisional significance regarding their eligibility for MF-II support
and compliance with MF-II requirements. Such notification of a
substantial change, including any reduction in the percentage of
eligible square miles being served or any failure to comply with any of
the MF-II requirements, shall be submitted within 10 business days
after the reportable event occurs, as is also required in CAF-II. A
recipient that is required to provide such updated or supplemental
information prior to having filed its first annual report, may
nevertheless comply with the 10-day filing requirement by submitting
that information to the entities listed in 47 CFR 54.1019(c). Moreover,
while the Commission expects that it will be a rare occurrence, if a
support recipient drops below the level of service to which it has
certified in a milestone report or an annual report during the six-year
deployment period, it will be subject to the provisions set out in the
MF-II Order for non-compliance.
B. Defaults
147. In MF-I, the Commission adopted two types of default payment
obligations for MF-I winning bidders: An auction default payment owed
by winning bidders if they failed to satisfy their auction obligations
prior to being authorized to receive support, and a performance default
payment owed by winning bidders authorized for support who subsequently
failed to meet their
[[Page 15440]]
public interest obligations or other terms and conditions of MF-I
support. As summarized below, for ease of administration, the
Commission modifies its proposal and adopts default rules for MF-II
that more closely parallel the CAF-II rules.
1. Forfeiture in the Event of an Auction Default
148. MF-I winning bidders, like all winning bidders in Commission
spectrum auctions, had a binding obligation to file a post-auction
long-form application--by the applicable deadline and consistent with
other requirements of the long-form application process--and failure to
do so constituted an auction default. For MF-II, the Commission
proposed that a winning bidder for MF-II support would be subject to
the same auction default payment obligations adopted for winning
bidders of MF-I support, including a default on a winning bid before
authorizations, the failure to timely file a long-form application,
being found ineligible or unqualified to be a recipient of MF-II
support, or if a long-form application is dismissed for any reason
after the close of the auction. For CAF-II, the Commission concluded
that any entity that files a short-form application to participate in
the CAF-II competitive bidding process will be subject to a forfeiture
in the event of a default before it is authorized to begin receiving
support.
149. The Commission concludes that it will align the MF-II rules
with its approach in CAF-II and adopts a rule that subjects a MF-II
winning bidder to a forfeiture payment if it defaults on its bid(s)
before it is authorized to begin receiving support. This forfeiture
payment shall satisfy the requirements of 47 CFR 1.21004(b) with
respect to default payments. The Commission holds that such an approach
will ensure that each violation has a relationship to the area affected
by the auction default, but will not be unduly punitive. Moreover, such
an approach will also ensure that the total forfeiture for a default is
generally proportionate to the overall scope of the winning bidder's
bid. The Commission will determine the minimum geographic unit to be
census block groups or census tracts in the pre-auction process. A
winning bidder that fails to become authorized to receive MF-II support
will then have violated the Commission's rules for each of the census
block groups or census tracts included in its defaulted bid. If a
winning bidder defaults on a bid that includes 10 census block groups/
census tracts, that entity could be subject to a base forfeiture of
$30,000 (10 census block groups/census tracts multiplied by the base
forfeiture of $3,000).
150. An entity will be considered to have an auction default and
will be subject to forfeiture if it fails to timely file a long-form
application or meet the document submission deadlines outlined in the
MF-II Order or is found ineligible or unqualified to receive Phase II
support by the Bureaus, or otherwise defaults on its bid or is
disqualified for any reason prior to the authorization of support.
Specifically, as the Commission found in the CAF-II context, it is
reasonable to subject all bidders to the same $3,000 base forfeiture
per violation, subject to adjustment based on the criteria set forth in
the Commission's forfeiture guidelines. A winning bidder will be
subject to the base forfeiture for each separate violation of the
Commission's rules.
151. For MF-II competitive bidding purposes, the Commission defines
a violation as any form of default with respect to each geographic unit
subject to a bid. However, to ensure that the amount of the base
forfeiture is not disproportionate to the amount of an entity's bid,
the Commission limits the total base forfeiture that could be owed by a
winning bidder to five percent of its total bid amount for the entire
ten-year support term. This would occur in situations where the dollar
amount associated with the bid is low. As an example, assume Bidder A
bids to serve 100 census block groups (CBGs) for $100,000 over the ten-
year support term. The Commission would impose a base forfeiture of
$5,000 (5 percent of $100,000) because otherwise the base forfeiture
would be $300,000 ($3,000 x 100 CBGs), which is three times the entire
bid amount. In contrast, if Bidder B bids to serve 100 census block
groups for $7,000,000 over the support term, the Commission would
impose a base forfeiture of $300,000 ($3,000 x 100 CBGs), which is 4.3
percent of the total bid.
152. By adopting such a forfeiture, the Commission impresses upon
recipients the importance of being prepared to meet all requirements
for the post-selection review process, and emphasizes the requirement
that the recipients conduct a due diligence review to ensure that they
are qualified to participate in the MF-II competitive bidding process
and meet its terms and conditions.
153. Failures by MF-II bidders to fulfill their auction obligations
will undermine the stability and predictability of the auction process,
and impose costs on the Commission and higher support costs for USF.
The Commission therefore finds that subjecting entities to a forfeiture
for an auction default is appropriate to ensure the integrity of the
auction process and to safeguard against costs to the Commission and
the USF. Thus, as a condition of participating in an MF-II auction,
entities acknowledge that they are subject to a forfeiture in the event
of an auction default.
154. The Commission distinguishes between an MF-II winning bidder
that is subject to an auction default, and a winning bidder whose long-
form application is approved but subsequently has a performance default
or otherwise fails to comply with the terms and conditions of receiving
MF-II support.
2. Measures for Non-Compliance
155. In the USF/ICC Transformation FNPRM, the Commission proposed
that a recipient of MF-II support would be subject to the same
performance default payment provisions as recipients of MF-I support.
For MF-I, the Commission required that in the event of a default, a
recipient would be required to repay all the support that it had
received plus an additional performance default of 10 percent of total
support for which the recipient is eligible.
156. In CAF-II, the Commission adopted a framework for reporting
and support reductions for all CAF-II recipients that fail to meet the
requisite service milestones. Specifically, the framework was adopted
to calibrate support reductions to the extent of an ETC's non-
compliance with service milestones. The Commission subsequently
extended that framework to rate-of-return carriers.
157. Given the policy goals underlying MF-II support, the public
interest benefit of establishing procedures for MF-II that are
substantially the same as those adopted for CAF-II, and the record
gathered on this issue, the Commission concludes that it should adopt a
more measured approach to recouping payment in the event of default
than the Commission employed in the MF-I auction. Accordingly, the
Commission adopts a process by which the Wireline Competition Bureau or
the Wireless Telecommunications Bureau will authorize USAC to draw on
the LOC(s) to recover all the support that has been disbursed in a
state in the event that the MF-II recipient does not meet the relevant
service milestones and does not cure its compliance gap pursuant to the
steps outlined below. For CAF-II, the Commission determined that USAC
would recover support from ETCs
[[Page 15441]]
associated with their compliance gap in three separate circumstances.
The Commission will adopt a corresponding approach for MF-II
recipients. If, after six months, the ETC fails to repay in full,
either the Wireline Competition Bureau or the Wireless
Telecommunications Bureau will issue a letter authorizing USAC to draw
on the letter of credit to recover 100 percent of the support that has
been disbursed to the ETC within the state.
158. First, for interim milestones, if the ETC has a compliance gap
of 50 percent or more of the eligible square miles that the ETC is
required to have covered by the relevant interim milestone (i.e., Tier
4 status) at the state level, USAC will withhold 50 percent of the
ETC's monthly support for that state, and the ETC will be required to
file quarterly reports. If, after having 50 percent of support withheld
for six months, the ETC has not reported that it has a compliance gap
of less than 50 percent at the state level (i.e., the ETC is eligible
for Tier 3 or lower or is in compliance), USAC will withhold 100
percent of the ETC's support for the state and will commence recovery
action for a percentage of support that is equal to the ETC's
compliance gap plus 10 percent of the ETC's support that has been paid
to that point. At this point, this ETC will have six months to pay back
the amount of support that USAC seeks to recover. An ETC is encouraged
to continue building out its MF-II projects during and after any
recovery of funds by USAC. If, at any point during the six-year period
for deployment, the ETC reports that it is eligible for Tier 1 status,
and USAC is able to substantiate that report, the ETC will have its
support fully restored including any support that had been withheld,
USAC will repay any funds that were recovered, and the ETC will move to
Tier 1 status. If, at the end of six months the ETC has not fully paid
back the support, the Wireline Competition Bureau or the Wireless
Telecommunications Bureau will issue a letter to that effect and USAC
will draw on the letter of credit to recover all of the support that
has been disbursed to the ETC. Consistent with CAF-II, the Commission
will review compliance with build-out milestones on a state-wide basis.
Accordingly, if a winning bidder chooses to obtain multiple letters of
credit for separate bids that are located in a state and defaults,
either of the Bureaus will authorize a draw on all the letters of
credit covering all the bids in that state.
159. Second, if an ETC misses the final milestone(s), it must
identify by what percentage the milestone has been missed at the state
level and/or any of the census block group(s) or census tract(s) in the
state. The ETC will then have 12 months from that date to come into
full compliance with both of those milestones. If it does not come into
full compliance within 12 months because it fails to meet the 85
percent benchmark (even if it meets the 75 percent benchmark for some
or all the census block group(s) or census tract(s)), the Wireline
Competition Bureau or the Wireless Telecommunications Bureau will issue
a letter, and USAC will recover disbursement(s) in an amount of support
that is equal to 1.89 multiplied by the average amount of support the
ETC received per eligible square mile in the state over the six-year
period multiplied by the number of square miles unserved in the ETC's
winning areas in the state that would be required to meet the 85
percent benchmark, plus 10 percent of the ETC's total MF-II support
received in the state over the six-year period for deployment. It is
reasonable to assume that many of the areas left unserved would have
higher than the average cost per area of the winning bid. Therefore, a
higher amount per area than the average is appropriate. Moreover, the
Commission wants to provide more incentive to carriers to complete the
build out for their winning bid. Thus, the Commission finds that the
administrative simplicity and predictability of using one factor for
all bidders outweighs the precision that would come from applying a
factor specific to each winning bidder and area. This multiplier was
adopted by the Commission for CAF-II.
160. After the ETC has paid the calculated recovery amount for
failure to comply with the final deployment milestone, the Bureaus will
calculate a reduced support payment for the remaining support term
based on the percentage of deployment coverage completed. The reduced
ongoing annual support amount will be the total of the ETC's original
winning bid amounts for annual support in the state multiplied by the
sum of the actual deployment percentage plus 15 percent (i.e., the
difference between 100 percent coverage and the required 85 percent
minimum coverage), or (annual support) * (percentage covered + 0.15).
161. If at the end of six months the ETC has not fully paid back
the support for missing the relevant 85 percent benchmark, the ETC
shall be liable for repayment of all the support that has been
disbursed to the ETC for that state, the Wireline Competition Bureau or
the Wireless Telecommunications Bureau will issue a letter to that
effect, and USAC will draw on the LOC(s) to recover all the support
that has been disbursed to the ETC for that state.
162. A similar approach will apply if the ETC meets the 85 percent
statewide benchmark but misses the 75 percent benchmark(s) for any
census block group(s) or census tract(s) in the state at the final
milestone and the ETC does not come into full compliance by meeting the
75 percent benchmark within 12 months. The Wireline Competition Bureau
or the Wireless Telecommunications Bureau will issue a letter for any
such census block group(s) or census tract(s), and USAC will recover
disbursement(s) in an amount of support that is equal to 1.89
multiplied by the average amount of support the ETC received per
eligible square mile in the census block group(s) or census tract(s) in
the state over the six-year period multiplied by the number of square
miles unserved in each of the ETC's winning census block group(s) or
census tract(s) in the state that would be required to meet their
respective 75 percent benchmarks, plus 10 percent of the ETC's total
MF-II support received in the relevant census block group(s) or census
tract(s) over the six-year period for deployment. At this point, the
ETC will have six months to repay the support USAC seeks to recover.
After the ETC has paid the calculated recovery amount, the Bureaus will
calculate a reduced support payment for the remaining support term. The
reduced ongoing annual support amount will be the ETC's original
winning bid amount for annual support in any such census block group or
census tract, multiplied by the sum of the actual deployment percentage
plus 25 percent (i.e., the difference between 100 percent coverage and
the required 75 percent minimum coverage), or (annual support) *
(percentage covered + 0.25). If at the end of six months the ETC has
not fully paid back the support for missing the relevant 75 percent
benchmark(s), the ETC shall be liable for repayment of all the support
that has been disbursed to the ETC for that state, the Wireline
Competition Bureau or the Wireless Telecommunications Bureau will issue
a letter to that effect, and USAC will draw on the LOC(s) to recover
all the support that has been disbursed to the ETC for that state. In
the event that USAC draws on a letter of credit to recover all the
support that has been disbursed to the ETC for a state, the ETC's
participation in MF-II in that state will immediately end and no
further support will be paid.
163. Third, after compliance with the final build-out milestones
has been verified and the ETC closes its letter of
[[Page 15442]]
credit, if at any point during the remainder of the 10-year term of
support it is determined that the ETC does not have sufficient evidence
to demonstrate that it is offering the requisite service to the
required percentage of square miles by census block group or census
tract, or state, USAC will withhold support for a period not to exceed
six months until the ETC demonstrates that it is again providing the
requisite service to the required percentage of square miles. When the
ETC's demonstration of coverage has been verified by USAC, USAC will
pay any withheld support and resume ongoing disbursements. If the ETC
cannot provide a verifiable demonstration of coverage within the
permitted six-month period, USAC will recover an amount of support that
is equal to 1.89 times the average amount of support per square mile
received in the winning bid area over the six-year deployment period
for the relevant number of square miles for which the ETC has failed to
produce sufficient evidence, plus 10 percent of the ETC's total support
received in that winning bid area over the six-year deployment time
period, and will reduce ongoing annual support as described in the MF-
II Order. Because the ETC's build-out will have already been verified
before it may close its letter of credit, the Commission does not find
it necessary to require that the ETC continue to keep its letter of
credit open in the event that the ETC does not repay the Commission
after it is found to be lacking evidence of continued service
deployment. Instead, if the ETC does not repay the Commission after a
six-month period permitted for repayment, it may be subject to
additional non-compliance measures, including the reduction of support
payments for the remaining support term as discussed in the MF-II
Order, and forfeitures.
164. Drawing on the letter of credit in the event that the ETC
fails to repay the support that USAC is instructed to recover will
ensure that the Commission will be able to recover the support in the
event that the ETC is unable to pay. Through the support reduction
framework the Commission adopted for CAF-II, the ETC will have a number
of opportunities to cure before the Commission will seek to recover the
support that is associated with the compliance gap. And the Commission
will only recover 100 percent of the support that has been disbursed
via the LOC in those cases where the ETC is unable to repay the support
associated with its compliance gap. Because an ETC that is unable to
repay the support is also unlikely to be able to meet its obligations
to use the support disbursed to offer service meeting the Commission's
requirements, recovering 100 percent of the support will allow the
Commission to re-award the support through an alternative mechanism to
an ETC that will be able to meet its obligations. This decision is
consistent with the conclusions reached by the Commission in the CAF II
context, that if an entity fails to repay the support amount associated
with its compliance gap, the risk becomes greater that the entity will
be unable to continue to serve its customers or may go into bankruptcy,
and thus it is necessary to ensure that the Commission can recover the
entire amount of support that it has disbursed.
165. If an ETC has a performance default for reasons other than
compliance with its construction milestones, such as the failure to
maintain its spectrum access, its LOC, or its ETC eligibility, these
performance defaults are incurable. The ETC must report its incurable
performance default within 10 days to the Commission, USAC will cease
disbursing MF-II support payments in the following month for the
affected area (whether one or more census block groups or a state), the
ETC's participation in MF-II in the affected census block group(s) or
census tract(s) will immediately end, and the amount of support subject
to recoupment for the ETC's non-compliance will then be calculated
based upon the final six-year milestone for either the relevant census
block group(s) or census tract(s) or the entire state, depending upon
the circumstances of the performance default. Specifically, the
Wireline Competition Bureau or the Wireless Telecommunications Bureau
will issue a letter for any census block group(s) or census tract(s) or
the entire state in which there has been an incurable performance
default. If the incurable performance default is only for some of the
ETC's census block group(s) or census tract(s), USAC will recover
disbursement(s) in an amount of support that is equal to 1.89
multiplied by the average amount of support the ETC received per
eligible square mile in the census block group(s) or census tract(s) in
the state over the time period it has received MF-II disbursements
multiplied by the number of square miles unserved in each of the ETC's
winning census block group(s) or census tract(s) in the state that
would be required to meet its respective 75 percent benchmarks, plus 10
percent of the ETC's total MF-II support received in the relevant
census block group(s) or census tract(s) over the relevant period for
deployment. If the incurable performance default is for an entire
state, USAC will recover disbursement(s) in an amount of support that
is equal to 1.89 multiplied by the average amount of support the ETC
received per eligible square mile in the state over the time period it
has received MF-II disbursements multiplied by the number of square
miles unserved in the ETC's winning areas in the state that would be
required to meet the 85 percent benchmark, plus 10 percent of the ETC's
total MF-II support received in the state over the relevant period for
deployment. At this point, the ETC will have six months to repay the
support USAC seeks to recover. If at the end of six months the ETC has
not fully paid back the support for missing the relevant benchmark, the
ETC shall be liable for repayment of all the support that has been
disbursed to the ETC for that state, the Wireline Competition Bureau or
the Wireless Telecommunications Bureau will issue a letter to that
effect, and USAC will draw on the LOC(s) to recover all of the support
that has been disbursed to the ETC for that state. After the ETC has
paid the calculated recovery amount for an incurable performance
default in a portion of a state, the Bureaus will calculate a reduced
support payment for the remaining support term as set out in the MF-II
Order.
166. Finally, the Commission notes that MF-II recipients may also
be subject to other sanctions for non-compliance with the terms and
conditions of high-cost funding, including, but not limited to
potential revocation of ETC designation and suspension or debarment.
C. Record Retention
167. In the USF/ICC Transformation FNPRM, the Commission proposed
that a recipient of MF-II support would be subject to the same rules
for accountability and oversight (including reporting, audit, and
record retention requirements) that apply to all recipients of CAF
support. The Commission also proposed that recipients of MF-II support
be required to include in their annual reports the same types of
additional information that are required of recipients of MF-I support.
In MF-I, the Commission adopted requirements that the record retention
requirements for recipients of support apply to all agents of the
recipient, and any documentation prepared for or in connection with the
recipient's MF-I support. The Commission also adopted revised
requirements that extend the record
[[Page 15443]]
retention period to 10 years for all recipients of high-cost and CAF
support, including recipients of Mobility Fund support. The retention
period runs from the date of the receipt of the final disbursement of
Mobility Fund funds. The Commission concludes that MF-II recipients are
subject to the same accountability and oversight requirements in 47 CFR
54.320, including the same audit and record retention requirements as
all other recipients of high-cost support.
X. Procedural Matters
A. Final Regulatory Flexibility Analysis
168. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the USF/ICC Transformation FNPRM and the 2014 CAF
Further Notice. The Commission sought written public comment on the
proposals in the USF/ICC Transformation FNPRM and 2014 CAF Further
Notice, including comment on the IRFAs. The Commission did not receive
any comments in response to these IRFAs. The Final Regulatory
Flexibility Analysis (FRFA) in the MF-II Order conforms to the RFA.
1. Need for, and Objectives of, the Report and Order
169. Despite the growing expansion of 4G Long Term Evolution (LTE)
service, rural and high-cost areas of our country have been left
behind. At the same time, the Universal Service Fund spends $25 million
a month (a conservative estimate) distributing legacy subsidies to
mobile carriers that compete with private capital and millions more
distributing duplicative subsidies to multiple carriers in the same
area.
170. In the MF-II Order, the Commission adopts the framework for
moving forward with the Mobility Fund Phase II (MF-II) and Tribal
Mobility Fund Phase II (Tribal MF-II), which will allocate up to $4.53
billion over the next decade to advance the deployment of 4G LTE
service to areas that are so costly that the private sector has not yet
deployed there and to preserve such service where it might not
otherwise exist. The funding for this effort will come from the
redirection of legacy subsidies and be distributed using a market-
based, multi-round reverse auction and will come with defined, concrete
compliance requirements so that rural consumers will be adequately
served by the mobile carriers receiving universal service support.
B. Summary of Significant Issues Raised by Public Comments in Response
to the IRFA
171. There were no comments filed that specifically addressed the
rules and policies proposed in the USF/ICC Transformation FNPRM IRFA or
the 2014 CAF Further Notice IRFA.
C. Response to Comments by the Chief Counsel for Advocacy of the Small
Business Administration
172. Pursuant to the Small Business Jobs Act of 2010, which amended
the RFA, the Commission is required to respond to any comments filed by
the Chief Counsel of the Small Business Administration (SBA), and to
provide a detailed statement of any change made to the proposed rule(s)
as a result of those comments.
173. The Chief Counsel did not file any comments in response to the
proposed rules in this proceeding.
D. Description and Estimate of the Number of Small Entities To Which
the Proposed Rules Will Apply
174. The RFA directs agencies to provide a description of, and
where feasible, an estimate of the number of small entities that may be
affected by the rules adopted herein. The RFA generally defines the
term ``small entity'' as having the same meaning as the terms ``small
business,'' ``small organization,'' and ``small governmental
jurisdiction.'' In addition, the term ``small business'' has the same
meaning as the term ``small-business concern'' under the Small Business
Act. A ``small-business concern'' is one which: (1) Is independently
owned and operated; (2) is not dominant in its field of operation; and
(3) satisfies any additional criteria established by the SBA.
175. Small Entities, Small Organizations, Small Governmental
Jurisdictions. The Commission's actions, over time, may affect small
entities that are not easily categorized at present. The Commission
therefore describes here, at the outset, three comprehensive small
entity size standards that could be directly affected herein. As of
2014, according to the SBA, there were 28.2 million small businesses in
the U.S., which represented 99.7% of all businesses in the United
States. Additionally, a ``small organization'' is generally ``any not-
for-profit enterprise which is independently owned and operated and is
not dominant in its field.'' Nationwide, as of 2007, there were
approximately 1,621,215 small organizations. Finally, the term ``small
governmental jurisdiction'' is defined generally as ``governments of
cities, towns, townships, villages, school districts, or special
districts, with a population of less than fifty thousand.'' Census
Bureau data for 2012 indicate that there were 89,476 local governmental
jurisdictions in the United States. The Commission estimates that, of
this total, as many as 88,761 entities may qualify as ``small
governmental jurisdictions.'' Thus, the Commission estimates that most
governmental jurisdictions are small.
176. Wireless Telecommunications Carriers (except Satellite). This
industry comprises establishments engaged in operating and maintaining
switching and transmission facilities to provide communications via the
airwaves. Establishments in this industry have spectrum licenses and
provide services using that spectrum, such as cellular services, paging
services, wireless internet access, and wireless video services. The
appropriate size standard under SBA rules is that such a business is
small if it has 1,500 or fewer employees. For this industry, census
data for 2012 show that there were 967 firms that operated for the
entire year. Of this total, 955 firms had employment of 999 or fewer
employees and 12 had employment of 1000 employees or more. Thus under
this category and the associated size standard, the Commission
estimates that the majority of wireless telecommunications carriers
(except satellite) are small entities. Similarly, according to
internally developed Commission data, 413 carriers reported that they
were engaged in the provision of wireless telephony, including cellular
service, Personal Communications Service, and Specialized Mobile Radio
Telephony services. Of this total, an estimated 261 have 1,500 or fewer
employees, and 152 have more than 1,500 employees. Thus, using
available data, the Commission estimates that the majority of wireless
firms can be considered small.
177. Internet Service Providers. Since 2007, these services have
been defined within the broad economic census category of Wired
Telecommunications Carriers; that category is defined as follows:
``This industry comprises establishments primarily engaged in operating
and/or providing access to transmission facilities and infrastructure
that they own and/or lease for the transmission of voice, data, text,
sound, and video using wired telecommunications networks. Transmission
facilities may be based on a single technology or a combination of
technologies.'' The SBA has developed a small business size standard
for Wired Telecommunications Carriers, which consists of all such firms
having 1,500
[[Page 15444]]
or fewer employees. Census Bureau data for 2012 shows that there were
3,117 firms that operated for the entire year. Of this total, 3,083
firms had employment of 999 or fewer employees, and 34 firms had
employment of 1,000 employees or more. Thus, under this size standard,
the majority of firms in this industry can be considered small. In
addition, while Internet Service Providers (broadband) are a
subcategory of the broader category of Wired Telecommunications
Carrier, there is Census Bureau data specific to Internet Service
Providers (broadband). For 2012, Census Bureau data shows there were a
total of 1,180 firms in the subcategory of Internet Service Providers
(broadband) that operated for the entire year. Of this total, 1,178
firms had employment of 999 or fewer employees, and two firms had
employment of 1000 employees or more. Consequently, the Commission
estimates that the majority of these firms are small entities that may
be affected by rules adopted pursuant to the MF-II Order.
E. Description of Projected Reporting, Recordkeeping, and Other
Compliance Requirements
178. In the MF-II Order, the Commission adopts the framework for
moving forward with MF-II and Tribal MF-II, which will allocate up to
$4.53 billion over the next decade to advance the deployment of 4G LTE
service to areas that are so costly that the private sector has not yet
deployed there and to preserve such service where it might not
otherwise exist. The funding for this effort will come from the
redirection of legacy subsidies and distributed using a market-based,
multi-round reverse auction and will come with defined, concrete
compliance requirements so that rural consumers will be adequately
served by the mobile carriers receiving universal service support. The
recordkeeping and other obligations of MF-II established in the MF-II
Order are summarized in this FRFA. Additional information on each of
these requirements can be found in the MF-II Order.
179. Recipients of MF-II support will be required to deploy 4G LTE
and to offer voice service. Recipients of MF-II funding will be
required to meet minimum baseline performance requirements for data
speeds, data latency, and data allowances in areas that receive support
for at least one plan that they offer. Specifically, the median data
speed of the network for the supported area must be 10 Mbps download
speed or greater and 1 Mbps upload speed or greater, with at least 90
percent of the required download speed measurements being not less than
a certain threshold speed. For latency, at least 90 percent of the
required measurements must have a data latency of 100 milliseconds or
less round trip. For data allowances, support recipients must offer at
least one service plan that includes a data allowance comparable to
mid-level service plans offered by nationwide providers--currently at
least 2 GB of data per month--and that is at a rate that is within a
reasonable range of rates for similar service plans offered by mobile
wireless providers in urban areas. These conditions will be defined
more precisely in the pre-auction process.
180. MF-II support recipients will be given a ten-year term of
support with no renewal expectancy, which will begin on the first day
of the month after the MF-II auction concludes. The Commission adopts
interim benchmarks as well as a final benchmark for deployment of
service that meets the performance metrics. The starting point for the
interim benchmarks is defined as six months from the first day of the
month that follows the month in which the MF-II auction closes. The
Commission requires a winning bidder to demonstrate coverage of at
least 40 percent by three years after the starting point, 60 percent by
four years after the starting point, 80 percent by five years after the
starting point, and 85 percent by six years after the starting point
across all areas for which they receive MF-II support in a state.
Support recipients must meet their required benchmarks across all areas
for which they receive MF-II support in a state. However, for the final
benchmark, every census block group or census tract in a state
(depending on minimum bidding unit) must also be at least 75 percent
covered. Recipients that fail to meet and maintain the performance
obligations within the time provided to submit their representative
data and to certify to coverage requirements will be subject to defined
measures, and must cure these failures to meet the deployment
requirements or they will be in performance default.
181. Entities that are interested in participating in the MF-II
auction will be required to file a short-form application in order to
establish their eligibility to participate. Each auction applicant will
be required to provide information to establish its identity, including
disclosure of parties with ownership interests, consistent with the
ownership interest disclosure required in 47 CFR part 1 for applicants
for spectrum licenses, as well as any agreements the applicant may have
relating to the support to be sought through the auction. Each
applicant will also be required to disclose and certify its ETC status,
although an applicant will not be required to obtain an ETC designation
prior to bidding in MF-II. Applicants will be required to disclose and
certify the source of the spectrum they plan to use to meet Mobility
Fund obligations in the particular area(s) for which they plan to bid.
Specifically, applicants will be required to disclose whether they
currently hold a license or lease the spectrum, including any necessary
renewal expectancy, and whether such spectrum access is contingent on
obtaining support in an MF-II auction. Applicants must have secured any
Commission approvals necessary for the required spectrum access prior
to submitting an auction application. Moreover, applicants will be
required to certify that they will retain their access to the spectrum
for at least ten years from the date support is authorized. The short-
form application may also include additional certifications or
requirements that are adopted in a public notice.
182. Within a specified number of days of the release of a public
notice identifying an entity as a winning bidder, that winning bidder
will be required to file a long-form application. In this long-form
application, an applicant for MF-II support will be required to fully
disclose its ownership structure as well as information regarding the
real party- or parties-in-interest of the applicant or application. An
applicant will also be required to submit with its long-form
application appropriate documentation of its ETC designation, including
the original designation order and any relevant modifications or name-
change orders, in all the areas for which it will receive support or
certify that it will do so within 180 days of the public notice
identifying winning bidders. An applicant will be required to certify
that it is financially and technically capable of providing the
required coverage and performance levels within the specified timeframe
in the geographic areas in which it won support.
183. For winning bids, the applicant must submit a project
description that describes the network to be built or upgraded;
identifies the proposed technology; demonstrates that the project is
technically feasible; discloses the complete project budget; and
discusses each specific phase of the project (e.g., network design,
construction, deployment, and maintenance). A complete project
schedule, including timelines,
[[Page 15445]]
milestones, and costs, must also be provided.
184. In addition, each applicant must provide in its long-form
application a description of the spectrum access that it will use to
meet its obligations in areas for which it is the winning bidder,
including whether it currently holds a license or leases the spectrum,
along with any necessary renewal expectancy, and certify that the
description is accurate and that the applicant will retain such access
for the entire ten-year support term. Each applicant must certify in
its long-form application that it has the funds available for all
project costs that exceed the amount of support to be received, and
that it will comply with all program requirements, which include the
public interest obligations contained in the Commission's rules. Each
applicant must also certify that it will offer service in supported
areas at rates that are within a reasonable range of rates for similar
service plans offered by mobile wireless providers in urban areas
during the term of support the applicant seeks.
185. Applicants must certify that they will meet the applicable
deadlines and requirements for demonstrating interim and final
performance benchmarks set forth in the rules, and that they will
comply with the MF-II collocation, voice and data roaming, and
reasonably comparable rate obligations. The long-form application may
also include additional certifications or requirements that are adopted
in a public notice.
186. Prior to the authorization of support, all winning bidders
must provide the Commission with an irrevocable standby letter of
credit (LOC) by a bank that is acceptable to the Commission in
substantially the same form as the model Letter of Credit set forth in
an appendix to the MF-II Order. The initial value of the LOC must be
set to at least the amount of authorized MF-II support for the first
year. Before the winning bidder can receive its next year's MF-II
support, it must modify, renew, or obtain a new LOC to ensure that it
is valued at a minimum at the total amount of money that has already
been disbursed plus the amount of money that is going to be provided in
the next year. The LOC must be maintained for 100 percent of the total
support amount disbursed plus the amount to be disbursed in the next
year until the Universal Service Administrative Company (USAC), in
coordination with the Commission, has determined that the recipient has
met its interim benchmark for deployment to 60 percent of the required
coverage area; and subject to USAC's consent, the amount of the LOC may
decrease to an amount equal to 90 percent of the total support amount
already disbursed plus the amount that will be disbursed in the coming
year. Once USAC, in coordination with the Commission, has determined
that the recipient has met its interim benchmark for deployment to 80
percent of the required coverage area; and subject to USAC's consent,
the amount of the LOC may decrease to an amount equal to 80 percent of
the total support amount already disbursed plus the amount that will be
disbursed in the coming year. After USAC, in coordination with the
Commission, has determined that the recipient has met its final
benchmark for deployment to a minimum of 85 percent of the required
coverage area by state and at least 75 percent by each census block
group or census tract in a state included in the LOC, the recipient may
relinquish its LOC. Each winning bidder will be allowed to provide a
single LOC covering all its winning bids within a single state.
187. At the time a winning bidder in MF-II submits its LOC, it also
will be required to provide an opinion letter from legal counsel
clearly stating, subject only to customary assumptions, limitations and
qualifications, that in a proceeding under the Bankruptcy Code, the
bankruptcy court would not treat the LOC or proceeds of the LOC as
property of the winning bidder's bankruptcy estate, or the bankruptcy
estate of any other bidder-related entity requesting issuance of the
LOC, under 11 U.S.C. 541. If the winning bidder is not prepared to
present its LOC at the time of the long-form application filing, it may
submit a commitment letter from the bank issuing the LOC in the long-
form application filing.
188. An entity will be considered to have an auction default and
will be subject to a forfeiture payment if it fails to timely file a
long-form application or meet the document submission deadlines, or is
found ineligible or unqualified to receive MF-II support, or otherwise
defaults on its bid or is disqualified for any reason prior to the
authorization of support. All bidders will be subject to the same
$3,000 base forfeiture per violation, subject to adjustment based on
the criteria set forth in the Commission's forfeiture guidelines. A
violation is defined as any form of default with respect to each
geographic unit subject to a bid. However, the total base forfeiture
that could be owed by a winning bidder is limited to five percent of
its total bid amount for the entire ten-year support term.
189. The Wireline Competition Bureau or the Wireless
Telecommunications Bureau will authorize USAC to draw on the LOC(s) to
recover all the support that has been disbursed in a state in the event
that the MF-II recipient does not meet the relevant service milestones
and does not cure its compliance gap. USAC will recover support from
ETCs associated with their compliance gap in three separate
circumstances. First, for interim milestones, if the ETC has a
compliance gap of 50 percent or more of the eligible square miles that
the ETC is required to have covered by the relevant interim milestone
(i.e., Tier 4 status) at the state level, USAC will withhold 50 percent
of the ETC's monthly support for that state, and the ETC will be
required to file quarterly reports. If, after having 50 percent of
support withheld for six months, the ETC has not reported that it has a
compliance gap of less than 50 percent at the state level (i.e., the
ETC is eligible for Tier 3 or lower or is in compliance), USAC will
withhold 100 percent of the ETC's support for the state and will
commence recovery action for a percentage of support that is equal to
the ETC's compliance gap plus 10 percent of the ETC's support that has
been paid to that point. At this point, this ETC will have six months
to pay back the amount of support that USAC seeks to recover. If, at
any point during the six-year period for deployment the ETC reports
that it is eligible for Tier 1 status, and USAC is able to substantiate
that report, the ETC will have its support fully restored including any
support that had been withheld, USAC will repay any funds that were
recovered, and the ETC will move to Tier 1 status. If, at the end of
six months the ETC has not fully paid back the support, the Wireline
Competition Bureau or the Wireless Telecommunications Bureau will issue
a letter to that effect and USAC will draw on the letter of credit to
recover all the support that has been disbursed to the ETC.
190. Second, if an ETC misses the final milestone(s), it must
identify by what percentage the milestone has been missed at the state
level and/or any of the census block group(s) or census tract(s) in the
state. The ETC will then have 12 months from that date to come into
full compliance with both of those milestones. If it does not come into
full compliance within 12 months because it fails to meet the 85
percent benchmark (even if it meets the 75 percent benchmark for some
or all the census block group(s) or census tract(s)), the Wireline
Competition Bureau or the Wireless Telecommunications Bureau will issue
a letter, and USAC will
[[Page 15446]]
recover disbursement(s) in an amount of support that is equal to 1.89
multiplied by the average amount of support the ETC received per
eligible square mile in the state over the six-year period multiplied
by the number of square miles unserved in the ETC's winning areas in
the state that would be required to meet the 85 percent benchmark, plus
10 percent of the ETC's total MF-II support received in the state over
the six-year period for deployment. After the ETC has paid the
calculated recovery amount for failure to comply with the final
deployment milestone, the Bureaus will calculate a reduced support
payment for the remaining support term based on the percentage of
deployment coverage completed. If, at the end of six months the ETC has
not fully paid back the support for missing the relevant 85 percent
benchmark, the ETC shall be liable for repayment of all the support
that has been disbursed to the ETC for that state, the Wireline
Competition Bureau or the Wireless Telecommunications Bureau will issue
a letter to that effect, and USAC will draw on the LOC(s) to recover
all the support that has been disbursed to the ETC for that state. A
similar approach will apply if the ETC meets the 85 percent statewide
benchmark but misses the 75 percent benchmark(s) for any census block
group(s) or census tract(s) in the state at the final milestone and the
ETC does not come into full compliance by meeting the 75 percent
benchmark within 12 months. At this point, the ETC will have six months
to repay the support USAC seeks to recover. After the ETC has paid the
calculated recovery amount, the Bureaus will calculate a reduced
support payment for the remaining support term. If, at the end of six
months the ETC has not fully paid back the support for missing the
relevant 75 percent benchmark(s), the ETC shall be liable for repayment
of all the support that has been disbursed to the ETC for that state,
the Wireline Competition Bureau or the Wireless Telecommunications
Bureau will issue a letter to that effect, and USAC will draw on the
LOC(s) to recover all the support that has been disbursed to the ETC
for that state. In the event that USAC draws on a letter of credit to
recover all the support that has been disbursed to the ETC for a state,
the ETC's participation in MF-II in that state will immediately end and
no further support will be paid.
191. Third, after compliance with the final build-out milestones
has been verified and the ETC closes its letter of credit, if at any
point during the remainder of the 10-year term of support it is
determined that the ETC does not have sufficient evidence to
demonstrate that it is offering the requisite service to the required
percentage of square miles by census block group or census tract, or
state, USAC will withhold support for a period not to exceed six months
until the ETC demonstrates that it is again providing the requisite
service to the required percentage of square miles. When the ETC's
demonstration of coverage has been verified by USAC, USAC will pay any
withheld support and resume ongoing disbursements. If the ETC cannot
provide a verifiable demonstration of coverage within the permitted
six-month period, USAC will recover an amount of support that is equal
to 1.89 times the average amount of support per square mile received in
the winning bid area over the six-year deployment period for the
relevant number of square miles for which the ETC has failed to produce
sufficient evidence, plus 10 percent of the ETC's total support
received in that winning bid over the six-year deployment time period
and will reduce ongoing annual support. If the ETC does not repay the
Commission after a six-month period permitted for repayment, it may be
subject to additional non-compliance measures, including the reduction
of support payments for the remaining support term and forfeitures. MF-
II recipients may also be subject to other sanctions for non-compliance
with the terms and conditions of high-cost funding, including, but not
limited to potential revocation of ETC designation and suspension or
debarment.
192. Once an MF-II recipient has been authorized to begin receiving
support, it will be required to report certain information so that the
Commission and USAC can track the progress of MF-II recipients and
monitor their use of the public's funds before and after they meet
service milestones. All MF-II recipients will be required to file
annual reports. Recipients will be required to file their reports each
year following the year in which the auction closes by July 1,
including all the certifications required under the MF-II rules, and in
which the recipient will update information, as required for the
following year.
193. MF-II recipients will be required to file a Milestone Report
on or before its third, fourth, fifth, and sixth year performance
deadline. The Bureaus will define more precisely the content and format
of the information, including substantiation that recipients are
required to include in their Milestone Reports, such that it is
consistent with the evidence that will be required from challenging
parties in the challenge process. Reports should be filed via the
portal that USAC is creating to receive filings by universal service
support recipients.
194. Support will be reduced for recipients that miss reporting,
certification, and milestone filing deadlines. A minimum reduction of
support of seven days of total statewide support for a winning bid in
any state for which a filing deadline is missed will be imposed. In
addition to the reduction of the initial seven days of support, support
will be reduced further state-wide on a pro-rata daily basis until the
MF-II recipient files the required report or certification. For a late
filer, a one-time grace period of three days will be provided so that a
recipient that quickly rectifies its error within three days of the
deadline will not be subject to the seven-day minimum loss of support.
USAC will send a letter to such a recipient notifying it that its
filing was late but cured within the grace period. If the recipient
again files any filing late, the grace period will not be available.
195. Each recipient will be required to maintain the accuracy and
completeness of the information it furnishes in its long-form
application and its annual and milestone reports. Recipients must
update their annual reports and milestone reports to provide
information about any substantial change that may be of decisional
significance regarding their eligibility for MF-II support and
compliance with MF-II requirements. Such notification of a substantial
change, including any reduction in the percentage of eligible square
miles being served or any failure to comply with any of the MF-II
requirements, must be submitted within 10 business days after the
reportable event occurs. If a support recipient drops below the level
of service to which it has certified in a milestone report or an annual
report during the six-year deployment period, it will be subject to the
Commission rules for non-compliance.
F. Steps Taken To Minimize Significant Economic Impact on Small
Entities, and Significant Alternatives Considered
196. The RFA requires an agency to describe any significant
alternatives that it has considered in reaching its approach, which may
include the following four alternatives, among others: ``(1) the
establishment of differing compliance or reporting requirements or
timetables that take into account the resources available to small
entities; (2) the clarification, consolidation, or simplification of
compliance or reporting requirements
[[Page 15447]]
under the rule for small entities; (3) the use of performance, rather
than design, standards; and (4) an exemption from coverage of the rule,
or any part thereof, for small entities.''
197. The Commission has considered the economic impact on small
entities in reaching its final conclusions and taking action in this
proceeding. The rules adopted in the MF-II Order will provide greater
certainty and flexibility for all carriers, including small entities.
For example, the Commission concludes that the minimum geographic area
for bidding should be census block groups or census tracts containing
one or more census blocks with eligible areas for bidding and support
for MF-II. The Commission found that adopting a smaller geographic area
would allow it to target support more efficiently to specific areas and
provide bidders, including small entities, the ability to tailor their
bids to their business plans. The Commission expects that the auction
design will similarly account for the needs of small entities.
198. To determine coverage levels in individual census blocks and
whether MF-II support is being awarded, the Commission has decided to
rely on Form 477 and high-cost disbursement data available from USAC.
Not only is this information the most reliable data currently available
for the purpose of determining the coverage levels of existing mobile
services, but it can also provide sufficiently granular information to
identify those areas of the country that lack 4G LTE service or where
such service is only provided by a subsidized provider. Moreover, the
Commission will utilize a streamlined challenge process to provide
interested parties, including small entities, with an opportunity to
challenge the coverage analysis and improve its accuracy. The Bureaus
will make an initial determination of eligible areas by census block as
part of the pre-auction process. Subsequently, the Bureaus will
implement a process consistent with the decisions the Commission will
make after review of the record received in response to the Further
Notice of Proposed Rulemaking included with the MF-II Order. The
Commission anticipates that this challenge process will be more
streamlined for all parties, including small entities, as it will be
based on Form 477 data, which use a uniform filing format.
199. The Commission amends its rules for the phase-down of
identical support to account for the relative costs of deploying a
coverage-based network given the differing terrain throughout the
United States. Wireless providers, including smaller providers, incur
additional costs to deploy service in more difficult terrain.
Accordingly, the Bureaus will apply a more-refined methodology that
uses a terrain factor as a proxy for determining higher cost areas. In
census blocks determined (after the completion of the challenge
process) not to be eligible for MF-II support, legacy support will be
phased down starting the first day of the month following release of a
public notice announcing the close of the MF-II auction. On that same
date, legacy support for current recipients in eligible census blocks
shall either be converted to MF-II support (for the winning bidder),
maintained (for one CETC in areas without a winning bidder), or subject
to phase down (for all other CETCs). More specifically, in census
blocks determined (after the completion of the challenge process) not
to be eligible for MF-II, legacy support will be phased down starting
the first day of the month following the close of the MF-II auction.
For the first 12 months thereafter, phase-down support shall be \2/3\
of the legacy support for each CETC associated with that area. For the
next 12 months, phase-down support shall be \1/3\ of the legacy support
for each CETC associated with that area. All legacy support shall end
thereafter. For a winning bidder that is a CETC receiving legacy
support in the area of its bid, MF-II support shall commence on the
first day of the month after the auction concludes. To ensure a smooth
transition to MF-II support, and to the extent the Commission
authorizes a winning bidder to receive MF-II support after that date, a
winning bidder will receive support payments at the current legacy
support level until such Commission action. A non-CETC winning bidder
will receive MF-II support once the Commission issues a public notice
authorizing MF-II support to the bidder. In eligible areas where there
is no winning bidder in MF-II, the CETC receiving the minimum level of
sustainable support will continue to receive such support until further
Commission action, but for no more than five years from the first day
of the month following the close of the MF-II auction. For CETCs
receiving support in areas eligible for MF-II that do not either win
MF-II support or receive the minimum level of sustainable support, the
phase-down of support shall commence on the first day of the month
after the auction concludes. For the first 12 months, phase-down
support shall be \2/3\ of the legacy support for each CETC associated
with that area. For the next 12 months thereafter, phase-down support
shall be \1/3\ of the legacy support for each CETC associated with that
area. All legacy support shall end thereafter. The Commission concludes
that this two-year phase-down schedule will ensure that affected CETCs,
including smaller providers, will have a smooth transition in areas
that are too costly to serve absent universal service subsidies.
200. The Commission has taken a number of steps to ensure that
small entities have the opportunity to participate in the MF-II
auction. For example, the Commission adopts more flexible eligibility
requirements by permitting a winning bidder in the MF-II auction to
obtain its ETC designation after the close of the auction, provided
that it submits proof of its ETC designation within 180 days of the
public notice identifying winning bidders. The Commission found that
the benefits of encouraging greater participation in the competitive
bidding process by all interested parties, including small entities,
outweigh the possible risk that a winning bidder will not meet the
necessary requirements to be designated as an ETC. The Commission also
recognized that some qualified bidders, including small entities, may
be hesitant to invest resources to apply for an ETC designation prior
to the competitive bidding process without any sense of whether they
are likely to be awarded MF-II support.
201. While the Commission requested comment on whether to adopt a
bidding credit preference for Tribally-owned-and-controlled entities,
it finds that such a bidding credit preference is unnecessary for the
MF-II auction. Setting aside funds specifically to serve Tribal lands
is likely to accomplish the Commission's goal of ensuring greater
coverage on Tribal lands. The Commission also finds that layering an
additional bidding credit for Tribal carriers on top of the funding
exclusively available for service to Tribal lands could deter other
entities from bidding to serve Tribal lands, reducing both the
competitiveness of the auction and the potential reach of the
Commission's finite funds for MF-II. Furthermore, commenters fail to
demonstrate that the benefits of a bidding credit preference outweigh
the costs of potentially depriving other eligible areas of MF-II
support.
202. The Commission requested comment on the adoption of a small
business bidding preference and the small business definition that
should apply if it adopts such a bidding preference for MF-II. The
Commission, however, declines to adopt a bidding preference for small
businesses for MF-II. It agrees with commenters that
[[Page 15448]]
oppose a bidding preference for small businesses, concluding that such
credits are unnecessary for an MF-II auction and would not further the
objective of MF-II of encouraging the efficient use of universal
support funds because a bidding credit for small businesses could
potentially reduce the reach of the Commission's finite funds.
203. The Commission adopts requirements for the short-form and
long-form applications that will maximize the number and types of
entities that can participate. For example, it adopts a two-stage
application process for an applicant seeking to participate in the MF-
II auction under which interested parties will submit a pre-auction
``short-form'' application, providing basic information and
certifications regarding their eligibility to receive support, and then
a long-form application, fully disclosing its ownership structure,
information and certifications regarding applicant eligibility, and
plans to meet performance requirements. This process is similar to that
used in spectrum license auctions and for Mobility Fund Phase I. Since
the Commission anticipates that many interested parties, including
small entities, will already be familiar with these requirements, it
expects that the application procedures will minimize burdens on
applicants and encourage a wide variety of parties to participate.
204. In light of concerns expressed by commenters, including small
entities, the Commission adopts more flexible provisions for MF-II LOCs
to help ease the administrative burden for support recipients. For
example, the Commission adopts LOC provisions that closely align with
the CAF-II LOC process and the MF-II performance requirements, allowing
the LOC to decrease over time as a support recipient satisfies its
minimum coverage and service requirements. The Commission also allows
winning bidders to provide a single LOC covering all its winning bids
within a single state, reducing the number of LOCs that a winning
bidder may need. Moreover, the Commission amends and expands the
definition of an ``acceptable bank'' for the purposes of MF-II LOC
requirements, which will lower barriers for entities, particularly
small and rural businesses that might otherwise face obstacles in
obtaining an LOC from a smaller pool of banks. The Commission also
allows the submission of a commitment letter from the bank issuing the
LOC in the long-form application filing, if the winning bidder is not
prepared to present its LOC at the time of the long-form application
filing.
205. Similarly, the Commission adopts more flexible measures for
non-compliance that will better enable support recipients, including
small entities, to meet the MF-II goals of preserving and expanding
service. For example, the Commission adopts a more measured approach to
recouping payment in the event of default than the Commission employed
in the MF-I auction. The Commission also limits when USAC will be
permitted to recover support from ETCs associated with their compliance
gap and conclude that only if the ETC fails to repay in full after six
months, USAC will be authorized to draw on the letter of credit to
recover 100 percent of the support that has been disbursed to the ETC
within the state.
206. The Commission notes that the reporting requirements it adopts
are tailored to ensuring that support is used for its intended purposes
and so that the Commission and USAC can monitor the ongoing progress
and performance of all MF-II recipients. The Commission finds the
benefits in establishing annual and milestone reporting obligations
outweigh any potential burdens on the recipients in filing these
reports because the targeted information required will be the type of
data that MF-II recipients will be already collecting for their own
business purposes and will help to ensure that program goals are met.
Nevertheless, to help minimize the burden of reporting requirements,
including the burden on small businesses, the Commission has adopted
annual and milestone reporting requirements that are consistent with
the reporting requirements for MF-I and CAF-II support recipients,
including grace periods for missed filing deadlines.
G. Report to Congress
207. The Commission will send a copy of the MF-II Order, including
the FRFA, in a report to be sent to Congress and the Government
Accountability Office pursuant to the Congressional Review Act. In
addition, the Commission will send a copy of the MF-II Order, including
the FRFA, to the Chief Counsel for Advocacy of the Small Business
Administration.
XI. Ordering Clauses
208. Accordingly, it is ordered, pursuant to the authority
contained in sections 1, 2, 4(i), 5, 10, 201-206, 214, 218-220, 251,
252, 254, 256, 303(r), 332, 403, 405, and 503 of the Communications Act
of 1934, as amended, and section 706 of the Telecommunications Act of
1996, 47 U.S.C. 151, 152, 154(i), 155, 160, 201-206, 214, 218-220, 251,
252, 254, 256, 303(r), 332, 403, 405, 503, 1302, and sections 1.1,
1.427, and 1.429 of the Commission's rules, 47 CFR 1.1, 1.427, and
1.429, that the MF-II Order is adopted. It is the Commission's
intention in adopting these rules that if any of the rules that it
retains, modifies, or adopts, or the application thereof to any person
or circumstance, are held to be unlawful, the remaining portions of the
rules not deemed unlawful, and the application of such rules to other
persons or circumstances, shall remain in effect to the fullest extent
permitted by law.
209. It is further ordered that Parts 1 and 54 of the Commission's
rules, 47 CFR 1 and 54, are amended as set forth in Appendix A of the
MF-II Order, and such rule amendments shall be effective thirty (30)
days after publication in the Federal Register, except to the extent
they contain new or modified information collection requirements that
require approval by the Office of Management and Budget under the
Paperwork Reduction Act. The rules that contain new and modified
information collection requirement subject to PRA review shall become
effective after the Commission publishes a notice in the Federal
Register announcing such approval and the relevant effective date.
210. It is further ordered that the Petition for Declaratory Ruling
filed by United States Cellular Corporation on March 21, 2014 is
denied.
211. It is further ordered that the Commission shall send a copy of
the MF-II Order to Congress and the Government Accountability Office
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
212. It is further ordered, that the Commission's Consumer and
Governmental Affairs Bureau, Reference Information Center, shall send a
copy of the MF-II Order, including the Final Regulatory Flexibility
Analysis, to the Chief Counsel for Advocacy of the Small Business
Administration.
List of Subjects
47 CFR Part 1
Administrative practice and procedures, Reporting and recordkeeping
requirements, Telecommunications.
47 CFR Part 54
Communications common carriers, Internet, Reporting and
recordkeeping requirements, Telecommunications.
[[Page 15449]]
Federal Communications Commission.
Katura Howard,
Federal Register Liaison Officer. Office of the Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR parts 1 and 54 as follows:
PART 1--PRACTICE AND PROCEDURE
0
1. The authority citation for part 1 continues to read as follows:
Authority: 15 U.S.C. 79, et seq.; 47 U.S.C. 151, 154(i), 154(j),
155, 157, 160, 201, 225, 227, 303, 309, 310, 332, 1403, 1404, 1451,
1452, and 1455.
0
2. In Sec. 1.21003, redesignate paragraphs (c) and (d) as paragraphs
(d) and (e), remove paragraph (b), and add new paragraphs (b) and (c)
to read as follows:
Sec. 1.21003 Competitive bidding process.
* * * * *
(b) Competitive Bidding Procedures--Design Options. The public
notice detailing competitive bidding procedures may establish the
design of the competitive bidding utilizing any of the following
options, without limitation:
(1) Procedures for Collecting Bids. (i) Procedures for collecting
bids in a single round or in multiple rounds.
(ii) Procedures for collecting bids on an item-by-item basis, or
using various aggregation specifications.
(iii) Procedures for collecting bids that specify contingencies
linking bids on the same item and/or for multiple items.
(iv) Procedures allowing for bids that specify a support level,
indicate demand at a specified support level, or provide other
information as specified by the Commission.
(v) Procedures to collect bids in one or more stage or stages,
including for transitions between stages.
(2) Procedures for Assigning Winning Bids. (i) Procedures for
scoring bids by factors in addition to bid amount, such as population
coverage or geographic contour, or other relevant measurable factors.
(ii) Procedures to incorporate public interest considerations into
the process for assigning winning bids.
(3) Procedures for Determining Payments. (i) Procedures to
determine the amount of any support for which winning bidders may
become authorized, consistent with other auction design choices.
(ii) Procedures that provide for support amounts based on the
amount as bid or on other pricing rules, either uniform or
discriminatory.
(c) Competitive Bidding Procedures--Mechanisms. The public notice
detailing competitive bidding procedures may establish any of the
following mechanisms, without limitation:
(1) Limits on Available Information. Procedures establishing limits
on the public availability of information regarding applicants,
applications, and bids during a period of time covering the competitive
bidding process, as well as procedures for parties to report the
receipt of non-public information during such periods.
(2) Sequencing. Procedures establishing one or more groups of
eligible areas and if more than one, the sequence of groups for which
bids will be accepted.
(3) Reserve Price. Procedures establishing reserve prices, either
disclosed or undisclosed, above which bids would not win in the
auction. The reserve prices may apply individually, in combination, or
in the aggregate.
(4) Timing and Method of Placing Bids. Procedures establishing
methods and times for submission of bids, whether remotely, by
telephonic or electronic transmission, or in person.
(5) Opening Bids and Bid Increments. Procedures establishing
maximum or minimum opening bids and, by announcement before or during
the auction, maximum or minimum bid increments in dollar or percentage
terms.
(6) Withdrawals. Procedures by which bidders may withdraw bids, if
withdrawals are allowed.
(7) Stopping Procedures. Procedures regarding when bidding will
stop for a round, a stage, or an entire auction, in order to terminate
the auction within a reasonable time and in accordance with public
interest considerations and the goals, statutory requirements, rules,
and procedures for the auction, including any reserve price or prices.
(8) Activity Rules. Procedures for activity rules that require a
minimum amount of bidding activity.
(9) Auction Delay, Suspension, or Cancellation. Procedures for
announcing by public notice or by announcement during the reverse
auction, delay, suspension, or cancellation of the auction in the event
of a natural disaster, technical obstacle, network disruption, evidence
of an auction security breach or unlawful bidding activity,
administrative or weather necessity, or for any other reason that
affects the fair and efficient conduct of the competitive bidding, and
procedures for resuming the competitive bidding starting from the
beginning of the current or some previous round or cancelling the
competitive bidding in its entirety.
* * * * *
PART 54--UNIVERSAL SERVICE
0
3. The authority citation for part 54 continues to read as follows:
Authority: 47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220,
254, 303(r), 403, and 1302 unless otherwise noted.
0
4. In Sec. 54.307, revise paragraph (e)(5) and remove and reserve
paragraph (e)(6).
The revision reads as follows:
Sec. 54.307 Support to a competitive eligible telecommunications
carrier.
* * * * *
(e) * * *
(5) Eligibility for Support after Mobility Fund Phase II Auction.
(i) A mobile competitive eligible telecommunications carrier that
receives monthly baseline support pursuant to this section and is a
winning bidder in the Mobility Fund Phase II auction shall receive
support at the same level as described in paragraph (e)(2)(iii) of this
section for such area until the Wireless Telecommunications and
Wireline Competition Bureaus determine whether to authorize the carrier
to receive Mobility Fund Phase II support.
(A) Upon the Wireless Telecommunications and Wireline Competition
Bureaus' release of a public notice approving a mobile competitive
eligible telecommunications carrier's application submitted pursuant to
Sec. 54.104(b) and authorizing the carrier to receive Mobility Fund
Phase II support, the carrier shall no longer receive support at the
level of monthly baseline support pursuant to this section for such
area. Thereafter, the carrier shall receive monthly support in the
amount of its Mobility Fund Phase II winning bid, provided that USAC
shall adjust the amount of the carrier's support to the extent
necessary to account for any difference in support the carrier received
during the period between the close of the Mobility Fund Phase II
auction and the release of the public notice authorizing the carrier to
receive Mobility Fund Phase II support.
(B) A mobile competitive eligible telecommunications carrier that
is a winning bidder in the Mobility Fund Phase II auction but is not
authorized to receive Mobility Fund Phase II support shall receive
monthly support as set forth in paragraphs (e)(5)(iii) and (iv) of this
section for such area, as applicable, provided that USAC shall decrease
such
[[Page 15450]]
amounts to account for support payments received prior to the Wireless
Telecommunications and Wireline Competition Bureaus' authorization
determination that exceed the amount of support for such area as set
forth in paragraphs (e)(5)(iii) and (iv), and the monthly support in
the mobile competitive eligible telecommunications carrier's winning
Mobility Fund Phase II, which USAC shall treat as the carrier's monthly
baseline support for purposes of paragraphs (e)(5)(iii) and (iv) to the
extent the carrier's winning bid is below that amount.
(ii) A mobile competitive eligible telecommunications carrier that
receives monthly baseline support pursuant to this section shall
receive the following monthly support amounts for areas that are
ineligible for Mobility Fund Phase II support, as determined by the
Wireless Telecommunications and Wireline Competition Bureaus:
(A) For 12 months starting the first day of the month following the
close of the Mobility Fund Phase II auction, each mobile competitive
eligible telecommunications carrier shall receive two-thirds (\2/3\) of
the carrier's support pursuant to paragraph (e)(2)(iii) of this section
for the ineligible area.
(B) For 12 months starting the month following the period described
in paragraph (e)(5)(ii)(A) of this section, each mobile competitive
eligible telecommunications carrier shall receive one-third (\1/3\) of
the carrier's support pursuant to paragraph (e)(2)(iii) of this section
for the ineligible area.
(C) Following the period described in paragraph (e)(5)(ii)(B) of
this section, no mobile competitive eligible telecommunications carrier
shall receive monthly baseline support for the ineligible area pursuant
to this section.
(iii) Except as provided in paragraph (e)(3) of this section, to
the extent Mobility Fund Phase II support is not awarded at auction for
an eligible area, as determined by the Wireless Telecommunications and
Wireline Competition Bureaus, the mobile competitive eligible
telecommunications carrier receiving the minimum level of sustainable
support for the eligible area shall continue to receive support at the
level described in paragraph (e)(2)(iii) of this section until further
Commission action, but such support shall not extend for more than 60
months from the first day of the month following the close of the
Mobility Fund Phase II auction. The ``minimum level of sustainable
support'' is the lowest monthly baseline support received by a mobile
competitive eligible telecommunications carrier that deploys the
highest technology for the eligible area.
(iv) All other mobile competitive eligible telecommunications
carriers shall receive the following monthly support amounts for areas
that are eligible for Mobility Fund Phase II support, as determined by
the Wireless Telecommunications and Wireline Competition Bureaus:
(A) For 12 months starting the first day of the month following the
close of the Mobility Fund Phase II auction, each mobile competitive
eligible telecommunications carrier shall receive two-thirds (\2/3\) of
the carrier's support pursuant to paragraph (e)(2)(iii) of this section
for the eligible area.
(B) For 12 months starting the month following the period described
in paragraph (e)(5)(iv)(A) of this section, each mobile competitive
eligible telecommunications carrier shall receive one-third (\1/3\) of
the carrier's support pursuant to paragraph (e)(2)(iii) of this section
for the eligible area.
(C) Following the period described in paragraph (e)(5)(iv)(B) of
this section, no mobile competitive eligible telecommunications carrier
shall receive monthly baseline support for the eligible area pursuant
to this section.
(v) Notwithstanding the foregoing schedule, the phase-down of
identical support below the level described in paragraph (e)(2)(iii) of
this section shall be subject to the restrictions in Consolidated
Appropriations Act, 2016, Public Law 114-113, Div. E, Title VI, section
631, 129 Stat. 2242, 2470 (2015), unless and until such restrictions
are no longer in effect.
* * * * *
0
5. In Sec. 54.313, revise paragraph (k) to read as follows:
Sec. 54.313 Annual reporting requirements for high-cost recipients.
* * * * *
(k) This section does not apply to recipients that solely receive
support from Phase I and Phase II of the Mobility Fund.
* * * * *
0
6. Amend subpart L by adding Sec. Sec. 54.1011 through 54.1021 to read
as follows:
Subpart L--Mobility Fund
Sec.
* * * * *
54.1011 Mobility Fund--Phase II.
54.1012 Geographic areas eligible for support.
54.1013 Provider eligibility.
54.1014 Application process.
54.1015 Public interest obligations.
54.1016 Letter of credit.
54.1017 Compliance for Mobility Fund Phase II.
54.1018 Mobility Fund Phase II disbursements.
54.1019 Annual reports.
54.1020 Milestone reports.
54.1021 Record retention for Mobility Fund Phase II.
Sec. 54.1011 Mobility Fund--Phase II.
The Commission will use competitive bidding, as provided in part 1,
subpart AA of this chapter, to determine the recipients of support
available through Phase II of the Mobility Fund and the amount(s) of
support that they may receive for specific geographic areas, subject to
applicable post-auction procedures.
Sec. 54.1012 Geographic areas eligible for support.
(a) Mobility Fund Phase II support may be made available for
eligible geographic areas as identified by public notice prior to
auction.
(b) Coverage units for purposes of conducting competitive bidding
and disbursing support based on designated square miles in a geographic
area will be identified by public notice for each area eligible for
support prior to auction.
Sec. 54.1013 Provider eligibility.
(a) An applicant shall be an Eligible Telecommunications Carrier in
an area in order to receive Mobility Fund Phase II support for that
area. An applicant may obtain its designation as an Eligible
Telecommunications Carrier after the close of the Mobility Fund Phase
II auction, provided that the applicant submits proof of its
designation within 180 days of the public notice identifying the
applicant as a winning bidder. An applicant shall not receive Mobility
Fund Phase II support prior to the submission of proof of its
designation as an Eligible Telecommunications Carrier. After such
submission, the Eligible Telecommunications Carrier shall receive a
balloon payment that will consist of the carrier's monthly Mobility
Fund Phase II payment amount multiplied by the number of whole months
between the first day of the month after the close of the auction and
the issuance of the public notice authorizing the carrier to receive
Mobility Fund Phase II support.
(b) An applicant shall have access to spectrum in an area that
enables it to satisfy the applicable performance requirements in order
to receive Mobility Fund Phase II support for that area. The applicant
shall describe its access to spectrum and certify, in a form acceptable
to the Commission, that it has such access at the time it applies to
participate in competitive bidding and
[[Page 15451]]
at the time that it applies for support and that it will retain such
access for at least ten (10) years after the date on which it is
authorized to receive support.
(c) An applicant shall certify that it is financially and
technically qualified to provide the services supported by Mobility
Fund Phase II within the specified timeframe in the geographic areas
for which it seeks support in order to receive such support.
Sec. 54.1014 Application process.
(a) Application to Participate in Competitive Bidding for Mobility
Fund Phase II Support. In addition to providing information specified
in Sec. 1.21001(b) of this chapter and any other information required
by the Commission, an applicant to participate in competitive bidding
for Mobility Fund Phase II support shall:
(1) Provide ownership information as set forth in Sec. 1.2112(a)
of this chapter as well as information on any agreement the applicant
may have relating to the support to be sought through the auction;
(2) Certify that the applicant is financially and technically
capable of meeting the public interest obligations of Sec. 54.1015 in
each area for which it seeks support;
(3) Disclose its status as an Eligible Telecommunications Carrier
in any area for which it will seek support or as an entity that will
file an application to become an Eligible Telecommunications Carrier in
any such area after winning support in Mobility Fund Phase II, and
certify that the disclosure is accurate; and
(4) Describe the spectrum access that the applicant plans to use to
meet obligations in areas for which it will bid for support, including
whether the applicant currently holds or leases the spectrum, including
any necessary renewal expectancy, and whether such spectrum access is
contingent upon receiving support in a Mobility Fund Phase II auction,
and certify that the description is accurate and that the applicant
will retain such access for the entire ten (10) year Mobility Fund
Phase II support term.
(b) Application by Winning Bidders for Mobility Fund Phase II
Support--(1) Deadline. Unless otherwise provided by public notice,
winning bidders for Mobility Fund Phase II support shall file an
application for Mobility Fund Phase II support no later than ten (10)
business days after the public notice identifying them as winning
bidders.
(2) Application contents. An application for Mobility Fund Phase II
support must contain:
(i) Identification of the party seeking the support, including
ownership information as set forth in Sec. 1.2112(a) of this chapter;
(ii) Certification that the applicant is financially and
technically capable of providing the required coverage and performance
levels within the specified timeframe in the geographic areas in which
it won support;
(iii) Proof of the applicant's status as an Eligible
Telecommunications Carrier, or a statement that the applicant will
become an Eligible Telecommunications Carrier in any area for which it
seeks support within 180 days of the public notice identifying them as
winning bidders, and certification that the proof is accurate;
(iv) A description of the spectrum access that the applicant plans
to use to meet obligations in areas for which it is winning bidder for
support, including whether the applicant currently holds or leases the
spectrum, along with any necessary renewal expectancy, and
certification that the description is accurate and that the applicant
will retain such access for the entire ten (10) year Mobility Fund
Phase II support term;
(v) A detailed project description that describes the network to be
built or upgraded, identifies the proposed technology, demonstrates
that the project is technically feasible, discloses the complete
project budget, and discusses each specific phase of the project (e.g.,
network design, construction, deployment, and maintenance), as well as
a complete project schedule, including timelines, milestones, and
costs;
(vi) Certifications that the applicant has available funds for all
project costs that exceed the amount of support to be received from
Mobility Fund Phase II and that the applicant will comply with all
program requirements, including the public interest obligations set
forth in Sec. 54.1015;
(vii) Any guarantee of performance that the Commission may require
by public notice or other proceedings, including but not limited to the
letters of credit required in Sec. 54.1016, or a written commitment
from an acceptable bank, as defined in Sec. 54.1016(a)(2), to issue
such a letter of credit;
(viii) Certification that the applicant will offer service in
supported areas at rates that are within a reasonable range of rates
for similar service plans offered by mobile wireless providers in urban
areas during the term of support the applicant seeks;
(ix) Certification that the party submitting the application is
authorized to do so on behalf of the applicant; and
(x) Such additional information as the Commission may require.
(3) Application processing. (i) No application will be considered
unless it has been submitted in an acceptable form during the period
specified by public notice. No applications submitted or demonstrations
made at any other time shall be accepted or considered.
(ii) Any application that, as of the submission deadline, either
does not identify the applicant seeking support as specified in the
public notice announcing application procedures, or does not include
required certifications, shall be denied.
(iii) An applicant may be afforded an opportunity to make minor
modifications to amend its application or correct defects noted by the
applicant, the Commission, the Administrator, or other parties. Minor
modifications include correcting typographical errors in the
application and supplying non-material information that was
inadvertently omitted or was not available at the time the application
was submitted.
(iv) Applications to which major modifications are made after the
deadline for submitting applications shall be denied. Major
modifications include, but are not limited to, any changes in the
ownership of the applicant that constitute an assignment or change of
control, or the identity of the applicant, or the certifications
required in the application.
(v) After receipt and review of the applications, a public notice
shall identify each winning bidder that may be authorized to receive
Mobility Fund Phase II support, after the winning bidder submits a
Letter of Credit and an accompanying opinion letter as required by
Sec. 54.1016, in a form acceptable to the Commission, and any final
designation as an Eligible Telecommunications Carrier that any
applicant may still require. Each such winning bidder shall submit a
Letter of Credit and an accompanying opinion letter as required by
Sec. 54.1016, in a form acceptable to the Commission, and any required
final designation as an Eligible Telecommunications Carrier no later
than ten (10) business days following the release of the public notice.
(vi) After receipt of all necessary information, a public notice
will identify each winning bidder that is authorized to receive
Mobility Fund Phase II support.
Sec. 54.1015 Public interest obligations.
(a) First interim deadline for construction. A winning bidder
authorized to receive Mobility Fund
[[Page 15452]]
Phase II support shall, no later than 42 months from the first day of
the month that follows the month in which the Mobility Fund Phase II
auction closes, submit to the entities listed in Sec. 54.1020(c) any
required data covering all areas for which they receive support in a
state demonstrating mobile transmissions supporting voice and data to
and from the network covering at least 40 percent of the square miles
associated with the eligible areas and meeting or exceeding the
following:
(1) Outdoor median data transmission rates of 1 Mbps upload and 10
Mbps download, with at least 90 percent of the required download speed
measurements not less than a certain threshold speed that will be
defined prior to the Mobility Fund Phase II auction; and
(2) Transmission latency of 100 ms or less round trip for at least
90 percent of the measurements.
(b) Second interim deadline for construction. A winning bidder
authorized to receive Mobility Fund Phase II support shall, no later
than 54 months from the first day of the month that follows the month
in which the Mobility Fund Phase II auction closes, submit to the
entities listed in Sec. 54.1020(c) any required data covering all
areas for which they receive support in a state demonstrating mobile
transmissions supporting voice and data to and from the network
covering at least 60 percent of the square miles associated with the
eligible areas and meeting or exceeding the thresholds in paragraphs
(a)(1) and (2) of this section.
(c) Third interim deadline for construction. A winning bidder
authorized to receive Mobility Fund Phase II support shall, no later
than 66 months from the first day of the month that follows the month
in which the Mobility Fund Phase II auction closes, submit to the
entities listed in Sec. 54.1020(c) any required data covering all
areas for which they receive support in a state demonstrating mobile
transmissions supporting voice and data to and from the network
covering at least 80 percent of the square miles associated with the
eligible areas and meeting or exceeding the thresholds in paragraphs
(a)(1) and (2) of this section.
(d) Final deadline for construction. A winning bidder authorized to
receive Mobility Fund Phase II support shall, no later than 78 months
from the first day of the month that follows the month in which the
Mobility Fund Phase II auction closes, submit to the entities listed in
Sec. 54.1020(c) any required data covering all areas for which they
receive support in a state demonstrating mobile transmissions
supporting voice and data to and from the network covering at least 85
percent of the square miles associated with the eligible areas and
meeting or exceeding the thresholds in paragraphs (a)(1) and (2) of
this section. A winning bidder shall also submit representative data
demonstrating that its network covers at least 75 percent of every
census block group or census tract for which it receives support in a
state.
(e) Coverage data. Coverage data submitted in compliance with a
recipient's public interest obligations shall demonstrate coverage of
the square miles designated in the public notice announcing the final
list of eligible areas for the competitive bidding that is the basis of
the recipient's support. Any data submitted in compliance with a
recipient's public interest obligations shall be in compliance with
standards set forth in the applicable public notice.
(f) Collocation obligations. During the period when a recipient
shall file annual reports pursuant to Sec. 54.1019, the recipient
shall allow for reasonable collocation by other providers of services
that would meet the technological requirements of Mobility Fund Phase
II on all towers it owns or manages in the area for which it receives
support. In addition, during this period, the recipient may not enter
into facilities access arrangements that restrict any party to the
arrangement from allowing others to collocate on the facilities.
(g) Voice and data roaming obligations. During the period when a
recipient shall file annual reports pursuant to Sec. 54.1019, the
recipient shall comply with the Commission's voice and data roaming
requirements that are currently in effect on networks that are built
through Mobility Fund Phase II support.
(h) Reasonably comparable rates obligations. Beginning no later
than the deadline set forth in paragraph (a) of this section and
continuing throughout the remaining period when a recipient shall file
annual reports pursuant to Sec. 54.1019, the recipient shall offer
service in supported areas at rates that are within a reasonable range
of rates for similar service plans offered by mobile wireless providers
in urban areas.
(i) Data allowance obligations. Beginning no later than the
deadline set forth in paragraph (a) of this section and continuing
throughout the remaining period when a recipient shall file annual
reports pursuant to Sec. 54.1019, recipient shall offer at least one
service plan in supported areas that includes a data allowance
comparable to mid-level service plans offered by nationwide providers.
(j) Liability for failing to satisfy public interest obligations. A
Mobility Fund Phase II support recipient's failure to comply with the
public interest obligations in this paragraph or any other terms and
conditions of the Mobility Fund Phase II support constitutes a
performance default.
Sec. 54.1016 Letter of credit.
(a) Before being authorized to receive Mobility Fund Phase II
support, a winning bidder shall obtain an irrevocable standby letter of
credit which shall be acceptable in all respects to the Commission.
(1) Each recipient authorized to receive Mobility Fund Phase II
support shall maintain the standby letter of credit or multiple standby
letters of credit in an amount equal to at a minimum the amount of
Mobility Fund Phase II auction support that has been disbursed and that
will be disbursed in the coming year, until the Universal Service
Administrative Company has verified that the recipient met the final
service milestone as described in Sec. 54.1015(d) of this chapter.
(i) Once the recipient has met its 60 percent service milestone as
described in Sec. 54.1015(b) of this chapter, it may, subject to the
consent of the Universal Service Administrative Company, obtain a new
letter of credit or renew its existing letter of credit so that it is
valued at a minimum at 90 percent of the total support amount already
disbursed plus the amount that will be disbursed in the coming year.
(ii) Once the recipient has met its 80 percent service milestone as
described in Sec. 54.1015(c) of this chapter, it may, subject to the
consent of the Universal Service Administrative Company, obtain a new
letter of credit or renew its existing letter of credit so that it is
valued at a minimum at 80 percent of the total support amount already
disbursed plus the amount that will be disbursed in the coming year.
(2) Acceptability. The bank issuing the letter of credit shall be
acceptable to the Commission. A bank that is acceptable to the
Commission is:
(i) Any United States Bank--
(A) Whose deposits are insured by the Federal Deposit Insurance
Corporation; and
(B) That has a Weiss bank safety rating of B- or higher, or
(ii) CoBank, ACB--
(A) As long as it maintains assets that would place it among the
top-100 U.S. banks in terms of the amount of assets, determined on the
basis of total assets as of the end of the calendar year immediately
preceding the issuance of the letter of credit;
[[Page 15453]]
(B) Its obligations are insured by the Farm Credit System Insurance
Corporation; and
(C) It has a long-term unsecured credit rating of BBB- or better
from Standard & Poor's (or the equivalent from a nationally-recognized
credit rating agency); or
(iii) The National Rural Utilities Cooperative Finance
Corporation--
(A) As long as it maintains assets that would place it among the
top-100 U.S. banks in terms of the amount of assets, determined on the
basis of total assets as of the end of the calendar year immediately
preceding the issuance of the letter of credit; and
(B) It has a long-term unsecured credit rating of BBB- or better
from Standard & Poor's (or the equivalent from a nationally-recognized
credit rating agency); or
(iv) Any non-U.S. bank that--
(A) Is among the 100 largest non-U.S. banks in the world,
determined on the basis of total assets as of the end of the calendar
year immediately preceding the issuance of the letter of credit
(determined on a U.S. dollar equivalent basis as of such date);
(B) Has a branch office in the District of Columbia or such other
branch office agreed to by the Commission;
(C) Maintains a credit rating of BBB- or better from Standard &
Poor's (or the equivalent from a nationally-recognized credit rating
agency); and
(D) Issues the letter of credit payable in United States dollars.
(b) Before being authorized to receive Mobility Fund Phase II
support, a winning bidder shall provide with its letter of credit an
opinion letter from legal counsel clearly stating, subject only to
customary assumptions, limitations, and qualifications, that in a
proceeding under Title 11 of the United States Code, 11 U.S.C. 101 et
seq. (the ``Bankruptcy Code''), the bankruptcy court would not treat
the letter of credit or proceeds of the letter of credit as property of
the winning bidder's bankruptcy estate, or the bankruptcy estate of any
other bidder-related entity requesting issuance of the letter of
credit, under section 541 of the Bankruptcy Code.
(c) Authorization to receive Mobility Fund Phase II support is
conditioned upon full and timely performance of all the requirements
set forth in this section, Sec. 54.1015, and any additional terms and
conditions upon which the support was granted.
(1) If a Mobility Fund Phase II recipient has triggered a recovery
action by USAC as set out in Sec. 54.1017 and has failed to repay the
requisite amount of support within six (6) months, USAC will be
entitled to draw the entire amount of the letter of credit and may
disqualify the Mobility Fund Phase II recipient from the receipt of
Mobility Fund Phase II auction support or additional universal service
support.
(2) The default will be evidenced by a letter issued by the Chief
of either the Wireless Telecommunications Bureau or Wireline
Competition Bureau or their respective designees, which letter,
describing the performance default and attached to a standby letter of
credit draw certificate, shall be sufficient for a draw on the standby
letter of credit.
Sec. 54.1017 Compliance for Mobility Fund Phase II.
(a) Mobile eligible telecommunications carriers subject to defined
build-out milestones in Sec. 54.1015 must notify the Commission and
USAC, and the relevant state, U.S. Territory, or Tribal government, if
applicable, within ten (10) business days after the applicable deadline
if they have failed to meet a build-out milestone.
(1) Interim build-out milestones. Upon notification that a mobile
eligible telecommunications carrier has defaulted on an interim build-
out milestone after it has begun receiving Mobility Fund Phase II
support, the Wireline Competition Bureau or Wireless Telecommunications
Bureau will issue a letter evidencing the default. For purposes of
determining whether a default has occurred, any service a mobile
eligible telecommunications carrier offers must meet the performance
obligations in Sec. 54.1015(a)(1) and (2). The issuance of this letter
shall initiate reporting obligations and withholding of a percentage of
the mobile eligible telecommunication carrier's total monthly Mobility
Fund Phase II support, if applicable, starting the month following the
issuance of the letter:
(i) Tier 1. If a mobile eligible telecommunications carrier has a
compliance gap of at least five (5) percent but less than 15 percent of
the eligible square miles that the mobile eligible telecommunications
carrier is required to have covered by the relevant interim milestone
at the state level, the Wireline Competition Bureau or Wireless
Telecommunications Bureau will issue a letter to that effect. Starting
three (3) months after the issuance of this letter, the mobile eligible
telecommunications carrier will be required to file a report every
three (3) months identifying the eligible square miles to which the
mobile eligible telecommunications carrier has newly deployed
facilities capable of meeting the requisite Mobility Fund Phase II
requirements at the state level in the previous quarter. Mobile
eligible telecommunications carriers that do not file these quarterly
reports on time will be subject to support reductions as specified in
Sec. 54.1019(f). The mobile eligible telecommunications carrier must
continue to file quarterly reports until the mobile eligible
telecommunications carrier reports that it has reduced the compliance
gap to less than five (5) percent of the eligible square miles for that
interim milestone at the state level and the Wireline Competition
Bureau or Wireless Telecommunications Bureau issues a letter to that
effect.
(ii) Tier 2. If a mobile eligible telecommunications carrier has a
compliance gap of at least 15 percent but less than 25 percent of the
eligible square miles that the mobile eligible telecommunications
carrier is required to have covered by the interim milestone at the
state level, USAC will withhold 15 percent of the mobile eligible
telecommunications carrier's monthly support for that state and the
mobile eligible telecommunications carrier will be required to file
quarterly reports. Once the mobile eligible telecommunications carrier
has reported that it has reduced the compliance gap to less than 15
percent of the eligible square miles for that interim milestone at the
state level, the Wireline Competition Bureau or Wireless
Telecommunications Bureau will issue a letter to that effect, and the
mobile eligible telecommunications carrier will then move to Tier 1
status.
(iii) Tier 3. If a mobile eligible telecommunications carrier has a
compliance gap of at least 25 percent but less than 50 percent of the
eligible square miles that the mobile eligible telecommunications
carrier is required to have covered by the interim milestone at the
state level, USAC will withhold 25 percent of the mobile eligible
telecommunications carrier's monthly support for that state and the
mobile eligible telecommunications carrier will be required to file
quarterly reports. Once the mobile eligible telecommunications carrier
has reported that it has reduced the compliance gap to less than 25
percent of the eligible square miles for that interim milestone at the
state level, the Wireline Competition Bureau or Wireless
Telecommunications Bureau will issue a letter to that effect, and the
mobile eligible telecommunications carrier will move to Tier 2 status.
(iv) Tier 4. If a mobile eligible telecommunications carrier has a
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compliance gap of 50 percent or more of the eligible square miles that
the mobile eligible telecommunications carrier is required to have
covered by the interim milestone at the state level:
(A) USAC will withhold 50 percent of the mobile eligible
telecommunications carrier's monthly support for that state, and the
mobile eligible telecommunications carrier will be required to file
quarterly reports. As with the other tiers, as the mobile eligible
telecommunications carrier reports that it has lessened the extent of
its non-compliance, and the Wireline Competition Bureau or Wireless
Telecommunications Bureau issues a letter to that effect, it will move
down the tiers until it reaches Tier 1 (or no longer is out of
compliance with the relevant interim milestone).
(B) If, after having 50 percent of its support withheld for six (6)
months, the mobile eligible telecommunications carrier has not reported
that it has a compliance gap of less than 50 percent, USAC will
withhold 100 percent of the mobile eligible telecommunications
carrier's monthly support for the state and will commence a recovery
action for a percentage of support that is equal to the mobile eligible
telecommunications carrier's compliance gap plus 10 percent of the
mobile eligible telecommunications carrier's support that has been
disbursed to that date.
(v) Restoration of full support. If at any point during the support
term, the mobile eligible telecommunications carrier reports that it is
eligible for Tier 1 status, it will have its support fully restored,
USAC will repay any funds that were recovered or withheld, and it will
move to Tier 1 status.
(2) Final milestone. Upon notification that the mobile eligible
telecommunications carrier has not met a final milestone, the mobile
eligible telecommunications carrier will have twelve (12) months from
the date of the final milestone deadline to come into full compliance
with this milestone.
(i) If the mobile eligible telecommunications carrier does not
report that it has come into full compliance with this milestone within
twelve (12) months because it fails to meet the 85 percent benchmark
(even if it meets the 75 percent benchmark for some or all the census
block group(s) or census tract(s)), the Wireline Competition Bureau or
the Wireless Telecommunications Bureau will issue a letter, and USAC
will recover disbursement(s) in an amount of support that is equal to
1.89 multiplied by the average amount of support the mobile eligible
telecommunications carrier received per eligible square mile in the
state over the six year period multiplied by the number of square miles
unserved in the mobile eligible telecommunications carrier's winning
areas in the state that would be required to meet the 85 percent
benchmark, plus 10 percent of the mobile eligible telecommunications
carrier's total Mobility Fund Phase II support received in the state
over the six-year period for deployment. After the mobile eligible
telecommunications carrier has paid the calculated recovery amount for
failure to comply with the final deployment milestone, the Bureaus will
calculate a reduced support payment for the remaining support term
based on the percentage of deployment coverage completed. The reduced
ongoing annual support amount will be the total of the mobile eligible
telecommunications carrier's original winning bid amounts for annual
support in the state multiplied by the sum of the actual deployment
percentage plus 15 percent (i.e., the difference between 100 percent
coverage and the required 85 percent minimum coverage), or (annual
support) * (percentage covered + 0.15). If at the end of six months the
mobile eligible telecommunications carrier has not fully paid back the
support for missing the relevant 85 percent benchmark, the mobile
eligible telecommunications carrier shall be liable for repayment of
all the support that has been disbursed to the mobile eligible
telecommunications carrier for that state, the Wireline Competition
Bureau or the Wireless Telecommunications Bureau will issue a letter to
that effect, and USAC will draw on the letter(s) of credit to recover
all the support that has been disbursed to the mobile eligible
telecommunications carrier for that state.
(ii) If the mobile eligible telecommunications carrier does not
report that it has come into full compliance with this milestone within
twelve (12) months because it fails to meet the 75 percent benchmark(s)
for any census block group(s) or census tract(s) in the state at the
final milestone (even if it meets the 85 percent statewide benchmark),
the Wireline Competition Bureau or the Wireless Telecommunications
Bureau will issue a letter for any such census block group(s) or census
tract(s), and USAC will recover disbursement(s) in an amount of support
that is equal to 1.89 multiplied by the average amount of support the
mobile eligible telecommunications carrier received per eligible square
mile in the census block group(s) or census tract(s) in the state over
the six year period multiplied by the number of square miles unserved
in each of the mobile eligible telecommunications carrier's winning
census block group(s) or census tract(s) in the state that would be
required to meet their respective 75 percent benchmarks, plus 10
percent of the mobile eligible telecommunications carrier's total
Mobility Fund Phase II support received in the relevant census block
group(s) or census tract(s) over the six-year period for deployment.
The mobile eligible telecommunications carrier will have six months to
repay the support USAC seeks to recover. After the mobile eligible
telecommunications carrier has paid the calculated recovery amount, the
Bureaus will calculate a reduced support payment for the remaining
support term. The reduced ongoing annual support amount will be the
mobile eligible telecommunications carrier's original winning bid
amount for annual support in any such census block group or census
tract, multiplied by the sum of the actual deployment percentage plus
25 percent (i.e., the difference between 100 percent coverage and the
required 75 percent minimum coverage), or (annual support) *
(percentage covered + 0.25). If at the end of six months the mobile
eligible telecommunications carrier has not fully paid back the support
for missing the relevant 75 percent benchmark(s), the mobile eligible
telecommunications carrier shall be liable for repayment of all the
support that has been disbursed to the mobile eligible
telecommunications carrier for that state, the Wireline Competition
Bureau or the Wireless Telecommunications Bureau will issue a letter to
that effect, and USAC will draw on the letter(s) of credit to recover
all the support that has been disbursed to the mobile eligible
telecommunications carrier for that state. In the event that USAC draws
on a letter of credit to recover all the support that has been
disbursed to the mobile eligible telecommunications carrier for a
state, the mobile eligible telecommunications carrier's participation
in Mobility Fund Phase II in that state will immediately end and no
further support will be paid.
(3) Compliance reviews. If, subsequent to the mobile eligible
telecommunications carrier's final milestone but during the remaining
support term, USAC determines in the course of a compliance review that
the mobile eligible telecommunications carrier does not have sufficient
evidence to demonstrate that it is offering service to the required
percentage of square miles by census block group or census
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tract, or state, USAC shall withhold support for a period not to exceed
six months until the mobile eligible telecommunications carrier
demonstrates that it is again providing the requisite service to the
required percentage of square miles. Once the mobile eligible
telecommunications carrier demonstrates that it is providing the
requisite service to the required percentage of square miles and USAC
has verified the demonstration, USAC will pay any withheld support and
resume ongoing disbursements. If the mobile eligible telecommunications
carrier does not provide a verifiable demonstration of coverage within
the permitted six-month period, USAC shall recover an amount of support
that is equal to 1.89 times the average amount of support per square
mile received in the winning bid area over the six-year deployment
period for the relevant number of square miles for which the mobile
eligible telecommunications carrier has failed to produce sufficient
evidence, plus 10 percent of the mobile eligible telecommunications
carrier's total support received in that winning bid area over the six-
year deployment time period, and will calculate a reduced ongoing
annual support amount as set out in paragraphs (a)(2)(i) and (ii) of
this section, as appropriate.
(b) [Reserved].
Sec. 54.1018 Mobility Fund Phase II disbursements.
(a) A winning bidder for Mobility Fund Phase II support will be
advised by public notice whether it has been authorized to receive such
support. The public notice will detail how disbursements will be made.
(b) Mobility Fund Phase II support will be available for monthly
disbursement to a winning bidder authorized to receive such support for
ten years from the first day of the month that follows the month in
which the Mobility Fund Phase II auction closes.
Sec. 54.1019 Annual reports.
(a) A winning bidder authorized to receive Mobility Fund Phase II
support shall submit an annual report no later than July 1 in each year
for the ten (10) years after it is so authorized.
(b) The party submitting the annual report must certify that it has
been authorized to do so by the winning bidder.
(c) Each annual report shall be submitted to the Office of the
Secretary of the Commission, clearly referencing the appropriate docket
for Mobility Fund Phase II reporting; the Administrator; and the
relevant state commissions, relevant authority in a U.S. Territory, or
Tribal governments, as appropriate, until such time that the
Administrator announces that annual reports shall be filed solely via
the Administrator's online portal.
(d) In each annual report, a recipient of Mobility Fund Phase II
support shall certify that it is in compliance with all requirements
for receipt of such support to continue receiving Mobility Fund Phase
II disbursements.
(e) Winning bidders have a continuing obligation to maintain the
accuracy and completeness of the information provided in their long-
form applications and their annual reports. All winning bidders shall
provide information about any substantial change that may be of
decisional significance regarding their eligibility for Mobility Fund
Phase II support and compliance with Mobility Fund Phase II
requirements as an update to their annual report submitted to the
entities listed in Sec. 54.1019(c). Such notification of a substantial
change, including any reduction in the percentage of eligible square
miles being served or any failure to comply with any of the Mobility
Fund Phase II requirements, shall be submitted within ten (10) business
days after the reportable event occurs.
(f) In order for a recipient of Mobility Fund Phase II support to
continue to receive support for the following calendar year, it must
submit the annual report required by this section annually by July 1 of
each year. Mobile eligible telecommunications carriers that file their
reports after the July 1 deadline shall receive a reduction in support
pursuant to the following schedule:
(1) A mobile eligible telecommunications carrier that files after
the July 1 deadline, but by July 8, will have its support reduced in an
amount equivalent to seven (7) days of support;
(2) A mobile eligible telecommunications carrier that files on or
after July 9 will have its support reduced on a pro-rata daily basis
equivalent to the period of non-compliance, plus the minimum seven-day
reduction.
(f) A mobile eligible telecommunications carrier that submits the
annual reporting information required by this section within three (3)
days of the July 1 deadline will not receive a reduction in support if
the mobile eligible telecommunications carrier has not missed the July
1 deadline in any prior year.
Sec. 54.1020 Milestone reports.
(a) A winning bidder authorized to receive Mobility Fund Phase II
support shall submit the reports required in Sec. 54.1015(a) through
(d) as well as certifications that it has met the construction
requirements in Sec. 54.1015(a) through (d).
(b) The party submitting the report must certify that it has been
authorized to do so by the winning bidder.
(c) Each report shall be submitted to the Office of the Secretary
of the Commission, clearly referencing the appropriate docket for
Mobility Fund Phase II reporting; the Administrator; and the relevant
state commissions, relevant authority in a U.S. Territory, or Tribal
governments, as appropriate, until such time that the Administrator
announces that such reports shall be filed solely via the
Administrator's online portal.
(d) Winning bidders have a continuing obligation to maintain the
accuracy and completeness of the information provided in their long-
form applications and their milestone reports. All winning bidders
shall provide information about any substantial change that may be of
decisional significance regarding their eligibility for Mobility Fund
Phase II support and compliance with Mobility Fund Phase II
requirements as an update to their milestone report submitted to the
entities listed in paragraph (c) of this section. Such notification of
a substantial change, including any reduction in the percentage of
eligible square miles being served or any failure to comply with any of
the Mobility Fund Phase II requirements, shall be submitted within ten
(10) business days after the reportable event occurs.
(e) In order for a recipient of Mobility Fund Phase II support to
continue to receive support for the following calendar year, it must
submit the milestone reports required by this section by the deadlines
set forth in Sec. 54.1015(a) through (d). Mobile eligible
telecommunications carriers that file their reports after the relevant
deadlines shall receive a reduction in support pursuant to the
following schedule:
(1) A mobile eligible telecommunications carrier that files after
the deadline, but within seven days of the deadline, will have its
support reduced in an amount equivalent to seven (7) days of support;
(2) A mobile eligible telecommunications carrier that files on or
after the eighth day following the deadline will have its support
reduced on a pro-rata daily basis equivalent to the period of non-
compliance, plus the minimum seven-day reduction.
(g) A mobile eligible telecommunications carrier that submits the
milestone reporting information required by this section within three
(3)
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days of the deadline will not receive a reduction in support if the
mobile eligible telecommunications carrier has not missed the deadline
in any prior year.
Sec. 54.1021 Record retention for Mobility Fund Phase II.
A winning bidder authorized to receive Mobility Fund Phase II
support and its agents are subject to the record retention requirements
in Sec. 54.320.
[FR Doc. 2017-05665 Filed 3-27-17; 8:45 am]
BILLING CODE 6712-01-P