[Federal Register Volume 81, Number 225 (Tuesday, November 22, 2016)]
[Rules and Regulations]
[Pages 83706-83714]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-28114]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 10-90; FCC 16-143]


Connect America Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) adopts tailored service obligations for Alaska 
Communications Systems (ACS), a carrier serving a non-contiguous area 
that elected to receive nearly $20 million annually in Connect America 
Phase II frozen support amounts in lieu of model-based support.

DATES: Effective December 22, 2016, except for the certification in 
paragraph 33 which contains a new information collection requirement 
that will not be effective until approved by the Office of Management 
and Budget. The Commission will publish a document in the Federal 
Register announcing the effective date for that certification.

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; FCC 16-143, adopted on October 24, 2016 and 
released on October 31, 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/db1031/FCC-16-143A1.pdf.

I. Introduction

    1. In this Order, the Commission adopts tailored service 
obligations for Alaska Communications Systems (ACS), a carrier serving 
a non-contiguous area that elected to receive nearly $20 million 
annually in Connect America Phase II frozen support amounts in lieu of 
model-based support. The Commission finds these obligations are in the 
public interest and will advance the Commission's goal of ensuring 
universal availability of modern networks capable of providing voice 
and broadband service. Specifically, ACS will receive Phase II frozen 
support for a 10-year term and be required to offer voice service and 
broadband service at the same speed, latency, usage and pricing metrics 
as established for Phase II model-based carriers to at least 31,571 
locations, primarily in census blocks identified as high-cost that are 
unserved by unsubsidized competitors, with limited exceptions. These 
service obligations strike the appropriate balance of ensuring Alaska 
consumers receive broadband service while also allowing ACS the 
flexibility to provide that service in a way that is logical, maximizes 
its network and is reasonable considering the unique climate and 
geographic conditions of its service territory.

II. Discussion

    2. As described below, the Commission adopts specific service 
obligations for ACS as a non-contiguous carrier electing to receive 
Phase II frozen support. The service obligations established today 
maintain many of the same public interest standards as those 
established for model-based price cap carriers, but allow flexibility 
in both buildout locations and the deployment schedule to account for 
the distinctive

[[Page 83707]]

geographic and climate challenges of building and providing voice and 
broadband service in Alaska. By adopting these standards today, the 
Commission establishes clear deadlines for planning and deploying new 
broadband services to consumers in Alaska, as well as clear obligations 
to maintain existing service. The Commission finds these service 
obligations are in the public interest as ACS will provide advanced 
communication service to at least 31,571 locations.
    3. Speed. The Commission adopts 10/1 Mbps as the minimum broadband 
speed requirement for ACS's Phase II broadband deployment.
    4. ACS stated in its comments in response to the April 2014 Connect 
America FNPRM, 79 FR 39196, July 9, 2014, that it intends to provide 
speeds of at least 10/1 Mbps in its service territory and did not 
request a lesser speed in any location. In fact, ACS stated that it 
prefers a 10/1 Mbps service obligation, and planned its proposal 
accordingly. ACS explains that providing 10/1 Mbps service is more 
costly, however, than providing \4/1\ Mbps service and requests that 
the 10/1 Mbps standard only be adopted if a ten-year term of support is 
adopted.
    5. In the December 2014 Connect America Order, 80 FR 4446, January 
27, 2015, the Commission adopted 10/1 Mbps as the minimum broadband 
speed for all ETCs subject to broadband performance obligations. 
Although the Commission has determined that 25/3 Mbps reflects 
``advanced'' capabilities, the Commission has explained that ``[b]y 
setting a lower baseline for Connect America funding, the Commission 
establishes a framework to ensure a basic level of service to be 
available for all Americans, while at the same time working to provide 
access to advanced services.'' Based on the record before us, the 
Commission sees no reason to apply a different standard to ACS. 
Accordingly, the Commission adopts 10/1 Mbps as the minimum broadband 
speed requirement for deployment of broadband services to a specified 
number of locations in the ACS service territory and as a condition of 
receiving frozen support. While this represents the minimum, consistent 
with our recent decision to improve oversight over the outcomes 
achieved by rate-of-return carriers, ACS will also report to us the 
number of locations that will receive 25/3 Mbps service so that the 
Commission can track progress over time in achieving higher speeds.
    6. Latency. The Commission adopts a roundtrip provider network 
latency requirement of 100 ms or less for ACS's Phase II broadband 
deployment.
    7. In the April 2014 Connect America FNPRM, the Commission proposed 
that non-contiguous carriers be required to meet a roundtrip provider 
network latency of 100 ms or less. The Commission proposed that non-
contiguous carriers choosing frozen support conduct their latency 
network testing from the customer location to a point at which traffic 
is consolidated for transport to an Internet exchange point in the 
continental United States. The Commission also proposed exempting non-
contiguous carriers from the latency requirements to the extent the 
carriers rely exclusively on satellite backhaul facility and certify 
annually that no terrestrial backhaul options exist.
    8. ACS stated in its comments that it intends to meet the Phase II 
parameters for roundtrip latency of 100 ms or less. Further, ACS 
confirms that none of the areas where it proposes to deploy new 
broadband rely exclusively on the use of satellite backhaul to deliver 
service. Accordingly, there is no reason in the record before us to 
relax the latency standard for ACS' proposed Phase II deployment. The 
Commission adopts the same requirement as implemented by the Bureau for 
model-based carriers in the Phase II Service Obligations Order, 78 FR 
70881, November 27, 2013. Specifically, ACS must certify that 95 
percent or more of all peak period measurements (also referred to as 
observations) of network round trip latency are at or below 100 ms. The 
measurements should be conducted over a minimum of two consecutive 
weeks during peak hours for at least 50 randomly-selected customer 
locations within the census blocks for which the provider is receiving 
frozen support using existing network management systems, ping tests, 
or other commonly available network measurement tools. ACS should 
conduct its latency network testing from the customer location to a 
point at which traffic is consolidated for transport to an Internet 
exchange point in the continental United States. The Commission adopts 
this latency standard for deployment of broadband services in the ACS 
service territory and as a condition of receiving of frozen support.
    9. Usage Allowance. The Commission concludes that ACS will be 
required to provide a usage allowance that evolves over time to remain 
reasonably comparable to usage by subscribers in urban areas, similar 
to the approach adopted for price cap carriers.
    10. In the April 2014 Connect America FNPRM, the Commission 
proposed that non-contiguous carriers continuing to receive frozen 
support be subject to the same usage allowance as that specified by the 
Bureau for price cap carriers receiving model-based support. Under the 
approach previously implemented by the Bureau for Phase II model-based 
support, price cap carriers must either provide a usage allowance based 
on the nationwide annual urban rate survey, or a usage allowance 
consistent with the usage level of 80 percent of their own broadband 
subscribers including those subscribers that live outside of Phase II-
funded areas, subject to a 100 gigabyte (GB) per month floor. The 
Commission sought comment on whether--in light of the potentially 
unique circumstances in non-contiguous areas--it would be appropriate 
to relax the 100 GB minimum usage allowance for non-contiguous carriers 
and instead allow them to meet their usage requirements based on a 
comparison to 80 percent of their entire subscriber base. The 
Commission also proposed exempting non-contiguous carriers from the 
usage requirements to the extent the carriers rely exclusively on 
satellite backhaul facility and certify annually that no terrestrial 
backhaul options exist.
    11. ACS stated in its comments that it intends to meet the Phase II 
obligations for usage and did not suggest any relaxation of the usage 
requirement was necessary. ACS also later explained that it is not its 
practice or policy to impose a data usage cap on its customers, and ACS 
has no intention of limiting usage in the future. ACS proposes to be 
subject to the same usage standard as that required for those carriers 
accepting the offer of model-based support.
    12. Earlier this year, the Bureau announced that, based on the most 
recent publicly available Measuring Broadband America data, 80 percent 
of cable subscribers nationwide are using 156 GB, and it therefore set 
the 2016 minimum usage allowance for eligible telecommunications 
carriers subject to broadband public interest obligations at 150 GB per 
month. The Commission concludes that ACS as a non-contiguous carrier 
should be subject to the same general approach as implemented by the 
Bureau for the carriers that accepted model-based support. Like the 
price cap carriers receiving model-based support, the Commission 
requires ACS to offer at least one service option that provides a usage 
allowance that meets or exceeds the usage level of 80 percent of cable 
or fiber-based fixed broadband subscribers, whichever is higher, 
according to the most current publicly available Measuring Broadband 
America usage data. This minimum will be announced

[[Page 83708]]

annually by the Bureau. Alternatively, ACS may offer a usage allowance 
consistent with the usage level of 80 percent of its own broadband 
subscribers, including those subscribers that live outside of Phase II-
funded areas, subject to a 150 GB floor. The Commission concludes it 
appropriate to update the minimum floor that ACS will be subject to in 
light of the more current information regarding usage trends. The 
Commission expects that ACS should have no problems meeting this 
requirement given its representation that it does not currently impose 
a usage limit on its customers or have any intent to do so in the 
future.
    13. Reasonably Comparable Rates. ACS will be subject to the same 
obligation as all other recipients of high-cost universal service 
support to provide voice and broadband service at reasonably comparable 
rates.
    14. In the April 2014 Connect America FNPRM, the Commission 
proposed to require non-contiguous carriers electing frozen support to 
offer both voice and broadband service at rates reasonably comparable 
to those services offered in urban areas. The Commission proposed the 
same two options for showing reasonable comparability as were adopted 
for model-based carriers: compliance with reasonable comparability 
benchmarks or a certification by the carrier that it offers the same or 
lower rates in rural areas as it does in urban areas. The Commission 
sought comment on whether non-contiguous carriers would face any 
challenges meeting this requirement. ACS stated in its comments that it 
does not anticipate challenges in meeting the statutory requirement to 
provide voice and broadband service at rates reasonably comparable to 
those offered in urban areas.
    15. In a separate order, the Commission recently directed the 
Wireline Competition Bureau to establish an Alaska-specific reasonable 
comparability benchmark using data from its urban rate survey or other 
sources, as appropriate. The Commission will provide ACS the same two 
options for demonstrating compliance with this statutory requirement: 
by meeting the Alaska-specific benchmark or offering the same or lower 
rates in rural areas as it does in urban areas. As with model-based 
carriers, ACS will be required to certify annual compliance with this 
requirement as explained further below.
    16. The Commission adopts a 10-year term of support for ACS's Phase 
II frozen support (2016-2025). As noted above, in the April 2014 
Connect America FNPRM, the Commission sought comment on whether to 
specify a five-year term for those non-contiguous carriers that elect 
to receive frozen support, and whether there is a need to modify the 
term of support for such non-contiguous carriers. The Commission sought 
comment on any specific extenuating circumstances in non-contiguous 
areas that would require extending the term of frozen support for 
longer than five years.
    17. ACS stated in its proposal that it will require a 10-year term 
of support to complete buildout to the stated number of locations and 
that buildout within five years is impossible. ACS explained that due 
to the harsh weather conditions of Alaska it is forced into a shortened 
construction season of three to four summer months throughout its 
service territory and thus a slower pace of progress. Further, ACS 
states it is challenged by decreased availability of experienced and 
qualified professionals knowledgeable in designing and deploying these 
services in Alaska--extending the time required to plan for deployment. 
Also, due to its remote northern location and unique construction 
limitations, ACS claims that it also confronts higher costs for 
broadband deployment. Ultimately, ACS argues these factors together 
require a 10-year term of support.
    18. The Commission recognizes the climate and geographic challenges 
ACS faces in serving Alaska and find that adopting a 10-year term of 
support for ACS is in the public interest. While the Commission expects 
ACS to use its best efforts to expedite deployment, the Commission 
recognizes the shortened construction season and limited availability 
of experienced personnel is a unique limitation for ACS in Alaska that 
could slow the pace of buildout. Accordingly, the Commission adopts a 
10-year term of support for ACS as a non-contiguous carrier electing 
Phase II frozen support, which will run from January 1, 2016, and end 
on December 31, 2025. For administrative reasons, the Commission finds 
it necessary to conform the term of support to the calendar year, to 
align reporting and other monitoring activities with that of other 
carriers. As discussed more completely below, ACS will be required to 
report its proposed list of locations by October 1, 2018. In year 
eight, the Commission expects it will conduct a rulemaking to determine 
how support will be awarded to serve these locations after the end of 
the ten-year period.
    19. In the April 2014 Connect America FNPRM, the Commission sought 
comment on the specific build out obligations that non-contiguous 
carriers receiving frozen support would have in those census blocks 
that do not currently have broadband service meeting the Commission's 
requirements. Specifically, the Commission asked whether non-contiguous 
carriers receiving frozen support should be required to deploy voice 
and broadband-capable networks and offer services meeting the adopted 
performance metrics to all locations in those funded areas, consistent 
with the state-level commitments required of carriers receiving model-
based support. In the alternative, the Commission asked whether these 
carriers should be allowed to serve some subset of locations within 
their respective service areas where the average cost equals or exceeds 
the funding benchmark established by the Bureau. Lastly, the Commission 
asked whether they should also be required to extend broadband-capable 
networks to locations in census blocks determined by the model to be 
above the extremely high-cost threshold.
    20. ACS elected to receive Phase II frozen support for its entire 
service territory, and therefore, none of the census blocks in its 
service territory are eligible for the Phase II competitive bidding 
process. Below, the Commission addresses the specific geographic 
parameters for ACS' provision of voice and broadband service within its 
existing designated service territory and provide ACS with flexibility 
in its broadband deployment to account for the unique nature of serving 
Alaska. The Commission also provides ACS with forbearance relief 
consistent with the relief it provided other price cap carriers.
    21. Number of Locations. The Commission requires ACS to offer voice 
and broadband service to a minimum of 31,571 locations that are not 
served by an unsubsidized competitor at 10/1 Mbps or better to meet its 
Phase II obligations, subject to the flexibility described below.
    22. ACS proposes to use Phase II frozen support to offer service to 
a minimum of 26,000 locations that are not served by any provider, 
which would occur in those census blocks that were identified as high-
cost by the cost model with certain exceptions discussed below. 
Initially, ACS proposed to offer service to 29,418 locations but later 
revised that number to 26,000. ACS explains that its initial 
calculation was based on CAM v4.1.1 and the revision was due to a 
recalculation using newer data from CAM v4.2, which excluded locations 
served by subsidized competitors. ACS then adjusted its initial 
estimate to exclude the off-road census blocks in the Alaskan Bush that 
ACS does not

[[Page 83709]]

propose to serve with broadband at this time.
    23. While ACS proposes to establish a deployment obligation with a 
minimum number of locations, it does not provide a specific list of 
proposed census blocks or locations at this time. Instead, ACS suggests 
that two years will be necessary for planning, coordination and 
identifying the total number and precise locations for buildout. ACS 
claims that it needs this time to ``fully explore the most efficient 
options for network infrastructure deployment.'' Once the pre-planning 
and coordination stage is completed, ACS intends to submit a list to 
the Commission of its proposed locations.
    24. Based on our review of June 2015 FCC Form 477 data for the 
number of high-cost locations, the Commission finds that requiring ACS 
to serve 31,571 locations is reasonable, given the other flexibility 
provided in this Order. While the Commission hopes that ACS will find 
after it engages in this planning process that it is possible to offer 
broadband services to more than 31,571 locations with the amount of 
funding provided, the Commission adopts this number as a strict 
minimum. Additionally, while ACS has proposed to select these locations 
using coverage data from the 2014 National Broadband Map, the 
Commission instead requires ACS to select its locations in blocks not 
served by a qualifying competitor using the June 2015 FCC Form 477 
data. The Commission also adopts a challenge process for locations in 
blocks where another provider is reporting service, and for those 
blocks it requires ACS to utilize more recent publicly available data. 
This will ensure that support is targeted appropriately to those areas 
where there are no other providers offering broadband service meeting 
the Commission's requirements for high-cost support.
    25. Consistent with the approach taken with respect to other price 
cap carriers, the Commission does not dictate which specific locations 
ACS must serve within its eligible areas, so long as it provides voice 
and broadband service meeting the obligations described in this Order 
to the minimum number of required locations, subject to the specific 
parameters adopted below. The Commission emphasizes, however, that it 
will hold ACS to its commitment to continue providing voice service 
throughout the Phase II term of support to all locations where it 
currently provides voice service, including those in the Alaskan Bush.
    26. Partially-served Census Blocks. In satisfaction of its Phase II 
deployment obligations, the Commission will allow ACS the flexibility 
to deploy to up to 7,900 locations unserved by any provider within 
census blocks that also have locations served by an unsubsidized 
competitor, which the Commission refers to as ``partially served census 
blocks,'' subject to the conditions described below.
    27. In the April 2014 Connect America FNPRM, the Commission 
proposed that non-contiguous carriers receiving frozen support not use 
such support in any areas where there is a terrestrial provider of 
fixed residential voice and broadband service that meets our Phase II 
performance requirements. However, the Commission also asked whether 
allowing substitution in partially-served census blocks could enable 
more effective network deployment and bring service to unserved 
consumers in those partially-served census blocks. In the December 2014 
Connect America Order, the Commission declined to adopt the flexibility 
for non-contiguous carriers receiving frozen support to use support in 
any census block where there is a competitor providing service of 10/1 
Mbps or greater to at least one location within the census block, and 
instead required them to relinquish the relevant Phase II frozen 
support for those areas. At the same time, the Commission acknowledged 
that all parties potentially interested in Connect America support have 
an interest in building economically efficient networks, which may not 
neatly align with census boundaries, and the Commission encouraged 
stakeholders to work together towards proposals that help ensure 
unserved consumers in partially served census blocks are not left 
behind.
    28. ACS requests the flexibility to substitute up to 25 percent of 
its eligible locations with unserved locations in partially-served 
census blocks. ACS explains these substitutions are necessary, because 
even though the census block is treated as served, due to the geography 
and topography of the census block, some specific locations within a 
census block are not in fact served by any carrier. Compared to other 
states, Alaska has relatively large census blocks. ACS argues it would 
be more logical and economically efficient for ACS to serve these 
``stranded'' customer locations, because in many cases these locations 
are very near or contiguous to ACS service territory and are clearly 
not easily served by the competitor given the particular geography of 
the census block. ACS proposes a public challenge process to ensure the 
substituted locations are actually unserved. ACS promises the 
substitutions would be made conservatively and would be limited to 
unserved locations in eligible census blocks in outlying areas--
primarily surrounding Fairbanks and on the Kenai Peninsula.
    29. In the USF/ICC Transformation Order, 76 FR 73830, November 29, 
2011, the Commission decided to target Phase II support to those census 
blocks that are not served by an unsubsidized competitor. However, the 
Commission did not foreclose other ways of supporting high-cost 
locations within partially-served census blocks. Where, as here, there 
are physically isolated and distinct unserved locations within large 
census blocks, the Commission is willing to implement an approach that 
allows it to extend service to unserved consumers, while balancing our 
policy goal of not providing high-cost support to overbuild locations 
that are already served by another competitor. The Commission has 
recognized in other contexts that the fact a competitor reports service 
on FCC Form 477 does not mean it serves all of the locations within a 
census block. Therefore, the Commission finds that it is in the public 
interest to permit ACS to substitute unserved locations in partially-
served census blocks for eligible model-based locations, because such 
locations may not otherwise receive service from ACS or a competitor. 
However, as suggested by ACS, the Commission limits ACS to no more than 
7,900 unserved locations in partially-served census blocks. The 
Commission also requires ACS to certify that it does not itself serve 
the locations in such blocks at the time it submits its list, no later 
than October 1, 2018.
    30. Challenge Process. The Commission will conduct a challenge 
process to ensure that all of the selected locations in partially 
served blocks in fact are unserved by any provider at 10/1 Mbps or 
better. The coverage data utilized in the cost model was State 
Broadband Initiative data as of June 2013. The Commission finds that it 
is in the public interest to ensure that the locations selected are 
unserved by any fixed, terrestrial competitors, including those that 
currently receive high-cost universal service support, before allowing 
ACS to build and deploy services to those locations. ACS suggested a 
format for conducting challenges for partially-served census blocks 
similar to the Phase II challenge process. The Commission concludes the 
process can be streamlined by using an approach similar to that 
previously adopted by the Commission for reporting changes to planned 
deployment for Phase I incremental support. Under this approach, the

[[Page 83710]]

Commission requires ACS to submit its proposed list of geocoded 
locations in partially served census blocks as soon as possible, but no 
later than October 1, 2018, along with certification of notice filed on 
any carrier that reports service in the relevant census block according 
to the most recent FCC Form 477 data available at that time, the 
Regulatory Commission of Alaska, and any relevant Tribal government. To 
ensure that the public is aware of the proposed deployment plan, the 
Commission directs the Bureau to issue a public notice announcing the 
proposed deployment plan, census blocks and geocoded locations. This 
will give any existing provider the opportunity to notify ACS and the 
Commission that the provider already serves the identified census 
blocks and specific locations with service meeting the Commission's 
standards for an unsubsidized competitor, thereby furthering the 
Commission's objective of not supporting areas where there are 
competitors already offering service. The Commission concludes that it 
is reasonable and most efficient to provide potential existing 
providers 45 days from the release of the Bureau's public notice to 
file a response notifying ACS and the Commission that they are 
currently providing service meeting the requisite requirements to the 
locations selected by ACS. Any identified locations that receive no 
response will automatically be deemed eligible for deployment with 
Phase II frozen support. The Commission delegates to the Bureau the 
authority to implement this process consistent with prior delegations 
regarding other challenge processes.
    31. Non-High-Cost Census Blocks. The Commission adopts the 
additional flexibility for ACS to deploy to unserved locations within 
census blocks that were not identified as high-cost by the adopted 
version of the CAM, subject to the several limitations described below.
    32. ACS requests the flexibility to substitute up to 10 percent of 
its eligible locations with unserved locations in census blocks that 
were not deemed high-cost by the cost model. ACS argues that the cost 
model did not accurately capture all of the costs of serving particular 
census blocks in Alaska, and excluded unserved areas and customers that 
are truly rural and where the cost to deploy service is in-fact high. 
For example, ACS explains there are several instances where all the 
census blocks surrounding a location are identified as high-cost, i.e., 
eligible for support, but the middle ``land locked'' census block is 
not identified as such. ACS argues these census blocks are not served 
today, leaving hundreds of stranded customers without broadband service 
or the opportunity to be served in the future. ACS argues that it makes 
good policy and economic sense to let ACS deploy services to the 
unserved non-high-cost locations that can efficiently be reached during 
deployment to the eligible high-cost locations. ACS suggests a 10 
percent cap on such substitutions.
    33. The Commission grants ACS the flexibility to count towards its 
service obligation up to 2,714 locations in census blocks identified by 
the model as low-cost, so long as those locations are unserved with 
broadband by either ACS or a competitor, and the ``low-cost'' census 
block is immediately adjacent to high-cost census blocks. The 
Commission finds that it is in the public interest to permit ACS to use 
its Phase II frozen support to deploy to these unserved locations given 
the unique geographic characteristics of Alaska. However, as suggested 
by ACS, the Commission finds a limitation is appropriate. The model 
calculates that there are 2,714 low-cost, unserved, on-road locations, 
using June 2015 FCC Form 477 data. As such, the Commission finds it is 
reasonable and in the public interest to limit ACS to no more than 
2,714 location substitutions in such census blocks that are not 
identified as high-cost by the model. Further, for each location ACS 
substitutes under the terms of this flexibility, the Commission 
requires ACS to certify that deployment to that location was, in fact, 
high cost. Specifically, the Commission requires ACS to certify that 
the capital expenditures (capex) it incurs to build out to each 
location within a qualifying ``low-cost'' census block was at least 
$5,000. According to the model, the average capital expenditure for 
high-cost locations in Alaska is at least $5,007.95, so the Commission 
concludes that ACS should only be able to count towards its total these 
locations if they in fact require at least this amount of capex to 
newly serve the location. This certification will be due along with the 
annual location report. ACS may be required to produce documentation 
regarding its actual capex for such locations to support its 
certification when USAC validates completion of its deployment 
obligations or in the course of an audit. Any location that cannot meet 
this certification will not be counted toward the minimum location 
requirement.
    34. Forbearance. The Commission takes the opportunity today to 
adopt the same forbearance for ACS as it did for other price cap 
carriers in the December 2014 Connect America Order. As the Commission 
did in that order and for the same reasons, it now concludes that it is 
in the public interest to forbear, pursuant to section 10 of the 
Communications Act of 1934, as amended (the Act) from enforcing a 
federal high-cost requirement that ACS offer voice telephony service 
throughout its service territory pursuant to section 214(e)(1)(A) in 
three types of geographic areas: (1) Census blocks determined by the 
adopted cost model to be low-cost, (2) census blocks served by an 
unsubsidized competitor, to the extent ACS does not identify locations 
within partially-served census blocks to meet its deployment 
obligation, and (3) in census blocks where another ETC is receiving 
high-cost support to deploy modern networks capable of providing voice 
and broadband to fixed locations. ACS will be able to avail itself of 
this forbearance upon the conclusion of the Bureau's review of ACS's 
submitted locations, and finalization of the specific census blocks 
containing locations to be served.
    35. Phase I Obligations. ACS seeks clarification regarding the 
relationship between Phase I and Phase II obligations with regard to 
the issue of upgrading facilities. ACS asks whether it can use Phase II 
frozen support to upgrade locations built in Phase I that are currently 
served with \4/1\ Mbps broadband, and are in census blocks eligible for 
support in Phase II. The Commission finds it is not in the public 
interest for ACS to use Phase II funding to upgrade Phase I locations. 
Consistent with Commission goals of universal service, the Commission 
finds it is an economically inefficient use of funds at this time to 
provide support to deploy service to a location and then provide 
support to upgrade that location while other locations remain unserved 
entirely. Instead, the Commission's goals are better served by reaching 
new customers that do not currently have any advanced communication. 
Therefore, the Commission concludes it is not in the public interest to 
allow ACS to use its Phase II frozen support funds to upgrade the 
existing Phase I locations served with \4/1\ Mbps to 10/1 Mbps service.
    36. Timeline. ACS supports interim buildout milestones and requests 
a timeline that reflects its proposed ten-year term of support. As 
discussed above, ACS suggests that it needs two years to determine its 
broadband buildout plan before ACS can begin deployment. Accordingly, 
ACS suggests buildout milestones that are ``backloaded'' as compared 
with the model-based timeline--30 percent

[[Page 83711]]

completion by year four, 60 percent completion by year seven, and full 
completion by year ten.
    37. Above the Commission adopted a 10-year term of support. The 
Commission also acknowledged the unique challenges that ACS confronts 
as a non-contiguous carrier building in Alaska. However, the Commission 
also wants to ensure that ACS begins construction no later than 2019. 
Accordingly, the Commission adopts a timeframe that requires ACS to 
complete its planning by October 1, 2018, with the remaining time to 
complete deployment of voice and broadband-capable networks. As such, 
the Commission will require ACS to complete initial planning and submit 
its proposed list of census blocks and locations to the Commission by 
October 1, 2018. Thereafter, as explained above, the Commission will 
conduct an efficient challenge process for those locations in partially 
served blocks to determine final deployment locations, which the 
Commission anticipates will be completed during first quarter 2019. ACS 
will then be able to commence deployment in those partially served 
census blocks no later than the summer of 2019. Full completion of the 
planning process is not a requisite, however, for it to begin 
deployment in the high-cost census blocks not subject to a challenge 
process. The Commission emphasizes that ACS is not precluded from, and 
indeed it is encouraged to begin, extending broadband to unserved 
locations in those high-cost blocks (the high-cost blocks lacking an 
unsubsidized competitor according to the June 2015 FCC Form 477 data).
    38. The Commission is not persuaded that ACS should only be subject 
to two intermediate milestones for the 10-year term. The Commission 
recently adopted evenly spaced interim deployment milestones for rate-
of-return carriers electing to receive Phase II model-based support. 
For similar reasons, the Commission concludes here that annual interim 
milestones are appropriate for ACS. This will enable the Commission to 
monitor ACS' progress throughout the term of support. Accordingly, the 
Commission adopts the following timeline for offering broadband service 
meeting the Commission's requirements: 30 percent of all locations by 
the end of 2018, 40 percent by the end of 2019, 50 percent by the end 
of 2020, 60 percent by the end of 2021, 70 percent by the end of 2022, 
80 percent by the end of 2023, 90 percent by the end of 2024, and all 
locations by the end of 2025.
    39. Standard for Meeting Deployment Obligation. ACS asks that it be 
allowed to serve between 95-100 percent of its minimum required number 
of locations, with a reduction in support for the locations not served 
if those locations are identified by a date certain in the planning 
process. ACS argues this flexibility is needed due to the inaccuracy of 
the cost model to determine proper high-cost census blocks in Alaska, 
and due to the lack of interest in building to these locations should 
ACS not deploy services there. ACS explains that while the substitution 
flexibilities will go a long way to correcting the alleged imprecisions 
of the cost model to provide service to those consumers that need it 
most, it simply is not enough flexibility.
    40. In the December 2014 Connect America Order, the Commission 
allowed price cap carriers the flexibility of deploying to between 95-
100 percent of required locations subject to a required refund of 
support based on the number of required locations left unserved at the 
end of the support term. The Commission recognized that there may be a 
variety of unforeseen factors, after the initial planning stage, that 
can cause significant changes as a network is actually being deployed 
in the field. The Commission balanced our goal of advancing the 
availability of broadband to these high-cost locations with this 
flexibility and adopted a metric to recover support. This metric was 
based on the assumption that many of the locations left unserved would 
have higher than the average costs calculated by the model. In 
particular, the Commission calculated the factor based on the average 
support for the top five percent of the funded locations nationwide 
compared to the average support for all funded locations. The 
Commission then divided that nationwide figure by one-half, in 
recognition that the average could vary widely between carriers and 
states.
    41. Consistent with the general approach adopted for price cap 
carriers accepting model-based support in the December 2014 Connect 
America Order, the Commission accepts the ACS proposal and allow ACS 
the flexibility to build to between 95-100 percent of its minimum 
required locations, subject to the requirement to refund support based 
on the number of unserved locations as the end of the 10-year support 
term. Accordingly, the Commission establishes a similar metric for 
refunding support calculated specifically for Alaska. The average 
support for the top five percent of ACS high-cost locations is 8.2 
times the average for all of ACS' funded high-cost locations. The 
Commission does not divide that figure in half, as this is an Alaska-
specific and carrier-specific number. Therefore, should ACS fail to 
build to 100 percent of its required minimum locations at the end of 
its support term, the Commission will require ACS to refund a support 
amount based on the number of locations left unserved times $51,152--
the average per-location Phase II frozen support ACS receives 
multiplied by 8.2.
    42. The Commission requires ACS to comply with our existing high-
cost reporting and oversight mechanisms, unless otherwise modified as 
described below. In the April 2014 Connect America FNPRM, the 
Commission sought comment on how to monitor and enforce compliance by 
non-contiguous carriers receiving frozen support once the Commission 
determined their specific service obligations. The Commission asked 
about measures that must be in place to ensure that it has the ability 
to monitor compliance with these service obligations. The Commission 
asked whether there were considerations specific to non-contiguous 
areas that it should account for when determining whether these 
carriers have complied with their service obligations.
    43. Annual Reporting Requirements. Pursuant to section 54.313 of 
the Commission's rules, ACS must continue to file its FCC Form 481 on 
July 1 each year. ACS supports monitoring and enforcement measures and 
did not request accommodations with regard to compliance standards. 
Further, consistent with the relief granted to other price cap carriers 
in the 2016 Rate-of-Return Reform Order, 79 FR 24282, April 25, 2016, 
the Commission also eliminates the requirement that ACS file the five-
year service quality improvement plan and annual updates, as it instead 
will be filing annual progress updates throughout the term. The 
Commission also adopts the same reporting obligation for ACS as 
required of the model-based price cap carriers to report the total 
amount of Connect America Phase II support, if any, it used for capital 
expenditures in the previous calendar year.
    44. Location Reporting Requirements. In the December 2014 Connect 
America Order, the Commission required all price cap carriers accepting 
model-based support to include in their annual reports a list of the 
geocoded locations to which they have newly deployed facilities using 
Connect America support in the prior year. The Commission also required 
those companies to report with their first list (i.e. the one due on 
July 1, 2016) geocoded locations where the carrier already was offering 
service meeting the

[[Page 83712]]

Commission's requirements. The list must identify which locations are 
located in a Phase II-funded block and which locations are located in 
extremely high-cost census blocks. In the 2016 Rate-of-Return Reform 
Order, the Commission updated the Phase II location reporting 
obligations--moving this data collection out of the annual report and 
revising deadlines for submission. Specifically, instead of reporting 
geocoded location information in the annual report, due July 1 for the 
prior calendar year, the Commission concluded that it will serve the 
public interest for price cap carriers to report on deployment by March 
1 every year with respect to the prior calendar year, rather than six 
months later. The Commission also required all rate-of-return ETCs to 
report annually to the Commission on the number of geocoded locations 
where they are offering \4/1\ Mbps, 10/1 Mbps or 25/3 Mbps. The 
Commission directed the Bureau to work with USAC to develop an online 
portal that will enable all carriers to submit their geocoded 
information on a rolling basis throughout the year. Further, the 
Commission decided that price cap carriers will continue to make annual 
certifications that they are meeting their public interest obligations, 
but will do so when submitting the information to USAC by this 
deadline, rather than in their annual reports.
    45. Additionally, price cap ETCs' geolocation data and associated 
deployment certifications no longer be are provided pursuant to the 
deadlines specified in section 54.313. The penalties in section 
54.313(j) for failure to timely file that information do not apply 
absent additional conforming modifications to our rules. Therefore, as 
is the case for rate-of-return ETCs, the penalties for price cap ETCs 
to fail to timely file geolocation data and associated deployment 
certifications are located in new section 54.316(c).
    46. The Commission adopts similar reporting obligations for ACS as 
a recipient of Phase II frozen high-cost support. ACS will be required 
to submit the requisite information to USAC no later than March 1 of 
each year, for locations where they offered service in the prior year. 
Similar to the rate-of-return carriers, ACS will be required to 
separately identify the number of locations where it is offering speeds 
of at least 10/1 Mbps or 25/3 Mbps. While ACS's deployment obligation 
is to offer at least 10/1 Mbps broadband to the requisite number of 
locations, depending on network design, some of those locations may 
receive better than 10/1 Mbps service, and the Commission sees value in 
tracking progress at the higher speed tier as well. As with other 
carriers subject to obligations to report their progress in broadband 
deployment, ACS is encouraged to submit information on a rolling basis 
throughout the year, as soon as service is offered, to avoid filing all 
of its locations at the deadline.
    47. Reductions in Support. Today, the Commission adopts specific 
defined deployment milestones for ACS. Based on the record before us, 
the Commission finds no reason to relax our compliance standards for 
ACS as a non-contiguous carrier electing frozen support. The table 
below summarizes the regime previously adopted by the Commission for 
non-compliance with defined deployment milestones.

                         Non-Compliance Measures
------------------------------------------------------------------------
          Compliance gap                   Non-Compliance measure
------------------------------------------------------------------------
5% to less than 15%...............  Quarterly reporting.
15% to less than 25%..............  Quarterly reporting + withhold 15%
                                     of monthly support.
25% to less than 50%..............  Quarterly reporting + withhold 25%
                                     of monthly support.
50% or more.......................  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.
------------------------------------------------------------------------

    48. Appropriate Uses of Support. The Commission clarifies, at ACS's 
request, that ACS may use Phase II frozen support for middle mile costs 
and reasonable operation expenses, so long as it otherwise meets the 
obligations to offer service meeting the requirements of this Order to 
31,571 locations. Recipients of model-determined support are free to 
use such support to defray the cost of middle mile transport necessary 
to deliver broadband service meeting the Commission's requirements to 
end-user customers. The Commission sees no reason to treat ACS 
differently because it is receiving Phase II frozen support as opposed 
to Phase II support calculated by the cost model.
    49. The Commission also finds that ACS's Phase II frozen support is 
sufficient to carry out its deployment obligations as well as maintain 
existing voice service in the high-cost and extremely high-cost census 
blocks in its territory, and the Commission clarifies that ACS may use 
its support for either such purpose.

III. Procedural Matters

    50. This Order contains a modified information collection, which 
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 
information collection requirement contained in this Order. 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. The 
Commission describes impacts that might affect small businesses, which 
includes most businesses with fewer than 25 employees, in the 
Supplemental Final Regulatory Flexibility Analysis (FRFA) below, infra.
    51. The Commission previously sent a copy of the December 2014 
Connect America Order to Congress and the Government Accountability 
Office pursuant to the Congressional Review Act and will supplement 
this filing with a copy of this Order.
    52. As required by the Regulatory Flexibility Act of 1980 (RFA), as 
amended, an Initial Regulatory Flexibility Analyses (IRFA) was 
incorporated in the Further Notice of Proposed Rulemaking adopted in 
November 2011 (USF/ICC Transformation FNPRM) and the Further Notice of 
Proposed Rulemaking adopted in April 2014 (April 2014 Connect America 
FNPRM) in this proceeding. The Commission included a Final Regulatory 
Flexibility Analysis (FRFA) in Appendix B of the December 2014 Connect 
America Order. This Supplemental Final Regulatory Flexibility Analysis 
(Supplemental

[[Page 83713]]

FRFA) supplements the FRFA to reflect the actions taken in this Order 
and conforms to the RFA.
    53. In this Order, the Commission adopts tailored public service 
obligations for Alaska Communications Systems (ACS), a price-cap 
carrier serving Alaska, to support the deployment of voice and 
broadband-capable networks in Alaska.
    54. In the USF/ICC Transformation Order, the Commission recognized 
that price cap carriers serving specific non-contiguous areas of the 
United States, including Alaska, face difference operating conditions 
and challenges from those faced by carriers in the contiguous 48 
states. In April 2014, the Commission proposed to establish the same 
service obligations but sought comment the flexibility required for 
non-contiguous carriers to meet the standards. In December 2014, the 
Commission concluded tailored service obligations for each non-
contiguous carrier was the best approach.
    55. In this Order, the Commission adopts targeted changes to the 
price cap model-based support public service obligations to accommodate 
the unique circumstances of ACS service in Alaska. Specifically, the 
Commission makes an adjustment to the term of support, establish a 
minimum number of locations where service must be offered, establish a 
planning phase deadline, adopt revised interim deployment milestones, 
and allow a limited number of location substitutions--allowing ACS to 
use its support to provide service in locations that are in partially-
served census blocks and ``high-cost'' locations in ``low-cost'' census 
blocks. The Commission establishes a challenge process for determining 
the substitute locations in partially-served census blocks, and amend 
the location certification requirement to effectively monitor 
substitutions in ``low-cost'' census blocks. The Commission also 
forbears from the federal high-cost universal service obligation of ACS 
to offer voice service in low-cost areas where it does not receive 
high-cost support, in areas served by an unsubsidized competitor, and 
in areas where ACS is replaced by another eligible telecommunications 
carrier (ETC).
    56. Pursuant to the Small Business Jobs Act of 2010, which amended 
the RFA, the Commission is required to respond to any comments filed by 
the Chief Counsel of the Small Business Administration (SBA), and to 
provide a detailed statement of any change made to the proposed rule(s) 
as a result of those comments. The Chief Counsel did not file any 
comments in response to the proposed rule(s) in this proceeding.
    57. As noted above, a FRFA was incorporated into the December 2014 
Connect America Order. In that analysis, the Commission described in 
detail the small entities that might be significantly affected by the 
rules adopted in the Order. Those entities may be found in a number of 
services including, e.g.: wired telecommunications carriers, local 
exchange carriers, incumbent local exchange carriers, competitive local 
exchange carriers, interexchange carriers, local resellers, toll 
resellers, wireless telecommunications carriers, broadband personal 
communications service, advanced wireless services, satellite 
telecommunications, cable companies and systems, cable system 
operators, internet service providers, and all other information 
services. In this Order, the Commission hereby incorporates by 
reference the descriptions and estimates of the number of small 
entities from the previous FRFA in this proceeding.
    58. The rule changes in this Order will affect one entity, Alaska 
Communications Systems, which fits the descriptions of entities 
outlined in the FRFA.
    59. The data, information and document collection required by the 
December 2014 Connect America Order as described in the previous FRFA 
in this proceeding is hereby incorporated by reference. The actions 
taken in this Order amend the collection by altering the reporting 
milestones, adding one reporting requirement, and adding one 
certification requirement.
    60. In this Order, the Commission amends the reporting requirements 
by requiring ACS to file a report at the conclusion of its planning 
phase, and no later than October 1, 2018. This report will provide the 
Commission with a list of the proposed locations to which ACS intends 
to offer service over the 10-year support term.
    61. In this Order, the Commission amends the interim milestones 
reports to accommodate the extended term. ACS will be provided support 
for a 10-year term and will be required to offer voice and broadband 
service meeting certain latency, data usage, speed and reasonably 
comparable rate obligations to a certain number of locations. 
Accordingly, ACS will be required to report that it has built 30 
percent of all locations by the end of 2018, 40 percent by the end of 
2019, 50 percent by the end of 2020, 60 percent by the end of 2021, 70 
percent by the end of 2022, 80 percent by the end of 2023, 90 percent 
by the end of 2024, and all locations by the end of 2025. Should ACS 
fail to meet these milestones, it will be subject to certain non-
compliance measures, including support reductions and reporting.
    62. Lastly, in this Order, the Commission amends the collection to 
include a new cost certification requirement. In that certification, 
ACS must certify that the capital investment cost incurred to newly 
extend service to a location in a ``low-cost'' census block is at least 
$5,000. ACS may be required to maintain documentation regarding this 
certification. The Commission concludes that requiring this 
certification will ensure that the Commission can monitor compliance 
with the section 254(b) principle that ``[c]onsumers in all regions of 
the Nation . . . including . . . those in . . . high cost areas, should 
have access to telecommunications and information services . . .''
    63. The analysis of the Commission's efforts to minimize the 
possible significant economic impact on small entities as described in 
the previous FRFA in this proceeding is hereby incorporated by 
reference. It is unchanged by this Order, save the addition of the 
reporting and certification obligations described above. This increased 
burden is outweighed by the importance of monitoring the use of the 
public's funds and ensuring support is used for its intended purpose.
    64. The Commission notes that the reporting and certification 
requirements it adopts for ACS are tailored to its unique circumstance. 
Additionally, the information that the Commission is requiring ACS 
report and certify is information it expects the company will already 
be tracking to ensure its system is built economically and effectively.
    65. 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).

IV. Ordering Clauses

    66. Accordingly, it is ordered, pursuant to the authority contained 
in sections 1, 2, 4(i), 5, 10, 201-206, 214, 218-220, 251, 252, 254, 
256, 303(r), 332, 403, and 405 of the Communications Act of 1934, as 
amended, and section 706 of the Telecommunications Act of 1996, 47 
U.S.C. 151, 152, 154(i), 155, 160, 201-206, 214, 218-220, 251, 252, 
254, 256, 303(r), 332, 403, 405, 1302, and sections 1.1, 1.427, and 
1.429 of the Commission's rules, 47 CFR 1.1, 1.427,

[[Page 83714]]

and 1.429, that this Order, Is Adopted, effective thirty (30) days 
after publication of the text or summary thereof in the Federal 
Register, except for the certification in paragraph 33, which contains 
information collections subject to PRA review and Shall Become 
Effective immediately upon announcement in the Federal Register of OMB 
approval.
    67. 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).

Federal Communications Commission.
Marlene H. Dortch,
Secretary.
[FR Doc. 2016-28114 Filed 11-21-16; 8:45 am]
 BILLING CODE 6712-01-P