Rural Digital Opportunity Fund, Connect America Fund, 13773-13802 [2020-03135]
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Federal Register / Vol. 85, No. 47 / Tuesday, March 10, 2020 / Rules and Regulations
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[FR Doc. 2020–04746 Filed 3–9–20; 8:45 am]
BILLING CODE 6560–50–P
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Part 54
[WC Docket Nos.19–126, 10–90; FCC 20–
5; FRS 16498]
Rural Digital Opportunity Fund,
Connect America Fund
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
In this document, the Federal
Communications Commission
(Commission) adopts the framework for
the Rural Digital Opportunity Fund. The
Rural Digital Opportunity Fund builds
on the Connect America Fund (CAF)
Phase II auction, which allocated funds
to deploy networks serving more than
700,000 unserved rural homes and
businesses across 45 states. The Rural
Digital Opportunity Fund represents the
Commission’s single biggest step to
close the digital divide and connect
millions more rural homes and small
businesses to high-speed broadband
networks.
SUMMARY:
Effective April 9, 2020, except of
§§ 54.313(e), 54.316(a)(8), (b)(5), (c)(1),
54.804 (a) through (c), and 54.806. The
Commission will publish a document in
the Federal Register announcing the
effective date of those rules.
FOR FURTHER INFORMATION CONTACT:
Alexander Minard, Wireline
Competition Bureau, (202) 418–7400 or
TTY: (202) 418–0484.
SUPPLEMENTARY INFORMATION: This is a
summary of the Commission’s Report
and Order (Order) in WC Docket Nos.
19–126, 10–90; FCC 20–5, adopted on
January 30, 2020 and released on
February 7, 2020. The full text of this
document is available for public
inspection during regular business
hours in the FCC Reference Center,
Room CY–A257, 445 12th Street SW,
Washington, DC 20554 or at the
following internet address: https://
www.fcc.gov/document/fcc-launches20-billion-rural-digital-opportunityfund-0.
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DATES:
I. Introduction
1. Bringing digital opportunity to
Americans living on the wrong side of
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the digital divide continues to be the
Federal Communication Commission’s
top priority. It is imperative that the
Commission take prompt and
expeditious action to deliver on its goal
of connecting all Americans, no matter
where they live and work. Without
access to broadband, rural communities
cannot connect to the digital economy
and the opportunities for better
education, employment, healthcare, and
civic and social engagement it provides.
2. In recent years, the Commission has
made tremendous strides toward its goal
of making broadband available to all
Americans. But while the digital divide
is closing, more work remains to be
done. Therefore, in the Order, the
Commission adopts the framework for
the Rural Digital Opportunity Fund. It
builds on the successful model from
2018’s CAF Phase II auction, which
allocated $1.488 billion to deploy
networks serving more than 700,000
unserved rural homes and businesses
across 45 states. The Rural Digital
Opportunity Fund represents the
Commission’s single biggest step to
close the digital divide by providing up
to $20.4 billion to connect millions
more rural homes and small businesses
to high-speed broadband networks. It
will ensure that networks stand the test
of time by prioritizing higher network
speeds and lower latency, so that those
benefitting from these networks will be
able to use tomorrow’s internet
applications as well as today’s.
II. Discussion
3. To ensure continued and rapid
deployment of broadband networks to
unserved Americans, the Commission
establishes the Rural Digital
Opportunity Fund, which will commit
up to $20.4 billion over the next decade
to support up to gigabit speed
broadband networks in rural America.
The Commission opts to allocate this
funding through a multi-round, reverse,
descending clock auction that favors
faster services with lower latency and
encourages intermodal competition in
order to ensure that the greatest possible
number of Americans will be connected
to the best possible networks, all at a
competitive cost. In light of the need to
bring service both to consumers in areas
wholly unserved by 25/3 Mbps, as well
as those living in areas partially served,
the Commission will assign funding in
two phases: Phase I will target those
areas that current data confirm are
wholly unserved; and, Phase II will
target unserved locations within areas
that data demonstrates are only partially
served, as well as any areas not won in
Phase I. By relying on a two-phase
process, the Commission can move
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expeditiously to commence an auction
in 2020 for those areas it already knows
with certainty are currently unserved,
while also ensuring that other areas are
not left behind by holding a second
auction once the Commission has
identified any additional unserved
locations through improvements to its
broadband deployment data collection.
4. The Rural Digital Opportunity
Fund Phase I auction will make use of
many of the rules that made the CAF
Phase II auction a success, with some
exceptions to account for the passage of
time and other changed circumstances.
Most importantly, in addition to the
weighting of performance tiers and
latency, the Commission will assign
support in the auction’s clearing round
to the bidder with the lowest weight.
After the auction, the Commission will
require Phase I support recipients to
offer the required voice and broadband
service to all eligible homes and small
businesses within the awarded areas,
without regard to the number of
locations identified by the Connect
America Cost Model (CAM), and instead
as determined subsequently by the
Wireline Competition Bureau (the
Bureau). This approach differs from that
used in the CAF Phase II auction, which
tied the deployment and service
obligations to a specific number of
locations within awarded areas but
allowed the recipients to demonstrate
that their obligations should be reduced
(along with a corresponding reduction
in support) where there were fewer
locations than the CAM specified. As
discussed in the following, the
Commission will use its cost model and
current data to establish initial service
milestones and to monitor interim
progress, but the Commission
emphasizes that Phase I bidders will be
competing for support amounts to offer
service to all locations ultimately
identified in an area, not just to the
specific number of locations in that area
identified prior to the auction, without
adjusting awarded support amounts.
5. The Commission adopts a term of
support of 10 years for the Rural Digital
Opportunity Fund. The Commission
believes that the stability of a 10-year
term of support was partially
responsible for the robust participation
that occurred in the CAF Phase II
auction. The Commission expects that
the same principles regarding
encouraging long-term investments and
auction participation will also apply to
the Rural Digital Opportunity Fund.
Most commenters addressing this issue
agree that a 10-year term of support will
provide the certainty and stability
needed to encourage broadband
deployment in unserved and
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underserved locations and attract
participation from a wide variety of
participants. Moreover, disbursing
support over a 10-year term minimizes
the impact on the contribution factor.
The Commission does not agree that
adopting a 10-year term risks funding
unsustainable projects, as one
commenter suggests, because it expects
bidders to seek sufficient support to
build and maintain their network
without an expectation of ongoing
support after the 10-year support term
expires. Nor does the Commission agree
that bidders proposing 25/3 Mbps
deployments should be offered only a
five-year term. First, given that bids will
be weighted to prioritize faster services,
the Commission expects bidders seeking
support for the 25/3 Mbps tier will win
support only in areas where higher
speeds are not economical, and that a
five-year term may simply increase the
amount sought in order to recover the
same amount of costs in a shorter
timeframe. The Commission also more
generally finds no benefit to having
multiple terms of support within the
same program.
6. The Commission adopts its
proposal to establish a budget of $20.4
billion for the Rural Digital Opportunity
Fund. The Commission also adopts its
proposal to make available $16 billion
for Phase I, and to make available for
Phase II a budget based on the
remaining $4.4 billion, along with any
unawarded funds from Phase I. The
Commission sought comment on
whether it should reassess the adequacy
of the budget after the Phase I auction.
Although commenters generally
supported the proposed budget, several
commenters suggested that the size of
the budget may be insufficient to serve
all the unserved locations and
supported reassessing the adequacy of
the budget after Phase I. The
Commission expects $16 billion to be
sufficient, given the areas eligible for
Phase I, to balance its objectives of
encouraging robust competition for
support below the reserve price and
closing the digital divide. The
Commission agrees that it may be
appropriate after the Phase I auction,
when it knows the areas eligible for
Phase II and how many unserved
locations will be eligible for Phase II
within those areas, to reassess the total
amount of funds available for Phase II
and expect to revisit this issue at that
time.
7. The Rural Digital Opportunity
Fund will target support to areas that
lack access to both fixed voice and 25/
3 Mbps broadband services in two
stages. For Phase I, the Commission
targets census blocks that are wholly
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unserved with broadband at speeds of
25/3 Mbps. For Phase II, the
Commission targets census blocks that it
later determined through the Digital
Opportunity Data Collection, or suitable
alternative data source, are only
partially served, as well as census
blocks unawarded in the Phase I
auction. Because the Commission will
have an additional opportunity to seek
comment on how best to target Phase II
support as it gathers more granular data
on where broadband has been actually
deployed, the Commission focused here
on the areas eligible for Phase I of the
auction.
8. A number of commenters support
moving forward to the extent the
Commission can identify unserved areas
using existing data. The Commission
agrees. The Commission currently has
the tools and the data to identify census
blocks that are wholly unserved, and
directs the Bureau to use the CAM with
updated coverage data using the most
recent publicly available FCC Form 477
data to identify census blocks that are
unserved with broadband at speeds of at
least 25/3 Mbps for the auction. The
FCC Form 477 data have been criticized
for identifying partially served blocks as
‘‘served,’’ but the Commission is not
aware of cases in which the data has
identified as ‘‘unserved’’ a census block
that is in fact served.
9. The Commission disagrees with
commenters who argue that it should
delay the auction until it has more
granular data. The primary
shortcomings of FCC Form 477 data do
not come into play under the twophased framework the Commission
adopts here. Thus, the Commission sees
no value in denying the benefits of
broadband to those rural Americans it
knows lacks service because there may
be other unserved Americans living in
other areas that it has not yet identified.
Waiting for the availability of more
granular data before moving forward
would only further disadvantage those
millions of Americans that the
Commission knows does not currently
have access to digital opportunity.
10. The Commission directs the
Bureau to compile a preliminary list of
eligible areas for Phase I of the Rural
Digital Opportunity Fund auction using
the following methodology. First, the
Commission will include: (1) The
census blocks for which price cap
carriers currently receive CAF Phase II
model-based support; (2) any census
blocks that were eligible for, but did not
receive, winning bids in the CAF Phase
II auction; (3) any census blocks where
a CAF Phase II auction winning bidder
has defaulted; (4) the census blocks
excluded from the offers of model-based
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support and the CAF Phase II auction
because they were served with voice
and broadband of at least 10/1 Mbps; (5)
census blocks served by both price cap
carriers and rate-of-return carriers to the
extent that the census block is in the
price cap carrier’s territory, using the
most recent study area boundary data
filed by the rate-of-return carriers to
identify their service areas and
determine the portion of each census
block that is outside this service area;
(6) any unserved census blocks that are
outside of price cap carriers’ service
areas where there is no certified highcost eligible telecommunications carrier
(ETC) providing service, such as the
Hawaiian Homelands, and any other
populated areas unserved by either a
rate-of-return or price cap carrier; and
(7) any census blocks identified by rateof-return carriers in their service areas
as ones where they do not expect to
extend broadband (as the Commission
did with the CAF Phase II auction). Not
included in these categories for Phase I
eligibility are census blocks where a
winning bidder in the CAF Phase II
auction is obligated to deploy
broadband service, and census blocks
where a Rural Broadband Experiment
support recipient is obligated to offer at
least 25/5 Mbps service over networks
capable of delivering 100/25 Mbps.
11. Second, the Commission will
exclude those census blocks where a
terrestrial provider offers voice and 25/
3 Mbps broadband service according to
the most recent publicly available FCC
Form 477 data. In addition, the
Commission will exclude those census
blocks which have been identified as
having been awarded funding through
the U.S. Department of Agriculture’s
ReConnect Program, or awarded funding
through other similar federal or state
broadband subsidy programs to provide
25/3 Mbps or better service. This is
consistent with the Commission’s
overarching goal of ensuring that finite
universal service support is awarded in
an efficient and cost-effective manner
and does not go toward overbuilding
areas that already have service.
Although the Commission sought
comment on whether there are any other
areas that it should include in the initial
list of eligible areas, such as areas in
legacy rate-of-return areas that are
almost entirely overlapped by an
unsubsidized competitor, it declines to
expand the list of eligible areas at this
time and instead focus Phase I on the
known wholly unserved census blocks.
12. After compiling the preliminary
list of eligible areas, the Bureau will
conduct a limited challenge process for
the Rural Digital Opportunity Fund
Phase I auction consistent with the
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process the Bureau used for the CAF
Phase II auction. Because there is an
inevitable lag between the time when
areas are served and the time that
service is reflected in publicly available
FCC Form 477 data, parties will be
given an opportunity to identify areas
that have subsequently become served,
and the Bureau will have the
opportunity to compare the preliminary
list of eligible areas with the final list to
identify any obvious reporting errors. As
discussed in this document, good policy
requires the Commission to avoid
making limited federal funding
available in areas where broadband
providers already are receiving support
to deploy 25/3 Mbps broadband service.
Thus, in order to identify which areas
to exclude, the Commission directs the
Bureau to provide an opportunity to
identify census blocks that have been
awarded support by a federal or state
broadband subsidy program to provide
25/3 Mbps or better service. The
Commission does this to ensure that its
auction does not award duplicative or
unnecessary support. The Commission
does not agree with commenters who
argue that a limited challenge process is
insufficient and that it should provide a
‘‘robust’’ challenge process to identify
census blocks that are not actually
served, and thus should be eligible for
Phase I. The Commission finds that
such a challenge process would be
administratively burdensome, timeconsuming, and unnecessary. In a
previous challenge process, the
Commission found that it was very
difficult to prove a negative—that is,
that an area was not served. The
Commission also notes that in Phase II,
any areas that are reported as served
based on its current data but are
ultimately deemed unserved will be
eligible, and expect that Phase II will
occur sooner if Phase I is not delayed by
a more burdensome challenge process.
The Commission directs the Bureau to
release a list and map of initially
eligible census blocks based on the most
recent publicly available FCC Form 477
data. If more recent FCC Form 477 data
is available when the Commission
adopts the specific procedures for the
Phase I auction, the Bureau should use
the more recent data and publish a final
list.
13. CAF Phase II support was targeted
to ‘‘census blocks where the cost of
service is likely to be higher than can be
supported through reasonable end-user
rates alone’’ by using a cost benchmark
that reflected the expected amount of
revenue that could reasonably be
recovered from end users. In the CAF
Phase II auction, the Commission
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included high-cost areas where the
CAM estimated the cost per location to
exceed $52.50 per month. The
Commission departs from that decision
here in the Rural Digital Opportunity
Fund auction and it will also include
some census blocks where the CAM
suggests the costs of deployment are
below that $52.50 high-cost threshold,
but deployment has nonetheless not yet
occurred. When the Commission
proposed including at least some lowcost blocks, then-current data indicated
that 6.3 million locations with costs
below a $52.50 per month benchmark
still lacked 25/3 Mbps broadband
(including 3.4 million locations that
lacked even 10/1 Mbps broadband based
on staff analysis of current FCC Form
477 data), suggesting that potential enduser revenue alone had not incentivized
deployment despite the model’s
predictions. Therefore, to encourage
deployment of high-speed broadband in
rural census blocks that are wholly
unserved, the Commission will use a
lower funding threshold to include
blocks where the CAM estimates the
cost per location equals or exceeds $40
per month, rather than $52.50. Although
some commenters do not agree with
providing support in such lower cost
areas, the Commission finds that a
modest reduction in the funding
threshold is warranted given the
number of census blocks where market
forces alone have been insufficient to
bring broadband to these areas.
14. To account for the unique
challenges of deploying broadband to
rural Tribal communities, the
Commission will use a funding
threshold of $30 per month. This
approach is consistent with the Tribal
Broadband Factor established for Tribal
areas for carriers that elected modelbased rate-of-return support, which
used a 25% decrease compared to the
$52.50 benchmark. Because the
Commission will use a $40 benchmark
for the Phase I auction, the $30
benchmark for Tribal areas reflects a
25% decrease compared to the $40
funding threshold. Using a $30 funding
threshold for census blocks in Tribal
areas, in addition to including blocks
below the $40 threshold, has the effect
of increasing the reserve price in all
Tribal areas by $10 per location. Finally,
to provide additional incentives in
wholly unserved areas that even lack
10/1 Mbps, the Commission will also
use a $30 per month funding threshold
in these areas. A number of commenters
agree that the Commission should
prioritize these areas, and it finds that
an increased reserve price could
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encourage deployment in areas where
rural consumers have been left behind.
15. Consistent with the approach the
Commission took in the CAF Phase II
auction, it adopts a general auction
framework and eligibility criteria in the
Order and leaves the specific
procedures to 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
Order.
16. Auction Framework. For Phase I,
the Commission adopts a single
nationwide, multi-round reverse auction
with competition within and across
eligible geographic areas to identify
areas that will receive support and
determine support amounts, as it did for
the CAF Phase II auction. The
Commission’s experience in the CAF II
auction demonstrates that reverse
auctions allow for market forces to
maximize the impact of finite universal
service resources while awarding
support to those providers that will
make the most efficient use of the
budgeted funds. Utilizing an auction
mechanism will allow the Commission
to distribute support consistent with its
policy goals and priorities in a
transparent manner. An auction
provides a straightforward means of
identifying those providers that are
willing to provide voice and broadband
at a competitive cost to the Fund,
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.
17. Commenters broadly support the
use of a reverse auction to distribute
Rural Digital Opportunity Fund support.
For example, commenters state that
based on the success of the CAF Phase
II auction, reverse auctions can be
expected to produce robust deployment
cost-effectively. The Nebraska Public
Service Commission, on the other hand,
raised concerns that a reverse auction
focuses on ‘‘the cheapest way to get to
the minimum speed of a given speed
tier to a coverage area’’ rather than
‘‘focusing on robust and scalable
technology.’’ The Commission
disagrees. As demonstrated in CAF
Phase II, reverse auctions are the best
available tool to achieve the
Commission’s overall goal of closing the
digital divide in a transparent and
efficient manner while maintaining
fiscal responsibility and cost-
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effectiveness. Moreover, in most
instances, CAF Phase II winning bidders
agreed to provide a higher speed than
the minimum; thus, the Commission
was able to push finite universal service
support to many more locations at a
much lower cost and higher speeds. The
Commission therefore maintains that a
reverse auction is the most efficient
means of awarding Rural Digital
Opportunity Fund support, consistent
with its goal of supporting the buildout
of the best possible networks in the
most cost-effective manner possible.
18. Similar to the CAF Phase II
auction, the Commission adopts an
auction design in which bidders
committing to different performance
levels will have their bids weighted to
reflect its preference for higher speeds,
greater usage allowances, and lower
latency. However, in addition to the
weights for each performance tier and
latency combination adopted in the
following, the Commission adopts bid
processing procedures specific to the
‘‘clearing round’’ of the Rural Digital
Opportunity Fund Phase I auction. In
the clearing round, the bidding system
will take into account the combined
performance tier and latency weight
when assigning support to bidders
competing for support in the same area
at the base clock percentage. Among
other modifications to the procedures
used in the CAF II auction, the bidding
system will assign support in the
clearing round to the bidder with the
lowest performance tier and latency
weight instead of, as was done in the
CAF II auction, carrying forward all bids
at the base clock percentage for the same
area for bidding in additional clock
rounds. If two or more bids were
submitted with the same lowest
performance tier and latency weight in
the clearing round, bidding for an area
will continue in additional clock
rounds.
19. In the CAF II auction, the
Commission adopted an auction that
considered all bids simultaneously, ‘‘so
that bidders that propose to meet one set
of performance standards will be
directly competing against bidders that
propose to meet other performance
standards.’’ In the Rural Digital
Opportunity Fund auction, the
Commission will continue to accept
bids committing to different
performance levels. In Phase I, however,
once the budget has cleared, the
Commission will prioritize bids with
lower tier and latency weights, thereby
encouraging the deployment of
networks that will be sustainable even
as new advancements are made and
which will be capable of delivering the
best level of broadband access for many
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years to come, all while keeping funding
within the Phase I budget. Although this
approach could result in less intra-area
competition after the clearing round in
some areas, the auction will have
selected the best possible service, at a
competitive level of support, for the
same number of consumers living in
those areas, and this will result in more
rapid and efficient funding for such
deployment. In other words, the
Commission’s goal to close the digital
divide is balanced against its goal to
support the deployment of future-proof
networks by this auction. Overall, the
Commission does not expect this
approach to adversely impact
competition. The Commission will still
accept competitive bids proposing to
offer performance that meets or exceeds
the minimums at each performance tier
and latency, but for those areas where
there is still competition as of the
clearing round, the Commission will
prioritize selection of bidders that
propose to offer the highest speeds,
most usage, and lowest latency for each
area.
20. The Commission also adopts the
same general competitive bidding rules,
which allow for the subsequent
determination of additional, specific
final auction procedures based on
additional public input during the preauction process, and the Commission
will apply as appropriate any
modifications to those rules that it may
adopt. Those competitive bidding rules,
together with the additional rules the
Commission adopts in this document,
will establish Rural Digital Opportunity
Fund winning bidders’ performance
obligations, eligible areas, and postauction obligations and oversight. As it
typically does for Commission auctions,
the Commission will seek further
comment on auction procedures at a
future date, so it does not address the
comments in the Order that speak to
those issues. A number of commenters
propose specific changes to the auction
that would be better evaluated during
the process to develop detailed auction
procedures.
21. Reserve Prices. Consistent with
the CAF Phase II auction procedures,
the Commission will use the CAM to
establish area-specific reserve prices.
The Commission makes several
adjustments to its approach in the CAF
II auction to include some unserved
areas that were excluded from the CAF
Phase II auction and to potentially
provide additional funding to extremely
high-cost areas. Specifically, the
Commission concludes it is appropriate
to reduce the high-cost support
threshold to $40 per location. The
Commission also increases the per-
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location support cap to $212.50. This
approach will add additional locations
above the new threshold and increase
inter-area bidding. Finally, the
Commission will prioritize areas
entirely lacking 10/1 Mbps and Tribal
areas by further lowering the funding
threshold for such areas by 25% to $30.
22. The reserve price in each whollyunserved, eligible census block will be
equal to the average per-location cost of
deploying and operating a network (as
calculated by the CAM) above the $40
support threshold and up to the perlocation support cap of $212.50,
multiplied by the number of locations in
the block. Lowering the support
threshold from $52.50 to $40 per
locations will provide support to
unserved areas in which the CAM may
be understating costs, while still being
cognizant about not offering support in
areas market forces alone are likely to
extend broadband. The Commission
previously determined that a CAMcalculated average per-location cost of
$52.50 reflected an appropriate line
between areas requiring support and
those where market forces would be
sufficient. Where some areas have not
yet seen unsubsidized deployment of
broadband networks, it could be an
indication that the assumptions
underlying the CAM do not always
reflect the reality facing service
providers, and the Commission now
concludes it is appropriate to revisit the
high-cost threshold. Likewise, the
Commission increases the per-location
support cap to ensure that the highestcost areas, many of which did not
receive winning bids in the CAF II
auction, will see sufficient interest from
bidders in the Rural Digital Opportunity
Fund. Thus, the Commission will set
the reserve price based on a lower
support threshold of $40 for all areas
and raise the per-location support cap
from $146.10 to $212.50, ultimately
helping promote participation and
competition in the Rural Digital
Opportunity Fund Phase I auction.
23. The Commission’s goal with this
auction is to target support and provide
incentives to serve areas that are known
to currently lack service at speeds of at
least 25/3 Mbps. Whereas the CAF
Phase II auction targeted support to
high-cost areas where the incumbent
price cap carrier declined the offer of
model-based support and extremely
high-cost areas nationwide, here the
Commission expands its focus to
include certain areas that remain
unserved despite being identified by the
CAM as lower cost. As the Commission
stated in the Rural Digital Opportunity
Fund NPRM, 84 FR 43543, August 21,
2019, the new lower support threshold
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of $40 will ensure that only census
blocks above the new support threshold
will be eligible for the auction. Buckeye
Hills Regional Council asserts that the
Commission should lower the cost
threshold to $20 or $30 for difficult to
serve parts of the country such as
Appalachia. However, lowering the
threshold any further than $40 would
provide more support than needed and
many locations could be included that
are more likely to be served without
universal service support.
24. Certain commenters oppose
including unserved low-cost census
blocks in Phase I of the auction, raising
concerns that the auction would shift
funding to more densely populated
areas at the expense of more rural
consumers and census blocks. The
Commission notes that these areas
remain unserved, despite being
identified as low cost by CAM more
than five years ago. Moreover, the
Commission is lowering the support
threshold in all eligible census blocks,
thereby increasing reserve prices (and
potentially available support)
throughout. The Commission declines
to adopt NCTA’s proposal to reduce the
cost threshold only to account for the
costs of upgrading an already deployed
network capable of providing 10/1 Mbps
to one capable of providing 25/3 Mbps,’’
to ‘‘ensure the . . . fund does not . . .
pay more than necessary to serve these
areas.’’ The Commission disagrees.
NCTA’s approach focuses on areas that
already have 10/1 Mbps but not 25/3
Mbps and presumes that the existing
provider would be the auction winner.
While an existing provider should in
many cases be able to seek less support
from the auction in order to upgrade
existing facilities, it may ultimately be
more efficient for a new provider to
serve that same biddable unit with new
facilities, in addition to serving
neighboring areas that lack 10/1 Mbps
broadband services.
25. The Commission also adopts its
proposal in the Rural Digital
Opportunity Fund NPRM to prioritize
census blocks that lack 10/1 Mbps over
eligible census blocks that have 10/1
Mbps service, but lack service at 25/3
Mbps based on Form 477 data.
Specifically, the Commission
accomplishes this by reducing the
support threshold for such census
blocks by an additional 25% to $30,
which will have the effect of raising the
support cap for these blocks to $222.50.
Some commenters support prioritizing
areas that lack 10/1 Mbps and some
suggest the reserve prices in such areas
should be increased to incentivize
bidders in those areas. USTelecom
opposes focusing first on areas that lack
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10/1 Mbps stating that it would be
difficult to implement ‘‘absent
mapping’’ and due to ongoing CAF
Phase II deployment. Pacific Dataport
objects to a 10/1 Mbps prioritization and
argues it is a ‘‘desperate attempt to
force-fit a terrestrial solution whether or
not the economics make sense.’’ The
Commission disagrees with both
commenters. As stated in this
document, the Commission has the data
to identify census blocks that are wholly
unserved by broadband speeds of at
least 10/1 Mbps and are not aware of
cases where Form 477 data have
identified as ‘‘unserved’’ a census block
that is in fact served. One of the
Commission’s goals in this proceeding
is to provide incentives to serve
locations that lack any terrestrial option.
Prioritizing areas that lack 10/1 entirely
is consistent with the Commission’s
statutory mandate that such services are
deployed to areas lacking broadband
and makes sure this auction does not
leave on the wrong side of the digital
divide those areas lacking even basic
broadband access.
26. For Tribal areas, the Commission
similarly adopts the Tribal Broadband
Factor as a 25% decrease, to $30, of the
support threshold applied to Tribal
areas. More specifically, with regard to
census blocks located within the
geographic area defined by the
boundaries of the Tribal land, all
eligible census blocks for which the
CAM-derived cost is more than $30 will
be included in the auction, and the
reserve price for such blocks will be the
CAM-derived cost minus $30, up to a
per-location support cap of $222.50. The
Commission recognizes the difficulty
Tribal lands have faced in obtaining
broadband deployment, and by
incorporating this Tribal Broadband
Factor, the Commission seeks to
incentivize network buildout to ensure
that Tribal Nations and their members
obtain access to advanced
communications services. The record
before the Commission provides ample
support for adopting a 25% decrease of
the cost benchmark to incentivize Rural
Digital Opportunity Fund participants
to bid on and serve rural Tribal census
blocks. A Tribal Broadband Factor will
attach to the eligible Tribal areas, and
thus reflect the additional cost of
serving Tribal lands. While the
Commission remains committed to
promoting deployment on Tribal lands,
it declines to extend a Tribal-specific
preference to Tribal entities or to require
a nontribal entity to ‘‘prove an
established partnership’’ prior to the
auction. The Commission concludes
that it serves the public interest to
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maximize participation, and to award
support to the most cost-effective bids,
subject to the performance and latency
weights it adopts in the following.
27. Bidding Credits. The Commission
declines to adopt bidding credits for
offsetting bidding weights or
committing to certain buildout
requirements, as proposed by some
bidders. Adopting bidding credits to
reward bidders for simply having met
prior regulatory obligations, for
example, would be contrary to the
competitive nature of the auction, and,
could ultimately reduce the potential
reach of the Rural Digital Opportunity
Fund. While the Commission declines
to adopt a Tribal bidding credit, in this
document, it has incorporated into the
reserve prices for Tribal lands a Tribal
Broadband Factor, similar to what the
Commission previously incorporated
into the recent offer of model-based
support to rate-of-return carriers serving
Tribal lands, which will reflect the
higher costs unique to deploying service
on Tribal lands that may not otherwise
already be included in the CAM, and
satisfy the Commission’s goal of
bridging the digital divide.
28. Minimum Geographic Area for
Bidding. The Commission concludes
that the minimum geographic area for
bidding will be no smaller than a census
block group, as identified by the U.S.
Census Bureau, containing one or more
eligible census blocks. As the
Commission determined in the CAF
Phase II Procedures PN, using census
block groups ensures that all interested
bidders, including small entities, have
flexibility to design a network that
matches their business model and the
technologies they intend to use.
Nevertheless, as the Commission did in
the CAF Phase II auction, it reserves the
right to select census tracts, or other
groupings of areas, when it finalizes the
auction design if necessary to limit the
number of discrete biddable units.
While some commenters support
bidding based on eligible census blocks,
the Commission declines to adopt
individual census blocks as the
minimum geographic area for bidding
because of the significantly larger
number of eligible census blocks,
increasing the complexity of the bidding
process both for bidders and the bidding
system and minimizing the potential for
broad coverage by winning bidders.
Furthermore, using census blocks as the
minimum geographic area could create
more challenges for providers in putting
together a bidding strategy that aligns
with their intended network
construction or expansion.
29. The Commission adopts
technology-neutral standards for voice
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and broadband services supported by
the Rural Digital Opportunity Fund,
based on its experience in the CAF
Phase II auction and its success in
awarding support to a variety of service
providers to deploy broadband in
unserved rural areas, and consistent
with long-standing Commission policy.
Specifically, the Commission will
permit bids in four performance tiers,
and for each tier will differentiate
between bids that would offer either
low- or high-latency service. The
Minimum performance tier means 25/3
Mbps with a usage allowance that is the
greater of 250 GB per month or the
average usage of a majority of fixed
broadband customers as announced by
the Bureau on an annual basis; the
Baseline performance tier means 50/5
Mbps speeds with a 250 GB monthly
usage allowance or a monthly usage
allowance that reflects the average usage
of a majority of fixed broadband
customers as announced by the Bureau
on an annual basis, whichever is higher;
the Above-Baseline performance tier
means 100/20 Mbps speeds with 2 TB
of monthly usage; and the Gigabit
performance tier means 1 Gbps/500
Mbps speeds with a 2 TB monthly usage
allowance. The Commission adopts 250
GB as the minimum monthly usage
allowance for the Baseline performance
tier rather than the 150 GB as proposed
because based on Measuring Broadband
America October 2018–September 2019
usage data, the average monthly usage
for fixed broadband customers is 251.45
GBs per month.
30. Low- or high-latency bids will be
required to meet the same latency
requirements as the CAF Phase II
auction high- and low-latency bidders.
Low latency means 95% or more of all
peak period measurements of network
round trip latency are at or below 100
milliseconds, and high latency means
95% or more of all peak period
measurements of network round trip
latency are at or below 750 milliseconds
and a demonstration of a score of 4 or
higher using the Mean Opinion Score
with respect to voice performance.
31. The Commission maintains a
Minimum performance tier for the Rural
Digital Opportunity Fund but increase
the speed from 10/1 Mbps to 25/3 Mbps.
In the CAF Phase II auction, winning
bids in a Minimum performance tier,
which required only 10/1 Mbps
broadband, covered less than 1% of
locations awarded support. The record
generally supports eliminating the 10/1
Mbps performance tier. Although the
Navajo Nation and the Navajo Nation
Telecommunications Regulatory
Commission (NNTRC) request that the
Commission establish a 10/1 Mbps
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bidding tier for Indian Country because
costs of deploying 25/3 Mbps on
reservations may discourage bidders,
they provided no specific, detailed
information about differences in cost.
Moreover, allowing another
performance tier only in certain areas
would complicate the bidding system
and the Commission believes the Tribal
Broadband Factor will be sufficient to
increase support on Tribal lands and
incent providers to bid on Tribal lands.
32. Some commenters argue that a
Baseline tier of 25/3 Mbps is too low
and the Commission should establish a
higher speed tier as the minimum
eligible for the auction, or that bidders
proposing 25/3 Mbps should be
required to deploy to all locations in
three years and receive only five years
of support. Although the Commission
has a preference for higher speeds, it
recognizes that some sparsely populated
areas of the country are extremely costly
to serve and providers offering only 25/
3 Mbps may be the only viable
alternative in the near term.
Accordingly, the Commission declines
to raise the required speeds in the
Minimum tier and it is not persuaded
that bidders proposing 25/3 Mbps
should be required to build out more
quickly or have their support term
reduced by half.
33. Several others argue that the
Commission should include a fourth
performance tier between the Minimum
and Gigabit tiers, some suggesting a tier
between 25/3 Mbps and 100/20 Mbps,
and others suggesting a tier between
100/20 Mbps and the Gigabit tier. The
Commission agrees, and accordingly,
add an additional performance tier. The
Commission finds that allowing bidders
to offer 50/5 Mbps service is ‘‘critical to
reaching the truly high-cost areas in a
cost effective way’’ while meeting the
‘‘immediate broadband needs’’ of
consumers today. Adding a performance
tier at 50/5 Mbps furthers the
Commission’s goal of incentivizing
providers to deploy networks that will
deliver services that consumers need
today as well as in the future, but also
ensures Minimum speed service will be
available in the hardest to serve areas.
34. The Commission declines to make
any modifications to its two latency
tiers. Some commenters propose a third,
very low-latency tier. Commenters have
provided no persuasive evidence that
suggests technologies meeting latency
standards below 100 milliseconds
would have such a material benefit for
consumers when compared to services
meeting the Commission’s existing longstanding low-latency requirements that
it should potentially divert support to
those lower-latency technologies and
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would not expect consumers to notice
the lower latency that would make it
worth weighting the auction differently.
The Commission notes that providers
are encouraged to offer service that
improves upon the Commission’s
minimum tier thresholds.
35. Satellite providers argue that the
Commission’s existing latency tiers do
not account for certain satellites capable
of providing lower latency, and that the
high-latency weight discourages hybrid
networks. SES Americom, which offers
middle-mile capacity on its satellites to
telecommunications carriers, argues its
medium earth orbit satellites can
provide broadband service with a
latency between 120 milliseconds and
150 milliseconds. Viasat and Hughes
ask that the Commission permits a
provider to qualify at the low-latency
weight if it demonstrates a mean
opinion score of 4 or more for VoIP
service and routes latency-sensitive
traffic over links in which 95% or more
of all peak period measurements of
network round trip latency are at or
below 100 milliseconds. Although
medium earth orbit satellites and hybrid
satellite technologies have the potential
to deliver high-speed broadband to
previously unserved rural areas, these
technologies have not been deployed
widely to deliver service to residential
consumers; therefore, it would be
premature to modify the Commission’s
latency standards based on the record to
qualify these technologies in the Phase
I auction to bid with a lower-latency
weight, or add an additional interim
latency weight. This decision does not
preclude the Commission from
reconsidering the feasibility of
modifying latency standards to
accommodate medium earth orbit
satellite and hybrid satellite
technologies for Phase II of the Rural
Digital Opportunity Fund.
36. As in the CAF Phase II auction,
the Commission adopts weights that
reflect its preference for higher speeds,
higher usage allowances, and low
latency. The Commission also
anticipates that terrestrial fixed
networks will likely result in significant
fiber deployment that can serve as a
backhaul for rural 5G networks.
Accordingly, the Commission chooses
performance tier and latency weights to
encourage the deployment of higher
speed, low-latency services.
Specifically, the Commission adopts
weights of 50 for the Minimum
performance tier, 35 for the Baseline
performance tier, 20 for the Above
Baseline performance tier, and 0 for the
Gigabit performance tier, as well as a
weight of 40 for high-latency bids and
0 for low-latency bids to favor higher-
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than Baseline speeds and low-latency
services. Under the descending clock
auction format the Commission will use
the weights, when subtracted from the
clock percentage for the round, to
indicate the percentage of an area’s
reserve price that a winning bidder
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would receive in per-location support
for serving the locations in that area.
37. The following charts summarize
the Commission’s approach:
PERFORMANCE TIERS, LATENCY, AND WEIGHTS
Minimum .....................................................
≥25/3 Mbps ................................................
Baseline ......................................................
≥50/5 Mbps ................................................
Above Baseline ..........................................
Gigabit ........................................................
≥100/20 Mbps ............................................
≥1 Gbps/500 Mbps .....................................
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Low Latency
High Latency.
≤100 ms
≤750 ms & MOS ≥4
0
40
38. The Commission declines to
modify the 90-point maximum spread
between the tiers that the Commission
used in the CAF II auction. Many
commenters argued that the
Commission should increase the 90point spread between the highest and
lowest tiers to favor higher speeds even
more. Others argue that the Commission
should narrow the weighting spread.
Although the Commission does value
higher speed services, it also recognizes
that different technologies may be better
suited for different areas. Based on the
Commission’s experience with the CAF
Phase II auction and its weights, the
Commission believes the weights it
adopts will provide an opportunity for
providers using various technologies to
participate in the auction and to
compete for appropriate levels of
support while providing a minimum
level of service to consumers in all
awarded areas.
39. The Commission adopts its
proposal to establish a weight of 40
points as the weight for high-latency
services, which is an increase from the
CAF Phase II weight of 25. Satellite
providers oppose increasing the weight
for high latency. Viasat claims that
substantially increasing the latency
weight would effectively preclude
meaningful participation by
geostationary orbit (GSO) satellite
providers in the auction and would give
Viasat and other GSO satellite providers
virtually no chance of participating
successfully. Moreover, Viasat argues
that increasing the latency weight
would significantly reduce the number
of supported locations, leaving behind
areas where no terrestrial provider bids,
and substantially increase the average
per-location subsidies in areas where
terrestrial providers do bid. On the other
side, several commenters argue the
Commission should assign an even
greater weight to high-latency bids.
USTelecom argues that satellite
broadband service is not a bridge to
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≥250 GB or U.S. average, whichever is
higher.
≥250 GB or U.S. average, whichever is
higher.
≥2 TB ..........................................................
≥2 TB ..........................................................
next-generation 5G broadband services
and suggests that the Commission
exclude satellite from bidding in the
Phase I auction, or at a minimum,
increase the high-latency weighting to
60. The Commission’s decision to
introduce a more moderate increase to
the high-latency weight reflects the
importance of latency to interactive,
real-time applications and voice
services, as well as the secondary
benefits of terrestrial facilities, but also
recognizes the importance of allowing
all technologies the ability to participate
in the auction and offer service to
unserved areas. Moreover, adopting a
fourth performance tier will moderate
some of the effects of the Rural Digital
Opportunity Fund NPRM’s proposed
weights. The 90-point spread the
Commission adopts in this document
will allow high-latency bidders to
compete for appropriate levels of
support in a much larger auction.
40. All Rural Digital Opportunity
Fund support recipients, like all other
high-cost ETCs, will be required to offer
standalone voice service and offer voice
and broadband services at rates that are
reasonably comparable to rates offered
in urban areas. Some commenters urge
the Commission to eliminate the
standalone voice requirement. WISPA
argues that RDOF recipients should not
be required to offer standalone voice
service, because, consumers
increasingly are subscribing to voice as
a component of their broadband
connections. SpaceX claims the
standalone voice requirement is no
longer useful for nearly all consumers
because Americans no longer choose to
buy standalone voice, and the
requirement adds costs to develop and
make available voice equipment and
provide voice-specific customer
support. GeoLinks urges the
Commission to simply require that
auction winners offer a voice service
option, which can be available via a
service bundle. The National
Association of Counties states that
‘‘unfortunately, the unintended
consequence of this requirement would
prevent willing and able entities from
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50
35
20
0
providing high-speed broadband
internet services solely because they do
not provide voice services in addition to
broadband.’’
41. Section 254 of the
Communications Act of 1934, as
amended, gives the Commission the
authority to support
telecommunications services, which the
Commission has defined as ‘‘voice
telephony service.’’ The Commission
made clear when it adopted the
standalone voice requirement as a
condition of receiving Connect America
Fund support in 2011 that the definition
of the supported service, voice
telephony service, is technologically
neutral, allowing ETCs to provision
voice service over many platforms.
When it adopted the broadband
reasonable rate comparability
requirement in 2014, the Commission
explained that ‘‘high-cost recipients are
permitted to offer a variety of broadband
service offerings as long as they offer at
least one standalone voice service plan
and one service plan that provides
broadband that meets the Commission’s
requirements.’’ In 2018, the Commission
dismissed requests to eliminate the
standalone voice requirement. The
Commission reasoned that auction
funding recipients, unlike funding
recipients of other USF mechanisms,
‘‘may be the only ETC offering voice in
some areas and not all consumers may
want to subscribe to broadband
service.’’ The record does not show that
these facts have changed, and voice
telephony is still the supported service.
Therefore, the Commission requires all
ETCs receiving Rural Digital
Opportunity Fund support to provide
standalone voice service meeting the
reasonable comparability requirements
in the areas in which they receive
support.
42. Some commenters suggest that the
Commission adopts additional public
interest obligations. For example, the
Schools, Health & Libraries Broadband
Coalition argues that the Commission
should specifically require recipients of
Rural Digital Opportunity Fund support
to deploy high-quality broadband to
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anchor institutions in their service
territories. The California Emerging
Technology Fund argues that the
Commission should require every
provider to propose a low-income
package with a rate not to exceed $20.
The Commission notes that support
recipients, like all high-cost ETCs, will
be required to report annually the
number of anchor institutions to which
they newly began providing service and
to comply with all relevant Lifeline
rules. Additional obligations regarding
anchor institutions and low-income
subscribers are more properly addressed
in the Commission’s other universal
service programs.
43. The Commission adopts interim
service milestones for the Rural Digital
Opportunity Fund that are based on
those the Commission adopted for the
CAF Phase II auction for monitoring
progress in meeting deployment
obligations. The Commission will
require support recipients to
commercially offer voice and broadband
service to 40% of the CAM-calculated
number of locations in a state by the end
of the third full calendar year following
funding authorization, and 20% each
year thereafter. The Commission
modifies that approach, however, in the
way it accounts for possible disparities
between the CAM location counts and
the actual number of locations in a
winning bidder’s service territory in a
state. Although initial service
milestones will be based on the number
of locations identified by the CAM, the
Commission is confident that it will
have access to more accurate location
data in the next few years, whether as
a result of the Digital Opportunity Data
Collection, the development of a
broadband serviceable location
database, the 2020 Census and/or some
other data source. The Commission
concludes that winning bidders will be
required to serve the number of
locations subsequently identified in
each respective area. The Commission is
persuaded by commenters who argue
that the costs of building and operating
broadband networks are predominantly
governed by the size and characteristics
of the areas served rather than the
precise number of locations. The
Commission accordingly directs the
Bureau to seek comment on the updated
location data and publish revised
location counts no later than the end of
service milestone year six, which the
Commission expects to be 2027. The
Commission will then use the new
location counts to determine whether a
Rural Digital Opportunity Fund support
recipient offers the required voice and
broadband service throughout the
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designated area by the end of milestone
year eight.
44. The Commission takes this
approach because the record reflects
considerable concern about the
proposed pro rata reductions in a
winning bidder’s support if, ultimately,
there are fewer locations than originally
identified by the Commission. For the
CAF Phase II auction, the Commission
created a process to facilitate
appropriate adjustments to the defined
deployment obligations, with associated
support reductions, and delegated the
implementation of this process to the
Bureau. Most commenters in this
proceeding oppose the pro rata support
reductions, and argue that the
Commission should not penalize
support recipients when the location
data used to establish milestones
overstates the number of locations in an
area. The Commission agrees and will
not reduce support if the Bureau’s
updated location counts indicate fewer
actual locations in the awarded areas in
most circumstances.
45. Location counts in the CAM are
based on 2011 Census data and the
Commission recognizes that there may
be some disparity between the number
of locations identified before the auction
occurs and the ‘‘facts on the ground.’’
Moreover, circumstances may change
before the end of the 10-year support
term. Some rural areas may experience
a decrease in population, and in other
areas new housing developments may
be built. By requiring build-out to the
entire designated area even in light of
the possibility that location numbers
could change, the Commission seeks to
ensure the availability of broadband and
voice services to as many rural
consumers and small businesses within
the Phase I auction areas by the end of
the ten-year term as possible.
46. Until the Bureau adopts new
location counts, the Commission will
measure compliance with service
milestones against the CAM location
counts across the awarded areas for each
Phase I support recipient. The
Commission will require support
recipients to commercially offer voice
and broadband service to 40% of the
CAM-calculated number of locations in
a state by the end of the third full
calendar year following funding
authorization, and 20% each year
thereafter, consistent with the CAF
Phase II deployment obligations. In the
following, the Commission explains
how service milestones will be revised
in various circumstances after the
Bureau gathers more accurate location
counts.
47. More Locations. After the Bureau
adopts updated location counts, in areas
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where there are more locations than the
number of CAM locations, the
Commission will not require a support
recipient to commercially offer voice
and qualifying broadband to 100% of
the new number of locations until year
eight. The Commission will continue to
use the CAM location counts to measure
compliance with interim service
milestones up to 100% of the CAM
locations by the end of the sixth
calendar year. If there are more new
locations than CAM locations,
recipients should be able to meet those
milestones, and measuring compliance
against the new number of locations
later in the term will give carriers the
opportunity to revise and update
deployment plans after the Bureau
announces the new number of locations.
The Commission does not adopt an
interim milestone for the end of year
seven, although carriers will be required
to report to Universal Service
Administrative Company (USAC),
consistent with current high-cost rules,
any locations deployed in that calendar
year. Support recipients will be required
to offer service to 100% of the new
location count by the end of year eight.
Carriers for which the new location
count exceeds the CAM locations within
their area in each state by more than
35% will have the opportunity to seek
additional support or relief from the
Commission.
48. Any such ETC with increased
deployment obligations may also seek to
have its new location count adjusted to
exclude additional locations, beyond
the number identified by CAM, that it
determines before the end of year eight
are ineligible (e.g., are not habitable),
unreasonable to deploy to (e.g., if it
would require a carrier to install new
backhaul facilities or other major
network upgrades solely to provide
broadband to that location), or part of a
development newly built after year six
for which the cost and/or time to deploy
before the end of the support term
would be unreasonable.
49. Fewer Locations. In areas where
there are fewer locations than CAM
locations, a support recipient must
notify the Bureau no later than the
March 1 following the fifth year of
deployment. Upon confirmation by the
Bureau, the Commission will require
support recipients to reach 100% of the
new number by the end of the sixth
calendar year. While planning and
deploying its network, a support
recipient that discovers there are not
enough locations to even meet its
service milestones in years three and
four, which are based on the number of
CAM locations, should seek a waiver
from the Bureau. Carriers for which the
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new location count is less than 65% of
the CAM locations within their area in
each state shall have their support
amount reduced on a pro rata basis by
the number of reduced locations.
50. Newly Built Locations. In addition
to offering voice and broadband service
to the updated number of locations
identified by the Bureau, the
Commission requires support recipients
to offer service on reasonable request to
locations built subsequently. Support
recipients are not obligated to offer
service to these newly built locations
that do not request service, or to those
with exclusive arrangements with other
providers. Assuming a two-year
deployment cycle, support recipients
similarly are not required to deploy to
any locations built after milestone year
eight.
51. The Commission aligns the service
milestones and related reporting
deadlines with those of other high-cost
programs to minimize the
administrative burdens on the
Commission, USAC, and support
recipients. Regardless of when a Rural
Digital Opportunity Fund recipient is
authorized to begin receiving support,
each service milestone will occur on
December 31. The Commission
acknowledges that, by aligning the
service milestones, some Rural Digital
Opportunity Fund support recipients
likely will have more than three years
to complete their 40% milestone.
CenturyLink suggests that the
Commission authorize funding for all
winning bidders to begin on January 1,
2022 to align all Rural Digital
Opportunity Fund support recipients on
calendar year basis for receipt of
support and corresponding obligations.
The Commission finds that its method
of aligning service milestones is
preferable because it establishes
December 31 as the service milestone
date for all participants regardless of
authorization date but still allows the
Commission to authorize support for a
participant and thus to begin broadband
deployment in unserved areas as soon
as possible.
52. The Commission concludes that a
support recipient will be deemed to be
commercially offering voice and/or
broadband service to a location if it
provides service to the location or could
provide it within 10 business days upon
request. All ETCs must advertise the
availability of their voice services
through their service areas, and the
Commission requires support recipients
also to advertise the availability of their
broadband services within their service
area. Compliance with service milestone
requirements will be determined on a
state-level basis, so that a support
recipient would be in compliance with
a service milestone if it offers service
meeting the relevant performance
requirements to the required percentage
of locations across all of the awarded
areas included in its winning bids in a
state.
53. The Commission also sought
comment on whether it should require
support recipients to build out more
quickly earlier in their support terms by
offering voice and broadband to 50% of
the requisite number of locations in a
state by the end of the third year. A few
commenters supported an accelerated
buildout schedule, while the Navajo
Nation and NNTRC asked the
Commission to extend build-out
milestones on Tribal Lands to recognize
the difficulty in deploying infrastructure
in Indian Country. Upon consideration,
the Commission finds that using the
same interim milestones as in the CAF
II auction strikes the appropriate
balance and, thus, adopts the identical
first service milestone that it used there.
Recipients have ample incentive to
reach their buildout milestones as
quickly as possible to increase their
subscribership and revenues. However,
the Commission also recognizes that
deploying broadband in some areas will
be more challenging than in others and
may require all the time allowed by the
deployment milestones.
54. To ensure that support recipients
are meeting their deployment
obligations, the Commission adopts
essentially the same reporting
requirements for the Rural Opportunity
Digital Fund that it adopted for the CAF
Phase II auction. Consistent with the
Commission’s decision in this
document to align the interim service
milestones, it requires Rural Digital
Opportunity Fund support recipients to
file annually location and technology
data in the HUBB at the same time and
to make the same certifications when
they have met their service milestones.
The Commission also amends section
54.316 of its rules to require all Rural
Digital Opportunity Fund support
recipients, as all high-cost support
recipients currently do, to file their
annual location data in the HUBB by
March 1, and the Commission
encourages them to file such data on a
rolling basis.
55. The Commission also requires
Rural Digital Opportunity Fund support
recipients to file the same information
in their annual FCC Form 481s that it
requires of the CAF Phase II auction
support recipients. Specifically, in
addition to the certifications and
information required of all high-cost
ETCs in the FCC Form 481, Rural Digital
Opportunity Fund support recipients
will be required to certify each year after
they have met their final service
milestone that the network they
operated in the prior year meets the
Commission’s performance
requirements. In addition, they will be
required to identify the number, names,
and addresses of community anchor
institutions to which they newly began
providing access to broadband service
in the preceding calendar year as well
as identify the total amount of support
that they used for capital expenditures
in the previous calendar year. Moreover,
support recipients will need to certify
that they have available funds for all
project costs that will exceed the
amount of support they will receive in
the next calendar year. Finally, Rural
Digital Opportunity Fund support
recipients will be subject to the same
annual section 54.314 certifications, the
same record retention and audit
requirements, and the same support
reductions for untimely filings as all
other high-cost ETCs.
56. In the event a support recipient
does not meet a service milestone, the
Commission adopts the same noncompliance measures that are applicable
to all high-cost ETCs, the same
framework for support reductions
applicable to high-cost ETCs that are
required to meet defined service
milestones, and the same process the
Commission adopted for drawing on
letters of credit for the CAF Phase II
auction. The Commission also adopts
additional non-compliance measures for
a support recipient that fails to meet its
third-year service milestone by more
than 50%. Specifically, the Commission
relies on the following non-compliance
tiers (which are described in more detail
in section 54.320 of the Commission’s
rules):
NON-COMPLIANCE FRAMEWORK
Tier 1: 5% to less than 15% of the required number of locations ...........
Tier 2: 15% to less than 25% of the required number of locations .........
Tier 3: 25% to less than 50% of the required number of locations .........
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Quarterly reporting + withhold 15% of monthly support.
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Tier 4: 50% or more of the required number of locations .......................
57. A support recipient will have the
opportunity to move tiers as it comes
into compliance and will receive any
withheld support as it increases buildout and moves from one of the higher
tiers (i.e., Tiers 2–4) to Tier 1 status
during the build-out period. If a support
recipient misses the six year or eight
year service milestone as applicable, it
will have 12 months from the date of the
service milestone deadline to come into
full compliance.
58. Given that the Commission is
modifying the service deployment
milestones to account for the Bureau’s
updated location counts, the
Commission makes commensurate
modifications to the consequences if an
ETC does not come into full compliance
after the grace period for its sixth-year
service milestone or, for an ETC with a
new location count that is greater than
its CAM location count, its eighth-year
service milestone. At the sixth-year
service milestone, support will be
recovered as follows: (1) If an ETC has
deployed to 95% or more of the CAM
location count, or of the adjusted CAM
location count if there are fewer
locations, but less than 100%, USAC
will recover an amount of support that
is equal to 1.25 times the average
amount of support per location received
in the state for that ETC over the
support term for the relevant number of
locations; (2) if an ETC has deployed to
90% or more of the CAM location count,
or of the adjusted CAM location count
if there are fewer locations, but less than
95%, USAC will recover an amount of
support that is equal to 1.5 times the
average amount of support per location
received in the state for that ETC over
the support term for the relevant
number of locations, plus 5% of the
support recipient’s total Rural Digital
Opportunity Fund support authorized
over the ten-year support term for that
state; and (3) if an ETC has deployed to
fewer than 90% of the CAM location
count, or of the adjusted CAM location
count if there are fewer locations, USAC
will recover an amount of support that
is equal to 1.75 times the average
amount of support per location received
in the state for that ETC over the
support term for the relevant number of
locations, plus 10% of the support
recipient’s total Rural Digital
Opportunity Fund support authorized
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Quarterly reporting + withhold 50% of monthly support for six months;
after six months withhold 100% of monthly support and recover percentage of support equal to compliance gap plus 10% of support disbursed to date.
over the ten-year support term for that
state.
59. If the ETC’s new location count is
greater than its CAM location count, and
recognizing the increased obligations of
such ETCs, support will be recovered as
follows if the ETC does not meet the
eighth year service milestone: (1) If an
ETC has deployed to 95% or more of its
new location count, but less than 100%,
USAC will recover an amount of
support that is equal to the average
amount of support per location received
in the state for that ETC over the
support term for the relevant number of
locations; (2) if an ETC has deployed to
90% or more of its new location count,
but less than 95%, USAC will recover
an amount of support that is equal to
1.25 times the average amount of
support per location received in the
state for that ETC over the support term
for the relevant number of locations; (3)
if an ETC has deployed to 85% or more
of its new location count, but less than
90%, USAC will recover an amount of
support that is equal to 1.5 times the
average amount of support per location
received in the state for that ETC over
the support term for the relevant
number of locations, plus 5% of the
support recipient’s total Rural Digital
Opportunity Fund support authorized
over the ten-year support term for that
state; and (4) if an ETC has deployed to
less than 85% of its new location count,
USAC will recover an amount of
support that is equal to 1.75 times the
average amount of support per location
received in the state for that ETC over
the support term for the relevant
number of locations, plus 10% of the
support recipient’s total Rural Digital
Opportunity Fund support authorized
over the ten-year support term for that
state.
60. The same support reductions will
apply if USAC later determines in the
course of a compliance review that a
support recipient does not have
sufficient evidence to demonstrate that
it was offering service to all of the
locations required by the sixth or eighth
service milestones.
61. As in the CAF Phase II auction,
USAC will be authorized to draw on an
ETC’s letter of credit to recover all of the
support that is covered by the letter of
credit in the event that a support
recipient does not meet the relevant
service milestones, does not come into
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compliance during the cure period, and
does not timely repay the Commission
the support associated with the noncompliance gap. If a support recipient is
in Tier 4 status during the build-out
period or has not deployed to 100% of
CAM locations by the end of year six (or
the adjusted location total if there are
fewer locations), and USAC has
initiated support recovery as described
in this document, the support recipient
will have six months to pay back the
support that USAC seeks to recover. If
the support recipient does not repay
USAC by the deadline, the Bureau will
issue a letter to that effect and USAC
will draw on the letter of credit to
recover all of the support that is covered
by the letter of credit. If a support
recipient has closed its letter of credit
and it is later determined that the
support recipient does not have
sufficient evidence to demonstrate that
it was offering service to the total
number of required locations, that
support recipient will be subject to
additional non-compliance measures if
it does not repay the Commission after
six months. And like other high-cost
ETCs, support recipients will be subject
to other sanctions for non-compliance
with the terms and conditions of highcost funding, including but not limited
to the Commission’s existing
enforcement procedures and penalties,
reductions in support amounts,
potential revocation of ETC
designations, and suspension or
debarment.
62. The Commission sought comment
on whether there are additional
measures it could adopt that would help
ensure that Rural Digital Opportunity
Fund support recipients will meet their
third-year service milestones, and on
what steps it should take if it appears
support recipients will not be able to
meet their service milestones. The
National Rural Electric Cooperative
Association (NRECA) suggested the
Commission make more detailed
inquiries of a support recipient to the
extent it substantially misses the 40%
service obligation at the three-year
benchmark and possibly terminate
support payments. The Commission
agrees with NRECA that it is unlikely
that a recipient that substantially misses
its third-year milestone would be able to
come into compliance in the following
year. The Commission therefore directs
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any support recipient that believes it
cannot meet its year three milestone to
notify the Bureau and provide
information explaining this expected
deficiency. If a support recipient has not
made such notification by March 1
following the third-year service
milestone and has deployed by the end
of the third-year milestone to fewer than
20% of its required locations in that
state, the Commission will find the
recipient to be in default, rather than
withholding support and providing an
additional six months to come into
compliance.
63. The Commission declines to adopt
additional performance targets to
provide greater incentives for Rural
Digital Opportunity Fund support
recipients to enroll customers in the
eligible areas. The Commission
specifically sought comment on a
proposal to adopt subscribership
milestones set at 70% of the yearly
deployment benchmarks and reduce
support accordingly for failure to meet
the subscription target. Most
commenters opposed a subscription
requirement and argued that a 70%
subscription requirement was too high
and unrealistic in rural areas. Even
some commenters supporting the
concept of a subscription requirement
thought 70% was too high and
suggested any subscribership
requirement should be as low as 35%.
Commenters argued that a
subscribership requirement with
reductions in support for failure to meet
those targets would discourage
participation in the auction, and change
the focus of the Rural Digital
Opportunity Fund program from a
deployment program to an adoption
program.
64. The Commission agrees that
requiring specific subscription
milestones is likely to discourage many
bidders from participating in the
auction because they would risk losing
funding when they likely need it most
to complete the buildout of their
networks. Commenters pointed out that
support recipients have a statutory
obligation to advertise the availability of
their services throughout their service
areas and argue that they have the
incentive to attract customers to
increase their revenues. Commenters
also argued that subscription rates of
70% in some rural, low-income areas
would be almost impossible to attain. In
addition, support recipients must be
prepared to provide service meeting the
relevant public interest obligations
within 10 business days to any locations
they report in the HUBB for purposes of
meeting the service milestones, which
will give support recipients added
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incentive to ensure their networks have
sufficient capacity to serve the required
number of locations. Given these
requirements, the risk of discouraging
participation in the auction, and the
administrative complexity of monitoring
subscribership, the Commission
declines to require a certain level of
subscription as a condition of Rural
Digital Opportunity Fund support.
65. Consistent with prior Commission
auctions and based on its recent
experience with the CAF Phase II
auction, the Commission adopts the
two-stage application process that will
govern the auction process for the Rural
Digital Opportunity Fund, including
pre-auction and post-auction
requirements.
66. The Commission concludes that
participants in the Rural Digital
Opportunity Fund Phase I auction
process will be required to comply with
the same short-form and long-form
application process. Specifically, in the
pre-auction short-form application, a
potential bidder will be required to
establish its eligibility to participate in
the auction by providing, among other
things, basic ownership information and
certifying to its qualifications to receive
support. Once approved as qualified to
bid by the Bureau, the company may
participate in the auction. After the
auction, winning bidders must file more
extensive information for the long-form
application, demonstrating to the
Commission that they are legally,
technically and financially qualified to
receive support. As in CAF Phase II, the
Commission stresses that each potential
bidder has the sole responsibility to
perform its due diligence research and
analysis before proceeding to participate
in the Rural Digital Opportunity Fund
auction. The Commission directs the
Bureau, the Office of Economics and
Analytics, and the Rural Broadband
Auctions Task Force, to adopt the
format and deadlines for the submission
of documentation for the short-form and
long-form applications.
67. Consistent with the approach in
the CAF Phase II auction and proposed
in the Rural Digital Opportunity Fund
NPRM, the Commission adopts its
existing universal service competitive
bidding rules so that applicants will be
required to provide information that
will establish their identity, including
disclosing parties with ownership
interests and any agreements the
applicants may have relating to the
support to be sought through the Rural
Digital Opportunity Fund auction.
Interested parties will submit a preauction short-form application,
providing basic information and
certifications regarding their eligibility
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13783
to receive support. Commission staff
will then review the short-form
applications, determining whether the
applicants are eligible to participate in
the auction. Thereafter, Commission
staff will release a public notice
indicating which short-form
applications are deemed complete and
which are deemed incomplete.
Consistent with CAF Phase II,
applicants whose short-form
applications are deemed incomplete
will be given a limited opportunity to
cure defects and to resubmit correct
applications, excluding major
modifications. As in CAF Phase II, a
second public notice will be released
designating the applicants that are
qualified to participate in the Rural
Digital Opportunity Fund auction.
68. Ownership. The Commission will
require that each auction applicant
provide information in its short-form
application to establish its identity,
including information concerning its
real parties in interest and its
ownership, and to identify all real
parties in interest to any agreements
relating to the participation of the
applicant in the competitive bidding.
The Commission will also require an
applicant to provide in its short-form
application a brief description of any
such agreements, including any joint
bidding arrangements. Commission staff
would use such information to identify
relationships among applicants,
including those that might be commonly
controlled or members of a joint bidding
arrangement. The Commission will also
require every applicant to certify in its
short-form application that it has not
entered into any explicit or implicit
agreements, arrangements, or
understandings of any kind related to
the support to be sought through the
Rural Digital Opportunity Fund auction,
other than those disclosed in the shortform application.
69. Types of Technologies. The
Commission will also require all
applicants to indicate the type of bids
that they plan to make and describe the
technology or technologies they will use
to provide service for each bid. This
information is imperative to establishing
bidders’ eligibility for the bidding
weights the Commission adopts.
Consistent with CAF Phase II, the
Commission will allow an applicant to
use different technologies within a state
as well as hybrid networks to meet its
public interest obligations.
70. Technical and Financial
Qualifications Certifications. Likewise,
applicants will be required to certify
that they are financially and technically
qualified to meet the public interest
obligations in each area for which they
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seek Rural Digital Opportunity Fund
support. Based on the Commission’s
experience with CAF Phase II, this
approach is an appropriate screening
process to ensure serious participation,
without being overly burdensome to
applicants and recipients.
71. Operational History. Applicants
will be required to provide additional
assurances to the Commission that the
entities that intend to bid in the auction
have experience operating networks.
The Commission adopts a requirement
that applicants certify in their shortform application that they have
provided voice, broadband, and/or
electric distribution or transmission
services for at least two years and that
they specify the number of years they
have been operating, or that they are the
wholly-owned subsidiary of an entity
that meets these requirements.
Applicants that have provided voice or
broadband services must also certify
that they have filed FCC Form 477s as
required during that time period. As the
Commission determined in CAF Phase
II, it also will accept certifications from
entities that have provided electric
distribution or transmission services for
at least two years (or their wholly
owned subsidiaries).
72. An applicant that can certify it has
provided voice, broadband, and/or
electric distribution or transmission
services for at least two years, or that it
is a wholly-owned subsidiary of such an
entity, will provide the Commission
with sufficient assurance before the
auction that it has the ability to build
and maintain a network.
73. The Commission will require each
applicant that does not have two years
of operational experience, to submit
with its short-form application its (or its
parent company’s) financial statements
that have been audited by an
independent certified public accountant
from the three prior fiscal years,
including the balance sheets, incomes,
and cash flow statements, along with a
qualified opinion letter. The
Commission’s interest in having a level
of insight into the financial health of a
potential Rural Digital Opportunity
Fund auction bidder over a longer
period of time is a necessary
prequalification to bid, particularly
because this subset of bidders will not
able to demonstrate that they have
operated and maintained a voice,
broadband and/or electric distribution
or transmission network for at least two
years. Likewise, such applicants will
also be required to submit a letter of
interest from a bank meeting the
Commission’s eligibility requirements
stating that the bank would provide a
letter of credit to the applicant if the
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applicant becomes a winning bidder
and is awarded support of a certain
dollar magnitude. A letter of interest
from the bank will provide the
Commission with an independent basis
for some additional assurance regarding
the financial status of the entity.
74. The Commission declines to adopt
a suggestions from USTelecom and
Windstream to limit the total bid based
on the bidder’s annual revenues, while
Verizon proposes further pre-auction
scrutiny ‘‘on applicants that are seeking
authority to bid for a large number of
locations, relative to the size of their
existing customer base, or are planning
to bid for performance tiers in which
they currently provide little or no
commercial service.’’ The Commission
is not persuaded that either of these
proposals are an effective method to
guarantee the financial qualifications of
bidders to perform; instead, they would
more likely limit competition by
arbitrarily excluding bidders with more
limited revenues or existing customer
bases. The Commission is generally
reluctant to adopt additional measures
that limit competition from bidders and
any concerns with financial
qualifications will be resolved during
the short-form applications.
75. The Commission declines to
collect less financial and technical
information from existing USF support
recipients on the short-form than it did
in CAF Phase II as suggested by some
commenters. It is important for
Commission staff to review the same
specific information from each carrier
when evaluating carriers’ qualifications
to bid. However, CAF Phase II auction
participants that subsequently defaulted
on their entire award will be barred
from participating in the Rural Digital
Opportunity Fund. The Commission
declines to bar participants that
defaulted in other universal service
programs as well as decline to subject
participants to additional scrutiny that
subsequently defaulted in CAF Phase II,
as suggested by other commenters, or
that have filed for bankruptcy or that
have been bankrupt in the recent past.
The Commission is capable of
evaluating the circumstances of a prior
default and the outcome of any
subsequent enforcement action without
collecting additional information in the
short-form application. All applicants
will be subject to a thorough financial
and technical review in both the shortform application stage and the longform application stage prior to bidding
and ultimately receiving support.
76. Conversely, some commenters
stated that the Commission should
increase the short-form requirements.
For instance, NTCA asserted that the
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Commission should require that a
prospective bidder demonstrate ‘‘more
thorough qualifications at the short-form
stage’’ focusing on technical and
operational qualifications. NRECA
proposes shifting to the short-form
review more of the detailed technical
and financial showings conducted at the
long-form review. USTelecom states that
the Commission should require an
applicant to provide information about
subscribership trends and employee
expertise to show that it has the
expertise and experience ‘‘to scale its
network.’’ Subscribership and employee
expertise do not necessarily suggest that
the entity is unqualified to bid in the
Rural Digital Opportunity Fund auction.
The Commission’s interest in
maximizing participation in the Rural
Digital Opportunity Fund auction
outweighs the potential risk of
qualifying a less experienced entity to
participate in the auction without
reviewing that bidder’s subscribership
and employee counts, particularly given
that it adopts the requirement that
bidders will be required to submit their
audited financial statements. This will
allow the Commission to scrutinize the
bidder’s audited financial statements at
the long-form application stage before
authorizing that entity to begin
receiving support. The Commission
believes that requiring more technical
and operational information before the
auction begins will provide significant
barriers to entry for some participants
and unnecessarily extend the short-form
review period and delay the auction.
Moreover, additional technical
information at the short-form stage
would be speculative based on a
presumption of what a winning area
would look like.
77. Similarly, the Commission
declines NTCA’s proposal to require
applicants to submit propagation maps
to show where they intend to bid, as it
would be burdensome on applicants
‘‘particularly given the maps may not be
relevant if an applicant does not become
qualified or does become qualified but
does not win support in that area.’’ The
Commission concludes on balance that
its short-form process provides
significant assurances for serious
participation and its long-form postauction process, as discussed in the
following, will provide an in-depth
extensive review of the winning
bidders’ qualifications.
78. Audited Financials. The
Commission will require each applicant
that has certified that it has at least two
years of operational experience to
submit financial statements that have
been audited by an independent
certified public accountant from the
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prior fiscal year, including balance
sheets, net income and cash flow, along
with a qualified opinion letter with its
short-form application. If such an
applicant (or its parent company) is not
audited in the ordinary course of
business, the Commission will require
the applicant to submit unaudited
financial statements from the prior fiscal
year with its short-form application and
to certify that it will submit audited
financials during the long-form
application process. The Commission
will require winning bidders that take
advantage of this option to submit their
audited financials no later than the
deadline for submitting their proof of
ETC designation (which is within 180
days of the public notice announcing
winning bidders). If the audit process is
expected to exceed 180 days, a winning
bidder will have the option of seeking
a waiver of this deadline. In considering
such waiver requests, the Commission
directs the Bureau to determine whether
the entity demonstrated in its waiver
petition that it took steps to prepare for
an audit prior to being named a winning
bidder and that it took immediate steps
to obtain an audit after being announced
as a winning bidder. Applicants that
certify that they have at least two years
of operational experience and fail to
submit audited financial statements as
required, will be subject to the same
base forfeiture of $50,000 that the
Commission adopted for the CAF Phase
II auction. The Commission notes that
most CAF Phase II auction support
recipients were able to obtain audited
financial statements by the required
deadlines. As with the CAF Phase II
auction, the Commission does not
extend to applicants that lack two years
of operational history the option of
submitting audited financial statements
during the long-form application stage.
They must submit audited financial
statements from the three prior fiscal
years with their short-form application,
as described in this document.
79. Eligible Telecommunications
Carrier Designation. The Commission
adopts the same CAF Phase II flexibility
with respect to ETC designations and do
not require an applicant to obtain its
designation as an ETC in the areas
where it seeks support prior to bidding
in the Rural Digital Opportunity Fund
auction. The Commission does,
however, require an applicant to
disclose in its short-form application its
status as an ETC in any area for which
it will seek support or if it will become
an ETC in any area where it wins
support. The Commission is not
persuaded that it should require an
applicant to secure its ETC designation
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prior to the auction. As the Commission
determined in CAF Phase II, permitting
entities to obtain ETC designation after
the announcement of winning bidders
for support, encourages broader
participation in the competitive process
by a wider range of entities.
Additionally, the Commission’s
experience with CAF Phase II indicates
that most applicants were ultimately
designated within the long form review
period, even if it took them longer than
the ETC designation proof deadline. The
Commission will continue to presume
that an entity acted in good faith if it
files its ETC application within 30 days
of the release of the public notice
announcing that it is a winning bidder,
but as with both the rural broadband
experiments and the CAF Phase II
auction, the Commission discovered
there were various circumstances
impacting the ability of individual
bidders to file their ETC applications
and that when an application was filed
did not always determine whether an
applicant was designated within the 150
remaining days.
80. Spectrum Access. Additionally,
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 Rural Digital Opportunity
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 the auction. Consistent with
CAF Phase II, the Commission will
require applicants intending to use
spectrum to indicate the spectrum
band(s) they will use for the last mile,
backhaul, and any other parts of the
network; and the total amount of uplink
and downlink bandwidth (in megahertz)
that they have access to in each
spectrum band for last mile. Applicants
must also describe the authorizations
they have obtained to operate in the
spectrum and list the call signs and/or
application file numbers associated with
their spectrum authorizations, if
applicable. Applicants must have
secured any Commission approvals
necessary for the required spectrum
access prior to submitting an auction
application, if applicable. 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. NTCA
argues that applicants who do not have
access to spectrum should be required
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to show how they would acquire it. The
Commission agrees and, consistent with
its treatment of this situation in CAF
Phase II, it will find a recipient in
default if it is unable to meet its
obligations, including if the
authorization is not renewed during the
support term.’’
81. Also, any applicant that intends to
provide service using satellite
technology will be required to identify
in its short-form application its
expected timing for applying for any
earth station licenses it intends to use in
the areas where it intends to bid, if it
has not already obtained these licenses.
The Commission does not require
satellite providers to obtain all
necessary earth station licenses by the
short-form application deadline. An
earth station license requires that a
satellite provider bring the station into
operation within one year of obtaining
a license and a satellite provider may
not be ready to meet this requirement by
the short-form filing deadline.
Moreover, because an applicant can
apply to obtain a microwave license at
any time, the Commission will permit
an applicant that intends to obtain
microwave license(s) for backhaul to
meet its public interest obligations for
the Rural Digital Opportunity Fund by
describing in its short-form application
its expected timing for applying for such
license(s), if it has not already obtained
them.
82. Due Diligence Certification.
Consistent with the procedures adopted
for the CAF Phase II auction, the
Commission adopts the requirement
that an applicant certify that it has
performed due diligence concerning its
potential participation in the Rural
Digital Opportunity Fund auction so the
applicant understands its obligations.
Specifically, the Commission adopts the
requirement that each applicant make
the following certification in its shortform application under penalty of
perjury:
The applicant acknowledges that it has
sole responsibility for investigating and
evaluating all technical and marketplace
factors that may have a bearing on the level
of Rural Digital Opportunity Fund support it
submits as a bid, and that if the applicant
wins support, it will be able to build and
operate facilities in accordance with the
Rural Digital Opportunity Fund obligations
and the Commission’s rules generally.
83. This proposed certification will
help ensure that each applicant
acknowledges and accepts
responsibility for its bids and any
forfeitures imposed in the event of
default, and that the applicant will not
attempt to place responsibility for the
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consequences of its bidding activity on
either the Commission or third parties.
84. Winning bidders for the Rural
Digital Opportunity Fund support will
be required to comply with the same
long-form application process the
Commission adopted for CAF Phase II.
The rules the Commission adopts in the
following provide the basic framework
and requirements for winning bidders to
demonstrate their qualifications for
support. After the close of the auction,
the Bureau will release a public notice
declaring the auction closed, identifying
the winning bidders, and establishing
details and deadlines for next steps.
Winning bidders will then be required
to submit extensive information
detailing their respective qualifications
in their long-form applications, allowing
for a further in-depth review of their
qualifications prior to authorization of
support. Any additional information
that is required to establish whether an
applicant is eligible for Rural Digital
Opportunity Fund support will be
announced by public notice. The
Commission notes that very few
commenters addressed the
Commission’s proposed post-auction
long-form application processes and
none of those commenters raised
significant concerns. The Commission
therefore concludes the rules it adopts
in this document will best serve the
Commission’s ability to determine
whether the applicants are ultimately
eligible for Rural Digital Opportunity
Support authorization funding,
providing a fair and efficient review
process.
85. Ownership Disclosure. The
Commission adopts the ownership
disclosure requirements proposed in the
Rural Digital Opportunity Fund NPRM.
Specifically, an applicant for Rural
Digital Opportunity Fund support must
fully disclose its ownership structure as
well as information regarding the real
party- or parties-in-interest of the
applicant or application. Ownership
disclosure reports from the short-form
process must be updated if any
information reported in the short-form
has changed.
86. Financial and Technical
Capability Certification. Consistent with
CAF Phase II, the Commission will
require a long-form applicant 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.
87. Public Interest Obligations
Certifications. The Commission next
adopts proposed rule 54.804(b)(2)(iii),
concluding that a long-form applicant
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must certify in its long-form application
that it will meet the relevant public
interest obligations for each
performance tier and latency
combination for which it was deemed a
winning bidder, including the
requirement that it will offer service at
rates that are equal to or lower than the
Commission’s reasonable comparability
benchmarks for fixed services offered in
urban areas.
88. Description of Technology and
System Design. Due to the varying types
of technologies that entities may use to
fulfill their Rural Digital Opportunity
Fund competitive bidding process
obligations, the Commission finds that it
is also reasonable to require each
winning bidder to submit a description
of the technology and system design it
intends to use to deliver voice and
broadband service, including a network
diagram, which must be certified by a
professional engineer. The professional
engineer must certify that the network is
capable of delivering, to at least 95%
percent of CAM locations in each
relevant state, voice and broadband
service that meets the requisite
performance requirements. There must
be sufficient capacity to meet customer
demand at or above the prescribed
levels during peak usage periods.
Entities proposing to use wireless
technologies also must provide a
description of their spectrum access in
the areas for which they seek support
and demonstrate that they have the
required licenses to use that spectrum if
applicable. This documentation will
enable Commission staff to have
assurance from an engineer that the
proposed network will be able to fulfill
the service obligations to which the
bidders will have to commit. Filing
deadlines will be strictly enforced, and
bidders should not presume that they
may obtain a waiver absent
extraordinary circumstances.
89. Available Funds Certification.
Next the Commission adopts proposed
rule 54.804(b)(2)(v), concluding that an
applicant must certify in its long-form
application that it will have 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. Simultaneously, the
Commission will also require that
winning bidders describe in their longform application how the required
construction will be funded and include
financial projections that demonstrate
that they can cover the necessary debt
service payments over the life of the
loan. Additionally, these requirements
include the public interest obligations
contained in the Commission’s rules.
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90. ETC Eligibility and
Documentation. Consistent with the
CAF Phase II auction rules, a winning
bidder in the Rural Digital Opportunity
Fund auction will be permitted to
obtain its ETC designation after the
close of the auction, submitting proof
within 180 days of the public notice
identifying winning bidders. The
Commission declines to forbear from the
ETC requirement. The Commission
recognizes the statutory role that
Congress created for state commissions
and the FCC with respect to ETC
designations, and the Commission does
not disturb that framework. Nothing in
the record addresses the standards
necessary to find forbearance in the
public interest, even if some interested
parties may prefer not to become ETCs
with all of the associated obligations.
Therefore, the Commission will
continue to require service providers to
obtain ETC status to qualify for
universal service support. A winning
bidder must demonstrate with
appropriate documentation that it has
been designated as an ETC covering
each of the geographic areas for which
it seeks to be authorized for support. For
example, in addition to providing the
relevant state or Commission orders,
each winning bidder will need to
demonstrate that its ETC designation
covers the areas of its winning bid(s)
(e.g., census blocks, wire centers, etc.).
Such documentation could include map
overlays of the winning bid areas, or
charts listing designated areas.
Furthermore, each winning bidder will
be required to submit a letter with its
documentation from an officer of the
company certifying that its ETC
designation for each state covers the
relevant areas where the winning
bidders will receive support. As the
Commission experienced with CAF
Phase II, these requirements will help
them verify that each winning bidder is
permitted to operate in the areas where
it will be receiving support.
91. Forbearance from Service Area
Redefinition Process. The Commission
adopts its proposal to forbear from the
statutory requirement that the ETC
service area of a Rural Digital
Opportunity Fund participant conform
to the service area of the rural telephone
company serving the same area. As in
the CAF Phase II auction, the
Commission will be maximizing the use
of Rural Digital Opportunity Fund
support by making it available for only
one provider per geographic area.
Moreover, the Commission expects that
the incumbent rural telephone
company’s service area will no longer be
relevant because the incumbent service
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provider may be replaced by another
Rural Digital Opportunity Fund
recipient in portions of its service area.
Thus, forbearance is appropriate and in
the public interest.
92. Accordingly, for those entities that
obtain ETC designations as a result of
being selected as winning bidders for
the Rural Digital Opportunity Fund, the
Commission forbears from applying
section 214(e)(5) of the Act, insofar as
this section requires that the service
area of such an ETC conform to the
service area of any rural telephone
company serving an area eligible for
Rural Digital Opportunity Fund support.
The Commission notes that forbearing
from the service area conformance
requirement eliminates the need for
redefinition of any rural telephone
company service areas in the context of
the Rural Digital Opportunity Fund
competitive bidding process. However,
if an existing ETC seeks support through
the Rural Digital Opportunity Fund
competitive bidding process 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. Likewise,
as in CAF Phase II, some of the price cap
carrier study areas that may become
eligible for the Rural Digital
Opportunity Fund competitive bidding
process meet the statutory definition so
that the carrier serving those study areas
would be classified as a rural telephone
company.
93. Thus, 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 new broadband to
consumers in those areas. Case-by-case
forbearance would likely delay the
Commission’s post-selection review of
entities once they are announced as
winning bidders. The Act requires the
Commission to forbear from applying
any requirement of the Act or its
regulations to a telecommunications
carrier if the Commission 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. For the same
reasons set forth in the CAF Phase II
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Auction Order, 81 FR 44414, July 7,
2016, the Commission concludes each
of these statutory criteria is met for
winning bidders of the Rural Digital
Opportunity Fund competitive bidding
process.
94. Letters of Credit. The Commission
next adopts letter of credit rules that
provide appropriate protection for Rural
Digital Opportunity Fund support, with
reduced burdens on participants. In
CAF Phase II, the Commission found
that requiring bidders to obtain an
irrevocable standby letter of credit,
covering the first year of support of a
recipient’s winning bid, was an effective
means to safeguard the universal service
funds. Moreover, the letter of credit was
subject to a phase-down schedule,
reducing the burdens on the recipients.
The letter of credit requirement did not
deter broad participation in the CAF
Phase II auction where the Commission
awarded $1.488 billion in support to
103 winning bidders and, as of
December 2019, nearly 90 percent of
carriers have been authorized after
securing valid letters of credit. Thus, the
Commission is not persuaded to adopt
suggestions from commenters that it
removes the letter of credit requirement
entirely, either for all winning bidders
or for certain groups of winning bidders
such as Tribally owned and controlled
carriers or established rural carriers.
95. The Commission finds
appropriate, however, certain
modifications to the letter of credit
requirements proposed in the Rural
Digital Opportunity Fund NPRM. The
Commission makes these changes after
hearing from commenters concerned
about the fees associated with
maintaining the larger letters of credit
required because of the size of the Rural
Digital Opportunity Fund. The
Commission concludes that the
modified letter of credit requirements it
adopts in the following, which
establishes a mechanism to easily
recover disbursed funding in the event
of non-compliance, fulfills its
responsibility to protect program funds
while also reducing for applicants the
costs of participating in the Rural Digital
Opportunity Fund.
96. First, the Commission’s revised
approach allows a support recipient to
reduce the amount of its letter of credit
as it meets—and USAC verifies that a
support recipient has completed—
service milestones. Specifically, the
Commission requires support recipients
to report their deployed locations in the
HUBB by March 1 following each
support year. Upon verification of the
buildout by USAC, the Commission will
then allow the recipient to reduce its
letter of credit to an amount equal to
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13787
only one year of total support. And once
a support recipient reduces its letter of
credit obligation to one year of total
support, it will be able to maintain its
letter of credit at that level for the
remainder of the deployment term, as
long as USAC verifies that the support
recipient successfully and timely meets
its remaining service milestones.
97. Second, the Commission creates
an optional 20% service milestone in
year two. Doing so allows a support
recipient to demonstrate concrete
progress in building its network earlier
than existing milestones (40% in year
three), thus allowing it to reduce its
letter of credit earlier than it could
otherwise. The Commission reiterates
that this 20% buildout benchmark is
optional; if a support recipient does not
meet this milestone, it will not be able
to reduce its letter of credit, but it will
not face any reductions in support.
98. Third, the Commission finds that
support recipients do not need to wait
for the specific support years to end to
meet their deployment milestones. For
example, if a support recipient is able to
deploy to 20% of its locations by the
end of year one, it may report those
locations and request that USAC
complete the verification process for
those locations in order to allow it to
reduce its letter of credit to one year of
support. In those instances, the
Commission requires that these support
recipients be able to immediately
produce the necessary documentation to
minimize the time required for USAC to
verify its milestone.
99. Fourth, the Commission adopts a
modified letter of credit requirement for
the time periods before any required
service milestones must be met and
verified by USAC. Specifically, at the
beginning of the first year of its support
term, a support recipient must obtain a
letter of credit equal to one year of the
total support it will receive. In year two,
it will be required to obtain a letter of
credit equal to eighteen months of its
total support. In year three, it will be
required to obtain a letter of credit equal
to two years of its total support. And in
year four, it will be required to obtain
a letter of credit equal to three years of
its total support. This schedule balances
the need to protect federal funds against
the costs of a letter of credit for those
that decline to meet the optional 20%
deployment milestone.
100. Fifth, the Commission finds it
necessary to maintain larger letters of
credit for support recipients that fail to
meet service milestones. If the support
recipient misses a required service
milestone, it will be required to obtain
a letter of credit covering an additional
year of total support for the next
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applicable support year, up to a letter of
credit covering a total of three years of
support. Likewise, any support recipient
failing to meet two or more service
milestones will be required to maintain
a letter of credit in the amount of three
years of support and will be subject to
additional non-compliance penalties as
outlined in this document. The
Commission finds these increased letter
of credit requirements will both protect
federal funds from potential default and
serve as an incentive to timely
deployment.
101. Sixth, consistent with CAF Phase
II, the Commission will require that the
letter of credit only remain open until
the recipient has certified that it has
deployed broadband and voice service
meeting the Commission’s requirements
to 100% of the CAM locations by the
end of year six, and USAC has verified
that the recipient has fully deployed its
network. The Commission does not
expect new additional locations in years
seven and eight to be significant enough
that it would be necessary to secure that
additional deployment with a letter of
credit, but recipients will be subject to
other sanctions for non-compliance with
the terms and conditions of Rural
Digital Opportunity Fund support,
including but not limited to the
Commission’s existing enforcement
procedures and penalties, reductions in
support amounts, potential revocation
of ETC designations, and suspension or
debarment.
102. In short, the Commission
provides a letter of credit trajectory that
recognizes that once support recipients
have demonstrated significant and
verifiable steps toward meeting their
deployment obligations, they should
have the opportunity to avoid some of
the more significant credit
requirements, consistent with their
proven performance in the Rural Digital
Opportunity Fund. For those support
recipients that elect to deploy quickly
and meet the 20% optional milestone
early in the support term, and continue
to meet all milestones, their letters of
credit may never exceed 18 months’
support at any time during the support
term. At the same time, the more
gradual increase in the letter of credit
requirements the Commission adopts for
support recipients that do not elect to
make use of the optional 20% milestone
will reduce potential financial strain on
support recipients, and still allow those
support recipients to maintain a smaller
letter of credit once their first
mandatory deployment milestone is met
in year three.
103. The Commission declines to
adopt the specific parameters of the
letter of credit proposals advanced and
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supported by several parties. After
thorough review of these constructive
proposals, the Commission determines
that they fail to sufficiently account for
the Commission’s interests in ensuring
that universal service dollars are being
used efficiently and for their intended
purposes, as well as protecting against
the potential for those carriers that may
fail to fulfill their broadband
deployment obligations. However, the
approach the Commission adopts here is
consistent with the proposals advocated
by parties in that it recognizes that the
letter of credit rules, as originally
proposed, would impose a
disproportionate financial burden on
support recipients and result in less
funding going directly to broadband
deployment. Moreover, given that the
Rural Digital Opportunity Fund will
award up to almost 15 times the amount
of funding as the CAF Phase II auction,
the Commission acknowledges that a
one-size-fits-all approach to letter of
credit requirements may not properly
reflect the realities of a particular
auction. Thus, the Commission’s revised
approach strives to carefully balance the
interest of potential support recipients
in minimizing their financial cost over
the course of the deployment term with
the Commission’s interest in ensuring
that universal funding is protected as
the Rural Digital Opportunity Fund
progresses.
104. Consistent with CAF Phase II, the
Commission will only authorize USAC
to draw on the letter of credit for the
entire amount of the letter of credit if
the entity does not repay them for the
support associated with its compliance
gap. Additionally, as stated in CAF
Phase II, ‘‘if the entity fails to pay this
support amount, the Commission
concludes that the risk that the entity
will be unable to continue to serve its
customers or may go into bankruptcy is
more likely, and thus it is necessary to
ensure that the Commission can recover
the entire amount of support that it has
disbursed.’’ The Commission also
requires each winning bidder to submit
a commitment letter from a bank no
later than the number of days provided
by public notice. A long-form applicant
must submit a letter from a bank
acceptable to the Commission,
committing to issue an irrevocable
stand-by letter of credit, to the long-form
applicant. The letter must, at a
minimum, provide the dollar amount of
the letter of credit and the issuing
bank’s agreement to follow the terms
and conditions of the Commission’s
model letter of credit provided in
Appendix C of the Order.
105. Once a winning bidder has been
authorized, the Commission will require
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an irrevocable standby letter of credit
from a bank that is acceptable to them
in substantially the same form as the
model letter of credit provided in
Appendix C of the Order. The letters of
credit for winning bidders must be
obtained from a domestic or foreign
bank meeting the requirements adopted
herein. For U.S. banks, the bank must be
insured by the Federal Deposit
Insurance Corporation and have a Weiss
bank safety rating of B- or higher
committing to issue a letter of credit.
Similarly, for non-U.S. banks, 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). Winning bidders
also have the option of obtaining a letter
of credit from CoBank or the National
Rural Utilities Cooperative Finance
Corporation so long as they continue to
meet the Commission’s requirements.
When a winning applicant obtains a
letter of credit, it must be at least equal
to the amount of the first year of
authorized support. Before the winning
applicant can receive its next year’s
support, it must modify, renew, or
obtain a new letter of credit. The
Commission concludes that requiring
recipients to obtain a letter of credit on
at least an annual basis will help
minimize administrative costs for USAC
and the recipient rather than having to
negotiate a new letter of credit for each
monthly disbursement.
106. However, the Commission will
require all winning bidders to provide a
single letter of credit covering all of
their winning bids within a single state.
The Commission declines to allow
multiple letters of credit that cover all
bids in a state as it did for CAF Phase
II, as this option was not used and is
administratively burdensome on the
Commission and USAC. Thus, a default
in one census block could result in a
draw on the entire letter of credit.
107. As the Commission has
previously recognized, it will again
allow for the option of greater flexibility
regarding letter of credit for Tribally
owned and controlled winning bidders.
Consistent with CAF Phase II, if any
Tribally owned and controlled Rural
Digital Opportunity Fund winning
bidder is unable to obtain a letter of
credit, it may file a petition for a waiver
of the letter of credit requirement.
Consistent with the Commission’s
precedent, waiver applicants must
show, with evidence acceptable to them,
that the Tribally owned and controlled
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winning bidder is unable to obtain a
letter of credit.
108. The determinations the
Commission reaches in this document
take into consideration the comments
submitted on the burdens associated
with the letter of credit requirement.
The Commission concludes, however,
that the letter of credit requirement best
protects the Fund. While the
Commission understands that there are
costs associated with the letter of credit,
it continues to believe bidders can
incorporate these costs when
determining their strategies prior to the
auction. The universal service program
provides significant benefits when
weighed against the costs of the letter of
credits, which in turn provide
significant security of public funding.
As the Commission has previously
stated, letters of credit have ‘‘the added
advantage of minimizing the possibility
that the support becomes property of a
recipient’s bankruptcy estate for an
extended period of time, thereby
preventing the funds from being used
promptly to accomplish the
Commission’s goals.’’
109. Commenters renewed requests
for other safeguard measures, yet none
of the measures fully guarantee that the
Commission will be able to recover past
support disbursements from a defaulting
recipient. Several commenters suggested
performance bonds or sureties. For
example, WISPA and WTA assert the
Commission should require auction
winners to obtain performance bonds as
an alternative to obtaining letters of
credit, costing participants substantially
less than a letter of credit. USTelecom
agrees, commenting that the
Commission should reconsider its
proposals requiring Rural Digital
Opportunity Fund winners to obtain a
letter of credit as it is a substantial
barrier to participation. Letters of credit,
unlike performance bonds, allow for an
immediate reclamation of support in the
event the recipient is not properly using
those funds. Performance bonds, on the
other hand, would not provide the same
level of protection and would require
the involvement of a third party to
adjudicate any disputes that arise,
which would complicate the
Commission processes and
unnecessarily limit the authority of the
Commission to allocate funds. A letter
of credit, unlike a performance bond,
has the benefit of the ‘‘independence
principle’’ in that the letter of credit is
independent of the underlying
transaction. The bank’s obligation to pay
under the letter of credit does not
depend on the auction winner’s default
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but on the presentation of documents
evidencing the default. Being
independent in this way assures that
USAC can collect monies due to it
promptly without engaging in disputes
with the winning bidder, the
performance bond guarantor or the
winning bidder’s trustee in bankruptcy
over whether the funds should be paid
or even whether the funds are available
to the Fund due to competing claims of
creditors.
110. Similarly, Frontier and
Windstream recommend placing money
in escrow prior to bidding because they
claim letters of credit are too expensive.
The record also includes several
comments opposing letter of credits or
suggesting other means of protecting the
Commission’s interests. However, the
Commission is not persuaded that
escrow agreements, or other
alternatives, would provide protection
equal to the letters of credit that it now
requires. Escrow agreements would put
an amount of money with a third party
who releases it when a contingency is
satisfied. The auction winner would be
a party to the escrow agreement, with
the possibility that the support becomes
the property of an auction winner’s
bankruptcy. Additionally, the auction
winner would be required to place the
same amount of funds in escrow as were
disbursed by USAC, which could cause
‘‘administrative burdens’’ on the
Commission and ‘‘could potentially
delay the auction.’’ The Commission
itself would need to create an escrow
account, attain the money of all
recipients, and manage and ensure
proper payment to all recipients, an
unnecessary and inefficient duplication
of a system banks already have in place
with letters of credit, with none of the
advantages. Instead, the Commission
can rely on the expertise of banks’
experience in managing letters of credit,
guaranteeing payment, and ensuring
security for the Commission and
ultimately the Fund. Therefore, the
Commission declines to implement
escrow accounts and maintain the letter
of credit requirement.
111. Finally, consistent with CAF
Phase II, the Commission will require
each winning bidder to submit a
bankruptcy opinion letter from outside
legal counsel. That opinion letter must
clearly state, subject only to customary
assumptions, limitations, and
qualifications, that in a proceeding
under the Bankruptcy Code, the
bankruptcy court would not treat the
letter of credit or proceeds of the letter
of credit as property of the account
party’s bankruptcy estate, or the
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13789
bankruptcy estate of any other
competitive bidding process recipientrelated entity requesting issuance of the
letter of credit under section 541 of the
Bankruptcy Code. The West Virginia
Council argues that the bankruptcy
opinion letter requirement is unduly
burdensome and should be eliminated
‘‘to accommodate non-traditional
service providers like co-ops, nonprofits, and government entities . . . .’’
However, it is important to receive
confirmation from each winning bidder
that its letter of credit would not be
consolidated in the estate. Therefore,
the Commission declines to eliminate
this requirement and concludes that the
limited burden imposed on winning
bidders to obtain this letter is
outweighed by its policy goal to be
fiscally responsible with finite universal
service funds.
112. The Commission next adopts
rules that establish the framework under
which a Rural Digital Opportunity Fund
winning bidder will be subject to a
forfeiture under section 503 of the Act
if it defaults on its winning bid(s) before
it is authorized to begin receiving
support. A recipient will be considered
in default and will be subject to
forfeiture if it fails to timely file a longform application, fails to meet the
document submission deadlines
outlined in this document, is found
ineligible or unqualified to receive
support, or otherwise defaults on its bid
or is disqualified for any reason prior to
the authorization of support. Consistent
with CAF Phase II, a winning bidder
will be subject to the base forfeiture for
each separate violation of the
Commission’s rules.
113. For Rural Digital Opportunity
Fund competitive bidding purposes, the
Commission defines a violation as any
form of default with respect to each
geographic unit subject to a bid. The
Commission maintains that each
violation should not be unduly punitive
and expect the forfeiture to be
proportionate to the overall scope of the
winning bidder’s bid. The Commission
concludes that 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 its forfeiture guidelines. To
determine the final forfeiture amount,
the Commission’s Enforcement Bureau
will consider the ‘‘nature,
circumstances, extent and gravity of the
violations.’’
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114. No commenter specifically
opposed the Commission’s original
proposal to establish the forfeiture owed
for an auction default. However,
Windstream characterized the CAF
Phase II forfeiture as ‘‘modest’’ and
‘‘apparently insufficient to prevent
[defaulters] from bidding.’’ Windstream
further noted that ‘‘the forfeiture
penalties proposed against [defaulters],
which range from $1,242 to $30,000 did
not deter these entities from bidding.’’
USTelecom suggested that the
Commission raise the base forfeitures, as
the CAF Phase II base amounts were
‘‘not substantial enough to dissuade’’
uncommitted applicants from
participating.
115. The Commission agrees with
commenters. Thus, to ensure that the
amount of the base forfeiture is not
disproportionate to the amount of an
entity’s bid, the Commission also limits
the total base forfeiture to 15% of the
bidder’s total bid amount for the
support term, which is an increase from
the CAF Phase II auction limit of 5%.
The Commission expects this will
further ensure serious participation,
without being overly burdensome and
punitive to defaulters. As a condition of
participating in the Rural Digital
Opportunity Fund auction, entities will
acknowledge that they are subject to a
forfeiture in the event of an auction
default. Thus, the Commission
maintains that by adopting rules
governing forfeitures for defaults, ‘‘the
Commission will impress upon
recipients the importance of being
prepared to meet all its requirements for
the post-selection review process, and
emphasize the requirement that they
conduct a due diligence review to
ensure that they are qualified to
participate in the . . . competitive
bidding process and meet its terms and
conditions.’’
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III. Rural Digital Opportunity Fund
Transitions
116. In this section, the Commission
addresses several issues relating to the
implementation of the Rural Digital
Opportunity Fund in areas currently
served by price cap carriers receiving
either legacy high-cost or CAF Phase II
model-based support. To ensure
continuity of service for consumers, the
Commission adopts specific support
transition paths for census blocks served
by these price cap carriers. The
Commission also considers additional
issues related to the transition from CAF
Phase II model-based support to Rural
Digital Opportunity Fund support,
including the continuing
responsibilities of incumbent price cap
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carriers no longer receiving support to
serve specific areas.
117. In the Rural Digital Opportunity
Fund NPRM, the Commission sought
comment on adopting a transition
period methodology for incumbent price
cap carriers receiving disaggregated
legacy support similar to the approach
employed following the CAF Phase II
auction. Specifically, the Commission
proposed that, in areas where an
incumbent price cap carrier receives
disaggregated legacy support and
subsequently it or another provider
becomes the authorized Rural Digital
Opportunity Fund support recipient, the
incumbent will cease receiving
disaggregated legacy support on the first
day of the month after it is authorized
to receive Rural Digital Opportunity
Fund support. In legacy high-cost
support areas where no Rural Digital
Opportunity Fund support is
authorized, the Commission proposed
allowing the incumbent to continue
receiving disaggregated support until
further Commission action. Finally, the
Commission proposed ceasing
disaggregated legacy support payments
to incumbent carriers in any census
block deemed ineligible for the Rural
Digital Opportunity Fund on the first
day of the month after the final Rural
Digital Opportunity Fund eligible areas
list is released.
118. Likewise, the Commission sought
comment on transitioning support in
areas served by CAF Phase II modelbased support recipients. In particular,
the Commission asked whether these
carriers should receive an additional
seventh year of model-based support,
given the potential timing of a Rural
Digital Opportunity Fund auction, and,
if so, whether that additional support
should be made available to all carriers
receiving model-based support or only a
certain subset of those carriers. The
Commission also sought comment on
whether the seventh year of support
should be modified in any way,
including whether it should cover all of
2021 or just a portion of the year, as
well as whether any additional
obligations should be tied to this
support. Finally, the Commission asked
parties to highlight any additional
issues related to the transition of
support.
119. Commenters broadly supported
ensuring appropriate transitions to
Rural Digital Opportunity Fund auction
support and encouraged the
Commission to affirm that all CAF
Phase II model-based support recipients
are entitled to a full seventh year of
funding. In areas won by bidders in the
Rural Digital Opportunity Fund auction,
CenturyLink proposed that the
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Commission authorize all auction
winners on January 1, 2022, with legacy
transition support and CAF Phase II
model-based support continuing
through that time. Frontier argued that,
in areas where the Rural Digital
Opportunity Fund auction winner is not
the incumbent price cap carrier, the
Commission must provide continued
support to existing CAF Phase II
providers to ensure continued voice and
broadband services, proposing a six-year
phase out of this support at periods
equal to the inverse of the new
provider’s deployment milestones. ITTA
also argued for continued support for
the incumbent price cap carriers in
these areas, but instead proposed that
the incumbent receive support at the
level of the winning bidder in the
respective service area until the winning
bidder is able to serve all the locations
currently served by the incumbent. In
areas where there is no Rural Digital
Opportunity Fund auction winner,
Frontier and ITTA encouraged the
Commission to provide existing price
cap carriers with sufficient support to
continue providing broadband and
voice service. USTelecom, Windstream,
and ITTA further advocated for
continued support to incumbent price
cap carriers in areas where auction
winners are not authorized by the end
of 2021. Additionally, CenturyLink and
NTCA proposed extending ongoing
support in areas deemed ineligible for
the Rural Digital Opportunity Fund.
Other commenters highlighted the need
for transitional support and encouraged
the Commission to tie specific metrics
or obligations to this support.
120. For incumbent price cap carriers
currently receiving support through the
disaggregated legacy high-cost support
mechanism, the Commission determines
that adopting a transition to Rural
Digital Opportunity Fund auction
support that builds on the approach
employed following the CAF Phase II
auction will provide necessary clarity as
it implements a new support
mechanism. As the Commission noted
when it adopted the transitions to CAF
Phase II auction support, such an
approach will ‘‘protect customers of
current support recipients from a
potential loss of service, and minimize
the disruption to recipients of frozen
legacy support from a loss of funding’’
while at the same time ensuring that
finite universal service funds are used
responsibly.
121. First, in areas currently funded
by disaggregated legacy support that are
subsequently won in the Rural Digital
Opportunity Fund auction by the
incumbent price cap carrier, the
incumbent will cease receiving
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disaggregated legacy support on the first
day of the month following its
authorization to receive Rural Digital
Opportunity Fund support. Likewise, in
legacy high-cost support areas won in
the Rural Digital Opportunity Fund
auction by new providers, the
incumbent will cease receiving
disaggregated legacy support the first
day of the month after the new ETC is
authorized to receive such support. In
these instances, the Commission
believes it is appropriate to transition to
the new support mechanism as soon as
possible to ensure that finite support
dollars are used most efficiently.
122. The Commission recognizes that
there may be eligible areas in the Rural
Digital Opportunity Fund auction that
see significant interest, but do not
receive a winning bid. For these areas,
the Commission revisits its prior
approach of extending disaggregated
legacy support on an interim basis until
further Commission action. As the
Commission previously noted,
continued legacy support in auctioneligible, high-cost areas was provided
on an interim basis pending further
Commission action. Thus, carriers
receiving legacy support have been on
notice that this support would not be
provided in perpetuity. The
Commission now concludes that price
cap carriers receiving legacy support in
areas that do not receive a winning bid
will cease receiving such support on the
first day of the month following the
close of Phase I of the auction. These
support amounts will instead be
included as part of the budget for Phase
II of the auction. The Commission also
declines to extend additional support to
these carriers to maintain fixed voice
services in these areas. As the
Commission’s most recent data indicate,
mobile voice subscriptions constitute
almost 75% of the overall consumer
voice subscriptions in the United States.
Given the increasing ubiquity of fixed
and mobile voice services, dedicating
continued support for fixed voice
services would be an inefficient use of
the Commission’s finite universal
service dollars. Instead, the Commission
concludes that directing support toward
deploying more robust broadband
services, rather than continuing to
13791
maintain current minimum service
levels, is the best use of this funding.
The Commission notes, however, that
these areas will be included in Phase II
of the Rural Digital Opportunity Fund
auction and thus price cap carriers
currently serving these areas will have
the opportunity to bid on and again
receive support to provide voice and
broadband services in these areas.
123. In all census blocks deemed
ineligible for the Rural Digital
Opportunity Fund auction, incumbent
price cap carriers will no longer receive
legacy support beginning the first day of
the month following release of the final
Rural Digital Opportunity Fund eligible
areas list for Phase I of the auction.
Because these areas will be excluded
from Phase I of this auction, the
Commission has determined that
continued legacy support for these areas
is no longer necessary. Thus, the
Commission will cease distributing
legacy support as soon as possible in
order to preserve its finite universal
service funds, instead focusing support
to areas in the greatest need of
broadband deployment.
TRANSITION OF PRICE CAP CARRIERS’ LEGACY SUPPORT
Won at auction by the incumbent price cap carrier.
Won at auction by a new provider .....................
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Not won at auction ..............................................
Not eligible for auction ........................................
124. Next, the Commission addresses
support transitions in areas where
incumbent price cap carriers currently
receive CAF Phase II model-based
support. As with the Commission’s
approach for legacy support transitions,
it has attempted to strike a balance
between properly allocating its finite
resources and ensuring that consumers
across the country have access to
uninterrupted services. The
Commission notes at the outset that it,
in establishing the six-year term of
support for model-based support
recipients that would extend through
2020, intended to conduct a competitive
bidding process in areas served by these
carriers ‘‘no later than the end of 2019
to ensure there is continuity and a
transition path’’ to the next support
mechanism. Though the Commission
did not meet this initial goal, it intends
to conduct Phase I of the Rural Digital
Opportunity Fund before the end of
2020. However, the Commission has
learned from its experience with the
CAF Phase II competitive bidding
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Receives legacy support until the first day of the month following its authorization, then transitions to Rural Digital Opportunity Fund support.
Receives legacy support until the first day of the month following the new provider’s authorization; new provider then receives Rural Digital Opportunity Fund support.
Receives legacy support until the first day of the month following close of the auction.
Receives legacy support until the first day of the month following release of the final eligible
areas list.
process that additional work will
remain post-auction before winning
bidders will be authorized to receive
Rural Digital Opportunity Fund support
and provide the required voice and
broadband service. Because this work
likely will stretch into 2021, the
Commission revisits the previously
established term of support for
incumbent price cap carriers.
125. In the December 2014 CAF Phase
II Order, 80 FR 4446, January 27, 2015,
the Commission recognized the
importance of providing a transition
path between recipients of CAF Phase II
model-based support and recipients of
funding under a new support
mechanism. Specifically, the
Commission determined that it would
offer incumbent price cap carriers the
option of electing an additional year of
support—through calendar year 2021—
if they did not win at, or chose not to
participate in, the subsequent
competitive bidding process. Because of
the timing considerations regarding
Phase I of Rural Digital Opportunity
Fund explained in this document, the
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Commission now determines that an
additional seventh year for carriers
receiving model-based support is
necessary to ensure continuity in
service for consumers and to provide a
reasonable support glide path as it
transitions from one support mechanism
to another. This additional seventh year
will not be limited to carriers that do
not win in Phase I of the Rural Digital
Opportunity Fund auction or carriers
that do not participate in the auction;
instead it will be available to all price
cap carriers that elected the offer of
model-based support in exchange for
meeting defined service obligations. The
Commission directs the Bureau to
determine and implement a mechanism
that will enable these price cap carriers
to elect whether to receive an additional
seventh year of support.
126. The Commission clarifies that in
census blocks where a price cap carrier
elects not to receive a seventh year of
model-based support, it is indicating
that ongoing model-based support is not
necessary to maintain voice and
broadband services in these areas. Thus,
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the carrier will receive no further
support after the conclusion of its sixyear term (i.e., December 31, 2020), even
if these areas are eligible for the Rural
Digital Opportunity Fund auction.
Following Phase I of the auction, the
provider authorized to receive funding
in these areas—whether the incumbent
price cap carrier or a new provider—
will begin receiving Rural Digital
Opportunity Fund support the first day
of the month after it is authorized. For
areas where no qualifying bid is
received in Phase I of the Rural Digital
Opportunity Fund auction, as well as
for areas deemed ineligible for Phase I
of the Rural Digital Opportunity Fund
auction, the incumbent price cap
carrier’s model-based support will cease
on December 31, 2020 and no further
support will be provided in these areas.
TRANSITION FOR PRICE CAP CARRIERS IN AREAS WHERE A CARRIER DECLINES A SEVENTH YEAR OF MODEL-BASED
SUPPORT
Won at auction by the incumbent price cap carrier.
Won at auction by a new provider .....................
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Not won at auction ..............................................
Not eligible for auction ........................................
127. In census blocks where a price
cap carrier elects to receive a seventh
year of model-based support, the
Commission clarifies that the carrier
will receive a full seventh calendar year
of support—from January 2021 through
December 2021—regardless of whether
Rural Digital Opportunity Fund support
is authorized in these areas in 2021.
Thus, in areas where a price cap carrier
currently receives model-based support
that are subsequently won in the Rural
Digital Opportunity Fund auction by a
new provider, the incumbent price cap
carrier will continue to receive modelbased support through 2021, even if the
new provider is authorized to receive
Rural Digital Opportunity Fund support
in 2021. The Commission concludes
providing support to both the
incumbent price cap carrier and the new
Rural Digital Opportunity Fund
provider in these areas for the limited
duration of 2021 will help facilitate an
appropriate transition to a new ETC.
The Commission notes that price cap
carriers receiving the seventh year of
model-based support will ‘‘be required
to continue providing broadband with
performance characteristics that remain
reasonably comparable to the
performance characteristics of terrestrial
fixed broadband service in urban
America, in exchange for ongoing CAF
Phase II support.’’
128. Similarly, in census blocks
where a price cap carrier elects to
receive a seventh year of model-based
support and ultimately becomes the
authorized Rural Digital Opportunity
Fund support recipient, the price cap
carrier will continue to receive support
at its model-based levels through 2021,
with Rural Digital Opportunity Fund
support levels commencing in January
2022. The Commission declines to
adopt USTelecom’s proposal that
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Receives model-based support through 2020; begins receiving Rural Digital Opportunity Fund
support the first day of the month after it is authorized.
Receives model-based support through 2020; new provider begins receiving Rural Digital Opportunity Fund support the first day of the month after it is authorized.
Receives model-based support through 2020.
Receives model-based support through 2020.
incumbent price cap carriers be allowed
to choose the greater of their modelbased support or RDOF support amount
to receive during the remainder of 2021.
The Commission observes that the
reserve price for the RDOF auction is
based on the support amounts
calculated by the model and likely will
be bid down by participants in the
auction. Thus, in most, if not all, cases
a price cap carrier’s model-based
support amount will be greater than its
Rural Digital Opportunity Fund support
amount. Relatedly, in some instances,
the incumbent price cap carrier may
wish to expand its service area from its
current CAF Phase II model-based
supported areas and may bid on and be
authorized to receive support in census
blocks eligible for the Rural Digital
Opportunity Fund that are adjacent to
areas in which the carrier receives
model-based support. Because the
Commission expects the amount of
model-based support that a carrier is
receiving in a certain area to be higher
than the amount of Rural Digital
Opportunity Fund support it will
receive, it expects these carriers to use
the additional model-based support they
receive in 2021 to begin the process of
planning their buildouts for any
adjacent, non-model-based support
census blocks they may win.
129. In auction-eligible census blocks
where a price cap carrier elects to
receive a seventh year of model-based
support and no qualifying bid is
received in Phase I of the Rural Digital
Opportunity Fund auction, the
incumbent price cap carrier will
continue to receive model-based
support until the end of 2021. At that
point, no further support will be
provided to carriers serving these areas.
As the Commission previously noted,
the state-level commitment procedure
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for incumbent price cap carriers was
intended to be limited in scope and
duration. Though the Commission is
providing carriers with a potential
seventh year of support, this option is
limited in duration and, as previously
contemplated by the Commission, is a
‘‘a gradual transition to the elimination
of support.’’ The Commission therefore
concludes that extending support in
these areas beyond the seven-year term
simply to maintain substandard
broadband levels would be an
inefficient use of its limited universal
service funds. Moreover, providing
additional support simply to maintain
fixed voice services in these areas is an
inefficient use of funding given the
ubiquity of mobile voice services.
Instead, the Commission determines
that these funds should be aimed at
deploying high-speed broadband
networks in rural communities across
the country.
130. Likewise, census blocks where a
price cap carrier elects to receive a
seventh year of model-based support
that are deemed ineligible for the Rural
Digital Opportunity Fund auction will
cease receiving model-based support at
the end of 2021. Because the
Commission, by excluding these blocks
from Phase I of this auction, has
determined that ongoing model-based
support for these areas is no longer
necessary, no further support will be
provided to carriers serving these blocks
after 2021. This approach is consistent
with the Commission’s decision to stop
providing legacy support in areas
deemed ineligible for both the CAF
Phase II auction and the Rural Digital
Opportunity Fund auction and allows
funding to flow to areas in the greatest
need of broadband deployment.
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TRANSITION FOR PRICE CAP CARRIERS IN AREAS WHERE A CARRIER ELECTS TO RECEIVE A SEVENTH YEAR OF MODELBASED SUPPORT
Won at auction by the incumbent price cap carrier.
Won at auction by a new provider .....................
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Not won at auction ..............................................
Not eligible for auction ........................................
131. Several commenters sought
clarification from the Commission on
the responsibilities of an incumbent
price cap carrier once a new provider is
authorized to receive Rural Digital
Opportunity Fund support in an area
previously served by the incumbent.
Frontier contended that price cap
carriers must be released from
incumbent obligations, including the
obligation to provide voice services, in
areas where they cease to receive Rural
Digital Opportunity Fund support.
USTelecom proposed requiring Rural
Digital Opportunity Fund auction
winners to offer voice services
beginning in the first month after they
receive Rural Digital Opportunity Fund
support. Likewise, Windstream and
INCOMPAS stated that new providers
should be able to provide voice service
on day one of their support term.
Commenters also encouraged the
Commission to address additional
issues regarding the responsibilities of
price cap carriers no longer receiving
support to serve specific areas.
Conversely, some opposed commenters’
requests to eliminate ETC obligations
and preempt state and discontinuance
requirements.
132. The Commission previously
addressed the issue of ETC obligations
as funding transitions to new
mechanisms. In the December 2014 CAF
Phase II Order, the Commission
concluded that it was in the public
interest to forbear, pursuant to section
10 of the Communications Act of 1934,
as amended, from enforcing a federal
high-cost requirement that price cap
carriers offer voice telephony service
throughout their service areas pursuant
to section 214(e)(1)(A) in three types of
geographic areas: (1) Low-cost census
blocks, (2) census blocks served by an
unsubsidized competitor, as defined in
the Commission’s rules, offering voice
and broadband at speeds of 10/1 Mbps
to all eligible locations, and (3) census
blocks where another ETC is receiving
federal high-cost support to deploy
modern networks capable of providing
voice and broadband to fixed locations.
At that time, the Commission also noted
that price cap carriers would remain
obligated to maintain existing voice
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support on January 1, 2022.
Receives model-based support through 2021; new provider receives RDOF support the first
day of the month following authorization.
Receives model-based support through 2021.
Receives model-based support through 2021.
service ‘‘unless and until they receive
authority under section 214(a) to
discontinue that service.’’
133. The same limited circumstances
that required the Commission to grant
forbearance to price cap carriers from
the federal high-cost requirement to
offer voice services in certain areas also
exist here. As a result, in areas where a
new provider is granted ETC status and
is authorized to receive Rural Digital
Opportunity Fund support, the
incumbent price cap carrier will be
relieved of its federal high-cost ETC
obligation to offer voice telephony
services in that area. As the Commission
explained when it initially granted such
forbearance, because there is another
ETC in these areas required to offer
voice and broadband services to fixed
locations that meet the Commission’s
public service obligations, it concludes
that enforcement of the requirement that
price cap carriers offer voice telephony
in these areas ‘‘is not necessary to
ensure that the charges, practices, or
classifications of price cap carriers are
just and reasonable and not unjustly or
unreasonably discriminatory in specific
geographic areas.’’ The Commission also
clarifies that this forbearance applies to
census blocks deemed ineligible for the
Rural Digital Opportunity Fund by
virtue of being served by an
unsubsidized competitor.
134. The Commission’s decision to
extend this limited forbearance to the
Rural Digital Opportunity Fund context
does not redefine price cap carriers’
service areas or revoke price cap
carriers’ ETC designations in these
areas. Thus, the Commission’s action
does not relieve ETCs of their other
‘‘incumbent-specific obligations’’ like
interconnection and negotiating
unbundled network elements pursuant
to sections 251 and 252 of the Act.
Moreover, these price cap carriers must
continue to satisfy all Lifeline ETC
obligations by offering voice telephony
service to qualifying low-income
households in areas in which they are
subject to this limited forbearance.
Finally, price cap carriers in these areas
remain subject to other Title II
requirements, including ensuring that
voice telephony rates remain just and
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reasonable and the nondiscrimination
obligations of sections 201 and 202 of
the Act. Additionally, the Commission
declines to preempt any state
regulations or obligations to which these
carriers may be subject. Commenters
make only vague, unsubstantiated
claims about burdensome state
obligations in support of these requests.
Price cap carriers must continue to
comply with state requirements,
including carrier of last resort
obligations, to the extent applicable.
The Commission similarly defers to the
states’ judgment in assuring that the
local rates that price cap carriers offer in
the areas from which the Commission
forbears remain just and reasonable.
Price cap carriers will remain subject to
ETC obligations other than those
covered by the Commission’s
forbearance unless or until they
relinquish their ETC designations in
those areas pursuant to section
214(e)(4). As the Commission
transitions to a new funding mechanism
to further its goal of supporting the
deployment of both voice and
broadband-capable networks, the
existing service areas and corresponding
obligations will help preserve existing
voice service for consumers until the
Rural Digital Opportunity Fund is fully
implemented, and ensure that even the
most remote, extremely high-cost areas
are served, consistent with the
Commission’s universal service goals
and principles.
135. More generally, price cap carriers
must continue to maintain existing
voice service until they receive
discontinuance authority under section
214(a) of the Act and section 63.71 of
the Commission’s rules. As noted in this
document, several commenters have
requested that the Commission adopt a
streamlined section 214 discontinuance
process for price cap carriers that are
replaced by a new provider receiving
high-cost support. The Commission is
not persuaded that such a process
would benefit consumers in these areas.
The Commission’s discontinuance rules
are designed to ensure that customers
are fully informed of any proposed
change that will reduce or end service,
ensure appropriate oversight by the
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Commission of such changes, and
provide an orderly transition of service,
as appropriate. This process allows the
Commission to minimize harm to
customers and to satisfy its obligation
under the Act to protect the public
interest.
136. In evaluating a section 214
discontinuance application, the
Commission generally considers a
number of factors, including the
existence, availability, and adequacy of
alternatives. By examining these factors,
the Commission can ensure that the
removal of a voice service option from
the marketplace occurs in a manner that
respects consumer expectations and
needs. Thus, the Commission will deny
a discontinuance application if it would
leave customers or other end users in
the proposed area without the ability to
receive voice service or a reasonable
alternative, or if the public convenience
and necessity would be otherwise
adversely affected. In such
circumstances, the Commission will
require price cap carriers to continue
offering voice telephony services in
those areas in those instances where
there is no reasonable alternative. The
Commission notes that an authorization
to receive Rural Digital Opportunity
Fund support includes an expectation
that the provider will offer a reasonable
voice service alternative satisfying
section 63.602(b) of the Commission’s
rules, but it will retain the
discontinuance process to confirm that
it is doing so. Adopting a streamlined
process for areas in which the
Commission grants limited forbearance
would prevent them from conducting
the thorough review process necessary
to ensure whether appropriate
alternatives are available to consumers
or the present or future public
convenience and necessity would be
adversely affected by such a
discontinuance.
137. Finally, the Commission clarifies
the specific timing to the grant of
limited forbearance to incumbent price
cap carriers that are replaced by a new
provider. First, the Commission finds
that these carriers will be relieved of
their federal high-cost ETC obligation to
offer voice telephony in specific census
blocks on the first day of the month after
a new ETC is authorized to receive
Rural Digital Opportunity Fund support
in those blocks. Thus, the new provider
receiving Rural Digital Opportunity
Fund support should be prepared to
provide voice service throughout its
service areas, either through its own
facilities or a combination of its own
and other ETC’s facilities, on the first
day of that month. Price cap carriers
electing to receive a seventh year of
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model-based support will maintain their
obligation to provide both voice and
broadband service throughout 2021, as
explained in this document. These
carriers will be relieved of their federal
high-cost ETC obligation to offer voice
telephony in specific census blocks on
January 1, 2022, regardless of when a
new ETC is authorized to receive Rural
Digital Opportunity Fund support.
Finally, incumbent price cap carriers
that decline a seventh year of modelbased support will be relieved of the
federal high-cost ETC obligation to offer
voice telephony on the first day of the
month after a new Rural Digital
Opportunity Fund support recipient is
authorized to receive support.
IV. Procedural Matters
A. Paperwork Reduction Act
138. This document 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 or
modified information collection
requirements contained in this
proceeding. In addition, the
Commission notes that pursuant to the
Small Business Paperwork Relief Act of
2002, it previously sought specific
comment on how the Commission might
further reduce the information
collection burden for small business
concerns with fewer than 25 employees.
B. Congressional Review Act
139. The Commission has determined,
and the Administrator of the Office of
Information and Regulatory Affairs,
Office of Management and Budget,
concurs that this rule is non-major
under the Congressional Review Act, 5
U.S.C. 804(2). The Commission will
send a copy of this Report and Order to
Congress and the Government
Accountability Office pursuant to 5
U.S.C. 801(a)(1)(A).
140. As required by the Regulatory
Flexibility Act of 1980, as amended
(RFA), an Initial Regulatory Flexibility
Analysis (IRFA) was incorporated in the
Rural Digital Opportunity Fund NPRM.
The Commission sought written public
comment on the proposals in the Rural
Digital Opportunity Fund NPRM,
including comment on the IRFA. The
Commission did not receive any
comments in response to this IRFA.
This Final Regulatory Flexibility
Analysis (FRFA) conforms to the RFA.
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141. Bringing digital opportunity to
Americans living on the wrong side of
the digital divide continues to be the
Federal Communication Commission’s
top priority. It is imperative that the
Commission take prompt and
expeditious action to deliver on its goal
of connecting all Americans, no matter
where they live and work. Without
access to broadband, rural communities
cannot connect to the digital economy
and the opportunities for better
education, employment, healthcare, and
civic and social engagement it provides.
142. In recent years, the Commission
has made tremendous strides toward its
goal of making broadband available to
all Americans. But while the digital
divide is closing, more work remains to
be done. Therefore, in this Order, the
Commission adopts the framework for
the Rural Digital Opportunity Fund. It
builds on the successful model from
2018’s Connect America Fund (CAF)
Phase II auction, which allocated $1.488
billion to deploy networks serving more
than 700,000 unserved rural homes and
businesses across 45 states. The Rural
Digital Opportunity Fund represents the
Commission’s single biggest step to
close the digital divide by providing up
to $20.4 billion to connect millions
more rural homes and small businesses
to high-speed broadband networks. It
will ensure that networks stand the test
of time by prioritizing higher network
speeds and lower latency, so that those
benefitting from these networks will be
able to use tomorrow’s internet
applications as well as today’s.
143. 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.
144. 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. First, while
there are industry specific size
standards for small businesses that are
used in the regulatory flexibility
analysis, according to data from the
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SBA’s Office of Advocacy, in general a
small business is an independent
business having fewer than 500
employees. These types of small
businesses represent 99.9% of all
businesses in the United States which
translates to 28.8 million businesses.
145. Next, the type of small entity
described as 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 August 2016,
there were approximately 356,494 small
organizations based on registration and
tax data filed by nonprofits with the
Internal Revenue Service (IRS).
146. Finally, the small entity
described as a ‘‘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.’’ U.S. Census
Bureau data from the 2012 Census of
Governments indicate that there were
90,056 local governmental jurisdictions
consisting of general purpose
governments and special purpose
governments in the United States. Of
this number there were 37,132 General
purpose governments (county,
municipal and town or township) with
populations of less than 50,000 and
12,184 Special purpose governments
(independent school districts and
special districts) with populations of
less than 50,000. The 2012 U.S. Census
Bureau data for most types of
governments in the local government
category show that the majority of these
governments have populations of less
than 50,000. Based on this data the
Commission estimates that at least
49,316 local government jurisdictions
fall in the category of ‘‘small
governmental jurisdictions.’’
147. Small entities potentially
affected by the rules herein include
Wireline Providers, Wireless Providers
(except Satellite), internet Service
Providers (Broadband), Satellite
Telecommunications, Electric Power
Generators, Transmitters, and
Distributors and All Other
Telecommunications.
148. In the Order the Commission
adopts rules that will apply in the Rural
Digital Opportunity Fund auction. The
Commission establishes four
technology-neutral tiers of bids
available for bidding with varying
broadband speed and usage allowances,
and for each tier will differentiate
between bids that would offer either
lower or higher latency. Like all highcost ETCs, the Commission requires that
Rural Digital Opportunity Fund
recipients offer standalone voice service
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and offer voice and broadband service
meeting the relevant performance
requirements at rates that are reasonably
comparable to rates offered in urban
areas. All ETCs must advertise the
availability of their voice services
through their service areas, and the
Commission requires support recipients
also to advertise the availability of their
broadband services within their service
area. Rural Digital Opportunity Fund
support recipients will also be subject to
the same uniform framework for
measuring speed and latency
performance along with the
accompanying compliance framework
as all other recipients of high-cost
support required to serve fixed
locations.
149. In the Order, the Commission
adopts a 10-year support term for Rural
Digital Opportunity Fund support
recipients along with interim service
milestones by which support recipients
must offer the required voice and
broadband service to a required number
of locations. The final service
milestones will differ based on whether
the Bureau determines that there are
more or fewer locations than initially
determined by the Connect America
Cost Model. Rural Digital Opportunity
Fund recipients must also offer service
to newly built locations upon
reasonable request if those locations
were built before milestone year eight.
150. For entities that are interested in
participating in the Rural Digital
Opportunity Fund, adopted a two-step
application process. The Commission
requires applicants to submit a preauction short-form application that
includes information regarding their
ownership, technical and financial
qualifications, the technologies they
intend to use and the types of bids they
intend to place, their operational
history, and an acknowledgement of
their responsibility to conduct due
diligence. Commission staff will review
the applications to determine if
applicants are qualified to bid in the
auction.
151. The Commission also requires
winning bidders to submit a long-form
application in which they will submit
information about their qualifications,
funding, and the networks they intend
to use to meet their obligations. During
the long-form application period, the
Commission will require long-form
applicants to obtain an ETC designation
from the state or the Commission as
relevant that covers the eligible areas in
their winning bids. Prior to being
authorized to receive support, the
Commission will require long-form
applicants to obtain an irrevocable
stand-by letter of credit that meets its
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13795
requirements from an eligible bank
along with a bankruptcy opinion letter.
The amount of support the letter of
credit must cover will vary based on
whether the support recipient has met
certain service milestones. Commission
staff will review the applications and
submitted documentation to determine
whether long-form applicants are
qualified to be authorized to receive
support. The Commission will subject
winning bidders or long-form applicants
that default during the long-form
application process to forfeiture.
152. To monitor the use of Rural
Digital Opportunity Fund support to
ensure that it is being used for its
intended purposes, the Commission will
require support recipients to file
location and technology data on an
annual basis in the online High Cost
Universal Broadband (HUBB) portal and
to make certifications when they have
met their service milestones. The
Commission also will require applicants
to file certain information in their
annual FCC Form 481 reports including
information regarding the community
anchor institutions they serve, the
support they used for capital
expenditures, and certifications
regarding meeting the Commission’s
performance obligations and available
funds. Support recipients will also be
subject to the annual section 54.314
certifications, the same record retention
and audit requirements, and the same
support reductions for untimely filings
as other high-cost ETCs.
153. For support recipients that do
not meet their Rural Digital Opportunity
Fund obligations, the Commission will
subject such support recipients to the
framework for support reductions that is
applicable to all high-cost ETCs that are
required to meet defined service
milestones and to the process the
Commission adopted for drawing on
letters of credit for the CAF Phase II
auction, subject to some modifications
regarding the amount of support that
will be recovered after the sixth and
eighth service milestones, as applicable.
Additionally, if a Rural Digital
Opportunity Fund support recipient
believes it cannot meet the 40% service
milestone, it must notify the Bureau and
provide information explaining this
expected deficiency. If a support
recipient has not made such a
notification and has deployed to fewer
than 20% of the required number of
locations by the third year service
milestone, the Commission will find the
recipient to be default rather than
withholding the support and giving the
support recipient an additional year to
come into compliance. Support
recipients may also seek waiver if as
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they are deploying their networks there
are not enough locations to meet their
interim milestones.
154. The Commission also adopts
specific support transition paths for
census blocks served by price cap
carriers receiving both legacy high-cost
and model-based support, including
delegating to the Wireline Competition
Bureau the task of determining and
implementing a mechanism that will
enable price cap carriers to elect
whether to receive an additional,
seventh year of Phase II model-based
support. Additionally, the Commission
clarifies the continuing responsibilities
of price cap carriers no longer receiving
support to serve specific areas.
155. 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
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.’’
156. The Commission has considered
the economic impact on small entities
in reaching its final conclusions and
taking action in this proceeding. The
rules that the Commission adopts in the
Order will provide greater certainty and
flexibility for all carriers, including
small entities. For example, the
Commission adopts different
performance standards for bidders to
maximize the types of entities that can
participate in the Rural Digital
Opportunity Fund auction.
Additionally, while the Commission
declines to adopt any bidding credits, it
does incorporate into the reserve prices
for Tribal areas a Tribal Broadband
Factor to provide an incentive for
service providers, including small
entities, to bid on and serve Tribal
lands.
157. The Commission also expects
that the minimum geographic area for
bidding will be a census block group
containing one or more eligible census
blocks, but reserve the right to select
census tracts when the Commission
finalizes the auction design if necessary
to limit the number of discrete biddable
units. The Commission finds that this
approach is preferable because it
ensures that all interested bidders,
including small entities, have flexibility
to design a network that matches their
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business model and the technologies
they intend to use. The Commission
declines to adopt census blocks as the
minimum geographic unit because there
are significantly more eligible census
blocks, increasing the complexity of the
bidding process both for bidders,
including small entities, and the
bidding system and minimizing the
potential for broad coverage by winning
bidders.
158. The Commission declines to
adopt a resource-intensive challenge
process and instead have decided to rely
on FCC Form 477 data and conduct a
more streamlined challenge process to
determine areas that are eligible for the
Rural Digital Opportunity Fund auction.
This means that service providers,
including small entities, will have to file
a FCC Form 477 as they are already
required to do to ensure that the areas
they serve are not overbuilt. Through
the challenge process, interested parties
may also identify areas that have been
served since they have submitted the
most recent publicly available FCC
Form 477 data or identify areas that
have been awarded funding through
federal or state broadband subsidy
programs to provide 25/3 Mbps or better
service.
159. Based on lessons learned from
the CAF Phase II auction, the
Commission also adopts a two-step
application process that will allow
entities interested in bidding to submit
a short-form application to be qualified
in the auction that it found to be an
appropriate but not burdensome screen
to ensure participation by qualified
providers, including small entities. Only
if an applicant becomes a winning
bidder will it be required to submit a
long-form application which requires a
more thorough review of an applicant’s
qualifications to be authorized to
receive support. Like the CAF Phase II
auction, the Commission provides two
pathways for eligibility for the auction—
both (1) for entities that have at least
two years’ experience providing a voice,
broadband, and/or electric transmission
or distribution service, and (2) for
entities that have at least three years of
audited financials and can obtain an
acceptable letter of interest from an
eligible bank. The Commission expects
that by proposing to adopt two
pathways for eligibility and to permit
experienced entities that do not audit
their financial statements in the
ordinary course of business to wait to
submit audited financials until after
they are announced as winning bidders,
more small entities will be able to
participate in the auction. The
Commission declines to collect less
financial and technical information
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from experienced providers, finding that
all existing service providers are not
necessarily qualified to bid for
additional universal service support and
that the passage of time since its last
review may impact qualifications. At
the same time, the Commission also
declines to require more detailed
technical and operational showings as
suggested by some commenters because
it found these proposals would provide
significant barriers to entry for
participation by interested entities,
including small entities.
160. The Commission also permits all
long-form applicants, including small
entities, to obtain their ETC
designations after becoming winning
bidders so that they do not have to go
through the ETC designation process
prior to finding out if they won support
through the auction. The Commission
declines to adopt the alternatives to
letters of credit that were suggested by
commenters because letters of credit
better achieve the Commission’s
objective of protecting the public’s
funds. But recognizing that some CAF
Phase II auction participants, including
small entities, have expressed concerns
about the costs of obtaining and
maintaining a letter of credit, the
Commission makes a modification to its
requirements to allow support
recipients to cover less support with
their letters of credit and further reduce
the value of their letters of credit once
it has been verified that they have met
certain service milestones.
161. The Commission declines to
adopt additional performance
requirements, like requiring specific
subscription milestones, because it finds
that they are likely to discourage many
bidders, including small entities, from
participating in the auction because
they would risk losing funding in areas
with low subscribership rates. The
Commission also declines to adopt more
aggressive service milestones and
instead explain that entities with
smaller projects have the opportunity to
build-out faster than the service
milestones.
162. The reporting requirements the
Commission adopts for all Rural Digital
Opportunity Fund support recipients
are tailored to ensuring that support is
used for its intended purpose and so
that the Commission can monitor the
progress of recipients in meeting their
service milestones. The Commission
finds that the importance of monitoring
the use of the public’s funds outweighs
the burden of filing the required
information on all entities, including
small entities, particularly because
much of the information that the
Commission requires they report is
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information the Commission expects
they will already be collecting to ensure
they comply with the terms and
conditions of support and they will be
able to submit their location data on a
rolling basis to help minimize the
burden of uploading a large number of
locations at once.
§ 54.310 Connect America Fund for Price
Cap Territories—Phase II.
*
*
*
*
(g) Extended term of model-based
support. Eligible telecommunications
carriers receiving model-based support
may elect to receive a seventh year of
such support. An eligible
telecommunications carrier electing to
V. Ordering Clauses
receive this additional year of support
makes a state-level commitment to
163. Accordingly, it is ordered,
maintain the required voice and
pursuant to the authority contained in
broadband services in the areas for
sections 4(i), 214, 254, 303(r), and 403
which it receives support during this
of the Communications Act of 1934, as
extended term. The Wireline
amended, 47 U.S.C. 154(i), 214, 254,
Competition Bureau will implement a
303(r), and 403, and §§ 1.1 and 1.425 of
the Commission’s rules, 47 CFR 1.1 and mechanism to enable an eligible
telecommunications carrier to elect
1.425 this Report and Order is adopted.
whether to receive an additional
The Report and Order shall be effective
seventh year of support.
30 days after publication in the Federal
(h) Transition to Rural Digital
Register, except for portions containing
Opportunity
Fund support. (1) In areas
information collection requirements in
where the eligible telecommunications
§§ 54.313, 54.316, 54.804, and 54.806
carrier elects to receive an optional
that have not been approved by OMB.
seventh year of model-based support
The Federal Communications
pursuant to paragraph (g) of this section,
Commission will publish a document in
it shall receive such support for a full
the Federal Register announcing the
calendar year, regardless of the
effective date of these provisions.
disposition of these areas in the Rural
164. It is further ordered that Part 54
Digital Opportunity Fund auction.
of the Commission’s rules is amended as
(i) If the eligible telecommunications
set forth in the following, and that any
carrier becomes the winning bidder in
such rule amendments that contain new the Rural Digital Opportunity Fund
or modified information collection
auction in these areas, it shall continue
requirements that require approval by
to receive model-based support through
the Office of Management and Budget
December 31, 2021. Thereafter, it shall
under the Paperwork Reduction Act
receive monthly support in the amount
shall be effective after announcement in of its Rural Digital Opportunity Fund
the Federal Register of Office of
winning bid.
Management and Budget approval of the
(ii) If another provider is the winning
rules, and on the effective date
bidder in the Rural Digital Opportunity
announced therein.
Fund auction in these areas, the new
provider shall receive monthly support
List of Subjects in 47 CFR Part 54
in the amount of its Rural Digital
Communications common carriers,
Opportunity Fund winning bid starting
Health facilities, Infants and children,
the first day of the month following its
internet, Libraries, Reporting and
authorization by the Wireline
recordkeeping requirements, Schools,
Competition Bureau. The eligible
Telecommunications, Telephone.
telecommunications carrier shall
continue to receive model-based
Federal Communications Commission.
support for these areas through
Marlene Dortch,
December 31, 2021.
Secretary, Office of the Secretary.
(iii) If there is no authorized Rural
Digital Opportunity Fund auction
Final Rules
support recipient in these areas or if
For the reasons discussed in the
these areas are deemed ineligible for the
preamble, the Federal Communications
Rural Digital Opportunity Fund auction,
Commission amends 47 CFR part 54 as
the eligible telecommunications carrier
follows:
shall continue to receive model-based
support for these areas through
PART 54—UNIVERSAL SERVICE
December 31, 2021. Thereafter, it shall
receive no additional support.
■ 1. The authority citation for part 54
(2) In areas where the eligible
continues to read as follows:
telecommunications carrier declines to
Authority: 47 U.S.C. 151, 154(i), 155, 201,
receive an optional seventh year of
205, 214, 219, 220, 229, 254, 303(r), 403,
model-based support pursuant to
1004, and 1302, unless otherwise noted.
paragraph (g) of this section, it shall
cease receiving model-based support for
■ 2. Amend § 54.310 by adding
paragraphs (g) and (h) to read as follows: these areas on December 31, 2020.
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*
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3. Amend § 54.312 by adding
paragraph (e) to read as follows:
■
§ 54.312 Connect America Fund for Price
Cap Territories—Phase I.
*
*
*
*
*
(e) Eligibility for support after Rural
Digital Opportunity Fund auction. (1) A
price cap carrier that receives monthly
baseline support pursuant to this
section and is a winning bidder in the
Rural Digital Opportunity Fund auction
shall receive support at the same level
as described in paragraph (a) of this
section for such area until the Wireline
Competition Bureau determines
whether to authorize the carrier to
receive Rural Digital Opportunity Fund
auction support for the same area. Upon
the Wireline Competition Bureau’s
release of a public notice approving a
price cap carrier’s application submitted
pursuant to § 54.315(b) and authorizing
the carrier to receive Rural Digital
Opportunity Fund auction 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
Rural Digital Opportunity Fund winning
bid.
(2) Starting the first day of the month
following the release of the final eligible
areas list for the Rural Digital
Opportunity Fund auction, as
determined by the Wireline Competition
Bureau, no price cap carrier that
receives monthly baseline support
pursuant to this section shall receive
such monthly baseline support for areas
that are ineligible for the Rural Digital
Opportunity Fund auction.
(3) Starting the first day of the month
following the close of Phase I of the
Rural Digital Opportunity Fund auction,
no price cap carrier that receives
monthly baseline support pursuant to
this section shall receive such monthly
baseline support for areas where Rural
Digital Opportunity Fund auction
support is not awarded at auction for an
eligible area.
(4) Starting the first day of the month
following the authorization of Rural
Digital Opportunity Fund auction
support to a winning bidder other than
the price cap carrier that receives
monthly baseline support pursuant to
this section for such area, the price cap
carrier shall no longer receive monthly
baseline support pursuant to this
section.
4. Amend § 54.313 by revising
paragraphs (e) introductory text, (e)(2)
introductory text and (e)(2)(iii) to read
as follows:
■
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§ 54.313 Annual reporting requirements
for high-cost recipients.
*
*
*
*
*
(e) In addition to the information and
certifications in paragraph (a) of this
section, the requirements in paragraphs
(e)(1) and (2) of this section apply to
recipients of Phase II, Rural Digital
Opportunity Fund, Uniendo a Puerto
Rico Fund Stage 2 fixed support, and
Connect USVI Fund Stage 2 fixed
support:
*
*
*
*
*
(2) Any recipient of Phase II, Rural
Digital Opportunity Fund, Uniendo a
Puerto Rico Fund Stage 2 fixed, or
Connect USVI Fund Stage 2 fixed
support awarded through a competitive
bidding or application process shall
provide:
*
*
*
*
*
(iii) Starting the first July 1st after
meeting the final service milestone in
§ 54.310(c) or § 54.802(c) of this chapter
until the July 1st after the Phase II
recipient’s or Rural Digital Opportunity
Fund recipient’s support term has
ended, a certification that the Phase II–
funded network that the Phase II
auction recipient operated in the prior
year meets the relevant performance
requirements in § 54.309 of this chapter,
or that the network that the Rural Digital
Opportunity Fund recipient operated in
the prior year meets the relevant
performance requirements in § 54.805
for the Rural Digital Opportunity Fund.
*
*
*
*
*
■ 5. Amend § 54.316 by revising
paragraph (a)(4), adding paragraph
(a)(8), and revising paragraphs (b)(5) and
(c)(1) to read as follows:
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§ 54.316 Broadband deployment reporting
and certification requirements for high-cost
recipients.
(a) * * *
(4) Recipients subject to the
requirements of § 54.310(c) shall report
the number of locations for each state
and locational information, including
geocodes, where they are offering
service at the requisite speeds.
Recipients of Connect America Phase II
auction support shall also report the
technology they use to serve those
locations.
*
*
*
*
*
(8) Recipients subject to the
requirements of § 54.802(c) shall report
the number of locations for each state
and locational information, including
geocodes, where they are offering
service at the requisite speeds.
Recipients of Rural Digital Opportunity
Fund support shall also report the
technology they use to serve those
locations.
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(b) * * *
(5) Recipients of Rural Digital
Opportunity Fund support shall
provide: No later than March 1
following each service milestone
specified by the Commission, a
certification that by the end of the prior
support year, it was offering broadband
meeting the requisite public interest
obligations to the required percentage of
its supported locations in each state.
*
*
*
*
*
(c) * * *
(1) Price cap carriers that accepted
Phase II model-based support, rate-ofreturn carriers, and recipients of Rural
Digital Opportunity Fund support must
submit the annual reporting information
required by March 1 as described in
paragraphs (a) and (b) of this section.
Eligible telecommunications carriers
that file their reports after the March 1
deadline shall receive a reduction in
support pursuant to the following
schedule:
*
*
*
*
*
■ 6. Revise subpart J to read as follows:
Subpart J—Rural Digital Opportunity Fund
Sec.
54.801 Use of competitive bidding for
Rural Digital Opportunity Fund.
54.802 Rural Digital Opportunity Fund
geographic areas, deployment
obligations, and support disbursements.
54.803 Rural Digital Opportunity Fund
provider eligibility.
54.804 Rural Digital Opportunity Fund
application process.
54.805 Rural Digital Opportunity Fund
public interest obligations.
54.806 Rural Digital Opportunity Fund
reporting obligations, compliance, and
recordkeeping.
Subpart J—Rural Digital Opportunity
Fund
§ 54.801 Use of competitive bidding for
Rural Digital Opportunity Fund.
The Commission will use competitive
bidding, as provided in part 1, subpart
AA of this chapter, to determine the
recipients of Rural Digital Opportunity
Fund support and the amount of
support that they may receive for
specific geographic areas, subject to
applicable post-auction procedures.
§ 54.802 Rural Digital Opportunity Fund
geographic areas, deployment obligations,
and support disbursements.
(a) Geographic areas eligible for
support. Rural Digital Opportunity Fund
support may be made available for
census blocks or other areas identified
as eligible by public notice.
(b) Term of support. Rural Digital
Opportunity Fund support shall be
provided for ten years.
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(c) Deployment obligation. (1) All
recipients of Rural Digital Opportunity
Fund support must complete
deployment to 40 percent of the
required number of locations as
determined by the Connect America
Cost Model by the end of the third year,
to 60 percent by the end of the fourth
year, and to 80 percent by the end of the
fifth year. The Wireline Competition
Bureau will publish updated location
counts no later than the end of the sixth
year. A support recipient’s final service
milestones will depend on whether the
Wireline Competition Bureau
determines there are more or fewer
locations than determined by the
Connect America Cost Model in the
relevant areas as follows:
(i) More Locations. After the Wireline
Competition Bureau adopts updated
location counts, in areas where there are
more locations than the number of
locations determined by the Connect
America Cost Model, recipients of Rural
Digital Opportunity Fund support must
complete deployment to 100 percent of
the number of locations determined by
the Connect America Cost Model by the
end of the sixth year. Recipients of
Rural Digital Opportunity Fund support
must then complete deployment to 100
percent of the additional number of
locations determined by the Wireline
Competition Bureau’s updated location
count by end of the eighth year. If the
new location count exceeds 35% of the
number of locations determined by the
Connect America Cost Model within
their area in each state, recipients of
Rural Digital Opportunity Fund support
will have the opportunity to seek
additional support or relief.
(ii) Fewer Locations. In areas where
there are fewer locations than the
number of locations determined by the
Connect America Cost Model, a Rural
Digital Opportunity Fund support
recipient must notify the Wireline
Competition Bureau no later than March
1 following the fifth year of deployment.
Upon confirmation by the Wireline
Competition Bureau, Rural Digital
Opportunity Fund support recipients
must complete deployment to the
number of locations required by the new
location count by the end of the sixth
year. Support recipients for which the
new location count is less than 65
percent of the Connect America Cost
Model locations within their area in
each state shall have the support
amount reduced on a pro rata basis by
the number of reduced locations.
(iii) Newly Built Locations. In addition
to offering the required service to the
updated number of locations identified
by the Wireline Competition Bureau,
Rural Digital Opportunity Fund support
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recipients must offer service to locations
built since the revised count, upon
reasonable request. Support recipients
are not required to deploy to any
location built after milestone year eight.
(d) Disbursement of Rural Digital
Opportunity Fund funding. An eligible
telecommunications carrier will be
advised by public notice when it is
authorized to receive support. The
public notice will detail how
disbursements will be made.
§ 54.803 Rural Digital Opportunity Fund
provider eligibility.
(a) Any eligible telecommunications
carrier is eligible to receive Rural Digital
Opportunity Fund support in eligible
areas.
(b) An entity may obtain eligible
telecommunications carrier designation
after public notice of winning bidders in
the Rural Digital Opportunity Fund
auction.
(c) To the extent any entity seeks
eligible telecommunications carrier
designation prior to public notice of
winning bidders for Rural Digital
Opportunity Fund support, its
designation as an eligible
telecommunications carrier may be
conditioned subject to receipt of Rural
Digital Opportunity Fund support.
(d) Any Connect America Phase II
auction participant that defaulted on all
of its Connect America Phase II auction
winning bids is barred from
participating in the Rural Digital
Opportunity Fund.
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§ 54.804 Rural Digital Opportunity Fund
application process.
(a) In addition to providing
information specified in § 1.21001(b) of
this chapter and any other information
required by the Commission, any
applicant to participate in competitive
bidding for Rural Digital Opportunity
Fund support shall:
(1) Provide ownership information as
set forth in § 1.2112(a) of this chapter;
(2) Certify that the applicant is
financially and technically qualified to
meet the public interest obligations
established for Rural Digital
Opportunity Fund support;
(3) Disclose its status as an eligible
telecommunications carrier to the extent
applicable and certify that it
acknowledges that it must be designated
as an eligible telecommunications
carrier for the area in which it will
receive support prior to being
authorized to receive support;
(4) Describe the technology or
technologies that will be used to
provide service for each bid;
(5) Submit any information required
to establish eligibility for any bidding
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weights adopted by the Commission in
an order or public notice;
(6) To the extent that an applicant
plans to use spectrum to offer its voice
and broadband services, demonstrate it
has the proper authorizations, if
applicable, and access to operate on the
spectrum it intends to use, and that the
spectrum resources will be sufficient to
cover peak network usage and deliver
the minimum performance requirements
to serve all of the fixed locations in
eligible areas, and certify that it will
retain its access to the spectrum for the
term of support;
(7) Submit operational and financial
information.
(i) If applicable, the applicant should
submit a certification that it has
provided a voice, broadband, and/or
electric transmission or distribution
service for at least two years or that it
is a wholly-owned subsidiary of such an
entity, and specifying the number of
years the applicant or its parent
company has been operating, and
submit the financial statements from the
prior fiscal year that are audited by an
independent certified public
accountant. If the applicant is not
audited in the ordinary course of
business, in lieu of submitting audited
financial statements it must submit
unaudited financial statements from the
prior fiscal year and certify that it will
provide financial statements from the
prior fiscal year that are audited by an
independent certified public accountant
by a specified deadline during the longform application review process.
(A) If the applicant has provided a
voice and/or broadband service it must
certify that it has filed FCC Form 477s
as required during this time period.
(B) If the applicant has operated only
an electric transmission or distribution
service, it must submit qualified
operating or financial reports that it has
filed with the relevant financial
institution for the relevant time period
along with a certification that the
submission is a true and accurate copy
of the reports that were provided to the
relevant financial institution.
(ii) If an applicant cannot meet the
requirements in paragraph (a)(7)(i) of
this section, in the alternative it must
submit the audited financial statements
from the three most recent fiscal years
and a letter of interest from a bank
meeting the qualifications set forth in
paragraph (c)(2) of this section, that the
bank would provide a letter of credit as
described in paragraph (c) of this
section to the bidder if the bidder were
selected for bids of a certain dollar
magnitude.
(8) Certify that the applicant has
performed due diligence concerning its
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potential participation in the Rural
Digital Opportunity Fund.
(b) Application by winning bidders
for Rural Digital Opportunity Fund
support—
(1) Deadline. As provided by public
notice, winning bidders for Rural Digital
Opportunity Fund support or their
assignees shall file an application for
Rural Digital Opportunity Fund support
no later than the number of business
days specified after the public notice
identifying them as winning bidders.
(2) Application contents. An
application for Rural Digital
Opportunity Fund support must
contain:
(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 qualified to
meet the public interest obligations for
Rural Digital Opportunity Fund support
in each area for which it seeks support;
(iii) Certification that the applicant
will meet the relevant public interest
obligations, including the requirement
that it will offer service at rates that are
equal or lower to the Commission’s
reasonable comparability benchmarks
for fixed wireline services offered in
urban areas;
(iv) A description of the technology
and system design the applicant intends
to use to deliver voice and broadband
service, including a network diagram
which must be certified by a
professional engineer. The professional
engineer must certify that the network is
capable of delivering, to at least 95
percent of the required number of
locations in each relevant state, voice
and broadband service that meets the
requisite performance requirements for
Rural Digital Opportunity Fund support;
(v) Certification that the applicant
will have available funds for all project
costs that exceed the amount of support
to be received from the Rural Digital
Opportunity Fund for the first two years
of its support term and that the
applicant will comply with all program
requirements, including service
milestones;
(vi) A description of how the required
construction will be funded, including
financial projections that demonstrate
the applicant can cover the necessary
debt service payments over the life of
the loan, if any;
(vii) Certification that the party
submitting the application is authorized
to do so on behalf of the applicant; and
(viii) Such additional information as
the Commission may require.
(3) Letter of credit commitment letter.
No later than the number of days
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provided by public notice, the long-form
applicant shall submit a letter from a
bank meeting the eligibility
requirements outlined in paragraph (c)
of this section committing to issue an
irrevocable stand-by letter of credit, in
the required form, to the long-form
applicant. The letter shall at a minimum
provide the dollar amount of the letter
of credit and the issuing bank’s
agreement to follow the terms and
conditions of the Commission’s model
letter of credit.
(4) Audited financial statements. No
later than the number of days provided
by public notice, if a long-form
applicant or a related entity did not
submit audited financial statements in
the relevant short-form application as
required, the long-form applicant must
submit the financial statements from the
prior fiscal year that are audited by an
independent certified public
accountant.
(5) Eligible telecommunications
carrier designation. No later than 180
days after the public notice identifying
it as a winning bidder, the long-form
applicant shall certify that it is an
eligible telecommunications carrier in
any area for which it seeks support and
submit the relevant documentation
supporting that certification.
(6) 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
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the applicant, or the certifications
required in the application.
(v) After receipt and review of the
applications, a public notice shall
identify each long-form applicant that
may be authorized to receive Rural
Digital Opportunity Fund support after
the long-form applicant submits a letter
of credit and an accompanying opinion
letter as described in paragraph (c) of
this section, in a form acceptable to the
Commission. Each such long-form
applicant shall submit a letter of credit
and accompanying opinion letter as
required by paragraph (c) of this section,
in a form acceptable to the Commission
no later than the number of business
days provided by public notice.
(vi) After receipt of all necessary
information, a public notice will
identify each long-form applicant that is
authorized to receive Rural Digital
Opportunity Fund support.
(c) Letter of credit. Before being
authorized to receive Rural Digital
Opportunity Fund support, a winning
bidder shall obtain an irrevocable
standby letter of credit which shall be
acceptable in all respects to the
Commission.
(1) Value. Each recipient authorized
to receive Rural Digital Opportunity
Fund support shall maintain the
standby letter of credit in an amount
equal to, at a minimum, one year of
support, until the Universal Service
Administrative Company has verified
that the recipient has served 100 percent
of the Connect America Cost Modeldetermined location total (or the
adjusted Connect America Cost Model
location count if there are fewer
locations) by the end of year six.
(i) For year one of a recipient’s
support term, it must obtain a letter of
credit valued at an amount equal to one
year of support.
(ii) For year two of a recipient’s
support term, it must obtain a letter of
credit valued at an amount equal to
eighteen months of support.
(iii) For year three of a recipient’s
support term, it must obtain a letter of
credit valued at an amount equal to two
years of support.
(iv) For year four of a recipient’s
support term, it must obtain a letter of
credit valued at an amount equal to
three years of support.
(v) A recipient may obtain a new
letter of credit or renew its existing
letter of credit so that it is valued at an
amount equal to one year of support
once it meets its optional or required
service milestones. The recipient may
obtain or renew this letter of credit upon
verification of its buildout by the
Universal Service Administrative
Company. The recipient may maintain
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its letter of credit at this level for the
remainder of its deployment term, so
long as the Universal Service
Administrative Company verifies that
the recipient successfully and timely
meets its remaining required service
milestones.
(vi) A recipient that fails to meet its
required service milestones must obtain
a new letter of credit or renew its
existing letter of credit at an amount
equal to its existing letter of credit, plus
an additional year of support, up to a
maximum of three years of support.
(vii) A recipient that fails to meet two
or more required service milestones
must maintain a letter of credit in the
amount of three year of support and
may be subject to additional noncompliance penalties as described in
§ 54.320(d).
(2) Bank eligibility. 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) That is insured by the Federal
Deposit Insurance Corporation, and
(B) That has a bank safety rating
issued by Weiss of B¥ or better; or
(ii) CoBank, so long as it maintains
assets that place it among the 100 largest
United States Banks, determined on
basis of total assets as of the calendar
year immediately preceding the
issuance of the letter of credit and it has
a long-term unsecured credit rating
issued by Standard & Poor’s of BBB¥ or
better (or an equivalent rating from
another nationally recognized credit
rating agency); or
(iii) The National Rural Utilities
Cooperative Finance Corporation, so
long as it maintains assets that place it
among the 100 largest United States
Banks, determined on basis of total
assets as of the calendar year
immediately preceding the issuance of
the letter of credit and it has a long-term
unsecured credit rating issued by
Standard & Poor’s of BBB¥ or better (or
an equivalent rating from another
nationally recognized credit rating
agency); or
(iv) Any non-United States bank:
(A) That is among the 100 largest nonU.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) Has a long-term unsecured credit
rating issued by a widely-recognized
credit rating agency that is equivalent to
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a BBB¥ or better rating by Standard &
Poor’s; and
(D) Issues the letter of credit payable
in United States dollars
(3) Bankruptcy opinion letter. A longform applicant for Rural Digital
Opportunity Fund support shall provide
with its letter of credit an opinion letter
from its 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 under section 541 of
the Bankruptcy Code.
(4) Non-compliance. .Authorization to
receive Rural Digital Opportunity Fund
support is conditioned upon full and
timely performance of all of the
requirements set forth in this section,
and any additional terms and conditions
upon which the support was granted.
(i) Failure by a Rural Digital
Opportunity Fund support recipient to
meet its service milestones for the
location totals determined by the
Connect America Cost Model, or the
location total that is adjusted by the
Wireline Competition Bureau for those
areas where there are fewer locations
than the number of locations
determined by the Connect America
Cost Model, as required by § 54.802 will
trigger reporting obligations and the
withholding of support as described in
§ 54.320(d). Failure to come into full
compliance during the relevant cure
period as described in
§§ 54.320(d)(1)(iv)(B) or 54.320(d)(2)
will trigger a recovery action by the
Universal Service Administrative
Company as described in
§ 54.320(d)(1)(iv)(B) or § 54.806(c)(1)(i),
as applicable. If the Rural Digital
Opportunity Fund recipient does not
repay the requisite amount of support
within six months, the Universal
Service Administrative Company will
be entitled to draw the entire amount of
the letter of credit and may disqualify
the Rural Digital Opportunity Fund
support recipient from the receipt of
Rural Digital Opportunity Fund support
or additional universal service support.
(ii) The default will be evidenced by
a letter issued by the Chief of the
Wireline Competition Bureau, or its
respective designees, which letter,
attached to a standby letter of credit
draw certificate, shall be sufficient for a
draw on the standby letter of credit for
the entire amount of the standby letter
of credit.
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§ 54.805 Rural Digital Opportunity Fund
public interest obligations.
(a) Recipients of Rural Digital
Opportunity Fund support are required
to offer broadband service with latency
suitable for real-time applications,
including Voice over internet Protocol,
and usage capacity that is reasonably
comparable to comparable offerings in
urban areas, at rates that are reasonably
comparable to rates for comparable
offerings in urban areas. For purposes of
determining reasonable comparable
usage capacity, recipients are presumed
to meet this requirement if they meet or
exceed the usage level announced by
public notice issued by the Wireline
Competition Bureau. For purposes of
determining reasonable comparability of
rates, recipients are presumed to meet
this requirement if they offer rates at or
below the applicable benchmark to be
announced annually by public notice
issued by the Wireline Competition
Bureau, or no more than the nonpromotional prices charged for a
comparable fixed wireline service in
urban areas in the state or U.S. Territory
where the eligible telecommunications
carrier receives support.
(b) Recipients of Rural Digital
Opportunity Fund support are required
to offer broadband service meeting the
performance standards for the relevant
performance tier.
(1) Rural Digital Opportunity Fund
support recipients meeting the
minimum performance tier standards
are required to offer broadband service
at actual speeds of at least 25 Mbps
downstream and 3 Mbps upstream and
offer a minimum usage allowance of 250
GB per month, or that reflects the
average usage of a majority of fixed
broadband customers as announced
annually by the Wireline Competition
Bureau over the 10-year term.
(2) Rural Digital Opportunity Fund
support recipients meeting the baseline
performance tier standards are required
to offer broadband service at actual
speeds of at least 50 Mbps downstream
and 5 Mbps upstream and offer a
minimum usage allowance of 250 GB
per month, or that reflects the average
usage of a majority of fixed broadband
customers as announced annually by
the Wireline Competition Bureau over
the 10-year term.
(2) Rural Digital Opportunity Fund
support recipients meeting the abovebaseline performance tier standards are
required to offer broadband service at
actual speeds of at least 100 Mbps
downstream and 20 Mbps upstream and
offer at least 2 terabytes of monthly
usage.
(3) Rural Digital Opportunity Fund
support recipients meeting the Gigabit
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performance tier standards are required
to offer broadband service at actual
speeds of at least 1 Gigabit per second
downstream and 500 Mbps upstream
and offer at least 2 terabytes of monthly
usage.
(4) For each of the tiers in paragraphs
(b)(1) through (3) of this section, bidders
are required to meet one of two latency
performance levels:
(i) Low-latency bidders will be
required to meet 95 percent or more of
all peak period measurements of
network round trip latency at or below
100 milliseconds; and
(ii) High-latency bidders will be
required to meet 95 percent or more of
all peak period measurements of
network round trip latency at or below
750 ms and, with respect to voice
performance, demonstrate a score of
four or higher using the Mean Opinion
Score (MOS).
(c) Recipients of Rural Digital
Opportunity Fund support are required
to bid on category one
telecommunications and internet access
services in response to a posted FCC
Form 470 seeking broadband service
that meets the connectivity targets for
the schools and libraries universal
service support program for eligible
schools and libraries (as described in
§ 54.501) located within any area in a
census block where the carrier is
receiving Rural Digital Opportunity
Fund support. Such bids must be at
rates reasonably comparable to rates
charged to eligible schools and libraries
in urban areas for comparable offerings.
§ 54.806 Rural Digital Opportunity Fund
reporting obligations, compliance, and
recordkeeping.
(a) Recipients of Rural Digital
Opportunity Fund support shall be
subject to the reporting obligations set
forth in §§ 54.313, 54.314, and 54.316.
(b) Recipients of Rural Digital
Opportunity Fund support shall be
subject to the compliance measures,
recordkeeping requirements and audit
requirements set forth in § 54.320(a)–(c).
(c) Recipients of Rural Digital
Opportunity Fund support shall be
subject to the non-compliance measures
set forth in § 54.320(d) subject to the
following modifications related to the
recovery of support.
(1) If the support recipient does not
report it has come into full compliance
after the grace period for its sixth year
or eighth year service milestone as
applicable or if USAC determines in the
course of a compliance review that the
eligible telecommunications carrier does
not have sufficient evidence to
demonstrate that it is offering service to
all of the locations required by the sixth
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or eighth year service milestone as set
forth in § 54.320(d)(3):
(i) Sixth year service milestone.
Support will be recovered as follows
after the sixth year service milestone
grace period or if USAC later determines
in the course of a compliance review
that a support recipient does not have
sufficient evidence to demonstrate that
it was offering service to all of the
locations required by the sixth year
service milestone:
(A) If an ETC has deployed to 95
percent or more of the Connect America
Cost Model location count or the
adjusted Connect America Cost Model
location count if there are fewer
locations, but less than 100 percent,
USAC will recover an amount of
support that is equal to 1.25 times the
average amount of support per location
received in the state for that ETC over
the support term for the relevant
number of locations;
(B) If an ETC has deployed to 90
percent or more of the Connect America
Cost Model location count or the
adjusted Connect America Cost Model
location count if there are fewer
locations, but less than 95 percent,
USAC will recover an amount of
support that is equal to 1.5 times the
average amount of support per location
received in the state for that ETC over
the support term for the relevant
number of locations, plus 5 percent of
the support recipient’s total Rural
Digital Opportunity Fund support
authorized over the 10-year support
term for that state;
(C) If an ETC has deployed to fewer
than 90 percent of the Connect America
Cost Model location count or the
adjusted Connect America Cost Model
location count if there are fewer
locations, USAC will recover an amount
of support that is equal to 1.75 times the
average amount of support per location
received in the state for that ETC over
the support term for the relevant
number of locations, plus 10 percent of
the support recipient’s total Rural
Digital Opportunity Fund support
authorized over the 10-year support
term for that state.
(ii) Eighth year service milestone. If a
Rural Digital Opportunity Fund support
recipient is required to serve more new
locations than determined by the
Connect America Cost Model, support
will be recovered as follows after the
eighth year service milestone grace
period or if USAC later determines in
the course of a compliance review that
a support recipient does not have
sufficient evidence to demonstrate that
it was offering service to all of the
locations required by the eighth year
service milestone:
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(A) If an ETC has deployed to 95
percent or more of its new location
count, but less than 100 percent, USAC
will recover an amount of support that
is equal to the average amount of
support per location received in the
state for that ETC over the support term
for the relevant number of locations;
(B) If an ETC has deployed to 90
percent or more of its new location
count, but less than 95 percent, USAC
will recover an amount of support that
is equal to 1.25 times the average
amount of support per location received
in the state for that ETC over the
support term for the relevant number of
locations;
(C) If an ETC has deployed to 85
percent or more of its new location
count, but less than 90 percent, USAC
will recover an amount of support that
is equal to 1.5 times the average amount
of support per location received in the
state for that ETC over the support term
for the relevant number of locations,
plus 5 percent of the support recipient’s
total Rural Digital Opportunity Fund
support authorized over the 10-year
support term for that state;
(D) If an ETC has deployed to less
than 85 percent of its new location
count, USAC will recover an amount of
support that is equal to 1.75 times the
average amount of support per location
received in the state for that ETC over
the support term for the relevant
number of locations, plus 10 percent of
the support recipient’s total Rural
Digital Opportunity Fund support
authorized over the 10-year support
term for that state.
(2) Any support recipient that
believes it cannot meet the third-year
service milestone must notify the
Wireline Competition Bureau within 10
business days of the third-year service
milestone deadline and provide
information explaining this expected
deficiency. If a support recipient has not
made such a notification by March 1
following the third-year service
milestone, and has deployed to fewer
than 20 percent of the required number
of locations by the end of the third year,
the recipient will immediately be in
default and subject to support recovery.
The Tier 4 status six-month grace period
as set forth in § 54.320(d)(iv) will not be
applicable.
[FR Doc. 2020–03135 Filed 3–9–20; 8:45 am]
BILLING CODE 6712–01–P
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Frm 00080
Fmt 4700
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DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 679
[Docket No. 200221–0062]
RIN 0648–XY201
Fisheries of the Exclusive Economic
Zone Off Alaska; Gulf of Alaska; Final
2020 and 2021 Harvest Specifications
for Groundfish
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Final rule; harvest specifications
and closures.
AGENCY:
NMFS announces final 2020
and 2021 harvest specifications,
apportionments, and Pacific halibut
prohibited species catch limits for the
groundfish fishery of the Gulf of Alaska
(GOA). This action is necessary to
establish harvest limits for groundfish
during the remainder of the 2020 and
the start of the 2021 fishing years and
to accomplish the goals and objectives
of the Fishery Management Plan for
Groundfish of the Gulf of Alaska. The
2020 harvest specifications supersede
those previously set in the final 2019
and 2020 harvest specifications, and the
2021 harvest specifications will be
superseded in early 2021 when the final
2021 and 2022 harvest specifications are
published. The intended effect of this
action is to conserve and manage the
groundfish resources in the GOA in
accordance with the Magnuson-Stevens
Fishery Conservation and Management
Act.
DATES: Harvest specifications and
closures are effective at 1200 hours,
Alaska local time (A.l.t.), March 10,
2020, through 2400 hours, A.l.t.,
December 31, 2021.
ADDRESSES: Electronic copies of the
Final Alaska Groundfish Harvest
Specifications Environmental Impact
Statement (EIS), Record of Decision
(ROD), the annual Supplementary
Information Reports (SIRs) to the EIS,
and the Initial Regulatory Flexibility
Analysis (IRFA) prepared for this action
are available from https://
alaskafisheries.noaa.gov. The 2019
Stock Assessment and Fishery
Evaluation (SAFE) report for the
groundfish resources of the GOA, dated
November 2019, and SAFE reports for
previous years are available from the
North Pacific Fishery Management
Council (Council) at 1007 West 3rd
Avenue, Suite 400, Anchorage, AK
SUMMARY:
E:\FR\FM\10MRR1.SGM
10MRR1
Agencies
[Federal Register Volume 85, Number 47 (Tuesday, March 10, 2020)]
[Rules and Regulations]
[Pages 13773-13802]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03135]
=======================================================================
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[WC Docket Nos.19-126, 10-90; FCC 20-5; FRS 16498]
Rural Digital Opportunity Fund, Connect America Fund
AGENCY: Federal Communications Commission.
ACTION: Final rule.
-----------------------------------------------------------------------
SUMMARY: In this document, the Federal Communications Commission
(Commission) adopts the framework for the Rural Digital Opportunity
Fund. The Rural Digital Opportunity Fund builds on the Connect America
Fund (CAF) Phase II auction, which allocated funds to deploy networks
serving more than 700,000 unserved rural homes and businesses across 45
states. The Rural Digital Opportunity Fund represents the Commission's
single biggest step to close the digital divide and connect millions
more rural homes and small businesses to high-speed broadband networks.
DATES: Effective April 9, 2020, except of Sec. Sec. 54.313(e),
54.316(a)(8), (b)(5), (c)(1), 54.804 (a) through (c), and 54.806. The
Commission will publish a document in the Federal Register announcing
the effective date of those rules.
FOR FURTHER INFORMATION CONTACT: Alexander Minard, Wireline Competition
Bureau, (202) 418-7400 or TTY: (202) 418-0484.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report
and Order (Order) in WC Docket Nos. 19-126, 10-90; FCC 20-5, adopted on
January 30, 2020 and released on February 7, 2020. The full text of
this document is available for public inspection during regular
business hours in the FCC Reference Center, Room CY-A257, 445 12th
Street SW, Washington, DC 20554 or at the following internet address:
https://www.fcc.gov/document/fcc-launches-20-billion-rural-digital-opportunity-fund-0.
I. Introduction
1. Bringing digital opportunity to Americans living on the wrong
side of the digital divide continues to be the Federal Communication
Commission's top priority. It is imperative that the Commission take
prompt and expeditious action to deliver on its goal of connecting all
Americans, no matter where they live and work. Without access to
broadband, rural communities cannot connect to the digital economy and
the opportunities for better education, employment, healthcare, and
civic and social engagement it provides.
2. In recent years, the Commission has made tremendous strides
toward its goal of making broadband available to all Americans. But
while the digital divide is closing, more work remains to be done.
Therefore, in the Order, the Commission adopts the framework for the
Rural Digital Opportunity Fund. It builds on the successful model from
2018's CAF Phase II auction, which allocated $1.488 billion to deploy
networks serving more than 700,000 unserved rural homes and businesses
across 45 states. The Rural Digital Opportunity Fund represents the
Commission's single biggest step to close the digital divide by
providing up to $20.4 billion to connect millions more rural homes and
small businesses to high-speed broadband networks. It will ensure that
networks stand the test of time by prioritizing higher network speeds
and lower latency, so that those benefitting from these networks will
be able to use tomorrow's internet applications as well as today's.
II. Discussion
3. To ensure continued and rapid deployment of broadband networks
to unserved Americans, the Commission establishes the Rural Digital
Opportunity Fund, which will commit up to $20.4 billion over the next
decade to support up to gigabit speed broadband networks in rural
America. The Commission opts to allocate this funding through a multi-
round, reverse, descending clock auction that favors faster services
with lower latency and encourages intermodal competition in order to
ensure that the greatest possible number of Americans will be connected
to the best possible networks, all at a competitive cost. In light of
the need to bring service both to consumers in areas wholly unserved by
25/3 Mbps, as well as those living in areas partially served, the
Commission will assign funding in two phases: Phase I will target those
areas that current data confirm are wholly unserved; and, Phase II will
target unserved locations within areas that data demonstrates are only
partially served, as well as any areas not won in Phase I. By relying
on a two-phase process, the Commission can move expeditiously to
commence an auction in 2020 for those areas it already knows with
certainty are currently unserved, while also ensuring that other areas
are not left behind by holding a second auction once the Commission has
identified any additional unserved locations through improvements to
its broadband deployment data collection.
4. The Rural Digital Opportunity Fund Phase I auction will make use
of many of the rules that made the CAF Phase II auction a success, with
some exceptions to account for the passage of time and other changed
circumstances. Most importantly, in addition to the weighting of
performance tiers and latency, the Commission will assign support in
the auction's clearing round to the bidder with the lowest weight.
After the auction, the Commission will require Phase I support
recipients to offer the required voice and broadband service to all
eligible homes and small businesses within the awarded areas, without
regard to the number of locations identified by the Connect America
Cost Model (CAM), and instead as determined subsequently by the
Wireline Competition Bureau (the Bureau). This approach differs from
that used in the CAF Phase II auction, which tied the deployment and
service obligations to a specific number of locations within awarded
areas but allowed the recipients to demonstrate that their obligations
should be reduced (along with a corresponding reduction in support)
where there were fewer locations than the CAM specified. As discussed
in the following, the Commission will use its cost model and current
data to establish initial service milestones and to monitor interim
progress, but the Commission emphasizes that Phase I bidders will be
competing for support amounts to offer service to all locations
ultimately identified in an area, not just to the specific number of
locations in that area identified prior to the auction, without
adjusting awarded support amounts.
5. The Commission adopts a term of support of 10 years for the
Rural Digital Opportunity Fund. The Commission believes that the
stability of a 10-year term of support was partially responsible for
the robust participation that occurred in the CAF Phase II auction. The
Commission expects that the same principles regarding encouraging long-
term investments and auction participation will also apply to the Rural
Digital Opportunity Fund. Most commenters addressing this issue agree
that a 10-year term of support will provide the certainty and stability
needed to encourage broadband deployment in unserved and
[[Page 13774]]
underserved locations and attract participation from a wide variety of
participants. Moreover, disbursing support over a 10-year term
minimizes the impact on the contribution factor. The Commission does
not agree that adopting a 10-year term risks funding unsustainable
projects, as one commenter suggests, because it expects bidders to seek
sufficient support to build and maintain their network without an
expectation of ongoing support after the 10-year support term expires.
Nor does the Commission agree that bidders proposing 25/3 Mbps
deployments should be offered only a five-year term. First, given that
bids will be weighted to prioritize faster services, the Commission
expects bidders seeking support for the 25/3 Mbps tier will win support
only in areas where higher speeds are not economical, and that a five-
year term may simply increase the amount sought in order to recover the
same amount of costs in a shorter timeframe. The Commission also more
generally finds no benefit to having multiple terms of support within
the same program.
6. The Commission adopts its proposal to establish a budget of
$20.4 billion for the Rural Digital Opportunity Fund. The Commission
also adopts its proposal to make available $16 billion for Phase I, and
to make available for Phase II a budget based on the remaining $4.4
billion, along with any unawarded funds from Phase I. The Commission
sought comment on whether it should reassess the adequacy of the budget
after the Phase I auction. Although commenters generally supported the
proposed budget, several commenters suggested that the size of the
budget may be insufficient to serve all the unserved locations and
supported reassessing the adequacy of the budget after Phase I. The
Commission expects $16 billion to be sufficient, given the areas
eligible for Phase I, to balance its objectives of encouraging robust
competition for support below the reserve price and closing the digital
divide. The Commission agrees that it may be appropriate after the
Phase I auction, when it knows the areas eligible for Phase II and how
many unserved locations will be eligible for Phase II within those
areas, to reassess the total amount of funds available for Phase II and
expect to revisit this issue at that time.
7. The Rural Digital Opportunity Fund will target support to areas
that lack access to both fixed voice and 25/3 Mbps broadband services
in two stages. For Phase I, the Commission targets census blocks that
are wholly unserved with broadband at speeds of 25/3 Mbps. For Phase
II, the Commission targets census blocks that it later determined
through the Digital Opportunity Data Collection, or suitable
alternative data source, are only partially served, as well as census
blocks unawarded in the Phase I auction. Because the Commission will
have an additional opportunity to seek comment on how best to target
Phase II support as it gathers more granular data on where broadband
has been actually deployed, the Commission focused here on the areas
eligible for Phase I of the auction.
8. A number of commenters support moving forward to the extent the
Commission can identify unserved areas using existing data. The
Commission agrees. The Commission currently has the tools and the data
to identify census blocks that are wholly unserved, and directs the
Bureau to use the CAM with updated coverage data using the most recent
publicly available FCC Form 477 data to identify census blocks that are
unserved with broadband at speeds of at least 25/3 Mbps for the
auction. The FCC Form 477 data have been criticized for identifying
partially served blocks as ``served,'' but the Commission is not aware
of cases in which the data has identified as ``unserved'' a census
block that is in fact served.
9. The Commission disagrees with commenters who argue that it
should delay the auction until it has more granular data. The primary
shortcomings of FCC Form 477 data do not come into play under the two-
phased framework the Commission adopts here. Thus, the Commission sees
no value in denying the benefits of broadband to those rural Americans
it knows lacks service because there may be other unserved Americans
living in other areas that it has not yet identified. Waiting for the
availability of more granular data before moving forward would only
further disadvantage those millions of Americans that the Commission
knows does not currently have access to digital opportunity.
10. The Commission directs the Bureau to compile a preliminary list
of eligible areas for Phase I of the Rural Digital Opportunity Fund
auction using the following methodology. First, the Commission will
include: (1) The census blocks for which price cap carriers currently
receive CAF Phase II model-based support; (2) any census blocks that
were eligible for, but did not receive, winning bids in the CAF Phase
II auction; (3) any census blocks where a CAF Phase II auction winning
bidder has defaulted; (4) the census blocks excluded from the offers of
model-based support and the CAF Phase II auction because they were
served with voice and broadband of at least 10/1 Mbps; (5) census
blocks served by both price cap carriers and rate-of-return carriers to
the extent that the census block is in the price cap carrier's
territory, using the most recent study area boundary data filed by the
rate-of-return carriers to identify their service areas and determine
the portion of each census block that is outside this service area; (6)
any unserved census blocks that are outside of price cap carriers'
service areas where there is no certified high-cost eligible
telecommunications carrier (ETC) providing service, such as the
Hawaiian Homelands, and any other populated areas unserved by either a
rate-of-return or price cap carrier; and (7) any census blocks
identified by rate-of-return carriers in their service areas as ones
where they do not expect to extend broadband (as the Commission did
with the CAF Phase II auction). Not included in these categories for
Phase I eligibility are census blocks where a winning bidder in the CAF
Phase II auction is obligated to deploy broadband service, and census
blocks where a Rural Broadband Experiment support recipient is
obligated to offer at least 25/5 Mbps service over networks capable of
delivering 100/25 Mbps.
11. Second, the Commission will exclude those census blocks where a
terrestrial provider offers voice and 25/3 Mbps broadband service
according to the most recent publicly available FCC Form 477 data. In
addition, the Commission will exclude those census blocks which have
been identified as having been awarded funding through the U.S.
Department of Agriculture's ReConnect Program, or awarded funding
through other similar federal or state broadband subsidy programs to
provide 25/3 Mbps or better service. This is consistent with the
Commission's overarching goal of ensuring that finite universal service
support is awarded in an efficient and cost-effective manner and does
not go toward overbuilding areas that already have service. Although
the Commission sought comment on whether there are any other areas that
it should include in the initial list of eligible areas, such as areas
in legacy rate-of-return areas that are almost entirely overlapped by
an unsubsidized competitor, it declines to expand the list of eligible
areas at this time and instead focus Phase I on the known wholly
unserved census blocks.
12. After compiling the preliminary list of eligible areas, the
Bureau will conduct a limited challenge process for the Rural Digital
Opportunity Fund Phase I auction consistent with the
[[Page 13775]]
process the Bureau used for the CAF Phase II auction. Because there is
an inevitable lag between the time when areas are served and the time
that service is reflected in publicly available FCC Form 477 data,
parties will be given an opportunity to identify areas that have
subsequently become served, and the Bureau will have the opportunity to
compare the preliminary list of eligible areas with the final list to
identify any obvious reporting errors. As discussed in this document,
good policy requires the Commission to avoid making limited federal
funding available in areas where broadband providers already are
receiving support to deploy 25/3 Mbps broadband service. Thus, in order
to identify which areas to exclude, the Commission directs the Bureau
to provide an opportunity to identify census blocks that have been
awarded support by a federal or state broadband subsidy program to
provide 25/3 Mbps or better service. The Commission does this to ensure
that its auction does not award duplicative or unnecessary support. The
Commission does not agree with commenters who argue that a limited
challenge process is insufficient and that it should provide a
``robust'' challenge process to identify census blocks that are not
actually served, and thus should be eligible for Phase I. The
Commission finds that such a challenge process would be
administratively burdensome, time-consuming, and unnecessary. In a
previous challenge process, the Commission found that it was very
difficult to prove a negative--that is, that an area was not served.
The Commission also notes that in Phase II, any areas that are reported
as served based on its current data but are ultimately deemed unserved
will be eligible, and expect that Phase II will occur sooner if Phase I
is not delayed by a more burdensome challenge process. The Commission
directs the Bureau to release a list and map of initially eligible
census blocks based on the most recent publicly available FCC Form 477
data. If more recent FCC Form 477 data is available when the Commission
adopts the specific procedures for the Phase I auction, the Bureau
should use the more recent data and publish a final list.
13. CAF Phase II support was targeted to ``census blocks where the
cost of service is likely to be higher than can be supported through
reasonable end-user rates alone'' by using a cost benchmark that
reflected the expected amount of revenue that could reasonably be
recovered from end users. In the CAF Phase II auction, the Commission
included high-cost areas where the CAM estimated the cost per location
to exceed $52.50 per month. The Commission departs from that decision
here in the Rural Digital Opportunity Fund auction and it will also
include some census blocks where the CAM suggests the costs of
deployment are below that $52.50 high-cost threshold, but deployment
has nonetheless not yet occurred. When the Commission proposed
including at least some low-cost blocks, then-current data indicated
that 6.3 million locations with costs below a $52.50 per month
benchmark still lacked 25/3 Mbps broadband (including 3.4 million
locations that lacked even 10/1 Mbps broadband based on staff analysis
of current FCC Form 477 data), suggesting that potential end-user
revenue alone had not incentivized deployment despite the model's
predictions. Therefore, to encourage deployment of high-speed broadband
in rural census blocks that are wholly unserved, the Commission will
use a lower funding threshold to include blocks where the CAM estimates
the cost per location equals or exceeds $40 per month, rather than
$52.50. Although some commenters do not agree with providing support in
such lower cost areas, the Commission finds that a modest reduction in
the funding threshold is warranted given the number of census blocks
where market forces alone have been insufficient to bring broadband to
these areas.
14. To account for the unique challenges of deploying broadband to
rural Tribal communities, the Commission will use a funding threshold
of $30 per month. This approach is consistent with the Tribal Broadband
Factor established for Tribal areas for carriers that elected model-
based rate-of-return support, which used a 25% decrease compared to the
$52.50 benchmark. Because the Commission will use a $40 benchmark for
the Phase I auction, the $30 benchmark for Tribal areas reflects a 25%
decrease compared to the $40 funding threshold. Using a $30 funding
threshold for census blocks in Tribal areas, in addition to including
blocks below the $40 threshold, has the effect of increasing the
reserve price in all Tribal areas by $10 per location. Finally, to
provide additional incentives in wholly unserved areas that even lack
10/1 Mbps, the Commission will also use a $30 per month funding
threshold in these areas. A number of commenters agree that the
Commission should prioritize these areas, and it finds that an
increased reserve price could encourage deployment in areas where rural
consumers have been left behind.
15. Consistent with the approach the Commission took in the CAF
Phase II auction, it adopts a general auction framework and eligibility
criteria in the Order and leaves the specific procedures to 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 Order.
16. Auction Framework. For Phase I, the Commission adopts a single
nationwide, multi-round reverse auction with competition within and
across eligible geographic areas to identify areas that will receive
support and determine support amounts, as it did for the CAF Phase II
auction. The Commission's experience in the CAF II auction demonstrates
that reverse auctions allow for market forces to maximize the impact of
finite universal service resources while awarding support to those
providers that will make the most efficient use of the budgeted funds.
Utilizing an auction mechanism will allow the Commission to distribute
support consistent with its policy goals and priorities in a
transparent manner. An auction provides a straightforward means of
identifying those providers that are willing to provide voice and
broadband at a competitive cost to the Fund, 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.
17. Commenters broadly support the use of a reverse auction to
distribute Rural Digital Opportunity Fund support. For example,
commenters state that based on the success of the CAF Phase II auction,
reverse auctions can be expected to produce robust deployment cost-
effectively. The Nebraska Public Service Commission, on the other hand,
raised concerns that a reverse auction focuses on ``the cheapest way to
get to the minimum speed of a given speed tier to a coverage area''
rather than ``focusing on robust and scalable technology.'' The
Commission disagrees. As demonstrated in CAF Phase II, reverse auctions
are the best available tool to achieve the Commission's overall goal of
closing the digital divide in a transparent and efficient manner while
maintaining fiscal responsibility and cost-
[[Page 13776]]
effectiveness. Moreover, in most instances, CAF Phase II winning
bidders agreed to provide a higher speed than the minimum; thus, the
Commission was able to push finite universal service support to many
more locations at a much lower cost and higher speeds. The Commission
therefore maintains that a reverse auction is the most efficient means
of awarding Rural Digital Opportunity Fund support, consistent with its
goal of supporting the buildout of the best possible networks in the
most cost-effective manner possible.
18. Similar to the CAF Phase II auction, the Commission adopts an
auction design in which bidders committing to different performance
levels will have their bids weighted to reflect its preference for
higher speeds, greater usage allowances, and lower latency. However, in
addition to the weights for each performance tier and latency
combination adopted in the following, the Commission adopts bid
processing procedures specific to the ``clearing round'' of the Rural
Digital Opportunity Fund Phase I auction. In the clearing round, the
bidding system will take into account the combined performance tier and
latency weight when assigning support to bidders competing for support
in the same area at the base clock percentage. Among other
modifications to the procedures used in the CAF II auction, the bidding
system will assign support in the clearing round to the bidder with the
lowest performance tier and latency weight instead of, as was done in
the CAF II auction, carrying forward all bids at the base clock
percentage for the same area for bidding in additional clock rounds. If
two or more bids were submitted with the same lowest performance tier
and latency weight in the clearing round, bidding for an area will
continue in additional clock rounds.
19. In the CAF II auction, the Commission adopted an auction that
considered all bids simultaneously, ``so that bidders that propose to
meet one set of performance standards will be directly competing
against bidders that propose to meet other performance standards.'' In
the Rural Digital Opportunity Fund auction, the Commission will
continue to accept bids committing to different performance levels. In
Phase I, however, once the budget has cleared, the Commission will
prioritize bids with lower tier and latency weights, thereby
encouraging the deployment of networks that will be sustainable even as
new advancements are made and which will be capable of delivering the
best level of broadband access for many years to come, all while
keeping funding within the Phase I budget. Although this approach could
result in less intra-area competition after the clearing round in some
areas, the auction will have selected the best possible service, at a
competitive level of support, for the same number of consumers living
in those areas, and this will result in more rapid and efficient
funding for such deployment. In other words, the Commission's goal to
close the digital divide is balanced against its goal to support the
deployment of future-proof networks by this auction. Overall, the
Commission does not expect this approach to adversely impact
competition. The Commission will still accept competitive bids
proposing to offer performance that meets or exceeds the minimums at
each performance tier and latency, but for those areas where there is
still competition as of the clearing round, the Commission will
prioritize selection of bidders that propose to offer the highest
speeds, most usage, and lowest latency for each area.
20. The Commission also adopts the same general competitive bidding
rules, which allow for the subsequent determination of additional,
specific final auction procedures based on additional public input
during the pre-auction process, and the Commission will apply as
appropriate any modifications to those rules that it may adopt. Those
competitive bidding rules, together with the additional rules the
Commission adopts in this document, will establish Rural Digital
Opportunity Fund winning bidders' performance obligations, eligible
areas, and post-auction obligations and oversight. As it typically does
for Commission auctions, the Commission will seek further comment on
auction procedures at a future date, so it does not address the
comments in the Order that speak to those issues. A number of
commenters propose specific changes to the auction that would be better
evaluated during the process to develop detailed auction procedures.
21. Reserve Prices. Consistent with the CAF Phase II auction
procedures, the Commission will use the CAM to establish area-specific
reserve prices. The Commission makes several adjustments to its
approach in the CAF II auction to include some unserved areas that were
excluded from the CAF Phase II auction and to potentially provide
additional funding to extremely high-cost areas. Specifically, the
Commission concludes it is appropriate to reduce the high-cost support
threshold to $40 per location. The Commission also increases the per-
location support cap to $212.50. This approach will add additional
locations above the new threshold and increase inter-area bidding.
Finally, the Commission will prioritize areas entirely lacking 10/1
Mbps and Tribal areas by further lowering the funding threshold for
such areas by 25% to $30.
22. The reserve price in each wholly-unserved, eligible census
block will be equal to the average per-location cost of deploying and
operating a network (as calculated by the CAM) above the $40 support
threshold and up to the per-location support cap of $212.50, multiplied
by the number of locations in the block. Lowering the support threshold
from $52.50 to $40 per locations will provide support to unserved areas
in which the CAM may be understating costs, while still being cognizant
about not offering support in areas market forces alone are likely to
extend broadband. The Commission previously determined that a CAM-
calculated average per-location cost of $52.50 reflected an appropriate
line between areas requiring support and those where market forces
would be sufficient. Where some areas have not yet seen unsubsidized
deployment of broadband networks, it could be an indication that the
assumptions underlying the CAM do not always reflect the reality facing
service providers, and the Commission now concludes it is appropriate
to revisit the high-cost threshold. Likewise, the Commission increases
the per-location support cap to ensure that the highest-cost areas,
many of which did not receive winning bids in the CAF II auction, will
see sufficient interest from bidders in the Rural Digital Opportunity
Fund. Thus, the Commission will set the reserve price based on a lower
support threshold of $40 for all areas and raise the per-location
support cap from $146.10 to $212.50, ultimately helping promote
participation and competition in the Rural Digital Opportunity Fund
Phase I auction.
23. The Commission's goal with this auction is to target support
and provide incentives to serve areas that are known to currently lack
service at speeds of at least 25/3 Mbps. Whereas the CAF Phase II
auction targeted support to high-cost areas where the incumbent price
cap carrier declined the offer of model-based support and extremely
high-cost areas nationwide, here the Commission expands its focus to
include certain areas that remain unserved despite being identified by
the CAM as lower cost. As the Commission stated in the Rural Digital
Opportunity Fund NPRM, 84 FR 43543, August 21, 2019, the new lower
support threshold
[[Page 13777]]
of $40 will ensure that only census blocks above the new support
threshold will be eligible for the auction. Buckeye Hills Regional
Council asserts that the Commission should lower the cost threshold to
$20 or $30 for difficult to serve parts of the country such as
Appalachia. However, lowering the threshold any further than $40 would
provide more support than needed and many locations could be included
that are more likely to be served without universal service support.
24. Certain commenters oppose including unserved low-cost census
blocks in Phase I of the auction, raising concerns that the auction
would shift funding to more densely populated areas at the expense of
more rural consumers and census blocks. The Commission notes that these
areas remain unserved, despite being identified as low cost by CAM more
than five years ago. Moreover, the Commission is lowering the support
threshold in all eligible census blocks, thereby increasing reserve
prices (and potentially available support) throughout. The Commission
declines to adopt NCTA's proposal to reduce the cost threshold only to
account for the costs of upgrading an already deployed network capable
of providing 10/1 Mbps to one capable of providing 25/3 Mbps,'' to
``ensure the . . . fund does not . . . pay more than necessary to serve
these areas.'' The Commission disagrees. NCTA's approach focuses on
areas that already have 10/1 Mbps but not 25/3 Mbps and presumes that
the existing provider would be the auction winner. While an existing
provider should in many cases be able to seek less support from the
auction in order to upgrade existing facilities, it may ultimately be
more efficient for a new provider to serve that same biddable unit with
new facilities, in addition to serving neighboring areas that lack 10/1
Mbps broadband services.
25. The Commission also adopts its proposal in the Rural Digital
Opportunity Fund NPRM to prioritize census blocks that lack 10/1 Mbps
over eligible census blocks that have 10/1 Mbps service, but lack
service at 25/3 Mbps based on Form 477 data. Specifically, the
Commission accomplishes this by reducing the support threshold for such
census blocks by an additional 25% to $30, which will have the effect
of raising the support cap for these blocks to $222.50. Some commenters
support prioritizing areas that lack 10/1 Mbps and some suggest the
reserve prices in such areas should be increased to incentivize bidders
in those areas. USTelecom opposes focusing first on areas that lack 10/
1 Mbps stating that it would be difficult to implement ``absent
mapping'' and due to ongoing CAF Phase II deployment. Pacific Dataport
objects to a 10/1 Mbps prioritization and argues it is a ``desperate
attempt to force-fit a terrestrial solution whether or not the
economics make sense.'' The Commission disagrees with both commenters.
As stated in this document, the Commission has the data to identify
census blocks that are wholly unserved by broadband speeds of at least
10/1 Mbps and are not aware of cases where Form 477 data have
identified as ``unserved'' a census block that is in fact served. One
of the Commission's goals in this proceeding is to provide incentives
to serve locations that lack any terrestrial option. Prioritizing areas
that lack 10/1 entirely is consistent with the Commission's statutory
mandate that such services are deployed to areas lacking broadband and
makes sure this auction does not leave on the wrong side of the digital
divide those areas lacking even basic broadband access.
26. For Tribal areas, the Commission similarly adopts the Tribal
Broadband Factor as a 25% decrease, to $30, of the support threshold
applied to Tribal areas. More specifically, with regard to census
blocks located within the geographic area defined by the boundaries of
the Tribal land, all eligible census blocks for which the CAM-derived
cost is more than $30 will be included in the auction, and the reserve
price for such blocks will be the CAM-derived cost minus $30, up to a
per-location support cap of $222.50. The Commission recognizes the
difficulty Tribal lands have faced in obtaining broadband deployment,
and by incorporating this Tribal Broadband Factor, the Commission seeks
to incentivize network buildout to ensure that Tribal Nations and their
members obtain access to advanced communications services. The record
before the Commission provides ample support for adopting a 25%
decrease of the cost benchmark to incentivize Rural Digital Opportunity
Fund participants to bid on and serve rural Tribal census blocks. A
Tribal Broadband Factor will attach to the eligible Tribal areas, and
thus reflect the additional cost of serving Tribal lands. While the
Commission remains committed to promoting deployment on Tribal lands,
it declines to extend a Tribal-specific preference to Tribal entities
or to require a nontribal entity to ``prove an established
partnership'' prior to the auction. The Commission concludes that it
serves the public interest to maximize participation, and to award
support to the most cost-effective bids, subject to the performance and
latency weights it adopts in the following.
27. Bidding Credits. The Commission declines to adopt bidding
credits for offsetting bidding weights or committing to certain
buildout requirements, as proposed by some bidders. Adopting bidding
credits to reward bidders for simply having met prior regulatory
obligations, for example, would be contrary to the competitive nature
of the auction, and, could ultimately reduce the potential reach of the
Rural Digital Opportunity Fund. While the Commission declines to adopt
a Tribal bidding credit, in this document, it has incorporated into the
reserve prices for Tribal lands a Tribal Broadband Factor, similar to
what the Commission previously incorporated into the recent offer of
model-based support to rate-of-return carriers serving Tribal lands,
which will reflect the higher costs unique to deploying service on
Tribal lands that may not otherwise already be included in the CAM, and
satisfy the Commission's goal of bridging the digital divide.
28. Minimum Geographic Area for Bidding. The Commission concludes
that the minimum geographic area for bidding will be no smaller than a
census block group, as identified by the U.S. Census Bureau, containing
one or more eligible census blocks. As the Commission determined in the
CAF Phase II Procedures PN, using census block groups ensures that all
interested bidders, including small entities, have flexibility to
design a network that matches their business model and the technologies
they intend to use. Nevertheless, as the Commission did in the CAF
Phase II auction, it reserves the right to select census tracts, or
other groupings of areas, when it finalizes the auction design if
necessary to limit the number of discrete biddable units. While some
commenters support bidding based on eligible census blocks, the
Commission declines to adopt individual census blocks as the minimum
geographic area for bidding because of the significantly larger number
of eligible census blocks, increasing the complexity of the bidding
process both for bidders and the bidding system and minimizing the
potential for broad coverage by winning bidders. Furthermore, using
census blocks as the minimum geographic area could create more
challenges for providers in putting together a bidding strategy that
aligns with their intended network construction or expansion.
29. The Commission adopts technology-neutral standards for voice
[[Page 13778]]
and broadband services supported by the Rural Digital Opportunity Fund,
based on its experience in the CAF Phase II auction and its success in
awarding support to a variety of service providers to deploy broadband
in unserved rural areas, and consistent with long-standing Commission
policy. Specifically, the Commission will permit bids in four
performance tiers, and for each tier will differentiate between bids
that would offer either low- or high-latency service. The Minimum
performance tier means 25/3 Mbps with a usage allowance that is the
greater of 250 GB per month or the average usage of a majority of fixed
broadband customers as announced by the Bureau on an annual basis; the
Baseline performance tier means 50/5 Mbps speeds with a 250 GB monthly
usage allowance or a monthly usage allowance that reflects the average
usage of a majority of fixed broadband customers as announced by the
Bureau on an annual basis, whichever is higher; the Above-Baseline
performance tier means 100/20 Mbps speeds with 2 TB of monthly usage;
and the Gigabit performance tier means 1 Gbps/500 Mbps speeds with a 2
TB monthly usage allowance. The Commission adopts 250 GB as the minimum
monthly usage allowance for the Baseline performance tier rather than
the 150 GB as proposed because based on Measuring Broadband America
October 2018-September 2019 usage data, the average monthly usage for
fixed broadband customers is 251.45 GBs per month.
30. Low- or high-latency bids will be required to meet the same
latency requirements as the CAF Phase II auction high- and low-latency
bidders. Low latency means 95% or more of all peak period measurements
of network round trip latency are at or below 100 milliseconds, and
high latency means 95% or more of all peak period measurements of
network round trip latency are at or below 750 milliseconds and a
demonstration of a score of 4 or higher using the Mean Opinion Score
with respect to voice performance.
31. The Commission maintains a Minimum performance tier for the
Rural Digital Opportunity Fund but increase the speed from 10/1 Mbps to
25/3 Mbps. In the CAF Phase II auction, winning bids in a Minimum
performance tier, which required only 10/1 Mbps broadband, covered less
than 1% of locations awarded support. The record generally supports
eliminating the 10/1 Mbps performance tier. Although the Navajo Nation
and the Navajo Nation Telecommunications Regulatory Commission (NNTRC)
request that the Commission establish a 10/1 Mbps bidding tier for
Indian Country because costs of deploying 25/3 Mbps on reservations may
discourage bidders, they provided no specific, detailed information
about differences in cost. Moreover, allowing another performance tier
only in certain areas would complicate the bidding system and the
Commission believes the Tribal Broadband Factor will be sufficient to
increase support on Tribal lands and incent providers to bid on Tribal
lands.
32. Some commenters argue that a Baseline tier of 25/3 Mbps is too
low and the Commission should establish a higher speed tier as the
minimum eligible for the auction, or that bidders proposing 25/3 Mbps
should be required to deploy to all locations in three years and
receive only five years of support. Although the Commission has a
preference for higher speeds, it recognizes that some sparsely
populated areas of the country are extremely costly to serve and
providers offering only 25/3 Mbps may be the only viable alternative in
the near term. Accordingly, the Commission declines to raise the
required speeds in the Minimum tier and it is not persuaded that
bidders proposing 25/3 Mbps should be required to build out more
quickly or have their support term reduced by half.
33. Several others argue that the Commission should include a
fourth performance tier between the Minimum and Gigabit tiers, some
suggesting a tier between 25/3 Mbps and 100/20 Mbps, and others
suggesting a tier between 100/20 Mbps and the Gigabit tier. The
Commission agrees, and accordingly, add an additional performance tier.
The Commission finds that allowing bidders to offer 50/5 Mbps service
is ``critical to reaching the truly high-cost areas in a cost effective
way'' while meeting the ``immediate broadband needs'' of consumers
today. Adding a performance tier at 50/5 Mbps furthers the Commission's
goal of incentivizing providers to deploy networks that will deliver
services that consumers need today as well as in the future, but also
ensures Minimum speed service will be available in the hardest to serve
areas.
34. The Commission declines to make any modifications to its two
latency tiers. Some commenters propose a third, very low-latency tier.
Commenters have provided no persuasive evidence that suggests
technologies meeting latency standards below 100 milliseconds would
have such a material benefit for consumers when compared to services
meeting the Commission's existing long-standing low-latency
requirements that it should potentially divert support to those lower-
latency technologies and would not expect consumers to notice the lower
latency that would make it worth weighting the auction differently. The
Commission notes that providers are encouraged to offer service that
improves upon the Commission's minimum tier thresholds.
35. Satellite providers argue that the Commission's existing
latency tiers do not account for certain satellites capable of
providing lower latency, and that the high-latency weight discourages
hybrid networks. SES Americom, which offers middle-mile capacity on its
satellites to telecommunications carriers, argues its medium earth
orbit satellites can provide broadband service with a latency between
120 milliseconds and 150 milliseconds. Viasat and Hughes ask that the
Commission permits a provider to qualify at the low-latency weight if
it demonstrates a mean opinion score of 4 or more for VoIP service and
routes latency-sensitive traffic over links in which 95% or more of all
peak period measurements of network round trip latency are at or below
100 milliseconds. Although medium earth orbit satellites and hybrid
satellite technologies have the potential to deliver high-speed
broadband to previously unserved rural areas, these technologies have
not been deployed widely to deliver service to residential consumers;
therefore, it would be premature to modify the Commission's latency
standards based on the record to qualify these technologies in the
Phase I auction to bid with a lower-latency weight, or add an
additional interim latency weight. This decision does not preclude the
Commission from reconsidering the feasibility of modifying latency
standards to accommodate medium earth orbit satellite and hybrid
satellite technologies for Phase II of the Rural Digital Opportunity
Fund.
36. As in the CAF Phase II auction, the Commission adopts weights
that reflect its preference for higher speeds, higher usage allowances,
and low latency. The Commission also anticipates that terrestrial fixed
networks will likely result in significant fiber deployment that can
serve as a backhaul for rural 5G networks. Accordingly, the Commission
chooses performance tier and latency weights to encourage the
deployment of higher speed, low-latency services. Specifically, the
Commission adopts weights of 50 for the Minimum performance tier, 35
for the Baseline performance tier, 20 for the Above Baseline
performance tier, and 0 for the Gigabit performance tier, as well as a
weight of 40 for high-latency bids and 0 for low-latency bids to favor
higher-
[[Page 13779]]
than Baseline speeds and low-latency services. Under the descending
clock auction format the Commission will use the weights, when
subtracted from the clock percentage for the round, to indicate the
percentage of an area's reserve price that a winning bidder would
receive in per-location support for serving the locations in that area.
37. The following charts summarize the Commission's approach:
Performance Tiers, Latency, and Weights
----------------------------------------------------------------------------------------------------------------
----------------------------------------------------------------------------------------------------------------
Minimum.................................. >=25/3 Mbps................. >=250 GB or U.S. average, 50
whichever is higher.
Baseline................................. >=50/5 Mbps................. >=250 GB or U.S. average, 35
whichever is higher.
Above Baseline........................... >=100/20 Mbps............... >=2 TB...................... 20
Gigabit.................................. >=1 Gbps/500 Mbps........... >=2 TB...................... 0
----------------------------------------------------------------------------------------------------------------
------------------------------------------------------------------------
------------------------------------------------------------------------
Low Latency........................... <=100 ms 0
High Latency.......................... <=750 ms & MOS >=4 40
------------------------------------------------------------------------
38. The Commission declines to modify the 90-point maximum spread
between the tiers that the Commission used in the CAF II auction. Many
commenters argued that the Commission should increase the 90-point
spread between the highest and lowest tiers to favor higher speeds even
more. Others argue that the Commission should narrow the weighting
spread. Although the Commission does value higher speed services, it
also recognizes that different technologies may be better suited for
different areas. Based on the Commission's experience with the CAF
Phase II auction and its weights, the Commission believes the weights
it adopts will provide an opportunity for providers using various
technologies to participate in the auction and to compete for
appropriate levels of support while providing a minimum level of
service to consumers in all awarded areas.
39. The Commission adopts its proposal to establish a weight of 40
points as the weight for high-latency services, which is an increase
from the CAF Phase II weight of 25. Satellite providers oppose
increasing the weight for high latency. Viasat claims that
substantially increasing the latency weight would effectively preclude
meaningful participation by geostationary orbit (GSO) satellite
providers in the auction and would give Viasat and other GSO satellite
providers virtually no chance of participating successfully. Moreover,
Viasat argues that increasing the latency weight would significantly
reduce the number of supported locations, leaving behind areas where no
terrestrial provider bids, and substantially increase the average per-
location subsidies in areas where terrestrial providers do bid. On the
other side, several commenters argue the Commission should assign an
even greater weight to high-latency bids. USTelecom argues that
satellite broadband service is not a bridge to next-generation 5G
broadband services and suggests that the Commission exclude satellite
from bidding in the Phase I auction, or at a minimum, increase the
high-latency weighting to 60. The Commission's decision to introduce a
more moderate increase to the high-latency weight reflects the
importance of latency to interactive, real-time applications and voice
services, as well as the secondary benefits of terrestrial facilities,
but also recognizes the importance of allowing all technologies the
ability to participate in the auction and offer service to unserved
areas. Moreover, adopting a fourth performance tier will moderate some
of the effects of the Rural Digital Opportunity Fund NPRM's proposed
weights. The 90-point spread the Commission adopts in this document
will allow high-latency bidders to compete for appropriate levels of
support in a much larger auction.
40. All Rural Digital Opportunity Fund support recipients, like all
other high-cost ETCs, will be required to offer standalone voice
service and offer voice and broadband services at rates that are
reasonably comparable to rates offered in urban areas. Some commenters
urge the Commission to eliminate the standalone voice requirement.
WISPA argues that RDOF recipients should not be required to offer
standalone voice service, because, consumers increasingly are
subscribing to voice as a component of their broadband connections.
SpaceX claims the standalone voice requirement is no longer useful for
nearly all consumers because Americans no longer choose to buy
standalone voice, and the requirement adds costs to develop and make
available voice equipment and provide voice-specific customer support.
GeoLinks urges the Commission to simply require that auction winners
offer a voice service option, which can be available via a service
bundle. The National Association of Counties states that
``unfortunately, the unintended consequence of this requirement would
prevent willing and able entities from providing high-speed broadband
internet services solely because they do not provide voice services in
addition to broadband.''
41. Section 254 of the Communications Act of 1934, as amended,
gives the Commission the authority to support telecommunications
services, which the Commission has defined as ``voice telephony
service.'' The Commission made clear when it adopted the standalone
voice requirement as a condition of receiving Connect America Fund
support in 2011 that the definition of the supported service, voice
telephony service, is technologically neutral, allowing ETCs to
provision voice service over many platforms. When it adopted the
broadband reasonable rate comparability requirement in 2014, the
Commission explained that ``high-cost recipients are permitted to offer
a variety of broadband service offerings as long as they offer at least
one standalone voice service plan and one service plan that provides
broadband that meets the Commission's requirements.'' In 2018, the
Commission dismissed requests to eliminate the standalone voice
requirement. The Commission reasoned that auction funding recipients,
unlike funding recipients of other USF mechanisms, ``may be the only
ETC offering voice in some areas and not all consumers may want to
subscribe to broadband service.'' The record does not show that these
facts have changed, and voice telephony is still the supported service.
Therefore, the Commission requires all ETCs receiving Rural Digital
Opportunity Fund support to provide standalone voice service meeting
the reasonable comparability requirements in the areas in which they
receive support.
42. Some commenters suggest that the Commission adopts additional
public interest obligations. For example, the Schools, Health &
Libraries Broadband Coalition argues that the Commission should
specifically require recipients of Rural Digital Opportunity Fund
support to deploy high-quality broadband to
[[Page 13780]]
anchor institutions in their service territories. The California
Emerging Technology Fund argues that the Commission should require
every provider to propose a low-income package with a rate not to
exceed $20. The Commission notes that support recipients, like all
high-cost ETCs, will be required to report annually the number of
anchor institutions to which they newly began providing service and to
comply with all relevant Lifeline rules. Additional obligations
regarding anchor institutions and low-income subscribers are more
properly addressed in the Commission's other universal service
programs.
43. The Commission adopts interim service milestones for the Rural
Digital Opportunity Fund that are based on those the Commission adopted
for the CAF Phase II auction for monitoring progress in meeting
deployment obligations. The Commission will require support recipients
to commercially offer voice and broadband service to 40% of the CAM-
calculated number of locations in a state by the end of the third full
calendar year following funding authorization, and 20% each year
thereafter. The Commission modifies that approach, however, in the way
it accounts for possible disparities between the CAM location counts
and the actual number of locations in a winning bidder's service
territory in a state. Although initial service milestones will be based
on the number of locations identified by the CAM, the Commission is
confident that it will have access to more accurate location data in
the next few years, whether as a result of the Digital Opportunity Data
Collection, the development of a broadband serviceable location
database, the 2020 Census and/or some other data source. The Commission
concludes that winning bidders will be required to serve the number of
locations subsequently identified in each respective area. The
Commission is persuaded by commenters who argue that the costs of
building and operating broadband networks are predominantly governed by
the size and characteristics of the areas served rather than the
precise number of locations. The Commission accordingly directs the
Bureau to seek comment on the updated location data and publish revised
location counts no later than the end of service milestone year six,
which the Commission expects to be 2027. The Commission will then use
the new location counts to determine whether a Rural Digital
Opportunity Fund support recipient offers the required voice and
broadband service throughout the designated area by the end of
milestone year eight.
44. The Commission takes this approach because the record reflects
considerable concern about the proposed pro rata reductions in a
winning bidder's support if, ultimately, there are fewer locations than
originally identified by the Commission. For the CAF Phase II auction,
the Commission created a process to facilitate appropriate adjustments
to the defined deployment obligations, with associated support
reductions, and delegated the implementation of this process to the
Bureau. Most commenters in this proceeding oppose the pro rata support
reductions, and argue that the Commission should not penalize support
recipients when the location data used to establish milestones
overstates the number of locations in an area. The Commission agrees
and will not reduce support if the Bureau's updated location counts
indicate fewer actual locations in the awarded areas in most
circumstances.
45. Location counts in the CAM are based on 2011 Census data and
the Commission recognizes that there may be some disparity between the
number of locations identified before the auction occurs and the
``facts on the ground.'' Moreover, circumstances may change before the
end of the 10-year support term. Some rural areas may experience a
decrease in population, and in other areas new housing developments may
be built. By requiring build-out to the entire designated area even in
light of the possibility that location numbers could change, the
Commission seeks to ensure the availability of broadband and voice
services to as many rural consumers and small businesses within the
Phase I auction areas by the end of the ten-year term as possible.
46. Until the Bureau adopts new location counts, the Commission
will measure compliance with service milestones against the CAM
location counts across the awarded areas for each Phase I support
recipient. The Commission will require support recipients to
commercially offer voice and broadband service to 40% of the CAM-
calculated number of locations in a state by the end of the third full
calendar year following funding authorization, and 20% each year
thereafter, consistent with the CAF Phase II deployment obligations. In
the following, the Commission explains how service milestones will be
revised in various circumstances after the Bureau gathers more accurate
location counts.
47. More Locations. After the Bureau adopts updated location
counts, in areas where there are more locations than the number of CAM
locations, the Commission will not require a support recipient to
commercially offer voice and qualifying broadband to 100% of the new
number of locations until year eight. The Commission will continue to
use the CAM location counts to measure compliance with interim service
milestones up to 100% of the CAM locations by the end of the sixth
calendar year. If there are more new locations than CAM locations,
recipients should be able to meet those milestones, and measuring
compliance against the new number of locations later in the term will
give carriers the opportunity to revise and update deployment plans
after the Bureau announces the new number of locations. The Commission
does not adopt an interim milestone for the end of year seven, although
carriers will be required to report to Universal Service Administrative
Company (USAC), consistent with current high-cost rules, any locations
deployed in that calendar year. Support recipients will be required to
offer service to 100% of the new location count by the end of year
eight. Carriers for which the new location count exceeds the CAM
locations within their area in each state by more than 35% will have
the opportunity to seek additional support or relief from the
Commission.
48. Any such ETC with increased deployment obligations may also
seek to have its new location count adjusted to exclude additional
locations, beyond the number identified by CAM, that it determines
before the end of year eight are ineligible (e.g., are not habitable),
unreasonable to deploy to (e.g., if it would require a carrier to
install new backhaul facilities or other major network upgrades solely
to provide broadband to that location), or part of a development newly
built after year six for which the cost and/or time to deploy before
the end of the support term would be unreasonable.
49. Fewer Locations. In areas where there are fewer locations than
CAM locations, a support recipient must notify the Bureau no later than
the March 1 following the fifth year of deployment. Upon confirmation
by the Bureau, the Commission will require support recipients to reach
100% of the new number by the end of the sixth calendar year. While
planning and deploying its network, a support recipient that discovers
there are not enough locations to even meet its service milestones in
years three and four, which are based on the number of CAM locations,
should seek a waiver from the Bureau. Carriers for which the
[[Page 13781]]
new location count is less than 65% of the CAM locations within their
area in each state shall have their support amount reduced on a pro
rata basis by the number of reduced locations.
50. Newly Built Locations. In addition to offering voice and
broadband service to the updated number of locations identified by the
Bureau, the Commission requires support recipients to offer service on
reasonable request to locations built subsequently. Support recipients
are not obligated to offer service to these newly built locations that
do not request service, or to those with exclusive arrangements with
other providers. Assuming a two-year deployment cycle, support
recipients similarly are not required to deploy to any locations built
after milestone year eight.
51. The Commission aligns the service milestones and related
reporting deadlines with those of other high-cost programs to minimize
the administrative burdens on the Commission, USAC, and support
recipients. Regardless of when a Rural Digital Opportunity Fund
recipient is authorized to begin receiving support, each service
milestone will occur on December 31. The Commission acknowledges that,
by aligning the service milestones, some Rural Digital Opportunity Fund
support recipients likely will have more than three years to complete
their 40% milestone. CenturyLink suggests that the Commission authorize
funding for all winning bidders to begin on January 1, 2022 to align
all Rural Digital Opportunity Fund support recipients on calendar year
basis for receipt of support and corresponding obligations. The
Commission finds that its method of aligning service milestones is
preferable because it establishes December 31 as the service milestone
date for all participants regardless of authorization date but still
allows the Commission to authorize support for a participant and thus
to begin broadband deployment in unserved areas as soon as possible.
52. The Commission concludes that a support recipient will be
deemed to be commercially offering voice and/or broadband service to a
location if it provides service to the location or could provide it
within 10 business days upon request. All ETCs must advertise the
availability of their voice services through their service areas, and
the Commission requires support recipients also to advertise the
availability of their broadband services within their service area.
Compliance with service milestone requirements will be determined on a
state-level basis, so that a support recipient would be in compliance
with a service milestone if it offers service meeting the relevant
performance requirements to the required percentage of locations across
all of the awarded areas included in its winning bids in a state.
53. The Commission also sought comment on whether it should require
support recipients to build out more quickly earlier in their support
terms by offering voice and broadband to 50% of the requisite number of
locations in a state by the end of the third year. A few commenters
supported an accelerated buildout schedule, while the Navajo Nation and
NNTRC asked the Commission to extend build-out milestones on Tribal
Lands to recognize the difficulty in deploying infrastructure in Indian
Country. Upon consideration, the Commission finds that using the same
interim milestones as in the CAF II auction strikes the appropriate
balance and, thus, adopts the identical first service milestone that it
used there. Recipients have ample incentive to reach their buildout
milestones as quickly as possible to increase their subscribership and
revenues. However, the Commission also recognizes that deploying
broadband in some areas will be more challenging than in others and may
require all the time allowed by the deployment milestones.
54. To ensure that support recipients are meeting their deployment
obligations, the Commission adopts essentially the same reporting
requirements for the Rural Opportunity Digital Fund that it adopted for
the CAF Phase II auction. Consistent with the Commission's decision in
this document to align the interim service milestones, it requires
Rural Digital Opportunity Fund support recipients to file annually
location and technology data in the HUBB at the same time and to make
the same certifications when they have met their service milestones.
The Commission also amends section 54.316 of its rules to require all
Rural Digital Opportunity Fund support recipients, as all high-cost
support recipients currently do, to file their annual location data in
the HUBB by March 1, and the Commission encourages them to file such
data on a rolling basis.
55. The Commission also requires Rural Digital Opportunity Fund
support recipients to file the same information in their annual FCC
Form 481s that it requires of the CAF Phase II auction support
recipients. Specifically, in addition to the certifications and
information required of all high-cost ETCs in the FCC Form 481, Rural
Digital Opportunity Fund support recipients will be required to certify
each year after they have met their final service milestone that the
network they operated in the prior year meets the Commission's
performance requirements. In addition, they will be required to
identify the number, names, and addresses of community anchor
institutions to which they newly began providing access to broadband
service in the preceding calendar year as well as identify the total
amount of support that they used for capital expenditures in the
previous calendar year. Moreover, support recipients will need to
certify that they have available funds for all project costs that will
exceed the amount of support they will receive in the next calendar
year. Finally, Rural Digital Opportunity Fund support recipients will
be subject to the same annual section 54.314 certifications, the same
record retention and audit requirements, and the same support
reductions for untimely filings as all other high-cost ETCs.
56. In the event a support recipient does not meet a service
milestone, the Commission adopts the same non-compliance measures that
are applicable to all high-cost ETCs, the same framework for support
reductions applicable to high-cost ETCs that are required to meet
defined service milestones, and the same process the Commission adopted
for drawing on letters of credit for the CAF Phase II auction. The
Commission also adopts additional non-compliance measures for a support
recipient that fails to meet its third-year service milestone by more
than 50%. Specifically, the Commission relies on the following non-
compliance tiers (which are described in more detail in section 54.320
of the Commission's rules):
Non-Compliance Framework
------------------------------------------------------------------------
------------------------------------------------------------------------
Tier 1: 5% to less than 15% of the Quarterly reporting.
required number of locations.
Tier 2: 15% to less than 25% of the Quarterly reporting + withhold
required number of locations. 15% of monthly support.
Tier 3: 25% to less than 50% of the Quarterly reporting + withhold
required number of locations. 25% of monthly support.
[[Page 13782]]
Tier 4: 50% or more of the required Quarterly reporting + withhold
number of locations. 50% of monthly support for six
months; after six months
withhold 100% of monthly
support and recover percentage
of support equal to compliance
gap plus 10% of support
disbursed to date.
------------------------------------------------------------------------
57. A support recipient will have the opportunity to move tiers as
it comes into compliance and will receive any withheld support as it
increases build-out and moves from one of the higher tiers (i.e., Tiers
2-4) to Tier 1 status during the build-out period. If a support
recipient misses the six year or eight year service milestone as
applicable, it will have 12 months from the date of the service
milestone deadline to come into full compliance.
58. Given that the Commission is modifying the service deployment
milestones to account for the Bureau's updated location counts, the
Commission makes commensurate modifications to the consequences if an
ETC does not come into full compliance after the grace period for its
sixth-year service milestone or, for an ETC with a new location count
that is greater than its CAM location count, its eighth-year service
milestone. At the sixth-year service milestone, support will be
recovered as follows: (1) If an ETC has deployed to 95% or more of the
CAM location count, or of the adjusted CAM location count if there are
fewer locations, but less than 100%, USAC will recover an amount of
support that is equal to 1.25 times the average amount of support per
location received in the state for that ETC over the support term for
the relevant number of locations; (2) if an ETC has deployed to 90% or
more of the CAM location count, or of the adjusted CAM location count
if there are fewer locations, but less than 95%, USAC will recover an
amount of support that is equal to 1.5 times the average amount of
support per location received in the state for that ETC over the
support term for the relevant number of locations, plus 5% of the
support recipient's total Rural Digital Opportunity Fund support
authorized over the ten-year support term for that state; and (3) if an
ETC has deployed to fewer than 90% of the CAM location count, or of the
adjusted CAM location count if there are fewer locations, USAC will
recover an amount of support that is equal to 1.75 times the average
amount of support per location received in the state for that ETC over
the support term for the relevant number of locations, plus 10% of the
support recipient's total Rural Digital Opportunity Fund support
authorized over the ten-year support term for that state.
59. If the ETC's new location count is greater than its CAM
location count, and recognizing the increased obligations of such ETCs,
support will be recovered as follows if the ETC does not meet the
eighth year service milestone: (1) If an ETC has deployed to 95% or
more of its new location count, but less than 100%, USAC will recover
an amount of support that is equal to the average amount of support per
location received in the state for that ETC over the support term for
the relevant number of locations; (2) if an ETC has deployed to 90% or
more of its new location count, but less than 95%, USAC will recover an
amount of support that is equal to 1.25 times the average amount of
support per location received in the state for that ETC over the
support term for the relevant number of locations; (3) if an ETC has
deployed to 85% or more of its new location count, but less than 90%,
USAC will recover an amount of support that is equal to 1.5 times the
average amount of support per location received in the state for that
ETC over the support term for the relevant number of locations, plus 5%
of the support recipient's total Rural Digital Opportunity Fund support
authorized over the ten-year support term for that state; and (4) if an
ETC has deployed to less than 85% of its new location count, USAC will
recover an amount of support that is equal to 1.75 times the average
amount of support per location received in the state for that ETC over
the support term for the relevant number of locations, plus 10% of the
support recipient's total Rural Digital Opportunity Fund support
authorized over the ten-year support term for that state.
60. The same support reductions will apply if USAC later determines
in the course of a compliance review that a support recipient does not
have sufficient evidence to demonstrate that it was offering service to
all of the locations required by the sixth or eighth service
milestones.
61. As in the CAF Phase II auction, USAC will be authorized to draw
on an ETC's letter of credit to recover all of the support that is
covered by the letter of credit in the event that a support recipient
does not meet the relevant service milestones, does not come into
compliance during the cure period, and does not timely repay the
Commission the support associated with the non-compliance gap. If a
support recipient is in Tier 4 status during the build-out period or
has not deployed to 100% of CAM locations by the end of year six (or
the adjusted location total if there are fewer locations), and USAC has
initiated support recovery as described in this document, the support
recipient will have six months to pay back the support that USAC seeks
to recover. If the support recipient does not repay USAC by the
deadline, the Bureau will issue a letter to that effect and USAC will
draw on the letter of credit to recover all of the support that is
covered by the letter of credit. If a support recipient has closed its
letter of credit and it is later determined that the support recipient
does not have sufficient evidence to demonstrate that it was offering
service to the total number of required locations, that support
recipient will be subject to additional non-compliance measures if it
does not repay the Commission after six months. And like other high-
cost ETCs, support recipients will be subject to other sanctions for
non-compliance with the terms and conditions of high-cost funding,
including but not limited to the Commission's existing enforcement
procedures and penalties, reductions in support amounts, potential
revocation of ETC designations, and suspension or debarment.
62. The Commission sought comment on whether there are additional
measures it could adopt that would help ensure that Rural Digital
Opportunity Fund support recipients will meet their third-year service
milestones, and on what steps it should take if it appears support
recipients will not be able to meet their service milestones. The
National Rural Electric Cooperative Association (NRECA) suggested the
Commission make more detailed inquiries of a support recipient to the
extent it substantially misses the 40% service obligation at the three-
year benchmark and possibly terminate support payments. The Commission
agrees with NRECA that it is unlikely that a recipient that
substantially misses its third-year milestone would be able to come
into compliance in the following year. The Commission therefore directs
[[Page 13783]]
any support recipient that believes it cannot meet its year three
milestone to notify the Bureau and provide information explaining this
expected deficiency. If a support recipient has not made such
notification by March 1 following the third-year service milestone and
has deployed by the end of the third-year milestone to fewer than 20%
of its required locations in that state, the Commission will find the
recipient to be in default, rather than withholding support and
providing an additional six months to come into compliance.
63. The Commission declines to adopt additional performance targets
to provide greater incentives for Rural Digital Opportunity Fund
support recipients to enroll customers in the eligible areas. The
Commission specifically sought comment on a proposal to adopt
subscribership milestones set at 70% of the yearly deployment
benchmarks and reduce support accordingly for failure to meet the
subscription target. Most commenters opposed a subscription requirement
and argued that a 70% subscription requirement was too high and
unrealistic in rural areas. Even some commenters supporting the concept
of a subscription requirement thought 70% was too high and suggested
any subscribership requirement should be as low as 35%. Commenters
argued that a subscribership requirement with reductions in support for
failure to meet those targets would discourage participation in the
auction, and change the focus of the Rural Digital Opportunity Fund
program from a deployment program to an adoption program.
64. The Commission agrees that requiring specific subscription
milestones is likely to discourage many bidders from participating in
the auction because they would risk losing funding when they likely
need it most to complete the buildout of their networks. Commenters
pointed out that support recipients have a statutory obligation to
advertise the availability of their services throughout their service
areas and argue that they have the incentive to attract customers to
increase their revenues. Commenters also argued that subscription rates
of 70% in some rural, low-income areas would be almost impossible to
attain. In addition, support recipients must be prepared to provide
service meeting the relevant public interest obligations within 10
business days to any locations they report in the HUBB for purposes of
meeting the service milestones, which will give support recipients
added incentive to ensure their networks have sufficient capacity to
serve the required number of locations. Given these requirements, the
risk of discouraging participation in the auction, and the
administrative complexity of monitoring subscribership, the Commission
declines to require a certain level of subscription as a condition of
Rural Digital Opportunity Fund support.
65. Consistent with prior Commission auctions and based on its
recent experience with the CAF Phase II auction, the Commission adopts
the two-stage application process that will govern the auction process
for the Rural Digital Opportunity Fund, including pre-auction and post-
auction requirements.
66. The Commission concludes that participants in the Rural Digital
Opportunity Fund Phase I auction process will be required to comply
with the same short-form and long-form application process.
Specifically, in the pre-auction short-form application, a potential
bidder will be required to establish its eligibility to participate in
the auction by providing, among other things, basic ownership
information and certifying to its qualifications to receive support.
Once approved as qualified to bid by the Bureau, the company may
participate in the auction. After the auction, winning bidders must
file more extensive information for the long-form application,
demonstrating to the Commission that they are legally, technically and
financially qualified to receive support. As in CAF Phase II, the
Commission stresses that each potential bidder has the sole
responsibility to perform its due diligence research and analysis
before proceeding to participate in the Rural Digital Opportunity Fund
auction. The Commission directs the Bureau, the Office of Economics and
Analytics, and the Rural Broadband Auctions Task Force, to adopt the
format and deadlines for the submission of documentation for the short-
form and long-form applications.
67. Consistent with the approach in the CAF Phase II auction and
proposed in the Rural Digital Opportunity Fund NPRM, the Commission
adopts its existing universal service competitive bidding rules so that
applicants will be required to provide information that will establish
their identity, including disclosing parties with ownership interests
and any agreements the applicants may have relating to the support to
be sought through the Rural Digital Opportunity Fund auction.
Interested parties will submit a pre-auction short-form application,
providing basic information and certifications regarding their
eligibility to receive support. Commission staff will then review the
short-form applications, determining whether the applicants are
eligible to participate in the auction. Thereafter, Commission staff
will release a public notice indicating which short-form applications
are deemed complete and which are deemed incomplete. Consistent with
CAF Phase II, applicants whose short-form applications are deemed
incomplete will be given a limited opportunity to cure defects and to
resubmit correct applications, excluding major modifications. As in CAF
Phase II, a second public notice will be released designating the
applicants that are qualified to participate in the Rural Digital
Opportunity Fund auction.
68. Ownership. The Commission will require that each auction
applicant provide information in its short-form application to
establish its identity, including information concerning its real
parties in interest and its ownership, and to identify all real parties
in interest to any agreements relating to the participation of the
applicant in the competitive bidding. The Commission will also require
an applicant to provide in its short-form application a brief
description of any such agreements, including any joint bidding
arrangements. Commission staff would use such information to identify
relationships among applicants, including those that might be commonly
controlled or members of a joint bidding arrangement. The Commission
will also require every applicant to certify in its short-form
application that it has not entered into any explicit or implicit
agreements, arrangements, or understandings of any kind related to the
support to be sought through the Rural Digital Opportunity Fund
auction, other than those disclosed in the short-form application.
69. Types of Technologies. The Commission will also require all
applicants to indicate the type of bids that they plan to make and
describe the technology or technologies they will use to provide
service for each bid. This information is imperative to establishing
bidders' eligibility for the bidding weights the Commission adopts.
Consistent with CAF Phase II, the Commission will allow an applicant to
use different technologies within a state as well as hybrid networks to
meet its public interest obligations.
70. Technical and Financial Qualifications Certifications.
Likewise, applicants will be required to certify that they are
financially and technically qualified to meet the public interest
obligations in each area for which they
[[Page 13784]]
seek Rural Digital Opportunity Fund support. Based on the Commission's
experience with CAF Phase II, this approach is an appropriate screening
process to ensure serious participation, without being overly
burdensome to applicants and recipients.
71. Operational History. Applicants will be required to provide
additional assurances to the Commission that the entities that intend
to bid in the auction have experience operating networks. The
Commission adopts a requirement that applicants certify in their short-
form application that they have provided voice, broadband, and/or
electric distribution or transmission services for at least two years
and that they specify the number of years they have been operating, or
that they are the wholly-owned subsidiary of an entity that meets these
requirements. Applicants that have provided voice or broadband services
must also certify that they have filed FCC Form 477s as required during
that time period. As the Commission determined in CAF Phase II, it also
will accept certifications from entities that have provided electric
distribution or transmission services for at least two years (or their
wholly owned subsidiaries).
72. An applicant that can certify it has provided voice, broadband,
and/or electric distribution or transmission services for at least two
years, or that it is a wholly-owned subsidiary of such an entity, will
provide the Commission with sufficient assurance before the auction
that it has the ability to build and maintain a network.
73. The Commission will require each applicant that does not have
two years of operational experience, to submit with its short-form
application its (or its parent company's) financial statements that
have been audited by an independent certified public accountant from
the three prior fiscal years, including the balance sheets, incomes,
and cash flow statements, along with a qualified opinion letter. The
Commission's interest in having a level of insight into the financial
health of a potential Rural Digital Opportunity Fund auction bidder
over a longer period of time is a necessary prequalification to bid,
particularly because this subset of bidders will not able to
demonstrate that they have operated and maintained a voice, broadband
and/or electric distribution or transmission network for at least two
years. Likewise, such applicants will also be required to submit a
letter of interest from a bank meeting the Commission's eligibility
requirements stating that the bank would provide a letter of credit to
the applicant if the applicant becomes a winning bidder and is awarded
support of a certain dollar magnitude. A letter of interest from the
bank will provide the Commission with an independent basis for some
additional assurance regarding the financial status of the entity.
74. The Commission declines to adopt a suggestions from USTelecom
and Windstream to limit the total bid based on the bidder's annual
revenues, while Verizon proposes further pre-auction scrutiny ``on
applicants that are seeking authority to bid for a large number of
locations, relative to the size of their existing customer base, or are
planning to bid for performance tiers in which they currently provide
little or no commercial service.'' The Commission is not persuaded that
either of these proposals are an effective method to guarantee the
financial qualifications of bidders to perform; instead, they would
more likely limit competition by arbitrarily excluding bidders with
more limited revenues or existing customer bases. The Commission is
generally reluctant to adopt additional measures that limit competition
from bidders and any concerns with financial qualifications will be
resolved during the short-form applications.
75. The Commission declines to collect less financial and technical
information from existing USF support recipients on the short-form than
it did in CAF Phase II as suggested by some commenters. It is important
for Commission staff to review the same specific information from each
carrier when evaluating carriers' qualifications to bid. However, CAF
Phase II auction participants that subsequently defaulted on their
entire award will be barred from participating in the Rural Digital
Opportunity Fund. The Commission declines to bar participants that
defaulted in other universal service programs as well as decline to
subject participants to additional scrutiny that subsequently defaulted
in CAF Phase II, as suggested by other commenters, or that have filed
for bankruptcy or that have been bankrupt in the recent past. The
Commission is capable of evaluating the circumstances of a prior
default and the outcome of any subsequent enforcement action without
collecting additional information in the short-form application. All
applicants will be subject to a thorough financial and technical review
in both the short-form application stage and the long-form application
stage prior to bidding and ultimately receiving support.
76. Conversely, some commenters stated that the Commission should
increase the short-form requirements. For instance, NTCA asserted that
the Commission should require that a prospective bidder demonstrate
``more thorough qualifications at the short-form stage'' focusing on
technical and operational qualifications. NRECA proposes shifting to
the short-form review more of the detailed technical and financial
showings conducted at the long-form review. USTelecom states that the
Commission should require an applicant to provide information about
subscribership trends and employee expertise to show that it has the
expertise and experience ``to scale its network.'' Subscribership and
employee expertise do not necessarily suggest that the entity is
unqualified to bid in the Rural Digital Opportunity Fund auction. The
Commission's interest in maximizing participation in the Rural Digital
Opportunity Fund auction outweighs the potential risk of qualifying a
less experienced entity to participate in the auction without reviewing
that bidder's subscribership and employee counts, particularly given
that it adopts the requirement that bidders will be required to submit
their audited financial statements. This will allow the Commission to
scrutinize the bidder's audited financial statements at the long-form
application stage before authorizing that entity to begin receiving
support. The Commission believes that requiring more technical and
operational information before the auction begins will provide
significant barriers to entry for some participants and unnecessarily
extend the short-form review period and delay the auction. Moreover,
additional technical information at the short-form stage would be
speculative based on a presumption of what a winning area would look
like.
77. Similarly, the Commission declines NTCA's proposal to require
applicants to submit propagation maps to show where they intend to bid,
as it would be burdensome on applicants ``particularly given the maps
may not be relevant if an applicant does not become qualified or does
become qualified but does not win support in that area.'' The
Commission concludes on balance that its short-form process provides
significant assurances for serious participation and its long-form
post-auction process, as discussed in the following, will provide an
in-depth extensive review of the winning bidders' qualifications.
78. Audited Financials. The Commission will require each applicant
that has certified that it has at least two years of operational
experience to submit financial statements that have been audited by an
independent certified public accountant from the
[[Page 13785]]
prior fiscal year, including balance sheets, net income and cash flow,
along with a qualified opinion letter with its short-form application.
If such an applicant (or its parent company) is not audited in the
ordinary course of business, the Commission will require the applicant
to submit unaudited financial statements from the prior fiscal year
with its short-form application and to certify that it will submit
audited financials during the long-form application process. The
Commission will require winning bidders that take advantage of this
option to submit their audited financials no later than the deadline
for submitting their proof of ETC designation (which is within 180 days
of the public notice announcing winning bidders). If the audit process
is expected to exceed 180 days, a winning bidder will have the option
of seeking a waiver of this deadline. In considering such waiver
requests, the Commission directs the Bureau to determine whether the
entity demonstrated in its waiver petition that it took steps to
prepare for an audit prior to being named a winning bidder and that it
took immediate steps to obtain an audit after being announced as a
winning bidder. Applicants that certify that they have at least two
years of operational experience and fail to submit audited financial
statements as required, will be subject to the same base forfeiture of
$50,000 that the Commission adopted for the CAF Phase II auction. The
Commission notes that most CAF Phase II auction support recipients were
able to obtain audited financial statements by the required deadlines.
As with the CAF Phase II auction, the Commission does not extend to
applicants that lack two years of operational history the option of
submitting audited financial statements during the long-form
application stage. They must submit audited financial statements from
the three prior fiscal years with their short-form application, as
described in this document.
79. Eligible Telecommunications Carrier Designation. The Commission
adopts the same CAF Phase II flexibility with respect to ETC
designations and do not require an applicant to obtain its designation
as an ETC in the areas where it seeks support prior to bidding in the
Rural Digital Opportunity Fund auction. The Commission does, however,
require an applicant to disclose in its short-form application its
status as an ETC in any area for which it will seek support or if it
will become an ETC in any area where it wins support. The Commission is
not persuaded that it should require an applicant to secure its ETC
designation prior to the auction. As the Commission determined in CAF
Phase II, permitting entities to obtain ETC designation after the
announcement of winning bidders for support, encourages broader
participation in the competitive process by a wider range of entities.
Additionally, the Commission's experience with CAF Phase II indicates
that most applicants were ultimately designated within the long form
review period, even if it took them longer than the ETC designation
proof deadline. The Commission will continue to presume that an entity
acted in good faith if it files its ETC application within 30 days of
the release of the public notice announcing that it is a winning
bidder, but as with both the rural broadband experiments and the CAF
Phase II auction, the Commission discovered there were various
circumstances impacting the ability of individual bidders to file their
ETC applications and that when an application was filed did not always
determine whether an applicant was designated within the 150 remaining
days.
80. Spectrum Access. Additionally, 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 Rural Digital Opportunity 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 the auction.
Consistent with CAF Phase II, the Commission will require applicants
intending to use spectrum to indicate the spectrum band(s) they will
use for the last mile, backhaul, and any other parts of the network;
and the total amount of uplink and downlink bandwidth (in megahertz)
that they have access to in each spectrum band for last mile.
Applicants must also describe the authorizations they have obtained to
operate in the spectrum and list the call signs and/or application file
numbers associated with their spectrum authorizations, if applicable.
Applicants must have secured any Commission approvals necessary for the
required spectrum access prior to submitting an auction application, if
applicable. 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. NTCA argues that applicants who do not
have access to spectrum should be required to show how they would
acquire it. The Commission agrees and, consistent with its treatment of
this situation in CAF Phase II, it will find a recipient in default if
it is unable to meet its obligations, including if the authorization is
not renewed during the support term.''
81. Also, any applicant that intends to provide service using
satellite technology will be required to identify in its short-form
application its expected timing for applying for any earth station
licenses it intends to use in the areas where it intends to bid, if it
has not already obtained these licenses. The Commission does not
require satellite providers to obtain all necessary earth station
licenses by the short-form application deadline. An earth station
license requires that a satellite provider bring the station into
operation within one year of obtaining a license and a satellite
provider may not be ready to meet this requirement by the short-form
filing deadline. Moreover, because an applicant can apply to obtain a
microwave license at any time, the Commission will permit an applicant
that intends to obtain microwave license(s) for backhaul to meet its
public interest obligations for the Rural Digital Opportunity Fund by
describing in its short-form application its expected timing for
applying for such license(s), if it has not already obtained them.
82. Due Diligence Certification. Consistent with the procedures
adopted for the CAF Phase II auction, the Commission adopts the
requirement that an applicant certify that it has performed due
diligence concerning its potential participation in the Rural Digital
Opportunity Fund auction so the applicant understands its obligations.
Specifically, the Commission adopts the requirement that each applicant
make the following certification in its short-form application under
penalty of perjury:
The applicant acknowledges that it has sole responsibility for
investigating and evaluating all technical and marketplace factors
that may have a bearing on the level of Rural Digital Opportunity
Fund support it submits as a bid, and that if the applicant wins
support, it will be able to build and operate facilities in
accordance with the Rural Digital Opportunity Fund obligations and
the Commission's rules generally.
83. This proposed certification will help ensure that each
applicant acknowledges and accepts responsibility for its bids and any
forfeitures imposed in the event of default, and that the applicant
will not attempt to place responsibility for the
[[Page 13786]]
consequences of its bidding activity on either the Commission or third
parties.
84. Winning bidders for the Rural Digital Opportunity Fund support
will be required to comply with the same long-form application process
the Commission adopted for CAF Phase II. The rules the Commission
adopts in the following provide the basic framework and requirements
for winning bidders to demonstrate their qualifications for support.
After the close of the auction, the Bureau will release a public notice
declaring the auction closed, identifying the winning bidders, and
establishing details and deadlines for next steps. Winning bidders will
then be required to submit extensive information detailing their
respective qualifications in their long-form applications, allowing for
a further in-depth review of their qualifications prior to
authorization of support. Any additional information that is required
to establish whether an applicant is eligible for Rural Digital
Opportunity Fund support will be announced by public notice. The
Commission notes that very few commenters addressed the Commission's
proposed post-auction long-form application processes and none of those
commenters raised significant concerns. The Commission therefore
concludes the rules it adopts in this document will best serve the
Commission's ability to determine whether the applicants are ultimately
eligible for Rural Digital Opportunity Support authorization funding,
providing a fair and efficient review process.
85. Ownership Disclosure. The Commission adopts the ownership
disclosure requirements proposed in the Rural Digital Opportunity Fund
NPRM. Specifically, an applicant for Rural Digital Opportunity Fund
support must fully disclose its ownership structure as well as
information regarding the real party- or parties-in-interest of the
applicant or application. Ownership disclosure reports from the short-
form process must be updated if any information reported in the short-
form has changed.
86. Financial and Technical Capability Certification. Consistent
with CAF Phase II, the Commission will require a long-form applicant 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.
87. Public Interest Obligations Certifications. The Commission next
adopts proposed rule 54.804(b)(2)(iii), concluding that a long-form
applicant must certify in its long-form application that it will meet
the relevant public interest obligations for each performance tier and
latency combination for which it was deemed a winning bidder, including
the requirement that it will offer service at rates that are equal to
or lower than the Commission's reasonable comparability benchmarks for
fixed services offered in urban areas.
88. Description of Technology and System Design. Due to the varying
types of technologies that entities may use to fulfill their Rural
Digital Opportunity Fund competitive bidding process obligations, the
Commission finds that it is also reasonable to require each winning
bidder to submit a description of the technology and system design it
intends to use to deliver voice and broadband service, including a
network diagram, which must be certified by a professional engineer.
The professional engineer must certify that the network is capable of
delivering, to at least 95% percent of CAM locations in each relevant
state, voice and broadband service that meets the requisite performance
requirements. There must be sufficient capacity to meet customer demand
at or above the prescribed levels during peak usage periods. Entities
proposing to use wireless technologies also must provide a description
of their spectrum access in the areas for which they seek support and
demonstrate that they have the required licenses to use that spectrum
if applicable. This documentation will enable Commission staff to have
assurance from an engineer that the proposed network will be able to
fulfill the service obligations to which the bidders will have to
commit. Filing deadlines will be strictly enforced, and bidders should
not presume that they may obtain a waiver absent extraordinary
circumstances.
89. Available Funds Certification. Next the Commission adopts
proposed rule 54.804(b)(2)(v), concluding that an applicant must
certify in its long-form application that it will have 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.
Simultaneously, the Commission will also require that winning bidders
describe in their long-form application how the required construction
will be funded and include financial projections that demonstrate that
they can cover the necessary debt service payments over the life of the
loan. Additionally, these requirements include the public interest
obligations contained in the Commission's rules.
90. ETC Eligibility and Documentation. Consistent with the CAF
Phase II auction rules, a winning bidder in the Rural Digital
Opportunity Fund auction will be permitted to obtain its ETC
designation after the close of the auction, submitting proof within 180
days of the public notice identifying winning bidders. The Commission
declines to forbear from the ETC requirement. The Commission recognizes
the statutory role that Congress created for state commissions and the
FCC with respect to ETC designations, and the Commission does not
disturb that framework. Nothing in the record addresses the standards
necessary to find forbearance in the public interest, even if some
interested parties may prefer not to become ETCs with all of the
associated obligations. Therefore, the Commission will continue to
require service providers to obtain ETC status to qualify for universal
service support. A winning bidder must demonstrate with appropriate
documentation that it has been designated as an ETC covering each of
the geographic areas for which it seeks to be authorized for support.
For example, in addition to providing the relevant state or Commission
orders, each winning bidder will need to demonstrate that its ETC
designation covers the areas of its winning bid(s) (e.g., census
blocks, wire centers, etc.). Such documentation could include map
overlays of the winning bid areas, or charts listing designated areas.
Furthermore, each winning bidder will be required to submit a letter
with its documentation from an officer of the company certifying that
its ETC designation for each state covers the relevant areas where the
winning bidders will receive support. As the Commission experienced
with CAF Phase II, these requirements will help them verify that each
winning bidder is permitted to operate in the areas where it will be
receiving support.
91. Forbearance from Service Area Redefinition Process. The
Commission adopts its proposal to forbear from the statutory
requirement that the ETC service area of a Rural Digital Opportunity
Fund participant conform to the service area of the rural telephone
company serving the same area. As in the CAF Phase II auction, the
Commission will be maximizing the use of Rural Digital Opportunity Fund
support by making it available for only one provider per geographic
area. Moreover, the Commission expects that the incumbent rural
telephone company's service area will no longer be relevant because the
incumbent service
[[Page 13787]]
provider may be replaced by another Rural Digital Opportunity Fund
recipient in portions of its service area. Thus, forbearance is
appropriate and in the public interest.
92. Accordingly, for those entities that obtain ETC designations as
a result of being selected as winning bidders for the Rural Digital
Opportunity Fund, the Commission forbears from applying section
214(e)(5) of the Act, insofar as this section requires that the service
area of such an ETC conform to the service area of any rural telephone
company serving an area eligible for Rural Digital Opportunity Fund
support. The Commission notes that forbearing from the service area
conformance requirement eliminates the need for redefinition of any
rural telephone company service areas in the context of the Rural
Digital Opportunity Fund competitive bidding process. However, if an
existing ETC seeks support through the Rural Digital Opportunity Fund
competitive bidding process 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. Likewise, as in CAF Phase II, some of the price cap
carrier study areas that may become eligible for the Rural Digital
Opportunity Fund competitive bidding process meet the statutory
definition so that the carrier serving those study areas would be
classified as a rural telephone company.
93. Thus, 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 new broadband to consumers in those
areas. Case-by-case forbearance would likely delay the Commission's
post-selection review of entities once they are announced as winning
bidders. The Act requires the Commission to forbear from applying any
requirement of the Act or its regulations to a telecommunications
carrier if the Commission 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. For the same reasons set forth in
the CAF Phase II Auction Order, 81 FR 44414, July 7, 2016, the
Commission concludes each of these statutory criteria is met for
winning bidders of the Rural Digital Opportunity Fund competitive
bidding process.
94. Letters of Credit. The Commission next adopts letter of credit
rules that provide appropriate protection for Rural Digital Opportunity
Fund support, with reduced burdens on participants. In CAF Phase II,
the Commission found that requiring bidders to obtain an irrevocable
standby letter of credit, covering the first year of support of a
recipient's winning bid, was an effective means to safeguard the
universal service funds. Moreover, the letter of credit was subject to
a phase-down schedule, reducing the burdens on the recipients. The
letter of credit requirement did not deter broad participation in the
CAF Phase II auction where the Commission awarded $1.488 billion in
support to 103 winning bidders and, as of December 2019, nearly 90
percent of carriers have been authorized after securing valid letters
of credit. Thus, the Commission is not persuaded to adopt suggestions
from commenters that it removes the letter of credit requirement
entirely, either for all winning bidders or for certain groups of
winning bidders such as Tribally owned and controlled carriers or
established rural carriers.
95. The Commission finds appropriate, however, certain
modifications to the letter of credit requirements proposed in the
Rural Digital Opportunity Fund NPRM. The Commission makes these changes
after hearing from commenters concerned about the fees associated with
maintaining the larger letters of credit required because of the size
of the Rural Digital Opportunity Fund. The Commission concludes that
the modified letter of credit requirements it adopts in the following,
which establishes a mechanism to easily recover disbursed funding in
the event of non-compliance, fulfills its responsibility to protect
program funds while also reducing for applicants the costs of
participating in the Rural Digital Opportunity Fund.
96. First, the Commission's revised approach allows a support
recipient to reduce the amount of its letter of credit as it meets--and
USAC verifies that a support recipient has completed--service
milestones. Specifically, the Commission requires support recipients to
report their deployed locations in the HUBB by March 1 following each
support year. Upon verification of the buildout by USAC, the Commission
will then allow the recipient to reduce its letter of credit to an
amount equal to only one year of total support. And once a support
recipient reduces its letter of credit obligation to one year of total
support, it will be able to maintain its letter of credit at that level
for the remainder of the deployment term, as long as USAC verifies that
the support recipient successfully and timely meets its remaining
service milestones.
97. Second, the Commission creates an optional 20% service
milestone in year two. Doing so allows a support recipient to
demonstrate concrete progress in building its network earlier than
existing milestones (40% in year three), thus allowing it to reduce its
letter of credit earlier than it could otherwise. The Commission
reiterates that this 20% buildout benchmark is optional; if a support
recipient does not meet this milestone, it will not be able to reduce
its letter of credit, but it will not face any reductions in support.
98. Third, the Commission finds that support recipients do not need
to wait for the specific support years to end to meet their deployment
milestones. For example, if a support recipient is able to deploy to
20% of its locations by the end of year one, it may report those
locations and request that USAC complete the verification process for
those locations in order to allow it to reduce its letter of credit to
one year of support. In those instances, the Commission requires that
these support recipients be able to immediately produce the necessary
documentation to minimize the time required for USAC to verify its
milestone.
99. Fourth, the Commission adopts a modified letter of credit
requirement for the time periods before any required service milestones
must be met and verified by USAC. Specifically, at the beginning of the
first year of its support term, a support recipient must obtain a
letter of credit equal to one year of the total support it will
receive. In year two, it will be required to obtain a letter of credit
equal to eighteen months of its total support. In year three, it will
be required to obtain a letter of credit equal to two years of its
total support. And in year four, it will be required to obtain a letter
of credit equal to three years of its total support. This schedule
balances the need to protect federal funds against the costs of a
letter of credit for those that decline to meet the optional 20%
deployment milestone.
100. Fifth, the Commission finds it necessary to maintain larger
letters of credit for support recipients that fail to meet service
milestones. If the support recipient misses a required service
milestone, it will be required to obtain a letter of credit covering an
additional year of total support for the next
[[Page 13788]]
applicable support year, up to a letter of credit covering a total of
three years of support. Likewise, any support recipient failing to meet
two or more service milestones will be required to maintain a letter of
credit in the amount of three years of support and will be subject to
additional non-compliance penalties as outlined in this document. The
Commission finds these increased letter of credit requirements will
both protect federal funds from potential default and serve as an
incentive to timely deployment.
101. Sixth, consistent with CAF Phase II, the Commission will
require that the letter of credit only remain open until the recipient
has certified that it has deployed broadband and voice service meeting
the Commission's requirements to 100% of the CAM locations by the end
of year six, and USAC has verified that the recipient has fully
deployed its network. The Commission does not expect new additional
locations in years seven and eight to be significant enough that it
would be necessary to secure that additional deployment with a letter
of credit, but recipients will be subject to other sanctions for non-
compliance with the terms and conditions of Rural Digital Opportunity
Fund support, including but not limited to the Commission's existing
enforcement procedures and penalties, reductions in support amounts,
potential revocation of ETC designations, and suspension or debarment.
102. In short, the Commission provides a letter of credit
trajectory that recognizes that once support recipients have
demonstrated significant and verifiable steps toward meeting their
deployment obligations, they should have the opportunity to avoid some
of the more significant credit requirements, consistent with their
proven performance in the Rural Digital Opportunity Fund. For those
support recipients that elect to deploy quickly and meet the 20%
optional milestone early in the support term, and continue to meet all
milestones, their letters of credit may never exceed 18 months' support
at any time during the support term. At the same time, the more gradual
increase in the letter of credit requirements the Commission adopts for
support recipients that do not elect to make use of the optional 20%
milestone will reduce potential financial strain on support recipients,
and still allow those support recipients to maintain a smaller letter
of credit once their first mandatory deployment milestone is met in
year three.
103. The Commission declines to adopt the specific parameters of
the letter of credit proposals advanced and supported by several
parties. After thorough review of these constructive proposals, the
Commission determines that they fail to sufficiently account for the
Commission's interests in ensuring that universal service dollars are
being used efficiently and for their intended purposes, as well as
protecting against the potential for those carriers that may fail to
fulfill their broadband deployment obligations. However, the approach
the Commission adopts here is consistent with the proposals advocated
by parties in that it recognizes that the letter of credit rules, as
originally proposed, would impose a disproportionate financial burden
on support recipients and result in less funding going directly to
broadband deployment. Moreover, given that the Rural Digital
Opportunity Fund will award up to almost 15 times the amount of funding
as the CAF Phase II auction, the Commission acknowledges that a one-
size-fits-all approach to letter of credit requirements may not
properly reflect the realities of a particular auction. Thus, the
Commission's revised approach strives to carefully balance the interest
of potential support recipients in minimizing their financial cost over
the course of the deployment term with the Commission's interest in
ensuring that universal funding is protected as the Rural Digital
Opportunity Fund progresses.
104. Consistent with CAF Phase II, the Commission will only
authorize USAC to draw on the letter of credit for the entire amount of
the letter of credit if the entity does not repay them for the support
associated with its compliance gap. Additionally, as stated in CAF
Phase II, ``if the entity fails to pay this support amount, the
Commission concludes that the risk that the entity will be unable to
continue to serve its customers or may go into bankruptcy is more
likely, and thus it is necessary to ensure that the Commission can
recover the entire amount of support that it has disbursed.'' The
Commission also requires each winning bidder to submit a commitment
letter from a bank no later than the number of days provided by public
notice. A long-form applicant must submit a letter from a bank
acceptable to the Commission, committing to issue an irrevocable stand-
by letter of credit, to the long-form applicant. The letter must, at a
minimum, provide the dollar amount of the letter of credit and the
issuing bank's agreement to follow the terms and conditions of the
Commission's model letter of credit provided in Appendix C of the
Order.
105. Once a winning bidder has been authorized, the Commission will
require an irrevocable standby letter of credit from a bank that is
acceptable to them in substantially the same form as the model letter
of credit provided in Appendix C of the Order. The letters of credit
for winning bidders must be obtained from a domestic or foreign bank
meeting the requirements adopted herein. For U.S. banks, the bank must
be insured by the Federal Deposit Insurance Corporation and have a
Weiss bank safety rating of B- or higher committing to issue a letter
of credit. Similarly, for non-U.S. banks, 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). Winning
bidders also have the option of obtaining a letter of credit from
CoBank or the National Rural Utilities Cooperative Finance Corporation
so long as they continue to meet the Commission's requirements. When a
winning applicant obtains a letter of credit, it must be at least equal
to the amount of the first year of authorized support. Before the
winning applicant can receive its next year's support, it must modify,
renew, or obtain a new letter of credit. The Commission concludes that
requiring recipients to obtain a letter of credit on at least an annual
basis will help minimize administrative costs for USAC and the
recipient rather than having to negotiate a new letter of credit for
each monthly disbursement.
106. However, the Commission will require all winning bidders to
provide a single letter of credit covering all of their winning bids
within a single state. The Commission declines to allow multiple
letters of credit that cover all bids in a state as it did for CAF
Phase II, as this option was not used and is administratively
burdensome on the Commission and USAC. Thus, a default in one census
block could result in a draw on the entire letter of credit.
107. As the Commission has previously recognized, it will again
allow for the option of greater flexibility regarding letter of credit
for Tribally owned and controlled winning bidders. Consistent with CAF
Phase II, if any Tribally owned and controlled Rural Digital
Opportunity Fund winning bidder is unable to obtain a letter of credit,
it may file a petition for a waiver of the letter of credit
requirement. Consistent with the Commission's precedent, waiver
applicants must show, with evidence acceptable to them, that the
Tribally owned and controlled
[[Page 13789]]
winning bidder is unable to obtain a letter of credit.
108. The determinations the Commission reaches in this document
take into consideration the comments submitted on the burdens
associated with the letter of credit requirement. The Commission
concludes, however, that the letter of credit requirement best protects
the Fund. While the Commission understands that there are costs
associated with the letter of credit, it continues to believe bidders
can incorporate these costs when determining their strategies prior to
the auction. The universal service program provides significant
benefits when weighed against the costs of the letter of credits, which
in turn provide significant security of public funding. As the
Commission has previously stated, letters of credit have ``the added
advantage of minimizing the possibility that the support becomes
property of a recipient's bankruptcy estate for an extended period of
time, thereby preventing the funds from being used promptly to
accomplish the Commission's goals.''
109. Commenters renewed requests for other safeguard measures, yet
none of the measures fully guarantee that the Commission will be able
to recover past support disbursements from a defaulting recipient.
Several commenters suggested performance bonds or sureties. For
example, WISPA and WTA assert the Commission should require auction
winners to obtain performance bonds as an alternative to obtaining
letters of credit, costing participants substantially less than a
letter of credit. USTelecom agrees, commenting that the Commission
should reconsider its proposals requiring Rural Digital Opportunity
Fund winners to obtain a letter of credit as it is a substantial
barrier to participation. Letters of credit, unlike performance bonds,
allow for an immediate reclamation of support in the event the
recipient is not properly using those funds. Performance bonds, on the
other hand, would not provide the same level of protection and would
require the involvement of a third party to adjudicate any disputes
that arise, which would complicate the Commission processes and
unnecessarily limit the authority of the Commission to allocate funds.
A letter of credit, unlike a performance bond, has the benefit of the
``independence principle'' in that the letter of credit is independent
of the underlying transaction. The bank's obligation to pay under the
letter of credit does not depend on the auction winner's default but on
the presentation of documents evidencing the default. Being independent
in this way assures that USAC can collect monies due to it promptly
without engaging in disputes with the winning bidder, the performance
bond guarantor or the winning bidder's trustee in bankruptcy over
whether the funds should be paid or even whether the funds are
available to the Fund due to competing claims of creditors.
110. Similarly, Frontier and Windstream recommend placing money in
escrow prior to bidding because they claim letters of credit are too
expensive. The record also includes several comments opposing letter of
credits or suggesting other means of protecting the Commission's
interests. However, the Commission is not persuaded that escrow
agreements, or other alternatives, would provide protection equal to
the letters of credit that it now requires. Escrow agreements would put
an amount of money with a third party who releases it when a
contingency is satisfied. The auction winner would be a party to the
escrow agreement, with the possibility that the support becomes the
property of an auction winner's bankruptcy. Additionally, the auction
winner would be required to place the same amount of funds in escrow as
were disbursed by USAC, which could cause ``administrative burdens'' on
the Commission and ``could potentially delay the auction.'' The
Commission itself would need to create an escrow account, attain the
money of all recipients, and manage and ensure proper payment to all
recipients, an unnecessary and inefficient duplication of a system
banks already have in place with letters of credit, with none of the
advantages. Instead, the Commission can rely on the expertise of banks'
experience in managing letters of credit, guaranteeing payment, and
ensuring security for the Commission and ultimately the Fund.
Therefore, the Commission declines to implement escrow accounts and
maintain the letter of credit requirement.
111. Finally, consistent with CAF Phase II, the Commission will
require each winning bidder to submit a bankruptcy opinion letter from
outside legal counsel. That opinion letter must clearly state, subject
only to customary assumptions, limitations, and qualifications, that in
a proceeding under the Bankruptcy Code, the bankruptcy court would not
treat the letter of credit or proceeds of the letter of credit as
property of the account party's bankruptcy estate, or the bankruptcy
estate of any other competitive bidding process recipient-related
entity requesting issuance of the letter of credit under section 541 of
the Bankruptcy Code. The West Virginia Council argues that the
bankruptcy opinion letter requirement is unduly burdensome and should
be eliminated ``to accommodate non-traditional service providers like
co-ops, non-profits, and government entities . . . .'' However, it is
important to receive confirmation from each winning bidder that its
letter of credit would not be consolidated in the estate. Therefore,
the Commission declines to eliminate this requirement and concludes
that the limited burden imposed on winning bidders to obtain this
letter is outweighed by its policy goal to be fiscally responsible with
finite universal service funds.
112. The Commission next adopts rules that establish the framework
under which a Rural Digital Opportunity Fund winning bidder will be
subject to a forfeiture under section 503 of the Act if it defaults on
its winning bid(s) before it is authorized to begin receiving support.
A recipient will be considered in default and will be subject to
forfeiture if it fails to timely file a long-form application, fails to
meet the document submission deadlines outlined in this document, is
found ineligible or unqualified to receive support, or otherwise
defaults on its bid or is disqualified for any reason prior to the
authorization of support. Consistent with CAF Phase II, a winning
bidder will be subject to the base forfeiture for each separate
violation of the Commission's rules.
113. For Rural Digital Opportunity Fund competitive bidding
purposes, the Commission defines a violation as any form of default
with respect to each geographic unit subject to a bid. The Commission
maintains that each violation should not be unduly punitive and expect
the forfeiture to be proportionate to the overall scope of the winning
bidder's bid. The Commission concludes that 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 its forfeiture
guidelines. To determine the final forfeiture amount, the Commission's
Enforcement Bureau will consider the ``nature, circumstances, extent
and gravity of the violations.''
[[Page 13790]]
114. No commenter specifically opposed the Commission's original
proposal to establish the forfeiture owed for an auction default.
However, Windstream characterized the CAF Phase II forfeiture as
``modest'' and ``apparently insufficient to prevent [defaulters] from
bidding.'' Windstream further noted that ``the forfeiture penalties
proposed against [defaulters], which range from $1,242 to $30,000 did
not deter these entities from bidding.'' USTelecom suggested that the
Commission raise the base forfeitures, as the CAF Phase II base amounts
were ``not substantial enough to dissuade'' uncommitted applicants from
participating.
115. The Commission agrees with commenters. Thus, to ensure that
the amount of the base forfeiture is not disproportionate to the amount
of an entity's bid, the Commission also limits the total base
forfeiture to 15% of the bidder's total bid amount for the support
term, which is an increase from the CAF Phase II auction limit of 5%.
The Commission expects this will further ensure serious participation,
without being overly burdensome and punitive to defaulters. As a
condition of participating in the Rural Digital Opportunity Fund
auction, entities will acknowledge that they are subject to a
forfeiture in the event of an auction default. Thus, the Commission
maintains that by adopting rules governing forfeitures for defaults,
``the Commission will impress upon recipients the importance of being
prepared to meet all its requirements for the post-selection review
process, and emphasize the requirement that they conduct a due
diligence review to ensure that they are qualified to participate in
the . . . competitive bidding process and meet its terms and
conditions.''
III. Rural Digital Opportunity Fund Transitions
116. In this section, the Commission addresses several issues
relating to the implementation of the Rural Digital Opportunity Fund in
areas currently served by price cap carriers receiving either legacy
high-cost or CAF Phase II model-based support. To ensure continuity of
service for consumers, the Commission adopts specific support
transition paths for census blocks served by these price cap carriers.
The Commission also considers additional issues related to the
transition from CAF Phase II model-based support to Rural Digital
Opportunity Fund support, including the continuing responsibilities of
incumbent price cap carriers no longer receiving support to serve
specific areas.
117. In the Rural Digital Opportunity Fund NPRM, the Commission
sought comment on adopting a transition period methodology for
incumbent price cap carriers receiving disaggregated legacy support
similar to the approach employed following the CAF Phase II auction.
Specifically, the Commission proposed that, in areas where an incumbent
price cap carrier receives disaggregated legacy support and
subsequently it or another provider becomes the authorized Rural
Digital Opportunity Fund support recipient, the incumbent will cease
receiving disaggregated legacy support on the first day of the month
after it is authorized to receive Rural Digital Opportunity Fund
support. In legacy high-cost support areas where no Rural Digital
Opportunity Fund support is authorized, the Commission proposed
allowing the incumbent to continue receiving disaggregated support
until further Commission action. Finally, the Commission proposed
ceasing disaggregated legacy support payments to incumbent carriers in
any census block deemed ineligible for the Rural Digital Opportunity
Fund on the first day of the month after the final Rural Digital
Opportunity Fund eligible areas list is released.
118. Likewise, the Commission sought comment on transitioning
support in areas served by CAF Phase II model-based support recipients.
In particular, the Commission asked whether these carriers should
receive an additional seventh year of model-based support, given the
potential timing of a Rural Digital Opportunity Fund auction, and, if
so, whether that additional support should be made available to all
carriers receiving model-based support or only a certain subset of
those carriers. The Commission also sought comment on whether the
seventh year of support should be modified in any way, including
whether it should cover all of 2021 or just a portion of the year, as
well as whether any additional obligations should be tied to this
support. Finally, the Commission asked parties to highlight any
additional issues related to the transition of support.
119. Commenters broadly supported ensuring appropriate transitions
to Rural Digital Opportunity Fund auction support and encouraged the
Commission to affirm that all CAF Phase II model-based support
recipients are entitled to a full seventh year of funding. In areas won
by bidders in the Rural Digital Opportunity Fund auction, CenturyLink
proposed that the Commission authorize all auction winners on January
1, 2022, with legacy transition support and CAF Phase II model-based
support continuing through that time. Frontier argued that, in areas
where the Rural Digital Opportunity Fund auction winner is not the
incumbent price cap carrier, the Commission must provide continued
support to existing CAF Phase II providers to ensure continued voice
and broadband services, proposing a six-year phase out of this support
at periods equal to the inverse of the new provider's deployment
milestones. ITTA also argued for continued support for the incumbent
price cap carriers in these areas, but instead proposed that the
incumbent receive support at the level of the winning bidder in the
respective service area until the winning bidder is able to serve all
the locations currently served by the incumbent. In areas where there
is no Rural Digital Opportunity Fund auction winner, Frontier and ITTA
encouraged the Commission to provide existing price cap carriers with
sufficient support to continue providing broadband and voice service.
USTelecom, Windstream, and ITTA further advocated for continued support
to incumbent price cap carriers in areas where auction winners are not
authorized by the end of 2021. Additionally, CenturyLink and NTCA
proposed extending ongoing support in areas deemed ineligible for the
Rural Digital Opportunity Fund. Other commenters highlighted the need
for transitional support and encouraged the Commission to tie specific
metrics or obligations to this support.
120. For incumbent price cap carriers currently receiving support
through the disaggregated legacy high-cost support mechanism, the
Commission determines that adopting a transition to Rural Digital
Opportunity Fund auction support that builds on the approach employed
following the CAF Phase II auction will provide necessary clarity as it
implements a new support mechanism. As the Commission noted when it
adopted the transitions to CAF Phase II auction support, such an
approach will ``protect customers of current support recipients from a
potential loss of service, and minimize the disruption to recipients of
frozen legacy support from a loss of funding'' while at the same time
ensuring that finite universal service funds are used responsibly.
121. First, in areas currently funded by disaggregated legacy
support that are subsequently won in the Rural Digital Opportunity Fund
auction by the incumbent price cap carrier, the incumbent will cease
receiving
[[Page 13791]]
disaggregated legacy support on the first day of the month following
its authorization to receive Rural Digital Opportunity Fund support.
Likewise, in legacy high-cost support areas won in the Rural Digital
Opportunity Fund auction by new providers, the incumbent will cease
receiving disaggregated legacy support the first day of the month after
the new ETC is authorized to receive such support. In these instances,
the Commission believes it is appropriate to transition to the new
support mechanism as soon as possible to ensure that finite support
dollars are used most efficiently.
122. The Commission recognizes that there may be eligible areas in
the Rural Digital Opportunity Fund auction that see significant
interest, but do not receive a winning bid. For these areas, the
Commission revisits its prior approach of extending disaggregated
legacy support on an interim basis until further Commission action. As
the Commission previously noted, continued legacy support in auction-
eligible, high-cost areas was provided on an interim basis pending
further Commission action. Thus, carriers receiving legacy support have
been on notice that this support would not be provided in perpetuity.
The Commission now concludes that price cap carriers receiving legacy
support in areas that do not receive a winning bid will cease receiving
such support on the first day of the month following the close of Phase
I of the auction. These support amounts will instead be included as
part of the budget for Phase II of the auction. The Commission also
declines to extend additional support to these carriers to maintain
fixed voice services in these areas. As the Commission's most recent
data indicate, mobile voice subscriptions constitute almost 75% of the
overall consumer voice subscriptions in the United States. Given the
increasing ubiquity of fixed and mobile voice services, dedicating
continued support for fixed voice services would be an inefficient use
of the Commission's finite universal service dollars. Instead, the
Commission concludes that directing support toward deploying more
robust broadband services, rather than continuing to maintain current
minimum service levels, is the best use of this funding. The Commission
notes, however, that these areas will be included in Phase II of the
Rural Digital Opportunity Fund auction and thus price cap carriers
currently serving these areas will have the opportunity to bid on and
again receive support to provide voice and broadband services in these
areas.
123. In all census blocks deemed ineligible for the Rural Digital
Opportunity Fund auction, incumbent price cap carriers will no longer
receive legacy support beginning the first day of the month following
release of the final Rural Digital Opportunity Fund eligible areas list
for Phase I of the auction. Because these areas will be excluded from
Phase I of this auction, the Commission has determined that continued
legacy support for these areas is no longer necessary. Thus, the
Commission will cease distributing legacy support as soon as possible
in order to preserve its finite universal service funds, instead
focusing support to areas in the greatest need of broadband deployment.
Transition of Price Cap Carriers' Legacy Support
------------------------------------------------------------------------
------------------------------------------------------------------------
Won at auction by the Receives legacy support until the first
incumbent price cap carrier. day of the month following its
authorization, then transitions to Rural
Digital Opportunity Fund support.
Won at auction by a new Receives legacy support until the first
provider. day of the month following the new
provider's authorization; new provider
then receives Rural Digital Opportunity
Fund support.
Not won at auction........... Receives legacy support until the first
day of the month following close of the
auction.
Not eligible for auction..... Receives legacy support until the first
day of the month following release of
the final eligible areas list.
------------------------------------------------------------------------
124. Next, the Commission addresses support transitions in areas
where incumbent price cap carriers currently receive CAF Phase II
model-based support. As with the Commission's approach for legacy
support transitions, it has attempted to strike a balance between
properly allocating its finite resources and ensuring that consumers
across the country have access to uninterrupted services. The
Commission notes at the outset that it, in establishing the six-year
term of support for model-based support recipients that would extend
through 2020, intended to conduct a competitive bidding process in
areas served by these carriers ``no later than the end of 2019 to
ensure there is continuity and a transition path'' to the next support
mechanism. Though the Commission did not meet this initial goal, it
intends to conduct Phase I of the Rural Digital Opportunity Fund before
the end of 2020. However, the Commission has learned from its
experience with the CAF Phase II competitive bidding process that
additional work will remain post-auction before winning bidders will be
authorized to receive Rural Digital Opportunity Fund support and
provide the required voice and broadband service. Because this work
likely will stretch into 2021, the Commission revisits the previously
established term of support for incumbent price cap carriers.
125. In the December 2014 CAF Phase II Order, 80 FR 4446, January
27, 2015, the Commission recognized the importance of providing a
transition path between recipients of CAF Phase II model-based support
and recipients of funding under a new support mechanism. Specifically,
the Commission determined that it would offer incumbent price cap
carriers the option of electing an additional year of support--through
calendar year 2021--if they did not win at, or chose not to participate
in, the subsequent competitive bidding process. Because of the timing
considerations regarding Phase I of Rural Digital Opportunity Fund
explained in this document, the Commission now determines that an
additional seventh year for carriers receiving model-based support is
necessary to ensure continuity in service for consumers and to provide
a reasonable support glide path as it transitions from one support
mechanism to another. This additional seventh year will not be limited
to carriers that do not win in Phase I of the Rural Digital Opportunity
Fund auction or carriers that do not participate in the auction;
instead it will be available to all price cap carriers that elected the
offer of model-based support in exchange for meeting defined service
obligations. The Commission directs the Bureau to determine and
implement a mechanism that will enable these price cap carriers to
elect whether to receive an additional seventh year of support.
126. The Commission clarifies that in census blocks where a price
cap carrier elects not to receive a seventh year of model-based
support, it is indicating that ongoing model-based support is not
necessary to maintain voice and broadband services in these areas.
Thus,
[[Page 13792]]
the carrier will receive no further support after the conclusion of its
six-year term (i.e., December 31, 2020), even if these areas are
eligible for the Rural Digital Opportunity Fund auction. Following
Phase I of the auction, the provider authorized to receive funding in
these areas--whether the incumbent price cap carrier or a new
provider--will begin receiving Rural Digital Opportunity Fund support
the first day of the month after it is authorized. For areas where no
qualifying bid is received in Phase I of the Rural Digital Opportunity
Fund auction, as well as for areas deemed ineligible for Phase I of the
Rural Digital Opportunity Fund auction, the incumbent price cap
carrier's model-based support will cease on December 31, 2020 and no
further support will be provided in these areas.
Transition for Price Cap Carriers in Areas Where a Carrier Declines a
Seventh Year of Model-Based Support
------------------------------------------------------------------------
------------------------------------------------------------------------
Won at auction by the Receives model-based support through
incumbent price cap carrier. 2020; begins receiving Rural Digital
Opportunity Fund support the first day
of the month after it is authorized.
Won at auction by a new Receives model-based support through
provider. 2020; new provider begins receiving
Rural Digital Opportunity Fund support
the first day of the month after it is
authorized.
Not won at auction........... Receives model-based support through
2020.
Not eligible for auction..... Receives model-based support through
2020.
------------------------------------------------------------------------
127. In census blocks where a price cap carrier elects to receive a
seventh year of model-based support, the Commission clarifies that the
carrier will receive a full seventh calendar year of support--from
January 2021 through December 2021--regardless of whether Rural Digital
Opportunity Fund support is authorized in these areas in 2021. Thus, in
areas where a price cap carrier currently receives model-based support
that are subsequently won in the Rural Digital Opportunity Fund auction
by a new provider, the incumbent price cap carrier will continue to
receive model-based support through 2021, even if the new provider is
authorized to receive Rural Digital Opportunity Fund support in 2021.
The Commission concludes providing support to both the incumbent price
cap carrier and the new Rural Digital Opportunity Fund provider in
these areas for the limited duration of 2021 will help facilitate an
appropriate transition to a new ETC. The Commission notes that price
cap carriers receiving the seventh year of model-based support will
``be required to continue providing broadband with performance
characteristics that remain reasonably comparable to the performance
characteristics of terrestrial fixed broadband service in urban
America, in exchange for ongoing CAF Phase II support.''
128. Similarly, in census blocks where a price cap carrier elects
to receive a seventh year of model-based support and ultimately becomes
the authorized Rural Digital Opportunity Fund support recipient, the
price cap carrier will continue to receive support at its model-based
levels through 2021, with Rural Digital Opportunity Fund support levels
commencing in January 2022. The Commission declines to adopt
USTelecom's proposal that incumbent price cap carriers be allowed to
choose the greater of their model-based support or RDOF support amount
to receive during the remainder of 2021. The Commission observes that
the reserve price for the RDOF auction is based on the support amounts
calculated by the model and likely will be bid down by participants in
the auction. Thus, in most, if not all, cases a price cap carrier's
model-based support amount will be greater than its Rural Digital
Opportunity Fund support amount. Relatedly, in some instances, the
incumbent price cap carrier may wish to expand its service area from
its current CAF Phase II model-based supported areas and may bid on and
be authorized to receive support in census blocks eligible for the
Rural Digital Opportunity Fund that are adjacent to areas in which the
carrier receives model-based support. Because the Commission expects
the amount of model-based support that a carrier is receiving in a
certain area to be higher than the amount of Rural Digital Opportunity
Fund support it will receive, it expects these carriers to use the
additional model-based support they receive in 2021 to begin the
process of planning their buildouts for any adjacent, non-model-based
support census blocks they may win.
129. In auction-eligible census blocks where a price cap carrier
elects to receive a seventh year of model-based support and no
qualifying bid is received in Phase I of the Rural Digital Opportunity
Fund auction, the incumbent price cap carrier will continue to receive
model-based support until the end of 2021. At that point, no further
support will be provided to carriers serving these areas. As the
Commission previously noted, the state-level commitment procedure for
incumbent price cap carriers was intended to be limited in scope and
duration. Though the Commission is providing carriers with a potential
seventh year of support, this option is limited in duration and, as
previously contemplated by the Commission, is a ``a gradual transition
to the elimination of support.'' The Commission therefore concludes
that extending support in these areas beyond the seven-year term simply
to maintain substandard broadband levels would be an inefficient use of
its limited universal service funds. Moreover, providing additional
support simply to maintain fixed voice services in these areas is an
inefficient use of funding given the ubiquity of mobile voice services.
Instead, the Commission determines that these funds should be aimed at
deploying high-speed broadband networks in rural communities across the
country.
130. Likewise, census blocks where a price cap carrier elects to
receive a seventh year of model-based support that are deemed
ineligible for the Rural Digital Opportunity Fund auction will cease
receiving model-based support at the end of 2021. Because the
Commission, by excluding these blocks from Phase I of this auction, has
determined that ongoing model-based support for these areas is no
longer necessary, no further support will be provided to carriers
serving these blocks after 2021. This approach is consistent with the
Commission's decision to stop providing legacy support in areas deemed
ineligible for both the CAF Phase II auction and the Rural Digital
Opportunity Fund auction and allows funding to flow to areas in the
greatest need of broadband deployment.
[[Page 13793]]
Transition for Price Cap Carriers in Areas Where a Carrier Elects to
Receive a Seventh Year of Model-Based Support
------------------------------------------------------------------------
------------------------------------------------------------------------
Won at auction by the Receives model-based support through
incumbent price cap carrier. 2021; transitions to Rural Digital
Opportunity Fund support on January 1,
2022.
Won at auction by a new Receives model-based support through
provider. 2021; new provider receives RDOF support
the first day of the month following
authorization.
Not won at auction........... Receives model-based support through
2021.
Not eligible for auction..... Receives model-based support through
2021.
------------------------------------------------------------------------
131. Several commenters sought clarification from the Commission on
the responsibilities of an incumbent price cap carrier once a new
provider is authorized to receive Rural Digital Opportunity Fund
support in an area previously served by the incumbent. Frontier
contended that price cap carriers must be released from incumbent
obligations, including the obligation to provide voice services, in
areas where they cease to receive Rural Digital Opportunity Fund
support. USTelecom proposed requiring Rural Digital Opportunity Fund
auction winners to offer voice services beginning in the first month
after they receive Rural Digital Opportunity Fund support. Likewise,
Windstream and INCOMPAS stated that new providers should be able to
provide voice service on day one of their support term. Commenters also
encouraged the Commission to address additional issues regarding the
responsibilities of price cap carriers no longer receiving support to
serve specific areas. Conversely, some opposed commenters' requests to
eliminate ETC obligations and preempt state and discontinuance
requirements.
132. The Commission previously addressed the issue of ETC
obligations as funding transitions to new mechanisms. In the December
2014 CAF Phase II Order, the Commission concluded that it was in the
public interest to forbear, pursuant to section 10 of the
Communications Act of 1934, as amended, from enforcing a federal high-
cost requirement that price cap carriers offer voice telephony service
throughout their service areas pursuant to section 214(e)(1)(A) in
three types of geographic areas: (1) Low-cost census blocks, (2) census
blocks served by an unsubsidized competitor, as defined in the
Commission's rules, offering voice and broadband at speeds of 10/1 Mbps
to all eligible locations, and (3) census blocks where another ETC is
receiving federal high-cost support to deploy modern networks capable
of providing voice and broadband to fixed locations. At that time, the
Commission also noted that price cap carriers would remain obligated to
maintain existing voice service ``unless and until they receive
authority under section 214(a) to discontinue that service.''
133. The same limited circumstances that required the Commission to
grant forbearance to price cap carriers from the federal high-cost
requirement to offer voice services in certain areas also exist here.
As a result, in areas where a new provider is granted ETC status and is
authorized to receive Rural Digital Opportunity Fund support, the
incumbent price cap carrier will be relieved of its federal high-cost
ETC obligation to offer voice telephony services in that area. As the
Commission explained when it initially granted such forbearance,
because there is another ETC in these areas required to offer voice and
broadband services to fixed locations that meet the Commission's public
service obligations, it concludes that enforcement of the requirement
that price cap carriers offer voice telephony in these areas ``is not
necessary to ensure that the charges, practices, or classifications of
price cap carriers are just and reasonable and not unjustly or
unreasonably discriminatory in specific geographic areas.'' The
Commission also clarifies that this forbearance applies to census
blocks deemed ineligible for the Rural Digital Opportunity Fund by
virtue of being served by an unsubsidized competitor.
134. The Commission's decision to extend this limited forbearance
to the Rural Digital Opportunity Fund context does not redefine price
cap carriers' service areas or revoke price cap carriers' ETC
designations in these areas. Thus, the Commission's action does not
relieve ETCs of their other ``incumbent-specific obligations'' like
interconnection and negotiating unbundled network elements pursuant to
sections 251 and 252 of the Act. Moreover, these price cap carriers
must continue to satisfy all Lifeline ETC obligations by offering voice
telephony service to qualifying low-income households in areas in which
they are subject to this limited forbearance. Finally, price cap
carriers in these areas remain subject to other Title II requirements,
including ensuring that voice telephony rates remain just and
reasonable and the nondiscrimination obligations of sections 201 and
202 of the Act. Additionally, the Commission declines to preempt any
state regulations or obligations to which these carriers may be
subject. Commenters make only vague, unsubstantiated claims about
burdensome state obligations in support of these requests. Price cap
carriers must continue to comply with state requirements, including
carrier of last resort obligations, to the extent applicable. The
Commission similarly defers to the states' judgment in assuring that
the local rates that price cap carriers offer in the areas from which
the Commission forbears remain just and reasonable. Price cap carriers
will remain subject to ETC obligations other than those covered by the
Commission's forbearance unless or until they relinquish their ETC
designations in those areas pursuant to section 214(e)(4). As the
Commission transitions to a new funding mechanism to further its goal
of supporting the deployment of both voice and broadband-capable
networks, the existing service areas and corresponding obligations will
help preserve existing voice service for consumers until the Rural
Digital Opportunity Fund is fully implemented, and ensure that even the
most remote, extremely high-cost areas are served, consistent with the
Commission's universal service goals and principles.
135. More generally, price cap carriers must continue to maintain
existing voice service until they receive discontinuance authority
under section 214(a) of the Act and section 63.71 of the Commission's
rules. As noted in this document, several commenters have requested
that the Commission adopt a streamlined section 214 discontinuance
process for price cap carriers that are replaced by a new provider
receiving high-cost support. The Commission is not persuaded that such
a process would benefit consumers in these areas. The Commission's
discontinuance rules are designed to ensure that customers are fully
informed of any proposed change that will reduce or end service, ensure
appropriate oversight by the
[[Page 13794]]
Commission of such changes, and provide an orderly transition of
service, as appropriate. This process allows the Commission to minimize
harm to customers and to satisfy its obligation under the Act to
protect the public interest.
136. In evaluating a section 214 discontinuance application, the
Commission generally considers a number of factors, including the
existence, availability, and adequacy of alternatives. By examining
these factors, the Commission can ensure that the removal of a voice
service option from the marketplace occurs in a manner that respects
consumer expectations and needs. Thus, the Commission will deny a
discontinuance application if it would leave customers or other end
users in the proposed area without the ability to receive voice service
or a reasonable alternative, or if the public convenience and necessity
would be otherwise adversely affected. In such circumstances, the
Commission will require price cap carriers to continue offering voice
telephony services in those areas in those instances where there is no
reasonable alternative. The Commission notes that an authorization to
receive Rural Digital Opportunity Fund support includes an expectation
that the provider will offer a reasonable voice service alternative
satisfying section 63.602(b) of the Commission's rules, but it will
retain the discontinuance process to confirm that it is doing so.
Adopting a streamlined process for areas in which the Commission grants
limited forbearance would prevent them from conducting the thorough
review process necessary to ensure whether appropriate alternatives are
available to consumers or the present or future public convenience and
necessity would be adversely affected by such a discontinuance.
137. Finally, the Commission clarifies the specific timing to the
grant of limited forbearance to incumbent price cap carriers that are
replaced by a new provider. First, the Commission finds that these
carriers will be relieved of their federal high-cost ETC obligation to
offer voice telephony in specific census blocks on the first day of the
month after a new ETC is authorized to receive Rural Digital
Opportunity Fund support in those blocks. Thus, the new provider
receiving Rural Digital Opportunity Fund support should be prepared to
provide voice service throughout its service areas, either through its
own facilities or a combination of its own and other ETC's facilities,
on the first day of that month. Price cap carriers electing to receive
a seventh year of model-based support will maintain their obligation to
provide both voice and broadband service throughout 2021, as explained
in this document. These carriers will be relieved of their federal
high-cost ETC obligation to offer voice telephony in specific census
blocks on January 1, 2022, regardless of when a new ETC is authorized
to receive Rural Digital Opportunity Fund support. Finally, incumbent
price cap carriers that decline a seventh year of model-based support
will be relieved of the federal high-cost ETC obligation to offer voice
telephony on the first day of the month after a new Rural Digital
Opportunity Fund support recipient is authorized to receive support.
IV. Procedural Matters
A. Paperwork Reduction Act
138. This document 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 or modified information collection requirements contained in
this proceeding. In addition, the Commission notes that pursuant to the
Small Business Paperwork Relief Act of 2002, it previously sought
specific comment on how the Commission might further reduce the
information collection burden for small business concerns with fewer
than 25 employees.
B. Congressional Review Act
139. The Commission has determined, and the Administrator of the
Office of Information and Regulatory Affairs, Office of Management and
Budget, concurs that this rule is non-major under the Congressional
Review Act, 5 U.S.C. 804(2). The Commission will send a copy of this
Report and Order to Congress and the Government Accountability Office
pursuant to 5 U.S.C. 801(a)(1)(A).
140. As required by the Regulatory Flexibility Act of 1980, as
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was
incorporated in the Rural Digital Opportunity Fund NPRM. The Commission
sought written public comment on the proposals in the Rural Digital
Opportunity Fund NPRM, including comment on the IRFA. The Commission
did not receive any comments in response to this IRFA. This Final
Regulatory Flexibility Analysis (FRFA) conforms to the RFA.
141. Bringing digital opportunity to Americans living on the wrong
side of the digital divide continues to be the Federal Communication
Commission's top priority. It is imperative that the Commission take
prompt and expeditious action to deliver on its goal of connecting all
Americans, no matter where they live and work. Without access to
broadband, rural communities cannot connect to the digital economy and
the opportunities for better education, employment, healthcare, and
civic and social engagement it provides.
142. In recent years, the Commission has made tremendous strides
toward its goal of making broadband available to all Americans. But
while the digital divide is closing, more work remains to be done.
Therefore, in this Order, the Commission adopts the framework for the
Rural Digital Opportunity Fund. It builds on the successful model from
2018's Connect America Fund (CAF) Phase II auction, which allocated
$1.488 billion to deploy networks serving more than 700,000 unserved
rural homes and businesses across 45 states. The Rural Digital
Opportunity Fund represents the Commission's single biggest step to
close the digital divide by providing up to $20.4 billion to connect
millions more rural homes and small businesses to high-speed broadband
networks. It will ensure that networks stand the test of time by
prioritizing higher network speeds and lower latency, so that those
benefitting from these networks will be able to use tomorrow's internet
applications as well as today's.
143. 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.
144. 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. First, while there
are industry specific size standards for small businesses that are used
in the regulatory flexibility analysis, according to data from the
[[Page 13795]]
SBA's Office of Advocacy, in general a small business is an independent
business having fewer than 500 employees. These types of small
businesses represent 99.9% of all businesses in the United States which
translates to 28.8 million businesses.
145. Next, the type of small entity described as 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 August 2016, there were approximately 356,494 small
organizations based on registration and tax data filed by nonprofits
with the Internal Revenue Service (IRS).
146. Finally, the small entity described as a ``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.'' U.S. Census Bureau data from
the 2012 Census of Governments indicate that there were 90,056 local
governmental jurisdictions consisting of general purpose governments
and special purpose governments in the United States. Of this number
there were 37,132 General purpose governments (county, municipal and
town or township) with populations of less than 50,000 and 12,184
Special purpose governments (independent school districts and special
districts) with populations of less than 50,000. The 2012 U.S. Census
Bureau data for most types of governments in the local government
category show that the majority of these governments have populations
of less than 50,000. Based on this data the Commission estimates that
at least 49,316 local government jurisdictions fall in the category of
``small governmental jurisdictions.''
147. Small entities potentially affected by the rules herein
include Wireline Providers, Wireless Providers (except Satellite),
internet Service Providers (Broadband), Satellite Telecommunications,
Electric Power Generators, Transmitters, and Distributors and All Other
Telecommunications.
148. In the Order the Commission adopts rules that will apply in
the Rural Digital Opportunity Fund auction. The Commission establishes
four technology-neutral tiers of bids available for bidding with
varying broadband speed and usage allowances, and for each tier will
differentiate between bids that would offer either lower or higher
latency. Like all high-cost ETCs, the Commission requires that Rural
Digital Opportunity Fund recipients offer standalone voice service and
offer voice and broadband service meeting the relevant performance
requirements at rates that are reasonably comparable to rates offered
in urban areas. All ETCs must advertise the availability of their voice
services through their service areas, and the Commission requires
support recipients also to advertise the availability of their
broadband services within their service area. Rural Digital Opportunity
Fund support recipients will also be subject to the same uniform
framework for measuring speed and latency performance along with the
accompanying compliance framework as all other recipients of high-cost
support required to serve fixed locations.
149. In the Order, the Commission adopts a 10-year support term for
Rural Digital Opportunity Fund support recipients along with interim
service milestones by which support recipients must offer the required
voice and broadband service to a required number of locations. The
final service milestones will differ based on whether the Bureau
determines that there are more or fewer locations than initially
determined by the Connect America Cost Model. Rural Digital Opportunity
Fund recipients must also offer service to newly built locations upon
reasonable request if those locations were built before milestone year
eight.
150. For entities that are interested in participating in the Rural
Digital Opportunity Fund, adopted a two-step application process. The
Commission requires applicants to submit a pre-auction short-form
application that includes information regarding their ownership,
technical and financial qualifications, the technologies they intend to
use and the types of bids they intend to place, their operational
history, and an acknowledgement of their responsibility to conduct due
diligence. Commission staff will review the applications to determine
if applicants are qualified to bid in the auction.
151. The Commission also requires winning bidders to submit a long-
form application in which they will submit information about their
qualifications, funding, and the networks they intend to use to meet
their obligations. During the long-form application period, the
Commission will require long-form applicants to obtain an ETC
designation from the state or the Commission as relevant that covers
the eligible areas in their winning bids. Prior to being authorized to
receive support, the Commission will require long-form applicants to
obtain an irrevocable stand-by letter of credit that meets its
requirements from an eligible bank along with a bankruptcy opinion
letter. The amount of support the letter of credit must cover will vary
based on whether the support recipient has met certain service
milestones. Commission staff will review the applications and submitted
documentation to determine whether long-form applicants are qualified
to be authorized to receive support. The Commission will subject
winning bidders or long-form applicants that default during the long-
form application process to forfeiture.
152. To monitor the use of Rural Digital Opportunity Fund support
to ensure that it is being used for its intended purposes, the
Commission will require support recipients to file location and
technology data on an annual basis in the online High Cost Universal
Broadband (HUBB) portal and to make certifications when they have met
their service milestones. The Commission also will require applicants
to file certain information in their annual FCC Form 481 reports
including information regarding the community anchor institutions they
serve, the support they used for capital expenditures, and
certifications regarding meeting the Commission's performance
obligations and available funds. Support recipients will also be
subject to the annual section 54.314 certifications, the same record
retention and audit requirements, and the same support reductions for
untimely filings as other high-cost ETCs.
153. For support recipients that do not meet their Rural Digital
Opportunity Fund obligations, the Commission will subject such support
recipients to the framework for support reductions that is applicable
to all high-cost ETCs that are required to meet defined service
milestones and to the process the Commission adopted for drawing on
letters of credit for the CAF Phase II auction, subject to some
modifications regarding the amount of support that will be recovered
after the sixth and eighth service milestones, as applicable.
Additionally, if a Rural Digital Opportunity Fund support recipient
believes it cannot meet the 40% service milestone, it must notify the
Bureau and provide information explaining this expected deficiency. If
a support recipient has not made such a notification and has deployed
to fewer than 20% of the required number of locations by the third year
service milestone, the Commission will find the recipient to be default
rather than withholding the support and giving the support recipient an
additional year to come into compliance. Support recipients may also
seek waiver if as
[[Page 13796]]
they are deploying their networks there are not enough locations to
meet their interim milestones.
154. The Commission also adopts specific support transition paths
for census blocks served by price cap carriers receiving both legacy
high-cost and model-based support, including delegating to the Wireline
Competition Bureau the task of determining and implementing a mechanism
that will enable price cap carriers to elect whether to receive an
additional, seventh year of Phase II model-based support. Additionally,
the Commission clarifies the continuing responsibilities of price cap
carriers no longer receiving support to serve specific areas.
155. 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 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.''
156. The Commission has considered the economic impact on small
entities in reaching its final conclusions and taking action in this
proceeding. The rules that the Commission adopts in the Order will
provide greater certainty and flexibility for all carriers, including
small entities. For example, the Commission adopts different
performance standards for bidders to maximize the types of entities
that can participate in the Rural Digital Opportunity Fund auction.
Additionally, while the Commission declines to adopt any bidding
credits, it does incorporate into the reserve prices for Tribal areas a
Tribal Broadband Factor to provide an incentive for service providers,
including small entities, to bid on and serve Tribal lands.
157. The Commission also expects that the minimum geographic area
for bidding will be a census block group containing one or more
eligible census blocks, but reserve the right to select census tracts
when the Commission finalizes the auction design if necessary to limit
the number of discrete biddable units. The Commission finds that this
approach is preferable because it ensures that all interested bidders,
including small entities, have flexibility to design a network that
matches their business model and the technologies they intend to use.
The Commission declines to adopt census blocks as the minimum
geographic unit because there are significantly more eligible census
blocks, increasing the complexity of the bidding process both for
bidders, including small entities, and the bidding system and
minimizing the potential for broad coverage by winning bidders.
158. The Commission declines to adopt a resource-intensive
challenge process and instead have decided to rely on FCC Form 477 data
and conduct a more streamlined challenge process to determine areas
that are eligible for the Rural Digital Opportunity Fund auction. This
means that service providers, including small entities, will have to
file a FCC Form 477 as they are already required to do to ensure that
the areas they serve are not overbuilt. Through the challenge process,
interested parties may also identify areas that have been served since
they have submitted the most recent publicly available FCC Form 477
data or identify areas that have been awarded funding through federal
or state broadband subsidy programs to provide 25/3 Mbps or better
service.
159. Based on lessons learned from the CAF Phase II auction, the
Commission also adopts a two-step application process that will allow
entities interested in bidding to submit a short-form application to be
qualified in the auction that it found to be an appropriate but not
burdensome screen to ensure participation by qualified providers,
including small entities. Only if an applicant becomes a winning bidder
will it be required to submit a long-form application which requires a
more thorough review of an applicant's qualifications to be authorized
to receive support. Like the CAF Phase II auction, the Commission
provides two pathways for eligibility for the auction--both (1) for
entities that have at least two years' experience providing a voice,
broadband, and/or electric transmission or distribution service, and
(2) for entities that have at least three years of audited financials
and can obtain an acceptable letter of interest from an eligible bank.
The Commission expects that by proposing to adopt two pathways for
eligibility and to permit experienced entities that do not audit their
financial statements in the ordinary course of business to wait to
submit audited financials until after they are announced as winning
bidders, more small entities will be able to participate in the
auction. The Commission declines to collect less financial and
technical information from experienced providers, finding that all
existing service providers are not necessarily qualified to bid for
additional universal service support and that the passage of time since
its last review may impact qualifications. At the same time, the
Commission also declines to require more detailed technical and
operational showings as suggested by some commenters because it found
these proposals would provide significant barriers to entry for
participation by interested entities, including small entities.
160. The Commission also permits all long-form applicants,
including small entities, to obtain their ETC designations after
becoming winning bidders so that they do not have to go through the ETC
designation process prior to finding out if they won support through
the auction. The Commission declines to adopt the alternatives to
letters of credit that were suggested by commenters because letters of
credit better achieve the Commission's objective of protecting the
public's funds. But recognizing that some CAF Phase II auction
participants, including small entities, have expressed concerns about
the costs of obtaining and maintaining a letter of credit, the
Commission makes a modification to its requirements to allow support
recipients to cover less support with their letters of credit and
further reduce the value of their letters of credit once it has been
verified that they have met certain service milestones.
161. The Commission declines to adopt additional performance
requirements, like requiring specific subscription milestones, because
it finds that they are likely to discourage many bidders, including
small entities, from participating in the auction because they would
risk losing funding in areas with low subscribership rates. The
Commission also declines to adopt more aggressive service milestones
and instead explain that entities with smaller projects have the
opportunity to build-out faster than the service milestones.
162. The reporting requirements the Commission adopts for all Rural
Digital Opportunity Fund support recipients are tailored to ensuring
that support is used for its intended purpose and so that the
Commission can monitor the progress of recipients in meeting their
service milestones. The Commission finds that the importance of
monitoring the use of the public's funds outweighs the burden of filing
the required information on all entities, including small entities,
particularly because much of the information that the Commission
requires they report is
[[Page 13797]]
information the Commission expects they will already be collecting to
ensure they comply with the terms and conditions of support and they
will be able to submit their location data on a rolling basis to help
minimize the burden of uploading a large number of locations at once.
V. Ordering Clauses
163. Accordingly, it is ordered, pursuant to the authority
contained in sections 4(i), 214, 254, 303(r), and 403 of the
Communications Act of 1934, as amended, 47 U.S.C. 154(i), 214, 254,
303(r), and 403, and Sec. Sec. 1.1 and 1.425 of the Commission's
rules, 47 CFR 1.1 and 1.425 this Report and Order is adopted. The
Report and Order shall be effective 30 days after publication in the
Federal Register, except for portions containing information collection
requirements in Sec. Sec. 54.313, 54.316, 54.804, and 54.806 that have
not been approved by OMB. The Federal Communications Commission will
publish a document in the Federal Register announcing the effective
date of these provisions.
164. It is further ordered that Part 54 of the Commission's rules
is amended as set forth in the following, and that any such rule
amendments that contain new or modified information collection
requirements that require approval by the Office of Management and
Budget under the Paperwork Reduction Act shall be effective after
announcement in the Federal Register of Office of Management and Budget
approval of the rules, and on the effective date announced therein.
List of Subjects in 47 CFR Part 54
Communications common carriers, Health facilities, Infants and
children, internet, Libraries, Reporting and recordkeeping
requirements, Schools, Telecommunications, Telephone.
Federal Communications Commission.
Marlene Dortch,
Secretary, Office of the Secretary.
Final Rules
For the reasons discussed in the preamble, the Federal
Communications Commission amends 47 CFR part 54 as follows:
PART 54--UNIVERSAL SERVICE
0
1. 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,
229, 254, 303(r), 403, 1004, and 1302, unless otherwise noted.
0
2. Amend Sec. 54.310 by adding paragraphs (g) and (h) to read as
follows:
Sec. 54.310 Connect America Fund for Price Cap Territories--Phase II.
* * * * *
(g) Extended term of model-based support. Eligible
telecommunications carriers receiving model-based support may elect to
receive a seventh year of such support. An eligible telecommunications
carrier electing to receive this additional year of support makes a
state-level commitment to maintain the required voice and broadband
services in the areas for which it receives support during this
extended term. The Wireline Competition Bureau will implement a
mechanism to enable an eligible telecommunications carrier to elect
whether to receive an additional seventh year of support.
(h) Transition to Rural Digital Opportunity Fund support. (1) In
areas where the eligible telecommunications carrier elects to receive
an optional seventh year of model-based support pursuant to paragraph
(g) of this section, it shall receive such support for a full calendar
year, regardless of the disposition of these areas in the Rural Digital
Opportunity Fund auction.
(i) If the eligible telecommunications carrier becomes the winning
bidder in the Rural Digital Opportunity Fund auction in these areas, it
shall continue to receive model-based support through December 31,
2021. Thereafter, it shall receive monthly support in the amount of its
Rural Digital Opportunity Fund winning bid.
(ii) If another provider is the winning bidder in the Rural Digital
Opportunity Fund auction in these areas, the new provider shall receive
monthly support in the amount of its Rural Digital Opportunity Fund
winning bid starting the first day of the month following its
authorization by the Wireline Competition Bureau. The eligible
telecommunications carrier shall continue to receive model-based
support for these areas through December 31, 2021.
(iii) If there is no authorized Rural Digital Opportunity Fund
auction support recipient in these areas or if these areas are deemed
ineligible for the Rural Digital Opportunity Fund auction, the eligible
telecommunications carrier shall continue to receive model-based
support for these areas through December 31, 2021. Thereafter, it shall
receive no additional support.
(2) In areas where the eligible telecommunications carrier declines
to receive an optional seventh year of model-based support pursuant to
paragraph (g) of this section, it shall cease receiving model-based
support for these areas on December 31, 2020.
0
3. Amend Sec. 54.312 by adding paragraph (e) to read as follows:
Sec. 54.312 Connect America Fund for Price Cap Territories--Phase I.
* * * * *
(e) Eligibility for support after Rural Digital Opportunity Fund
auction. (1) A price cap carrier that receives monthly baseline support
pursuant to this section and is a winning bidder in the Rural Digital
Opportunity Fund auction shall receive support at the same level as
described in paragraph (a) of this section for such area until the
Wireline Competition Bureau determines whether to authorize the carrier
to receive Rural Digital Opportunity Fund auction support for the same
area. Upon the Wireline Competition Bureau's release of a public notice
approving a price cap carrier's application submitted pursuant to Sec.
54.315(b) and authorizing the carrier to receive Rural Digital
Opportunity Fund auction 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 Rural Digital Opportunity Fund winning
bid.
(2) Starting the first day of the month following the release of
the final eligible areas list for the Rural Digital Opportunity Fund
auction, as determined by the Wireline Competition Bureau, no price cap
carrier that receives monthly baseline support pursuant to this section
shall receive such monthly baseline support for areas that are
ineligible for the Rural Digital Opportunity Fund auction.
(3) Starting the first day of the month following the close of
Phase I of the Rural Digital Opportunity Fund auction, no price cap
carrier that receives monthly baseline support pursuant to this section
shall receive such monthly baseline support for areas where Rural
Digital Opportunity Fund auction support is not awarded at auction for
an eligible area.
(4) Starting the first day of the month following the authorization
of Rural Digital Opportunity Fund auction support to a winning bidder
other than the price cap carrier that receives monthly baseline support
pursuant to this section for such area, the price cap carrier shall no
longer receive monthly baseline support pursuant to this section.
0
4. Amend Sec. 54.313 by revising paragraphs (e) introductory text,
(e)(2) introductory text and (e)(2)(iii) to read as follows:
[[Page 13798]]
Sec. 54.313 Annual reporting requirements for high-cost recipients.
* * * * *
(e) In addition to the information and certifications in paragraph
(a) of this section, the requirements in paragraphs (e)(1) and (2) of
this section apply to recipients of Phase II, Rural Digital Opportunity
Fund, Uniendo a Puerto Rico Fund Stage 2 fixed support, and Connect
USVI Fund Stage 2 fixed support:
* * * * *
(2) Any recipient of Phase II, Rural Digital Opportunity Fund,
Uniendo a Puerto Rico Fund Stage 2 fixed, or Connect USVI Fund Stage 2
fixed support awarded through a competitive bidding or application
process shall provide:
* * * * *
(iii) Starting the first July 1st after meeting the final service
milestone in Sec. 54.310(c) or Sec. 54.802(c) of this chapter until
the July 1st after the Phase II recipient's or Rural Digital
Opportunity Fund recipient's support term has ended, a certification
that the Phase II-funded network that the Phase II auction recipient
operated in the prior year meets the relevant performance requirements
in Sec. 54.309 of this chapter, or that the network that the Rural
Digital Opportunity Fund recipient operated in the prior year meets the
relevant performance requirements in Sec. 54.805 for the Rural Digital
Opportunity Fund.
* * * * *
0
5. Amend Sec. 54.316 by revising paragraph (a)(4), adding paragraph
(a)(8), and revising paragraphs (b)(5) and (c)(1) to read as follows:
Sec. 54.316 Broadband deployment reporting and certification
requirements for high-cost recipients.
(a) * * *
(4) Recipients subject to the requirements of Sec. 54.310(c) shall
report the number of locations for each state and locational
information, including geocodes, where they are offering service at the
requisite speeds. Recipients of Connect America Phase II auction
support shall also report the technology they use to serve those
locations.
* * * * *
(8) Recipients subject to the requirements of Sec. 54.802(c) shall
report the number of locations for each state and locational
information, including geocodes, where they are offering service at the
requisite speeds. Recipients of Rural Digital Opportunity Fund support
shall also report the technology they use to serve those locations.
(b) * * *
(5) Recipients of Rural Digital Opportunity Fund support shall
provide: No later than March 1 following each service milestone
specified by the Commission, a certification that by the end of the
prior support year, it was offering broadband meeting the requisite
public interest obligations to the required percentage of its supported
locations in each state.
* * * * *
(c) * * *
(1) Price cap carriers that accepted Phase II model-based support,
rate-of-return carriers, and recipients of Rural Digital Opportunity
Fund support must submit the annual reporting information required by
March 1 as described in paragraphs (a) and (b) of this section.
Eligible telecommunications carriers that file their reports after the
March 1 deadline shall receive a reduction in support pursuant to the
following schedule:
* * * * *
0
6. Revise subpart J to read as follows:
Subpart J--Rural Digital Opportunity Fund
Sec.
54.801 Use of competitive bidding for Rural Digital Opportunity
Fund.
54.802 Rural Digital Opportunity Fund geographic areas, deployment
obligations, and support disbursements.
54.803 Rural Digital Opportunity Fund provider eligibility.
54.804 Rural Digital Opportunity Fund application process.
54.805 Rural Digital Opportunity Fund public interest obligations.
54.806 Rural Digital Opportunity Fund reporting obligations,
compliance, and recordkeeping.
Subpart J--Rural Digital Opportunity Fund
Sec. 54.801 Use of competitive bidding for Rural Digital Opportunity
Fund.
The Commission will use competitive bidding, as provided in part 1,
subpart AA of this chapter, to determine the recipients of Rural
Digital Opportunity Fund support and the amount of support that they
may receive for specific geographic areas, subject to applicable post-
auction procedures.
Sec. 54.802 Rural Digital Opportunity Fund geographic areas,
deployment obligations, and support disbursements.
(a) Geographic areas eligible for support. Rural Digital
Opportunity Fund support may be made available for census blocks or
other areas identified as eligible by public notice.
(b) Term of support. Rural Digital Opportunity Fund support shall
be provided for ten years.
(c) Deployment obligation. (1) All recipients of Rural Digital
Opportunity Fund support must complete deployment to 40 percent of the
required number of locations as determined by the Connect America Cost
Model by the end of the third year, to 60 percent by the end of the
fourth year, and to 80 percent by the end of the fifth year. The
Wireline Competition Bureau will publish updated location counts no
later than the end of the sixth year. A support recipient's final
service milestones will depend on whether the Wireline Competition
Bureau determines there are more or fewer locations than determined by
the Connect America Cost Model in the relevant areas as follows:
(i) More Locations. After the Wireline Competition Bureau adopts
updated location counts, in areas where there are more locations than
the number of locations determined by the Connect America Cost Model,
recipients of Rural Digital Opportunity Fund support must complete
deployment to 100 percent of the number of locations determined by the
Connect America Cost Model by the end of the sixth year. Recipients of
Rural Digital Opportunity Fund support must then complete deployment to
100 percent of the additional number of locations determined by the
Wireline Competition Bureau's updated location count by end of the
eighth year. If the new location count exceeds 35% of the number of
locations determined by the Connect America Cost Model within their
area in each state, recipients of Rural Digital Opportunity Fund
support will have the opportunity to seek additional support or relief.
(ii) Fewer Locations. In areas where there are fewer locations than
the number of locations determined by the Connect America Cost Model, a
Rural Digital Opportunity Fund support recipient must notify the
Wireline Competition Bureau no later than March 1 following the fifth
year of deployment. Upon confirmation by the Wireline Competition
Bureau, Rural Digital Opportunity Fund support recipients must complete
deployment to the number of locations required by the new location
count by the end of the sixth year. Support recipients for which the
new location count is less than 65 percent of the Connect America Cost
Model locations within their area in each state shall have the support
amount reduced on a pro rata basis by the number of reduced locations.
(iii) Newly Built Locations. In addition to offering the required
service to the updated number of locations identified by the Wireline
Competition Bureau, Rural Digital Opportunity Fund support
[[Page 13799]]
recipients must offer service to locations built since the revised
count, upon reasonable request. Support recipients are not required to
deploy to any location built after milestone year eight.
(d) Disbursement of Rural Digital Opportunity Fund funding. An
eligible telecommunications carrier will be advised by public notice
when it is authorized to receive support. The public notice will detail
how disbursements will be made.
Sec. 54.803 Rural Digital Opportunity Fund provider eligibility.
(a) Any eligible telecommunications carrier is eligible to receive
Rural Digital Opportunity Fund support in eligible areas.
(b) An entity may obtain eligible telecommunications carrier
designation after public notice of winning bidders in the Rural Digital
Opportunity Fund auction.
(c) To the extent any entity seeks eligible telecommunications
carrier designation prior to public notice of winning bidders for Rural
Digital Opportunity Fund support, its designation as an eligible
telecommunications carrier may be conditioned subject to receipt of
Rural Digital Opportunity Fund support.
(d) Any Connect America Phase II auction participant that defaulted
on all of its Connect America Phase II auction winning bids is barred
from participating in the Rural Digital Opportunity Fund.
Sec. 54.804 Rural Digital Opportunity Fund application process.
(a) In addition to providing information specified in Sec.
1.21001(b) of this chapter and any other information required by the
Commission, any applicant to participate in competitive bidding for
Rural Digital Opportunity Fund support shall:
(1) Provide ownership information as set forth in Sec. 1.2112(a)
of this chapter;
(2) Certify that the applicant is financially and technically
qualified to meet the public interest obligations established for Rural
Digital Opportunity Fund support;
(3) Disclose its status as an eligible telecommunications carrier
to the extent applicable and certify that it acknowledges that it must
be designated as an eligible telecommunications carrier for the area in
which it will receive support prior to being authorized to receive
support;
(4) Describe the technology or technologies that will be used to
provide service for each bid;
(5) Submit any information required to establish eligibility for
any bidding weights adopted by the Commission in an order or public
notice;
(6) To the extent that an applicant plans to use spectrum to offer
its voice and broadband services, demonstrate it has the proper
authorizations, if applicable, and access to operate on the spectrum it
intends to use, and that the spectrum resources will be sufficient to
cover peak network usage and deliver the minimum performance
requirements to serve all of the fixed locations in eligible areas, and
certify that it will retain its access to the spectrum for the term of
support;
(7) Submit operational and financial information.
(i) If applicable, the applicant should submit a certification that
it has provided a voice, broadband, and/or electric transmission or
distribution service for at least two years or that it is a wholly-
owned subsidiary of such an entity, and specifying the number of years
the applicant or its parent company has been operating, and submit the
financial statements from the prior fiscal year that are audited by an
independent certified public accountant. If the applicant is not
audited in the ordinary course of business, in lieu of submitting
audited financial statements it must submit unaudited financial
statements from the prior fiscal year and certify that it will provide
financial statements from the prior fiscal year that are audited by an
independent certified public accountant by a specified deadline during
the long-form application review process.
(A) If the applicant has provided a voice and/or broadband service
it must certify that it has filed FCC Form 477s as required during this
time period.
(B) If the applicant has operated only an electric transmission or
distribution service, it must submit qualified operating or financial
reports that it has filed with the relevant financial institution for
the relevant time period along with a certification that the submission
is a true and accurate copy of the reports that were provided to the
relevant financial institution.
(ii) If an applicant cannot meet the requirements in paragraph
(a)(7)(i) of this section, in the alternative it must submit the
audited financial statements from the three most recent fiscal years
and a letter of interest from a bank meeting the qualifications set
forth in paragraph (c)(2) of this section, that the bank would provide
a letter of credit as described in paragraph (c) of this section to the
bidder if the bidder were selected for bids of a certain dollar
magnitude.
(8) Certify that the applicant has performed due diligence
concerning its potential participation in the Rural Digital Opportunity
Fund.
(b) Application by winning bidders for Rural Digital Opportunity
Fund support--
(1) Deadline. As provided by public notice, winning bidders for
Rural Digital Opportunity Fund support or their assignees shall file an
application for Rural Digital Opportunity Fund support no later than
the number of business days specified after the public notice
identifying them as winning bidders.
(2) Application contents. An application for Rural Digital
Opportunity Fund 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 qualified to meet the public interest obligations for Rural
Digital Opportunity Fund support in each area for which it seeks
support;
(iii) Certification that the applicant will meet the relevant
public interest obligations, including the requirement that it will
offer service at rates that are equal or lower to the Commission's
reasonable comparability benchmarks for fixed wireline services offered
in urban areas;
(iv) A description of the technology and system design the
applicant intends to use to deliver voice and broadband service,
including a network diagram which must be certified by a professional
engineer. The professional engineer must certify that the network is
capable of delivering, to at least 95 percent of the required number of
locations in each relevant state, voice and broadband service that
meets the requisite performance requirements for Rural Digital
Opportunity Fund support;
(v) Certification that the applicant will have available funds for
all project costs that exceed the amount of support to be received from
the Rural Digital Opportunity Fund for the first two years of its
support term and that the applicant will comply with all program
requirements, including service milestones;
(vi) A description of how the required construction will be funded,
including financial projections that demonstrate the applicant can
cover the necessary debt service payments over the life of the loan, if
any;
(vii) Certification that the party submitting the application is
authorized to do so on behalf of the applicant; and
(viii) Such additional information as the Commission may require.
(3) Letter of credit commitment letter. No later than the number of
days
[[Page 13800]]
provided by public notice, the long-form applicant shall submit a
letter from a bank meeting the eligibility requirements outlined in
paragraph (c) of this section committing to issue an irrevocable stand-
by letter of credit, in the required form, to the long-form applicant.
The letter shall at a minimum provide the dollar amount of the letter
of credit and the issuing bank's agreement to follow the terms and
conditions of the Commission's model letter of credit.
(4) Audited financial statements. No later than the number of days
provided by public notice, if a long-form applicant or a related entity
did not submit audited financial statements in the relevant short-form
application as required, the long-form applicant must submit the
financial statements from the prior fiscal year that are audited by an
independent certified public accountant.
(5) Eligible telecommunications carrier designation. No later than
180 days after the public notice identifying it as a winning bidder,
the long-form applicant shall certify that it is an eligible
telecommunications carrier in any area for which it seeks support and
submit the relevant documentation supporting that certification.
(6) 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 long-form applicant that may be authorized to
receive Rural Digital Opportunity Fund support after the long-form
applicant submits a letter of credit and an accompanying opinion letter
as described in paragraph (c) of this section, in a form acceptable to
the Commission. Each such long-form applicant shall submit a letter of
credit and accompanying opinion letter as required by paragraph (c) of
this section, in a form acceptable to the Commission no later than the
number of business days provided by public notice.
(vi) After receipt of all necessary information, a public notice
will identify each long-form applicant that is authorized to receive
Rural Digital Opportunity Fund support.
(c) Letter of credit. Before being authorized to receive Rural
Digital Opportunity Fund support, a winning bidder shall obtain an
irrevocable standby letter of credit which shall be acceptable in all
respects to the Commission.
(1) Value. Each recipient authorized to receive Rural Digital
Opportunity Fund support shall maintain the standby letter of credit in
an amount equal to, at a minimum, one year of support, until the
Universal Service Administrative Company has verified that the
recipient has served 100 percent of the Connect America Cost Model-
determined location total (or the adjusted Connect America Cost Model
location count if there are fewer locations) by the end of year six.
(i) For year one of a recipient's support term, it must obtain a
letter of credit valued at an amount equal to one year of support.
(ii) For year two of a recipient's support term, it must obtain a
letter of credit valued at an amount equal to eighteen months of
support.
(iii) For year three of a recipient's support term, it must obtain
a letter of credit valued at an amount equal to two years of support.
(iv) For year four of a recipient's support term, it must obtain a
letter of credit valued at an amount equal to three years of support.
(v) A recipient may obtain a new letter of credit or renew its
existing letter of credit so that it is valued at an amount equal to
one year of support once it meets its optional or required service
milestones. The recipient may obtain or renew this letter of credit
upon verification of its buildout by the Universal Service
Administrative Company. The recipient may maintain its letter of credit
at this level for the remainder of its deployment term, so long as the
Universal Service Administrative Company verifies that the recipient
successfully and timely meets its remaining required service
milestones.
(vi) A recipient that fails to meet its required service milestones
must obtain a new letter of credit or renew its existing letter of
credit at an amount equal to its existing letter of credit, plus an
additional year of support, up to a maximum of three years of support.
(vii) A recipient that fails to meet two or more required service
milestones must maintain a letter of credit in the amount of three year
of support and may be subject to additional non-compliance penalties as
described in Sec. 54.320(d).
(2) Bank eligibility. 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) That is insured by the Federal Deposit Insurance Corporation,
and
(B) That has a bank safety rating issued by Weiss of B- or better;
or
(ii) CoBank, so long as it maintains assets that place it among the
100 largest United States Banks, determined on basis of total assets as
of the calendar year immediately preceding the issuance of the letter
of credit and it has a long-term unsecured credit rating issued by
Standard & Poor's of BBB- or better (or an equivalent rating from
another nationally recognized credit rating agency); or
(iii) The National Rural Utilities Cooperative Finance Corporation,
so long as it maintains assets that place it among the 100 largest
United States Banks, determined on basis of total assets as of the
calendar year immediately preceding the issuance of the letter of
credit and it has a long-term unsecured credit rating issued by
Standard & Poor's of BBB- or better (or an equivalent rating from
another nationally recognized credit rating agency); or
(iv) Any non-United States bank:
(A) That 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) Has a long-term unsecured credit rating issued by a widely-
recognized credit rating agency that is equivalent to
[[Page 13801]]
a BBB- or better rating by Standard & Poor's; and
(D) Issues the letter of credit payable in United States dollars
(3) Bankruptcy opinion letter. A long-form applicant for Rural
Digital Opportunity Fund support shall provide with its letter of
credit an opinion letter from its 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 under
section 541 of the Bankruptcy Code.
(4) Non-compliance. .Authorization to receive Rural Digital
Opportunity Fund support is conditioned upon full and timely
performance of all of the requirements set forth in this section, and
any additional terms and conditions upon which the support was granted.
(i) Failure by a Rural Digital Opportunity Fund support recipient
to meet its service milestones for the location totals determined by
the Connect America Cost Model, or the location total that is adjusted
by the Wireline Competition Bureau for those areas where there are
fewer locations than the number of locations determined by the Connect
America Cost Model, as required by Sec. 54.802 will trigger reporting
obligations and the withholding of support as described in Sec.
54.320(d). Failure to come into full compliance during the relevant
cure period as described in Sec. Sec. 54.320(d)(1)(iv)(B) or
54.320(d)(2) will trigger a recovery action by the Universal Service
Administrative Company as described in Sec. 54.320(d)(1)(iv)(B) or
Sec. 54.806(c)(1)(i), as applicable. If the Rural Digital Opportunity
Fund recipient does not repay the requisite amount of support within
six months, the Universal Service Administrative Company will be
entitled to draw the entire amount of the letter of credit and may
disqualify the Rural Digital Opportunity Fund support recipient from
the receipt of Rural Digital Opportunity Fund support or additional
universal service support.
(ii) The default will be evidenced by a letter issued by the Chief
of the Wireline Competition Bureau, or its respective designees, which
letter, attached to a standby letter of credit draw certificate, shall
be sufficient for a draw on the standby letter of credit for the entire
amount of the standby letter of credit.
Sec. 54.805 Rural Digital Opportunity Fund public interest
obligations.
(a) Recipients of Rural Digital Opportunity Fund support are
required to offer broadband service with latency suitable for real-time
applications, including Voice over internet Protocol, and usage
capacity that is reasonably comparable to comparable offerings in urban
areas, at rates that are reasonably comparable to rates for comparable
offerings in urban areas. For purposes of determining reasonable
comparable usage capacity, recipients are presumed to meet this
requirement if they meet or exceed the usage level announced by public
notice issued by the Wireline Competition Bureau. For purposes of
determining reasonable comparability of rates, recipients are presumed
to meet this requirement if they offer rates at or below the applicable
benchmark to be announced annually by public notice issued by the
Wireline Competition Bureau, or no more than the non-promotional prices
charged for a comparable fixed wireline service in urban areas in the
state or U.S. Territory where the eligible telecommunications carrier
receives support.
(b) Recipients of Rural Digital Opportunity Fund support are
required to offer broadband service meeting the performance standards
for the relevant performance tier.
(1) Rural Digital Opportunity Fund support recipients meeting the
minimum performance tier standards are required to offer broadband
service at actual speeds of at least 25 Mbps downstream and 3 Mbps
upstream and offer a minimum usage allowance of 250 GB per month, or
that reflects the average usage of a majority of fixed broadband
customers as announced annually by the Wireline Competition Bureau over
the 10-year term.
(2) Rural Digital Opportunity Fund support recipients meeting the
baseline performance tier standards are required to offer broadband
service at actual speeds of at least 50 Mbps downstream and 5 Mbps
upstream and offer a minimum usage allowance of 250 GB per month, or
that reflects the average usage of a majority of fixed broadband
customers as announced annually by the Wireline Competition Bureau over
the 10-year term.
(2) Rural Digital Opportunity Fund support recipients meeting the
above-baseline performance tier standards are required to offer
broadband service at actual speeds of at least 100 Mbps downstream and
20 Mbps upstream and offer at least 2 terabytes of monthly usage.
(3) Rural Digital Opportunity Fund support recipients meeting the
Gigabit performance tier standards are required to offer broadband
service at actual speeds of at least 1 Gigabit per second downstream
and 500 Mbps upstream and offer at least 2 terabytes of monthly usage.
(4) For each of the tiers in paragraphs (b)(1) through (3) of this
section, bidders are required to meet one of two latency performance
levels:
(i) Low-latency bidders will be required to meet 95 percent or more
of all peak period measurements of network round trip latency at or
below 100 milliseconds; and
(ii) High-latency bidders will be required to meet 95 percent or
more of all peak period measurements of network round trip latency at
or below 750 ms and, with respect to voice performance, demonstrate a
score of four or higher using the Mean Opinion Score (MOS).
(c) Recipients of Rural Digital Opportunity Fund support are
required to bid on category one telecommunications and internet access
services in response to a posted FCC Form 470 seeking broadband service
that meets the connectivity targets for the schools and libraries
universal service support program for eligible schools and libraries
(as described in Sec. 54.501) located within any area in a census
block where the carrier is receiving Rural Digital Opportunity Fund
support. Such bids must be at rates reasonably comparable to rates
charged to eligible schools and libraries in urban areas for comparable
offerings.
Sec. 54.806 Rural Digital Opportunity Fund reporting obligations,
compliance, and recordkeeping.
(a) Recipients of Rural Digital Opportunity Fund support shall be
subject to the reporting obligations set forth in Sec. Sec. 54.313,
54.314, and 54.316.
(b) Recipients of Rural Digital Opportunity Fund support shall be
subject to the compliance measures, recordkeeping requirements and
audit requirements set forth in Sec. 54.320(a)-(c).
(c) Recipients of Rural Digital Opportunity Fund support shall be
subject to the non-compliance measures set forth in Sec. 54.320(d)
subject to the following modifications related to the recovery of
support.
(1) If the support recipient does not report it has come into full
compliance after the grace period for its sixth year or eighth year
service milestone as applicable or if USAC determines in the course of
a compliance review that the eligible telecommunications carrier does
not have sufficient evidence to demonstrate that it is offering service
to all of the locations required by the sixth
[[Page 13802]]
or eighth year service milestone as set forth in Sec. 54.320(d)(3):
(i) Sixth year service milestone. Support will be recovered as
follows after the sixth year service milestone grace period or if USAC
later determines in the course of a compliance review that a support
recipient does not have sufficient evidence to demonstrate that it was
offering service to all of the locations required by the sixth year
service milestone:
(A) If an ETC has deployed to 95 percent or more of the Connect
America Cost Model location count or the adjusted Connect America Cost
Model location count if there are fewer locations, but less than 100
percent, USAC will recover an amount of support that is equal to 1.25
times the average amount of support per location received in the state
for that ETC over the support term for the relevant number of
locations;
(B) If an ETC has deployed to 90 percent or more of the Connect
America Cost Model location count or the adjusted Connect America Cost
Model location count if there are fewer locations, but less than 95
percent, USAC will recover an amount of support that is equal to 1.5
times the average amount of support per location received in the state
for that ETC over the support term for the relevant number of
locations, plus 5 percent of the support recipient's total Rural
Digital Opportunity Fund support authorized over the 10-year support
term for that state;
(C) If an ETC has deployed to fewer than 90 percent of the Connect
America Cost Model location count or the adjusted Connect America Cost
Model location count if there are fewer locations, USAC will recover an
amount of support that is equal to 1.75 times the average amount of
support per location received in the state for that ETC over the
support term for the relevant number of locations, plus 10 percent of
the support recipient's total Rural Digital Opportunity Fund support
authorized over the 10-year support term for that state.
(ii) Eighth year service milestone. If a Rural Digital Opportunity
Fund support recipient is required to serve more new locations than
determined by the Connect America Cost Model, support will be recovered
as follows after the eighth year service milestone grace period or if
USAC later determines in the course of a compliance review that a
support recipient does not have sufficient evidence to demonstrate that
it was offering service to all of the locations required by the eighth
year service milestone:
(A) If an ETC has deployed to 95 percent or more of its new
location count, but less than 100 percent, USAC will recover an amount
of support that is equal to the average amount of support per location
received in the state for that ETC over the support term for the
relevant number of locations;
(B) If an ETC has deployed to 90 percent or more of its new
location count, but less than 95 percent, USAC will recover an amount
of support that is equal to 1.25 times the average amount of support
per location received in the state for that ETC over the support term
for the relevant number of locations;
(C) If an ETC has deployed to 85 percent or more of its new
location count, but less than 90 percent, USAC will recover an amount
of support that is equal to 1.5 times the average amount of support per
location received in the state for that ETC over the support term for
the relevant number of locations, plus 5 percent of the support
recipient's total Rural Digital Opportunity Fund support authorized
over the 10-year support term for that state;
(D) If an ETC has deployed to less than 85 percent of its new
location count, USAC will recover an amount of support that is equal to
1.75 times the average amount of support per location received in the
state for that ETC over the support term for the relevant number of
locations, plus 10 percent of the support recipient's total Rural
Digital Opportunity Fund support authorized over the 10-year support
term for that state.
(2) Any support recipient that believes it cannot meet the third-
year service milestone must notify the Wireline Competition Bureau
within 10 business days of the third-year service milestone deadline
and provide information explaining this expected deficiency. If a
support recipient has not made such a notification by March 1 following
the third-year service milestone, and has deployed to fewer than 20
percent of the required number of locations by the end of the third
year, the recipient will immediately be in default and subject to
support recovery. The Tier 4 status six-month grace period as set forth
in Sec. 54.320(d)(iv) will not be applicable.
[FR Doc. 2020-03135 Filed 3-9-20; 8:45 am]
BILLING CODE 6712-01-P