Office of Economics and Analytics and Wireline Competition Bureau Adopt Adjustment Factor Values for the 5G Fund, 11149-11152 [2021-03420]
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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Rules and Regulations
List of Subjects in 47 CFR Part 1
Administrative practice and
procedure.
Marlene Dortch,
Secretary.
Editorial note: This document was
received for publication by the Office of the
Federal Register on January 4, 2021.
Final Rules
For the reasons discussed in the
preamble, the Federal Communications
Commission amends 47 CFR part 1 as
follows:
PART 1—PRACTICE AND
PROCEDURE
1. The authority citation for part 1
continues to read as follows:
■
Authority: 47 U.S.C. chs. 2, 5, 9, 13; 28
U.S.C. 2461, unless otherwise noted.
2. Amend § 1.1104 by revising the
introductory text to read as follows:
■
§ 1.1104 Schedule of charges for
applications and other filings for media
services.
Synopsis
Remit payment for these services
electronically using the Commission’s
electronic payment system in
accordance with the procedures set
forth on the Commission’s website,
www.fcc.gov/licensing-databases/fees.
The asterisk (*) indicates that multiple
stations and multiple fee submissions
are acceptable within the same
payment.
*
*
*
*
*
[FR Doc. 2021–00050 Filed 2–23–21; 8:45 am]
BILLING CODE 6712–01–P
FEDERAL COMMUNICATIONS
COMMISSION
47 CFR Parts 1 and 54
[GN Docket No. 20–32; DA 20–1361; FRS
17443]
Office of Economics and Analytics and
Wireline Competition Bureau Adopt
Adjustment Factor Values for the 5G
Fund
Federal Communications
Commission.
ACTION: Final action.
AGENCY:
In this document, the Office
of Economics and Analytics (Office) and
the Wireline Competition Bureau
(Bureau) adopt adjustment factor values
for an adjustment factor that will be
used in bidding in the 5G Fund auctions
and applied to the methodology for
disaggregating legacy high-cost support.
DATES: Effective February 24, 2021.
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SUMMARY:
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Federal Communications
Commission, 45 L Street NE,
Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT: Kate
Matraves, Office of Economics and
Analytics, Economic Analysis Division,
(202) 391–6272 or Catherine.Matraves@
fcc.gov, or Nicholas Copeland, Office of
Economics and Analytics, Economic
Analysis Division, (202) 418–1025 or
Nicholas.Copeland@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a
summary of the Commission’s 5G Fund
Adjustment Values Public Notice in GN
Docket No. 20–32, DA 20–1361, released
on November 16, 2020. The full text of
this document is available on the
Commission’s website at https://
www.fcc.gov/document/oea-and-wcbadopt-adjustment-factor-values-5g-fund.
To request materials in accessible
formats for people with disabilities,
send an email to FCC504@fcc.gov or call
the Consumer & Governmental Affairs
Bureau at 202–418–0530 (voice), 202–
418–0432 (TTY).
ADDRESSES:
1. The Office of Economics and
Analytics (Office) and the Wireline
Competition Bureau (Bureau) adopt 5G
Fund adjustment factor values to help
direct more 5G Fund support to harder
to serve areas. Specifically, the values
we adopt will increase support levels
for bids to serve areas where the terrain
elevation variation raises the expected
costs of deploying 5G networks, and/or
where the business case for 5G
otherwise is likely to be weaker, relative
to the support for bids for easier to serve
areas. Likewise, the adjustment factor
values will also be used in the process
of disaggregating legacy high-cost
support to account for differences
between recipients’ subsidized service
areas. These adjustment factor values
will help ensure that additional 5G
Fund support goes to the areas that need
it the most.
2. In the 5G Fund NPRM and Order,
85 FR 31636, May 26, 2020, 85 FR
34525, Jun. 5, 2020, the Federal
Communications Commission
(Commission) proposed to distribute up
to $9 billion in two phases using multiround, descending clock auctions to
assign support for the deployment of 5G
service in rural areas. To account for
differences in the cost of providing
service and business case considerations
across eligible areas, the Commission
proposed incorporating an adjustment
factor into the 5G Fund auctions that
would assign a weight to each
geographic area, which would be
applied to bidding for support amounts
to make the areas most difficult to serve
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11149
more attractive to bidders and increase
the support to such areas. In addition to
incorporating an adjustment factor into
the 5G Fund auctions, the Commission
proposed to apply this adjustment factor
to the methodology for disaggregating
legacy high-cost support in the
transition to 5G Fund support.
3. Legacy high-cost support is
currently provided to a competitive
eligible telecommunications carrier’s
entire study area, with no attribution to
particular sub-areas within that study
area. To illustrate the role of the
adjustment factor in the disaggregation
of legacy support, consider a
hypothetical carrier serving one
mountainous census tract and one flat
census tract of equal size in its
subsidized service area. Such a carrier
might require 75% of its support to
serve the mountainous tract and 25% to
serve the flat tract. Were an
unsubsidized carrier to enter the flat
tract, which may be more likely given
the relatively lower costs in the flat
tract, if we did not apply the adjustment
factor in calculating disaggregated
support, the carrier would lose 50% of
its funding and would be unable to
continue serving the mountainous tract.
However, applying an adjustment factor
of three to the mountainous area would
result in the carrier retaining 75% of its
original support amount and allow it to
continue serving the mountainous tract.
4. On June 5, 2020, the Office and
Bureau released the Adjustment Factor
Public Notice, 85 FR 36522, Jun. 17,
2020, which sought comment on the
proposed adjustment factor values, the
three analyses that inform the values,
and the application of the adjustment
factor to the disaggregation of legacy
support.
5. In the 5G Fund Report and Order,
85 FR 75770, Nov. 25, 2020, the
Commission adopted its proposal to
incorporate an adjustment factor into
the 5G Fund auctions that will assign a
weight to each geographic area and
apply that adjustment factor to bidding
for support amounts; this adjustment
factor also will be applied to the
methodology for disaggregating legacy
high-cost support. For a 5G Fund
auction, the Commission deferred the
final determination of the precise
manner in which the adjustment factor
will be incorporated into the auction
mechanism to the pre-auction process.
We provide herein the adjustment factor
values, and we discuss the studies
underlying our decision to adopt these
values for use in a 5G Fund auction and
in the methodology for the
disaggregation of legacy high-cost
support.
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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Rules and Regulations
6. Adjustment Factor Values. In the
5G Fund Adjustment Factor Public
Notice, we proposed values for an
adjustment factor that operates along
two dimensions: Terrain elevation
variation and demand, using median
household income as a proxy. These
two dimensions were included to
account for differences in network
deployment costs and business case
considerations that stem from the
geographic and economic variations in
the United States. We proposed that
areas be sorted into terrain elevation
variation and demand factor groups
according to their characteristics. The
terrain elevation variation dimension is
intended to address, in part, network
cost differences across areas, while the
demand factor is intended to address
differences in expected revenues across
areas. Under the approach proposed in
the 5G Fund Adjustment Factor Public
Notice, an area’s terrain classification is
determined by its average standard
deviation of elevation. Areas are
separated into one of three categories:
(1) Flat (standard deviation of 40 meters
or less); (2) hilly (standard deviation
between 40 and 115 meters); and (3)
mountainous (standard deviation greater
than 115 meters). Similarly, areas’
demand classification is determined by
the areas’ median household income.
We note that the category thresholds for
the medium- and high-income
categories represent 2017 median
household incomes that are 150% and
200% of the poverty line for a family of
three, respectively. Consistent with the
adjustment factor values we adopt
herein, we will use the latest available
data on terrain and median household
income appropriate for such purposes to
classify areas into the adjustment factor
categories concurrent with the
Commission’s release of the map of final
areas eligible for 5G Fund Phase I
support.
7. We adopt the adjustment factor
values in Fig. 1, as proposed in the 5G
Fund Adjustment Factor Public Notice.
We find that these adjustment factor
values, informed by the three economic
analyses laid out in the 5G Fund
Adjustment Factor Public Notice,
appropriately reflect the relative cost of
serving areas with differing terrain
characteristics, as well as the potential
business case for each area, with less
profitable areas receiving greater weight
and therefore more support. Using these
values to help distribute 5G Fund
support to, and disaggregate legacy
support in, a range of areas across the
country that are geographically and
economically diverse serves the public
interest.
FIG. 1—ADJUSTMENT FACTOR VALUES
Terrain elevation variation
Demand factors
Flat
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Low ..............................................................................................................................................
Medium ........................................................................................................................................
High ..............................................................................................................................................
8. Use of An Adjustment Factor in
Bidding. Commenters generally support
the use of an adjustment factor to
increase support in higher-cost, lessprofitable areas, and no commenter
suggests alternative adjustment factor
values to those proposed in the 5G Fund
Adjustment Factor Public Notice.
Although no commenter objects to the
use of terrain elevation variation and
median household income in the
determination of the adjustment factor,
several commenters suggest that the
adjustment factor should consider other
variables, such as differences in the cost
of labor and transportation to both
deploy and operate 5G service,
differences in the cost of utility and
other operating costs, and the existing
infrastructure in an area.
9. We are not persuaded by these
arguments and decline to increase the
number of components or categories
that make up the adjustment factor. We
acknowledge that terrain elevation
variation and median household income
do not exhaust the list of potentially
relevant variables. Likewise, we
acknowledge that when we separate
areas into categories, the areas near the
midpoint of the category will have their
relative costs and business cases more
accurately represented by the
adjustment factor values than areas at
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the margins. Nevertheless, as noted in
the 5G Fund Report and Order, the
adjustment factor adopted by the
Commission is not intended to fully
offset the differences inherent in
providing service to different types of
areas. Rather, it is intended to ‘‘make
the most difficult areas to serve more
attractive at auction in order to
encourage more bidding for these
areas.’’ Moreover, we selected terrain
elevation variation and median
household income as the two
dimensions for the adjustment factor
characteristics because they are
important factors in characterizing
deployment costs and business case
considerations, respectively, and
because there is more readily available
and verifiable data with which to apply
these two factors. As we discussed in
the 5G Fund Adjustment Factor Public
Notice, terrain elevation variation
captures differences in network costs
because ‘‘wireless network engineering
principles indicate that greater
variability of terrain in a given
geographic area reduces the signal
strength received by a mobile user,
which requires wireless carriers to build
more sites to provide the same quality
of service.’’ As a result, areas with
higher terrain elevation variation
generally have higher capital
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Hilly
1.2
1.1
1.0
Mountainous
2.4
2.3
2.0
3.8
3.5
3.0
expenditures, operating expenditures,
and leasing costs. Similarly, we also
discussed in the 5G Fund Adjustment
Factor Public Notice the importance of
demand factors and the role that
expected revenues play in carriers
deployment decisions. The Entry Model
Adjustment Factor study found that, all
else equal, areas with higher median
household incomes are more likely to be
covered, a finding consistent with the
basic assumption that higher income
areas are more profitable.
10. Economic Analyses. To inform the
proposed adjustment factor values, the
Office and Bureau included three
economic analyses. The first analysis
(the Entry Model) used coverage data to
estimate the effect that an area’s
physical and demographic
characteristics have on carriers’ network
deployment decisions. The second
analysis (the Cell Site Density Model)
examined how cell site spacing changes
as terrain roughness increases. The third
analysis (the Auction Bidding Model)
used Mobility Fund Phase I (Auction
901) bidding data to estimate how
terrain roughness and other factors
affected carriers’ bids.
11. Discussion of the economic
analyses in the record is limited, and no
party submitted an alternative economic
analysis. Some commenters argue that
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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Rules and Regulations
the Auction Bidding Model should not
be used to determine the adjustment
factor values because (1) bidding data
from the Mobility Fund Phase I auction
is distorted, (2) the Mobility Fund Phase
I auction is not an appropriate analogue
because it provided one-time funding
for capital expenditures versus longterm support for capital expenditures
and operational expenses, (3) bidding
decisions were based on 2012 pricing
that is not comparable to today’s
pricing, and (4) at the time of the
Mobility Fund Phase I auction, carriers
could still use network equipment from
low-cost equipment suppliers that have
since been designated by the
Commission as national security threats.
12. We acknowledge the contextual
differences between the Mobility Fund
Phase I auction and the upcoming 5G
Fund auctions, but do not find that such
differences unduly undermine the
analysis. While the timing and one-time
funding nature of the Mobility Fund
Phase I auction and the presence of
Huawei and ZTE as low-cost equipment
options for Mobility Fund Phase I
support recipients may have influenced
the absolute bid amounts, the
commenters fail to explain why the
relative bid amounts would differ
significantly compared with a more
recent long-term funding auction where
bidders could not use Huawei and ZTE
equipment. The absolute level of the
bids does not necessarily affect the
relative differences across areas. For
example, if all bids were 20% lower in
absolute level due to factors related to
the auction’s context, the ratio of bids
across areas would be unaffected. We
find it more likely that the calculated
adjustment factor should be largely
invariant to differences in funding type
and radio equipment costs. There are
two cases to consider. In the case where
the costs to build and operate towers are
the same across terrain types and more
towers are needed to cover rougher
terrain, the cost of radio equipment
would have no effect on the calculated
adjustment factors. In the case where
towers cost more to build and operate in
rougher terrain, the absolute cost of
radio equipment could affect the
adjustment factor. However, given that
radio equipment costs are a very low
percentage of the overall costs to build
and operate a network, the change in the
calculated adjustment factor would be
negligible.
13. Similarly, arguments that the
Mobility Fund Phase I auction is not an
appropriate point of comparison
because it did not provide funding for
both capital and operational
expenditures likewise do not undermine
our analysis here because the
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adjustment factor values we adopt are
meant to capture the relative differences
in cost and business case for different
areas. That is, reliance upon bid
amounts in an auction that did not
award operational expenses should not
affect the relative differences in costs
because bidders in the 5G Fund
auctions will be able to consider the
entirety of costs (including both capital
and operational expenditures). Thus,
any additional operational expenses
will be reflected in higher bidding
values in the auction but the relative
differences between areas is likely to
remain the same. Moreover, our
conclusions about the appropriateness
of using Mobility Fund Phase I auction
data are also consistent with all three
models producing comparable
adjustment factor estimates. We find
that the information regarding the
relative bidding incentives across areas
produced by the Auction Bidding Model
outweighs any concerns with the
absolute levels of the bidding data.
14. Use of an Adjustment Factor for
Disaggregation of Legacy High-Cost
Support. In the 5G Fund Adjustment
Factor Public Notice, the Office and
Bureau sought comment on the
appropriate adjustment factor values for
the disaggregation of legacy high-cost
support to account for differences in
costs across areas and the underlying
methodologies that could be used to
develop the values. In cases where the
transition of legacy support occurs
across areas of different types, such as
eligible areas and ineligible areas, the
adjustment factor would be used to
scale the actual square kilometers
associated with each disaggregated area.
In the 5G Fund Report and Order, the
Commission concluded that the
adjustment factor values that are
adopted by the Office and Bureau for a
5G Fund auction also would be used for
the disaggregation of legacy high-cost
support. Accordingly, we adopt the
adjustment factor values proposed in
the 5G Fund Adjustment Factor Public
Notice, as set forth in Fig. 1 herein, for
use in the process of disaggregating
legacy support.
15. We note that some commenters
oppose using the adjustment factor in
the disaggregation process. They
generally argue that, because the
adjustment factor does not capture all of
the characteristics of the particular
service areas for which legacy support is
provided (e.g., foliage) and the terrain
categories are too broad, thereby
disadvantaging the areas near the
margins, it is not appropriate to apply
the factor when disaggregating legacy
support. They propose instead that the
Commission rely on service providers’
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11151
knowledge of their subsidized areas to
estimate the costs of deploying in those
areas.
16. In the 5G Fund Report and Order,
the Commission rejected the argument
that the adjustment factor should not be
applied to the disaggregation of legacy
support, finding that ‘‘[u]sing an
adjustment factor is appropriate because
it will alleviate potential concerns over
a carrier losing a disproportionate
amount of its legacy support resulting
from a disaggregation methodology in
which more costly areas would be
treated the same as less costly areas
with respect to subsidies received.’’ As
the Commission indicated, this
approach will help ensure that legacy
high-cost support is available for harderto-serve areas.
17. We also note that there are other
reasons to apply the adjustment factor to
the disaggregation of legacy high-cost
support. Using an adjustment factor to
disaggregate legacy support is preferable
to the administrative burdens that
would arise from requiring service
providers to disaggregate their costs,
and furthermore, it avoids the potential
incentive issues associated with service
providers self-reporting their own costs.
For example, where part of a legacy
support recipient’s service area would
be served by a 5G Fund winner while
its remaining area would continue to
receive legacy support, the legacy
support recipient would have the
incentive to overestimate the amount of
high-cost support flowing to the area
that would continue to receive legacy
support, thus maximizing the funds it
would receive through preservation of
service support. In addition, while we
acknowledge that the adjustment factor
does not account for all factors that
affect network costs, the Commission
indicated that the adjustment factor is
meant to give an estimate of how a
carrier may allocate legacy high-cost
support within the area for which it
receives such support. It is not meant to
reflect the actual cost of deployment in
that area. We maintain that applying an
adjustment factor in the disaggregation
process will lead to a more equitable
distribution of legacy funding. Applying
the adjustment factor will better reflect
the distribution of high-cost support by
accounting for cost differences arising
from terrain elevation variation and
business case differences arising from
income disparities within a service area.
Thus, we will use the adjustment factor
values in Fig. 1 for the disaggregation of
legacy high-cost support.
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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Rules and Regulations
Federal Communications Commission.
Marlene Dortch,
Secretary.
Commission amends 47 CFR part 73 as
follows:
PART 73—RADIO BROADCAST
SERVICES
[FR Doc. 2021–03420 Filed 2–23–21; 8:45 am]
BILLING CODE 6712–01–P
1. The authority citation for part 73
continues to read as follows:
■
FEDERAL COMMUNICATIONS
COMMISSION
Authority: 47 U.S.C. 154, 155, 301, 303,
307, 309, 310, 334, 336, 339.
47 CFR Part 73
[MB Docket No. 20–155, RM–11856; DA 20–
1522; FRS 17360]
2. In § 73.202, the table in paragraph
(b) is amended under South Carolina by
adding an entry for ‘‘Edgefield’’ to read
as follows:
Radio Broadcasting Services;
Edgefield, South Carolina
§ 73.202
■
*
Federal Communications
Commission.
ACTION: Final rule.
AGENCY:
Table of Allotments.
*
*
(b) * * *
*
TABLE 1 TO PARAGRAPH (b)
At the request of GeorgiaCarolina Radiocasting Company, LLC,
the Audio Division amends the FM
Table of Allotments, by Channel 238A
at Edgefield, South Carolina, as a first
local service. A staff engineering
analysis indicates that Channel 238A
can be allotted to Edgefield, South
Carolina, consistent with the minimum
distance separation requirements of the
Commission’s rules, using city reference
coordinates. The reference coordinates
are 33–48–53 NL 81–56–10 WL.
DATES: Effective February 24, 2021.
FOR FURTHER INFORMATION CONTACT:
Rolanda F. Smith, Media Bureau, (202)
418–2700.
SUPPLEMENTARY INFORMATION: This is a
synopsis of the Commission’s Report
and Order, MB Docket No. 20–155,
adopted December 21, 2020, and
released December 23, 2020. The full
text of this Commission decision is
available online at https://apps.fcc.gov/
ecfs/. This document does not contain
information collection requirements
subject to the Paperwork Reduction Act
of 1995, Public Law 104–13. The
Commission will send a copy of the
Report and Order in a report to be sent
to Congress and the Government
Accountability Office pursuant to the
Congressional Review Act, see 5 U.S.C.
801(a)(1)(A).
[U.S. States]
SUMMARY:
List of Subjects in 47 CFR Part 73
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Radio, Radio broadcasting.
Federal Communications Commission.
Nazifa Sawez,
Assistant Chief, Audio Division, Media
Bureau.
For the reasons discussed in the
preamble, the Federal Communications
16:14 Feb 23, 2021
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Channel No.
*
*
*
*
South Carolina
Edgefield ...............................
*
*
*
*
238A
*
*
[FR Doc. 2021–00081 Filed 2–23–21; 8:45 am]
BILLING CODE 6712–01–P
DEPARTMENT OF COMMERCE
National Oceanic and Atmospheric
Administration
50 CFR Part 622
[Docket No. 210211–0019]
RIN 0648–BJ60
Fisheries of the Caribbean, Gulf of
Mexico, and South Atlantic; Coastal
Migratory Pelagic Resources in the
Gulf of Mexico and Atlantic Region and
Reef Fish Resources of the Gulf of
Mexico; Possession Limits for
Federally-Permitted Charter Vessels
and Headboats
National Marine Fisheries
Service (NMFS), National Oceanic and
Atmospheric Administration (NOAA),
Commerce.
ACTION: Final rule.
AGENCY:
NMFS issues regulations to
implement management measures as
described in an abbreviated framework
action to the Fishery Management Plans
(FMPs) for the Reef Fish Resources of
the Gulf of Mexico (Reef Fish FMP) and
the Coastal Migratory Pelagic (CMP)
Resources of the Gulf of Mexico and
Atlantic Region (CMP FMP), as prepared
SUMMARY:
Editorial note: This document was
received for publication at the Office of the
Federal Register on January 4, 2021.
VerDate Sep<11>2014
*
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by the Gulf of Mexico Fishery
Management Council (Gulf Council).
This final rule modifies the on-board
multi-day recreational possession limit
regulations for Federal charter vessel
and headboat (for-hire) trips in the Gulf
of Mexico (Gulf). This final rule also
makes an administrative change to the
reporting requirement for Gulf’s
individual fishing quota (IFQ) program
during catastrophic conditions. The
purposes of this final rule are to
promote efficiency in the utilization of
the reef fish and CMP resources and
reduce regulatory discards, and to
update the IFQ reporting requirements.
DATES: This final rule is effective March
26, 2021.
ADDRESSES: Electronic copies of the
framework action that contain an
environmental assessment and a
regulatory flexibility analysis (RFA) may
be obtained from the Southeast Regional
Office website at https://
www.fisheries.noaa.gov/action/
framework-amendment-modify-multiday-trip-possession-limits-federalpermitted-charter.
FOR FURTHER INFORMATION CONTACT: Rich
Malinowski, NMFS Southeast Regional
Office, telephone: 727–824–5305, or
email: rich.malinowski@noaa.gov.
SUPPLEMENTARY INFORMATION: NMFS and
the Gulf Council manage reef fish
resources in the Gulf exclusive
economic zone (EEZ) under the Reef
Fish FMP. NMFS, and both the Gulf
Council and South Atlantic Fishery
Management Council (Councils) manage
the CMP fishery under the CMP FMP.
The Gulf Council prepared the Reef Fish
FMP and the Councils jointly prepared
the CMP FMP. NMFS implements the
FMPs through regulations at 50 CFR
part 622 under the authority of the
Magnuson-Stevens Fishery
Conservation and Management Act
(Magnuson-Stevens Act) (16 U.S.C.
1801, et seq.).
On July 28, 2020, NMFS published a
proposed rule for the framework action
and requested public comment (85 FR
45363). The proposed rule and the
framework action outline the rationale
for the actions contained in this final
rule. A summary of the management
measures described in the framework
action and implemented by this final
rule is described below.
Background
In Gulf Federal waters, each person
aboard a vessel with a Federal Gulf
charter vessel/headboat permit for reef
fish or CMP species (for-hire permit)
that is on a for-hire trip greater than 24
hours in duration is allowed to possess
two daily recreational bag limits for
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]]>Agencies
[Federal Register Volume 86, Number 35 (Wednesday, February 24, 2021)]
[Rules and Regulations]
[Pages 11149-11152]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2021-03420]
-----------------------------------------------------------------------
FEDERAL COMMUNICATIONS COMMISSION
47 CFR Parts 1 and 54
[GN Docket No. 20-32; DA 20-1361; FRS 17443]
Office of Economics and Analytics and Wireline Competition Bureau
Adopt Adjustment Factor Values for the 5G Fund
AGENCY: Federal Communications Commission.
ACTION: Final action.
-----------------------------------------------------------------------
SUMMARY: In this document, the Office of Economics and Analytics
(Office) and the Wireline Competition Bureau (Bureau) adopt adjustment
factor values for an adjustment factor that will be used in bidding in
the 5G Fund auctions and applied to the methodology for disaggregating
legacy high-cost support.
DATES: Effective February 24, 2021.
ADDRESSES: Federal Communications Commission, 45 L Street NE,
Washington, DC 20554.
FOR FURTHER INFORMATION CONTACT: Kate Matraves, Office of Economics and
Analytics, Economic Analysis Division, (202) 391-6272 or
[email protected], or Nicholas Copeland, Office of Economics
and Analytics, Economic Analysis Division, (202) 418-1025 or
[email protected].
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's 5G
Fund Adjustment Values Public Notice in GN Docket No. 20-32, DA 20-
1361, released on November 16, 2020. The full text of this document is
available on the Commission's website at https://www.fcc.gov/document/oea-and-wcb-adopt-adjustment-factor-values-5g-fund. To request
materials in accessible formats for people with disabilities, send an
email to [email protected] or call the Consumer & Governmental Affairs
Bureau at 202-418-0530 (voice), 202-418-0432 (TTY).
Synopsis
1. The Office of Economics and Analytics (Office) and the Wireline
Competition Bureau (Bureau) adopt 5G Fund adjustment factor values to
help direct more 5G Fund support to harder to serve areas.
Specifically, the values we adopt will increase support levels for bids
to serve areas where the terrain elevation variation raises the
expected costs of deploying 5G networks, and/or where the business case
for 5G otherwise is likely to be weaker, relative to the support for
bids for easier to serve areas. Likewise, the adjustment factor values
will also be used in the process of disaggregating legacy high-cost
support to account for differences between recipients' subsidized
service areas. These adjustment factor values will help ensure that
additional 5G Fund support goes to the areas that need it the most.
2. In the 5G Fund NPRM and Order, 85 FR 31636, May 26, 2020, 85 FR
34525, Jun. 5, 2020, the Federal Communications Commission (Commission)
proposed to distribute up to $9 billion in two phases using multi-
round, descending clock auctions to assign support for the deployment
of 5G service in rural areas. To account for differences in the cost of
providing service and business case considerations across eligible
areas, the Commission proposed incorporating an adjustment factor into
the 5G Fund auctions that would assign a weight to each geographic
area, which would be applied to bidding for support amounts to make the
areas most difficult to serve more attractive to bidders and increase
the support to such areas. In addition to incorporating an adjustment
factor into the 5G Fund auctions, the Commission proposed to apply this
adjustment factor to the methodology for disaggregating legacy high-
cost support in the transition to 5G Fund support.
3. Legacy high-cost support is currently provided to a competitive
eligible telecommunications carrier's entire study area, with no
attribution to particular sub-areas within that study area. To
illustrate the role of the adjustment factor in the disaggregation of
legacy support, consider a hypothetical carrier serving one mountainous
census tract and one flat census tract of equal size in its subsidized
service area. Such a carrier might require 75% of its support to serve
the mountainous tract and 25% to serve the flat tract. Were an
unsubsidized carrier to enter the flat tract, which may be more likely
given the relatively lower costs in the flat tract, if we did not apply
the adjustment factor in calculating disaggregated support, the carrier
would lose 50% of its funding and would be unable to continue serving
the mountainous tract. However, applying an adjustment factor of three
to the mountainous area would result in the carrier retaining 75% of
its original support amount and allow it to continue serving the
mountainous tract.
4. On June 5, 2020, the Office and Bureau released the Adjustment
Factor Public Notice, 85 FR 36522, Jun. 17, 2020, which sought comment
on the proposed adjustment factor values, the three analyses that
inform the values, and the application of the adjustment factor to the
disaggregation of legacy support.
5. In the 5G Fund Report and Order, 85 FR 75770, Nov. 25, 2020, the
Commission adopted its proposal to incorporate an adjustment factor
into the 5G Fund auctions that will assign a weight to each geographic
area and apply that adjustment factor to bidding for support amounts;
this adjustment factor also will be applied to the methodology for
disaggregating legacy high-cost support. For a 5G Fund auction, the
Commission deferred the final determination of the precise manner in
which the adjustment factor will be incorporated into the auction
mechanism to the pre-auction process. We provide herein the adjustment
factor values, and we discuss the studies underlying our decision to
adopt these values for use in a 5G Fund auction and in the methodology
for the disaggregation of legacy high-cost support.
[[Page 11150]]
6. Adjustment Factor Values. In the 5G Fund Adjustment Factor
Public Notice, we proposed values for an adjustment factor that
operates along two dimensions: Terrain elevation variation and demand,
using median household income as a proxy. These two dimensions were
included to account for differences in network deployment costs and
business case considerations that stem from the geographic and economic
variations in the United States. We proposed that areas be sorted into
terrain elevation variation and demand factor groups according to their
characteristics. The terrain elevation variation dimension is intended
to address, in part, network cost differences across areas, while the
demand factor is intended to address differences in expected revenues
across areas. Under the approach proposed in the 5G Fund Adjustment
Factor Public Notice, an area's terrain classification is determined by
its average standard deviation of elevation. Areas are separated into
one of three categories: (1) Flat (standard deviation of 40 meters or
less); (2) hilly (standard deviation between 40 and 115 meters); and
(3) mountainous (standard deviation greater than 115 meters).
Similarly, areas' demand classification is determined by the areas'
median household income. We note that the category thresholds for the
medium- and high-income categories represent 2017 median household
incomes that are 150% and 200% of the poverty line for a family of
three, respectively. Consistent with the adjustment factor values we
adopt herein, we will use the latest available data on terrain and
median household income appropriate for such purposes to classify areas
into the adjustment factor categories concurrent with the Commission's
release of the map of final areas eligible for 5G Fund Phase I support.
7. We adopt the adjustment factor values in Fig. 1, as proposed in
the 5G Fund Adjustment Factor Public Notice. We find that these
adjustment factor values, informed by the three economic analyses laid
out in the 5G Fund Adjustment Factor Public Notice, appropriately
reflect the relative cost of serving areas with differing terrain
characteristics, as well as the potential business case for each area,
with less profitable areas receiving greater weight and therefore more
support. Using these values to help distribute 5G Fund support to, and
disaggregate legacy support in, a range of areas across the country
that are geographically and economically diverse serves the public
interest.
Fig. 1--Adjustment Factor Values
----------------------------------------------------------------------------------------------------------------
Terrain elevation variation
Demand factors -----------------------------------------------
Flat Hilly Mountainous
----------------------------------------------------------------------------------------------------------------
Low............................................................. 1.2 2.4 3.8
Medium.......................................................... 1.1 2.3 3.5
High............................................................ 1.0 2.0 3.0
----------------------------------------------------------------------------------------------------------------
8. Use of An Adjustment Factor in Bidding. Commenters generally
support the use of an adjustment factor to increase support in higher-
cost, less-profitable areas, and no commenter suggests alternative
adjustment factor values to those proposed in the 5G Fund Adjustment
Factor Public Notice. Although no commenter objects to the use of
terrain elevation variation and median household income in the
determination of the adjustment factor, several commenters suggest that
the adjustment factor should consider other variables, such as
differences in the cost of labor and transportation to both deploy and
operate 5G service, differences in the cost of utility and other
operating costs, and the existing infrastructure in an area.
9. We are not persuaded by these arguments and decline to increase
the number of components or categories that make up the adjustment
factor. We acknowledge that terrain elevation variation and median
household income do not exhaust the list of potentially relevant
variables. Likewise, we acknowledge that when we separate areas into
categories, the areas near the midpoint of the category will have their
relative costs and business cases more accurately represented by the
adjustment factor values than areas at the margins. Nevertheless, as
noted in the 5G Fund Report and Order, the adjustment factor adopted by
the Commission is not intended to fully offset the differences inherent
in providing service to different types of areas. Rather, it is
intended to ``make the most difficult areas to serve more attractive at
auction in order to encourage more bidding for these areas.'' Moreover,
we selected terrain elevation variation and median household income as
the two dimensions for the adjustment factor characteristics because
they are important factors in characterizing deployment costs and
business case considerations, respectively, and because there is more
readily available and verifiable data with which to apply these two
factors. As we discussed in the 5G Fund Adjustment Factor Public
Notice, terrain elevation variation captures differences in network
costs because ``wireless network engineering principles indicate that
greater variability of terrain in a given geographic area reduces the
signal strength received by a mobile user, which requires wireless
carriers to build more sites to provide the same quality of service.''
As a result, areas with higher terrain elevation variation generally
have higher capital expenditures, operating expenditures, and leasing
costs. Similarly, we also discussed in the 5G Fund Adjustment Factor
Public Notice the importance of demand factors and the role that
expected revenues play in carriers deployment decisions. The Entry
Model Adjustment Factor study found that, all else equal, areas with
higher median household incomes are more likely to be covered, a
finding consistent with the basic assumption that higher income areas
are more profitable.
10. Economic Analyses. To inform the proposed adjustment factor
values, the Office and Bureau included three economic analyses. The
first analysis (the Entry Model) used coverage data to estimate the
effect that an area's physical and demographic characteristics have on
carriers' network deployment decisions. The second analysis (the Cell
Site Density Model) examined how cell site spacing changes as terrain
roughness increases. The third analysis (the Auction Bidding Model)
used Mobility Fund Phase I (Auction 901) bidding data to estimate how
terrain roughness and other factors affected carriers' bids.
11. Discussion of the economic analyses in the record is limited,
and no party submitted an alternative economic analysis. Some
commenters argue that
[[Page 11151]]
the Auction Bidding Model should not be used to determine the
adjustment factor values because (1) bidding data from the Mobility
Fund Phase I auction is distorted, (2) the Mobility Fund Phase I
auction is not an appropriate analogue because it provided one-time
funding for capital expenditures versus long-term support for capital
expenditures and operational expenses, (3) bidding decisions were based
on 2012 pricing that is not comparable to today's pricing, and (4) at
the time of the Mobility Fund Phase I auction, carriers could still use
network equipment from low-cost equipment suppliers that have since
been designated by the Commission as national security threats.
12. We acknowledge the contextual differences between the Mobility
Fund Phase I auction and the upcoming 5G Fund auctions, but do not find
that such differences unduly undermine the analysis. While the timing
and one-time funding nature of the Mobility Fund Phase I auction and
the presence of Huawei and ZTE as low-cost equipment options for
Mobility Fund Phase I support recipients may have influenced the
absolute bid amounts, the commenters fail to explain why the relative
bid amounts would differ significantly compared with a more recent
long-term funding auction where bidders could not use Huawei and ZTE
equipment. The absolute level of the bids does not necessarily affect
the relative differences across areas. For example, if all bids were
20% lower in absolute level due to factors related to the auction's
context, the ratio of bids across areas would be unaffected. We find it
more likely that the calculated adjustment factor should be largely
invariant to differences in funding type and radio equipment costs.
There are two cases to consider. In the case where the costs to build
and operate towers are the same across terrain types and more towers
are needed to cover rougher terrain, the cost of radio equipment would
have no effect on the calculated adjustment factors. In the case where
towers cost more to build and operate in rougher terrain, the absolute
cost of radio equipment could affect the adjustment factor. However,
given that radio equipment costs are a very low percentage of the
overall costs to build and operate a network, the change in the
calculated adjustment factor would be negligible.
13. Similarly, arguments that the Mobility Fund Phase I auction is
not an appropriate point of comparison because it did not provide
funding for both capital and operational expenditures likewise do not
undermine our analysis here because the adjustment factor values we
adopt are meant to capture the relative differences in cost and
business case for different areas. That is, reliance upon bid amounts
in an auction that did not award operational expenses should not affect
the relative differences in costs because bidders in the 5G Fund
auctions will be able to consider the entirety of costs (including both
capital and operational expenditures). Thus, any additional operational
expenses will be reflected in higher bidding values in the auction but
the relative differences between areas is likely to remain the same.
Moreover, our conclusions about the appropriateness of using Mobility
Fund Phase I auction data are also consistent with all three models
producing comparable adjustment factor estimates. We find that the
information regarding the relative bidding incentives across areas
produced by the Auction Bidding Model outweighs any concerns with the
absolute levels of the bidding data.
14. Use of an Adjustment Factor for Disaggregation of Legacy High-
Cost Support. In the 5G Fund Adjustment Factor Public Notice, the
Office and Bureau sought comment on the appropriate adjustment factor
values for the disaggregation of legacy high-cost support to account
for differences in costs across areas and the underlying methodologies
that could be used to develop the values. In cases where the transition
of legacy support occurs across areas of different types, such as
eligible areas and ineligible areas, the adjustment factor would be
used to scale the actual square kilometers associated with each
disaggregated area. In the 5G Fund Report and Order, the Commission
concluded that the adjustment factor values that are adopted by the
Office and Bureau for a 5G Fund auction also would be used for the
disaggregation of legacy high-cost support. Accordingly, we adopt the
adjustment factor values proposed in the 5G Fund Adjustment Factor
Public Notice, as set forth in Fig. 1 herein, for use in the process of
disaggregating legacy support.
15. We note that some commenters oppose using the adjustment factor
in the disaggregation process. They generally argue that, because the
adjustment factor does not capture all of the characteristics of the
particular service areas for which legacy support is provided (e.g.,
foliage) and the terrain categories are too broad, thereby
disadvantaging the areas near the margins, it is not appropriate to
apply the factor when disaggregating legacy support. They propose
instead that the Commission rely on service providers' knowledge of
their subsidized areas to estimate the costs of deploying in those
areas.
16. In the 5G Fund Report and Order, the Commission rejected the
argument that the adjustment factor should not be applied to the
disaggregation of legacy support, finding that ``[u]sing an adjustment
factor is appropriate because it will alleviate potential concerns over
a carrier losing a disproportionate amount of its legacy support
resulting from a disaggregation methodology in which more costly areas
would be treated the same as less costly areas with respect to
subsidies received.'' As the Commission indicated, this approach will
help ensure that legacy high-cost support is available for harder-to-
serve areas.
17. We also note that there are other reasons to apply the
adjustment factor to the disaggregation of legacy high-cost support.
Using an adjustment factor to disaggregate legacy support is preferable
to the administrative burdens that would arise from requiring service
providers to disaggregate their costs, and furthermore, it avoids the
potential incentive issues associated with service providers self-
reporting their own costs. For example, where part of a legacy support
recipient's service area would be served by a 5G Fund winner while its
remaining area would continue to receive legacy support, the legacy
support recipient would have the incentive to overestimate the amount
of high-cost support flowing to the area that would continue to receive
legacy support, thus maximizing the funds it would receive through
preservation of service support. In addition, while we acknowledge that
the adjustment factor does not account for all factors that affect
network costs, the Commission indicated that the adjustment factor is
meant to give an estimate of how a carrier may allocate legacy high-
cost support within the area for which it receives such support. It is
not meant to reflect the actual cost of deployment in that area. We
maintain that applying an adjustment factor in the disaggregation
process will lead to a more equitable distribution of legacy funding.
Applying the adjustment factor will better reflect the distribution of
high-cost support by accounting for cost differences arising from
terrain elevation variation and business case differences arising from
income disparities within a service area. Thus, we will use the
adjustment factor values in Fig. 1 for the disaggregation of legacy
high-cost support.
[[Page 11152]]
Federal Communications Commission.
Marlene Dortch,
Secretary.
[FR Doc. 2021-03420 Filed 2-23-21; 8:45 am]
BILLING CODE 6712-01-P
