[Federal Register Volume 81, Number 69 (Monday, April 11, 2016)]
[Rules and Regulations]
[Pages 21272-21275]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-07718]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket Nos. 10-90, 14-58, 14-259; FCC 16-28]


Connect America Fund, ETC Annual Reports and Certifications, 
Rural Broadband Experiments

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) clarifies that price cap carriers can use Phase II model-
based support to serve locations in eligible census blocks where the 
price cap carrier has served or intends to serve a location or 
locations using Phase I Round 2 incremental support. The Commission 
also makes several modifications to the letter of credit requirements 
for recipients of rural broadband experiment support.

DATES: Effective May 11, 2016.

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 Order 
in WC Docket No. 10-90, 14-58 and 14-259; FCC 16-28, adopted on March 
8, 2016 and released on March 9, 2016. 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: http://transition.fcc.gov/Daily_Releases/Daily_Business/2016/db0309/FCC-16-28A1.pdf.

I. Introduction

    1. In this Order the Commission clarifies that price cap carriers 
can use Phase II model-based support to serve locations in eligible 
census blocks where the price cap carrier has served or intends to 
serve a location or locations using Phase I Round 2 incremental 
support. The Commission also makes several modifications to the letter 
of credit requirements for recipients of rural broadband experiment 
support.

II. Interplay Between Phase I Incremental Support and Phase II

    2. In 2013, the Commission instructed price cap carriers to meet 
their Phase I Round 2 incremental support obligations by deploying 
service to locations outside of the census blocks

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where they will receive Phase II support. The intent was to take steps 
to ensure that Connect America funds are used ``in the most efficient 
manner possible'' and to ``avoid providing excess support in an area.'' 
Subsequently, in December 2014, the Commission adopted a requirement 
that price cap carriers accepting model-based support annually submit a 
list of the geo-coded locations that are newly broadband-capable as a 
result of Phase II funding.
    3. On April 29, 2015, the Wireline Competition Bureau (Bureau) 
announced the final details of the offer of Phase II model-based 
support to price cap carriers, setting an August 27, 2015 deadline to 
accept or decline the offer. Ten carriers accepted over $1.5 billion in 
annual support to provide broadband to nearly 7.3 million consumers in 
45 states and the Commonwealth of the Northern Mariana Islands.
    4. Discussion. The Commission now clarifies that in light of the 
adoption of the geo-coded location reporting requirement for recipients 
of Phase II model-based support, if a price cap carrier has served or 
intends to serve a location or locations using Phase I Round 2 
incremental support in a census block where that price cap carrier 
accepted Phase II model-based support, that price cap carrier may use 
Phase II model-based support to serve the remaining eligible locations 
within that census block. Because it would be an inefficient use of 
Connect America support to permit a price cap carrier to receive both 
Phase I incremental and Phase II model-based support to serve a single 
location, however, the price cap carrier may not count the locations it 
serves using Phase I Round 2 incremental support towards its Phase II 
obligation to serve a set number of locations within the state. 
Accordingly, if the price cap carrier is using Phase I Round 2 funding 
to upgrade, or has already upgraded, specific locations in census 
blocks that were part of the offer of model-based support, it will need 
to deploy service to other locations in Phase II eligible census blocks 
or extremely high-cost census blocks in the state to fulfill its Phase 
II model-based support obligation to serve a specific number of 
locations.
    5. The Commission directs the Universal Service Administrative 
Company (USAC) to compare the list of geocoded locations that price cap 
carriers submit for their Phase II deployment obligation, with the list 
of geocoded locations that price cap carriers must submit to indicate 
the locations which they have served or will serve to satisfy their 
Phase I Round 2 obligation. If USAC determines that a price cap carrier 
has included in its list of Phase II locations any locations that the 
price cap carrier indicated it has deployed to or will deploy to using 
Phase I Round 2 incremental support, that price cap carrier will be 
deemed to have not met its Phase II model-based support build-out 
obligation and will be subject to the applicable non-compliance 
measures.
    6. The Commission makes this modest adjustment to its earlier 
conclusion that price cap carriers could not use Phase I Round 2 
support to serve locations in census blocks where they receive Phase II 
support because at the time the Commission made these statements, it 
had not yet adopted the more granular reporting requirements for price 
cap carriers accepting Phase II support to identify the locations they 
have served using Phase II support. The Bureau and USAC will now have 
access to geocoded information for each location that a price cap 
carrier serves using Phase I Round 2 and using Phase II support, and 
thus can verify in a more targeted manner that support is being used 
efficiently on a location-by-location basis rather than on a census 
block-by-census block basis.

III. Rural Broadband and Experiments

    7. Before a provisionally selected bidder may be authorized to 
begin receiving support, it must obtain a letter of credit that meets 
the Commission's requirements. Under those existing requirements, 
throughout the 10-year support term, the letter of credit must be 
valued at an amount equal to the total amount of support that has been 
disbursed plus the amount of support the recipient will receive in the 
next disbursement. Rural broadband experiment recipients must maintain 
an open and renewed letter of credit until 120 days after the support 
term has ended. They must build out to 85 percent of locations with 
voice and broadband service meeting the relevant public interest 
obligations by year three and to 100 percent of locations by year five 
of their support term. Recipients receive their rural broadband 
experiment support in equal monthly installments over the 10-year term, 
but they were given the opportunity to request 30 percent of their 
support upfront. Recipients that elected this option are required to 
build out to at least 25 percent of the required number of locations 
within 15 months of their first disbursement of support.
    8. Discussion. The Commission grants the Alliance of Rural 
Broadband Applicants (ARBA) petition for waiver in part to the extent 
the ARBA sought a reduction in the duration of the letter of credit 
requirement and asked that rural broadband experiment recipients be 
released from their letter of credit obligations upon satisfying their 
deployment obligations. In response to concerns raised about the cost 
of maintaining a letter of credit for the entire support period, 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 percent of 
the required number of locations, and USAC has validated that the 
entity has fully deployed its network. The Commission concludes that 
such an approach will help alleviate the costs of obtaining a letter of 
credit, particularly for entities that are able to build out their 
networks faster than the five-year build-out period, while still 
protecting the Commission's ability to recover the funds in the event 
that the entity is not building out its network as required. This 
approach is consistent with the approach used for Mobility Fund Phase I 
and Tribal Mobility Fund Phase I, where an entity is required to 
maintain a letter of credit valued at the support that had been 
disbursed until the Commission verifies that the build-out has been 
completed. As a result, authorized rural broadband experiment 
recipients must only maintain their letter of credit until it is 
verified that the final build-out milestone has been met.
    9. Recognizing that the risk of a default will lessen as a 
recipient makes progress towards building its network, the Commission 
also finds that it is appropriate to modestly reduce the value of the 
letter of credit in an effort to reduce the cost of maintaining a 
letter of credit as the recipient meets certain build-out milestones. 
Once recipients have met the 85 percent build-out milestone, the 
Commission will also permit those recipients to obtain a new or renew 
their existing letters of credit so that they are valued at 80 percent 
of the total support disbursed plus the next year of support until the 
100 percent build-out milestone has been met and verified. The 
Commission concludes that the benefit to recipients of potentially 
decreasing the cost of the letter of credit as it becomes less likely 
that a recipient will default outweighs the potential risk that if a 
recipient does default and is unable to cure, the Commission will be 
unable to recover a modest amount of support.
    10. Once a rural broadband experiment recipient has certified that 
it has deployed broadband and voice service meeting the Commission's

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requirements to 100 percent of the required number of locations and 
supplied the geocoded data for the final locations, it must keep the 
letter of credit open until the Commission can verify that the 
deployment has been met. The Commission directs USAC to implement 
processes to verify in a timely manner that deployment has occurred. 
Once a rural broadband experiment recipient no longer maintains a 
letter of credit, the Commission will withhold support as described in 
the Rural Broadband Experiments Order, 79 FR 45705, August 6, 2014, if 
the Commission finds that the rural broadband experiment recipient is 
not providing voice and broadband service that meets the Commission's 
requirements to the funded locations. If after the year cure period, 
the rural broadband experiment recipient is still not providing service 
that meets the Commission's requirements to all of the required 
locations, the Commission will withhold from the entity a percentage of 
support equivalent to the entity's compliance gap until it comes into 
compliance, rather than recover 100 percent of the support as 
originally contemplated when the Commission expected that the entity 
would have a letter of credit in place for the entire support period. 
If the entity cures the default before the 10-year support term has 
ended, it will be entitled to the withheld support and any subsequent 
payments.
    11. The Commission concludes that it is not necessary to continue 
to require rural broadband experiment recipients to maintain a letter 
of credit after the build-out period to provide an adequate incentive 
for rural broadband experiment recipients to offer service that meets 
the Commission's requirements. The Commission notes that rural 
broadband experiment recipients remain subject to forfeitures and other 
consequences for non-compliance in the event of a default, including 
but not limited to, potential revocation of ETC designation and 
disqualification from future competitive bidding for universal service 
support.
    12. The Commission also grants ARBA's petition in part to the 
extent that it requests that entities that elected to receive 30 
percent of their payment upfront be permitted to amend their 
applications to propose the standard deployment time period. The 
Commission adopted the requirement that entities specify whether they 
would be interested in receiving 30 percent of their support upfront in 
their applications so that the Commission could learn about whether 
there was interest in upfront support for the Phase II competitive 
bidding process. To help reduce the costs of the letter of credit 
requirement for entities that have elected upfront support, the 
Commission will permit such entities that have not already been 
authorized to receive rural broadband experiment support to send a 
letter to the Commission electing to receive support in equal 
installments throughout the 10-year term rather than 30 percent upfront 
before they are authorized to begin receiving support. If they elect 
this option before they are authorized, they will no longer be required 
to deploy to 25 percent of locations and submit the required 
certifications within 15 months of their first disbursement of support. 
To the extent provisionally selected bidders decide they still want to 
receive 30 percent of their support upfront they will need to obtain a 
letter of credit that covers this amount.
    13. The Commission denies ARBA's petition in part to the extent it 
requests that the Commission reduce the value of the letter of credit 
to 50 percent of support. Such an approach would prevent the Commission 
from recovering half of the Connect America support that it will 
disburse to rural broadband experiment recipients during the build-out 
period in the event that such support is not used for its intended 
purposes. While such an approach may reduce costs further for 
recipients, the Commission is not persuaded that the public interest 
will be better served by protecting only half of the Connect America 
support, particularly when the Commission has adopted other measures to 
help reduce the costs of maintaining a letter of credit for rural 
broadband experiment recipients.

IV. Procedural Matters

A. Paperwork Reduction Act Analysis

    14. This document does not contain proposed information 
collection(s) subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. In addition, therefore, it does not contain any new 
or modified information collection burden for small business concerns 
with fewer than 25 employees, pursuant to the Small Business Paperwork 
Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4).

B. Congressional Review Act

    15. The Commission will send a copy of this Order to Congress and 
the Government Accountability Office pursuant to the Congressional 
Review Act.

C. Final Regulatory Flexibility Act Certification

    16. The Regulatory Flexibility Act of 1980, as amended (RFA), 
requires that a regulatory flexibility analysis be prepared for 
rulemaking proceedings, unless the agency certifies that ``the rule 
will not have a significant economic impact on a substantial number of 
small entities.'' The RFA generally defines ``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 Small Business Administration 
(SBA).
    17. This Order modifies and clarifies the rules adopted by the 
Commission in the Rural Broadband Experiments Order, the Phase I Round 
2 Order, 78 FR 38227, June 26, 2013 and the USF/ICC Transformation 
Order, 76 FR 73830, November 29, 2011. These modifications and 
clarifications do not create any burdens, benefits, or requirements 
that were not addressed by the Final Regulatory Flexibility Analysis 
attached to USF/ICC Transformation Order and the Rural Broadband 
Experiments Order. Therefore, the Commission certifies that the 
requirements of this Order will not have a significant economic impact 
on a substantial number of small entities. The Commission will send a 
copy of the Order including a copy of this final certification in a 
report to Congress pursuant to the Small Business Regulatory 
Enforcement Fairness Act of 1996. In addition, the Order and this 
certification will be sent to the Chief Counsel for Advocacy of the 
Small Business Administration, and will be published in the Federal 
Register.

D. Additional Information

    18. People with Disabilities. To request materials in accessible 
formats for people with disabilities (braille, large print, electronic 
files, audio format), send an email to [email protected] or call the 
Consumer & Governmental Affairs Bureau at 202-418-0530 (voice), 202-
418-0432 (tty).
    19. Additional Information. For additional information on this 
proceeding, contact Alexander Minard of the Wireline Competition 
Bureau, Telecommunications Access Policy Division, 
[email protected], (202) 418-7400.

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V. Ordering Clauses

    20. Accordingly, it is ordered, pursuant to the authority contained 
in sections 1, 2, 4(i), 5, 10, 214, 218-220, 254, 303(r), 403, and 503 
of the Communications Act of 1934, as amended, and section 706 of the 
Telecommunications Act of 1996, 47 U.S.C. 151, 152, 154(i), 155, 160, 
214, 218-220, 254, 303(r), 403, 503, 1302, and sections 1.1, and 1.427 
of the Commission's rules, 47 CFR 1.1, and 1.427, that this order is 
adopted, effective thirty (30) days after publication of the text or 
summary thereof in the Federal Register.
    21. It is further ordered that, pursuant to section 1.3 of the 
Commission's rules, 47 CFR 1.3, the Petition for Waiver filed by the 
Alliance of Rural Broadband Applicants on January 27, 2015 is granted 
in part and denied in part to the extent described herein.
    22. It is further ordered that the Commission shall send a copy of 
this Order to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    23. It is further ordered, that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of this Order, including the Final Regulatory Flexibility Act 
Certification, to the Chief Counsel for Advocacy of the Small Business 
Administration.

    Federal Comunications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2016-07718 Filed 4-8-16; 8:45 am]
 BILLING CODE 6712-01-P