[Federal Register Volume 82, Number 58 (Tuesday, March 28, 2017)]
[Rules and Regulations]
[Pages 15422-15456]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2017-05665]



[[Page 15421]]

Vol. 82

Tuesday,

No. 58

March 28, 2017

Part II





Federal Communications Commission





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47 CFR Parts 1 and 54





Connect America Fund; Universal Service Reform--Mobility Fund; Final 
Rule

  Federal Register / Vol. 82 , No. 58 / Tuesday, March 28, 2017 / Rules 
and Regulations  

[[Page 15422]]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Parts 1 and 54

[WC Docket No. 10-90, WT Docket No. 10-208; FCC 17-11]


Connect America Fund; Universal Service Reform--Mobility Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) adopts the framework to allocate funds to assist in the 
deployment of 4G LTE to areas that are so costly that the private 
sector has not yet deployed there and to preserve such service where it 
might not otherwise exist. This framework redirects funding from legacy 
subsidies and distributes them through the Mobility Fund Phase II and 
Tribal Mobility Fund Phase II, using market-based, multi-round reverse 
auctions, and contains defined, concrete compliance requirements to 
help ensure rural consumers will be adequately served by mobile 
carriers receiving universal support.

DATES: Effective April 27, 2017 except for additions of Sec. Sec.  
54.1013, 54.1014, 54.1015(a) through (e), 54.1016(a) and (b), 54.1017, 
54.1019, 54.1020, and 54.1021, which contain new or modified 
information collection requirements that require approval by the Office 
of Management and Budget (OMB). The Commission will publish a document 
in the Federal Register announcing the effective date of those 
additions.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auction and Spectrum Access Division, Mark Montano, at (202) 418-0660. 
For further information concerning the Paperwork Reduction Act 
information collection requirements contained in this document, contact 
Cathy Williams at (202) 418-2918, or via the Internet at [email protected].

ADDRESSES: Federal Communications Commission, 445 12th Street SW., 
Washington, DC 20554.

SUPPLEMENTARY INFORMATION: This is a summary of the Report and Order 
and Further Notice of Proposed Rulemaking (MF-II Order), WC Docket No. 
10-90, WT Docket No. 10-208, FCC 17-11, adopted on February 23, 2017 
and released on March 7, 2017. The complete text of this document is 
available for public inspection and copying from 8:00 a.m. to 4:30 p.m. 
Eastern Time (ET) Monday through Thursday or from 8:00 a.m. to 11:30 
a.m. ET on Fridays in the FCC Reference Information Center, 445 12th 
Street SW., Room CY-A257, Washington, DC 20554. The complete text is 
also available on the Commission's Web site at http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0309/FCC-17-11A1.pdf. Alternative formats are available to persons with 
disabilities by sending an email to [email protected] or by calling the 
Consumer & Governmental Affairs Bureau at (202) 418-0530 (voice), (202) 
418-0432 (TTY).

Regulatory Flexibility Analysis

    As required by the Regulatory Flexibility Act of 1980, the 
Commission has prepared a Final Regulatory Flexibility Analysis (FRFA) 
of the possible significant economic impact on small entities of the 
policies and rules adopted in this document. The FRFA is set forth in 
an appendix to the MF-II Order, and is summarized below. The 
Commission's Consumer and Governmental Affairs Bureau, Reference 
Information Center, will send a copy of this MF-II Order, including the 
FRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration (SBA).

Paperwork Reduction Act

    The MF-II Order contains new and modified information collection 
requirements subject to the Paperwork Reduction Act of 1995 (PRA), 
Public Law 104-13. It will be submitted to the Office of Management and 
Budget (OMB) for review under section 3507(d) of the PRA. OMB, the 
general public, and other Federal agencies will be invited to comment 
on the new and modified information collection requirements contained 
in this proceeding.

Congressional Review Act

    The Commission will send a copy of this MF-II Order in a report to 
be sent to Congress and the Government Accountability Office pursuant 
to the Congressional Review Act (CRA), see 5 U.S.C. 801(a)(1)(A).

I. Introduction

    1. In the MF-II Order, the Commission adopts the framework for 
moving forward with the Mobility Fund Phase II (MF-II) and Tribal 
Mobility Fund Phase II (Tribal MF-II), which will allocate up to $4.53 
billion over the next decade to advance the deployment of 4G LTE 
service to areas that are so costly that the private sector has not yet 
deployed there and to preserve such service where it might not 
otherwise exist. The funding for this effort will come from the 
redirection of legacy subsidies and distributed using a market-based, 
multi-round reverse auction and will come with defined, concrete 
compliance requirements so that rural consumers will be adequately 
served by the mobile carriers receiving universal service support.
    2. The Commission expects to release a list of presumptively 
eligible areas shortly, to finalize the challenge process in the coming 
months, and to conclude the challenge process by January 31, 2018. The 
Commission expects to commence the auction shortly thereafter. The 
phase-down of legacy support is scheduled to commence in the first 
month following the close of the MF-II auction.

II. Background

    3. In the USF/ICC Transformation Order, 76 FR 73829, November 29, 
2011, the Commission sought to achieve the universal availability of 
``mobile networks capable of delivering mobile broadband and voice 
service in areas where Americans live, work, or travel.'' This goal was 
``designed to help ensure that all Americans in all parts of the 
nation, including those in rural, insular, and high-cost areas, have 
access to affordable technologies that will empower them to learn, 
work, create, and innovate.'' At the same time, the Commission 
recognized the importance of minimizing the universal service 
contribution burden on consumers and businesses. The Commission sought 
to balance the objective of ``providing support that is sufficient but 
not excessive so as to not impose an excessive burden on consumers and 
businesses who ultimately pay to support the Fund.''
    4. Applying those goals, the Commission targeted funding to expand 
mobile coverage, while ensuring that the funding is ``cost-effective 
and targeted to areas that require public funding to receive the 
benefits of mobility.'' As a result, the Commission eliminated the 
``identical support rule,'' which previously had set the level of 
support for competitive eligible telecommunications carriers (CETCs), 
including those providing mobile services, at the level received by the 
incumbent local exchange carrier, and had limited CETC support to those 
areas where wireline providers received support because of their high 
costs. The Commission concluded that ``[t]he support levels generated 
by the identical support rule bear no relation to the efficient cost of 
providing mobile voice service in a particular geography,'' and 
established the Mobility Fund to assure that universal service support 
for mobile service would be targeted in a more cost

[[Page 15423]]

effective manner. The Mobility Fund included two phases. For Mobility 
Fund Phase I (MF-I), the Commission provided up to $300 million in one-
time support payments, to be awarded through a reverse auction. The 
Commission also provided an additional $50 million in one-time support 
dedicated to Tribal lands. For MF-II, the Commission decided it would 
provide up to $500 million per year in ongoing support--including 
support to Tribal lands--and sought comment in the USF/ICC 
Transformation FNPRM, 76 FR 78383, December 16, 2011, on the structure 
and operational details of that fund.
    5. To minimize ``shocks to service providers that may result in 
service disruptions for consumers,'' the USF/ICC Transformation Order 
provided for a five-year transition period during which legacy support 
going to CETCs would phase down 20 percent per year beginning July 1, 
2012. The Commission noted that, during the transition period, mobile 
carriers would have the opportunity to seek one-time MF-I support to 
expand 3G or better service to areas where such service was unavailable 
while also receiving phase-down legacy support. The Commission also 
provided that if MF-II were not operational by July 1, 2014, the phase 
down of legacy support for CETCs would pause at the 60 percent level in 
effect on that date. The Commission also provided that the phase-down 
of legacy support for CETCs serving Tribal lands would pause at that 
time if Phase II of the Tribal Mobility Fund were not implemented.
    6. Following the comments filed in response to the USF/ICC 
Transformation Order FNPRM accompanying the USF/ICC Transformation 
Order, the Wireless Telecommunications Bureau and the Wireline 
Competition Bureau (the Bureaus) issued a Public Notice in November 
2012, 77 FR 73586, December 11, 2012, seeking to develop a more 
comprehensive, robust record on certain issues related to the award of 
ongoing support for advanced mobile services. The Bureaus sought to 
build upon their experience in implementing a reverse auction to 
distribute universal service support and the experiences of carriers 
that participated in MF-I. In particular, among other things, the 
Bureaus sought further feedback on issues pertaining to the method for 
identifying the geographic areas that are eligible for MF-II support 
and establishing the base unit for bidding and measuring coverage, 
performance obligations, and the term of support.
    7. In April 2014, the Commission in the 2014 CAF Further Notice, 79 
FR 39195, July 9, 2014, again took the opportunity to expand upon what 
it had learned from its efforts to modernize universal service as well 
as the considerable developments in the marketplace for mobile wireless 
services that had occurred since adoption of the USF/ICC Transformation 
Order. Given the significant commercial deployment of 4G LTE, the 
Commission proposed to retarget the focus of MF-II to address those 
areas of the country where LTE would not be available absent support 
and existing mobile voice and broadband service would not be preserved 
without support.
    8. In September 2016, the Wireless Telecommunications Bureau 
released its analysis of mobile broadband providers' December 2015 Form 
477 submissions in order to identify and quantify the areas in the 
country that may require support on an ongoing basis in order to have 
4G LTE coverage. In addition to identifying the specific areas of the 
country without 4G LTE coverage, Wireless Telecommunications Bureau 
staff examined the current distribution of high-cost support to assess 
the efficacy of that support. That analysis reveals that 4G LTE is 
absent from or only provided with support in one-fifth of the area of 
the United States excluding Alaska and that a conservative estimate is 
that three-quarters of support currently distributed to mobile 
providers is being directed to areas where it is not needed. In other 
words, carriers are receiving approximately $300 million or more each 
year in subsidies to provide service even though such subsidies are 
unnecessary and may deter investment by unsubsidized competitors from 
increasing competition in those areas.

III. Goals of the Mobility Fund Phase II

    9. The Commission reaffirms the following goals for Phase II of the 
Mobility Fund.
    10. First, the Commission reaffirms that universal service funding 
for the preservation and advancement of high-speed advanced services 
such as 4G LTE is an appropriate and necessary use of universal service 
funds. Because they are unmoored from a fixed point, mobile devices 
empower Americans to make calls and access the web and web-based 
applications while on the go.
    11. Second, the Commission reaffirms that it should target 
universal service funding to support the deployment of the highest 
level of mobile service available today--4G LTE. In the 2014 CAF 
Further Notice, the Commission observed that two major wireless 
providers had widely deployed 4G LTE throughout the country. Since that 
time, consumers increasingly demand 4G LTE service in order to take 
advantage of the significantly better performance characteristics, 
including faster data transfer speeds that 4G LTE provides while using 
the web or web-based applications. Targeting MF-II support to expand 
and preserve 4G LTE coverage will ensure that the Commission does not 
relegate rural areas to substandard service.
    12. Third, the Commission reaffirms that it should target universal 
service funding to coverage gaps, not areas already built out by 
private capital. Despite a surge in private investment in mobile 
deployment, recent analysis shows that at least 575,000 square miles 
(approximately 750,000 road miles and 3 million people) either lack 4G 
LTE service or are being served only by subsidized 4G LTE providers. 
Virtually all commenters agree that proceeding with MF-II is critically 
important to supporting mobile voice and broadband coverage. Thus, by 
proceeding to MF-II, the Commission seeks to assure that 4G LTE service 
is preserved and advanced to those areas of the country where there is 
no unsubsidized service, all consonant with the Commission's goal of 
``ubiquitous availability of mobile services.''
    13. Fourth, the Commission reaffirms that it is committed to 
minimizing the overall burden of universal service contributions on 
consumers and businesses by expending the finite funds it has available 
in the most efficient and cost effective manner. The Wireless 
Telecommunications Bureau's latest analysis indicates that a 
substantial majority of current ongoing legacy CETC support is 
allocated to census blocks that already have complete 4G LTE coverage 
from one or more unsubsidized competitors.

IV. Framework for Mobility Fund Phase II

    14. The Commission adopts a reverse auction to distribute high-cost 
support for mobile services to areas that lack unsubsidized 4G LTE 
service, while completing the phase-down of legacy support going to 
mobile CETCs, thereby eliminating duplicative and unnecessary CETC 
support, and better managing its finite financial resources. Utilizing 
an annual budget of $453 million for a term of ten years, the 
Commission will provide ongoing support for provision of service in 
areas that would lack mobile voice and broadband coverage absent 
government subsidies. Likewise, consistent with the Commission's 
decision in the USF/ICC

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Transformation Order to abandon the identical support rule and to 
depart from duplicative investments in multiple CETCs in the same 
geographic area, the Commission will award support to one provider per 
eligible geographic area. This section describes this basic framework 
for MF-II and its conclusions on these issues. The Commission intends 
before the commencement of the MF-II auction to supplement the 
performance goals and measures for the program.

A. Reverse Auction To Award Mobility Fund Phase II Support

    15. The Commission adopts a nationwide, multi-round reverse auction 
with competition within and across geographic areas to award MF-II 
support. Utilizing an auction mechanism will allow the Commission to 
distribute support consistent with its policy goals and priorities in a 
transparent, speedy, and efficient manner. An auction provides a 
straightforward means of identifying those providers that are willing 
to provide 4G LTE service at the lowest cost to the budget, targeting 
support to prioritized areas, and determining support levels that 
awardees are willing to accept in exchange for the obligations the 
Commission imposes. Moreover, a reverse auction is consistent with the 
Commission's decision to provide support to at most one provider per 
area. While auction alternatives suggested by commenters may address 
some of these objectives--for example, a cost model could theoretically 
determine appropriate support amounts for an area--the Commission is 
not persuaded that there is an alternative approach that would achieve 
all its core policy objectives that could be implemented in a timely 
manner. Furthermore, the Commission's experience in administering 
Auction 901 for MF-I funding was a new endeavor in 2012, and it can 
apply the lessons learned to the MF-II auction.
    16. The Commission finds that those parties advocating for use of a 
model do not acknowledge or resolve the myriad policy goals that are 
addressed by the Commission's reverse auction proposal, and therefore 
do not offer a realistic alternative--consistent with its decisions--to 
the proposed auction mechanism. This determination is substantiated by 
the fact that the Commission has not received a fully developed cost 
model for ongoing support since it first sought comment on the issue in 
2011. The Commission received a developed model regarding Alaska, but 
it recently adopted a different approach for mobile carriers there. The 
Alaska Mobile Plan is a consensus plan among the mobile providers in 
remote areas of Alaska that provides predictable, stable high-cost 
support to those providers, frozen at 2014 levels for a term of ten 
years. Because the Commission adopted the Alaska Plan for mobile 
carriers as an Alaska-specific comprehensive substitute mechanism for 
mobile high-cost support, the Commission decided that no support 
provided under MF-II or Tribal MF-II will be provided for mobile 
service within Alaska. In the absence of a workable, nationwide model 
to award ongoing support that addresses all of the Commission's core 
policy objectives, the Commission adopts its proposal to use a reverse 
auction mechanism to distribute MF-II support.
    17. The Commission declines to adopt a federal-state broadband 
mobile grant program in lieu of an auction as proposed earlier this 
year by one commenter. This proposal would impose significant 
responsibilities on the states that choose to participate, including an 
obligation to contribute funds (that the Commission would match), 
review service providers' applications and subsequently award grants, 
and verify providers' compliance with the Commission's performance 
requirements. It would require significant Commission coordination and 
oversight to implement such a proposal, which is inconsistent with the 
Commission's desire to act quickly so that providers can expand to 
those areas lacking 4G LTE coverage and the Commission can take 
fiscally responsible measures to redistribute current support from 
those areas with unsubsidized 4G LTE. Based on the record before the 
Commission, as well as its experience in MF-I, the Commission is not 
convinced that this approach would be a more efficient or effective 
means of awarding MF-II support than using a reverse auction.

B. Mobility Fund Phase II Budget

    18. The Commission adopts a budget of $4.53 billion for MF-II over 
ten years--the amount of legacy support mobile carriers outside Alaska 
would receive over the next decade less the funding needed to phase-
down support in census blocks fully built with private capital. Current 
legacy high-cost support received by wireless providers is 
approximately $483 million per year, excluding Alaska, and around $300 
million of that amount is being provided to census blocks fully covered 
with unsubsidized 4G LTE. In the MF-II Order, the Commission is phasing 
down the support it pays for those areas over two years, with these 
phase-down payments totaling one year's support, i.e., approximately 
$300 million. In keeping with its obligation to be fiscally 
responsible, the Commission arrives at an annual MF-II budget by taking 
$483 million (representing current CETC support), minus $30 million 
(representing the estimated $300 million phase-down payments for those 
areas, evenly apportioned over the ten-year term), for a total each 
year of $453 million. Given the need to preserve and advance 4G LTE 
service revealed by its staff analysis, the Commission concludes that 
retargeting existing funds is appropriate.
    19. The cost of universal service programs is ultimately borne by 
the consumers and businesses that pay to fund these programs, and the 
Commission has a corresponding obligation to exercise fiscal 
responsibility by avoiding excessive subsidization and overburdening 
communications consumers. The courts have recognized that over-
subsidizing universal service programs can actually undermine the 
statutory principles set forth in section 254(b) of the Communications 
Act of 1934, as amended (Communications Act), 47 U.S.C. 254. The 
Commission adopts an MF-II budget to balance the various competing 
objectives in section 254 of the Communications Act, including the 
objective of providing support that is sufficient, but not so excessive 
so as to impose an undue burden on consumers and businesses. The 
Commission further notes that MF-II is only one component of its 
broader reform efforts, and the MF-II annual budget also reflects a 
careful analysis of the respective needs and objectives of all aspects 
of the universal service program.
    20. The Commission finds that this level of support over the next 
ten years will allow MF-II to achieve its objectives in a fiscally 
responsible manner. The Commission recognizes that the currently 
unserved areas are likely the most expensive areas in the country to 
serve; however, its budget--when distributed cost-effectively--should 
make meaningful progress in eliminating the lingering coverage gaps. 
The Commission also remains free, after the auction has concluded, to 
assess its results and determine whether additional funding is needed 
to advance the deployment of advanced mobile services throughout rural 
America.
    21. The Commission declines to adopt the proposal in the 2014 CAF 
Further Notice to significantly reduce the budget for MF-II. The 
proposal to reduce the budget in the 2014 CAF Further Notice was made 
in the context of awarding

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support for service based on uncovered population, rather than land 
areas where mobile broadband is absent. Because the Commission has 
decided to award support to cover square miles, its projected funding 
requirements in 2014 are inapplicable.
    22. The Commission declines to adopt two separate budgets--one to 
fund operating expenses for preservation of service and one to fund 
capital expenses for expansion of service--as proposed by one 
commenter. This proposal would require two separate auctions to award 
support from two funds, which would be administratively less efficient 
and risk duplicative funding to eligible areas. Moreover, two funds 
would require the Commission to decide in advance the levels of support 
for each, and would require the Commission to monitor and enforce 
restrictions on the purposes for which these two types of support can 
be used. By contrast, a single fund allows reverse auction bidders to 
make their own efficiency tradeoffs between operating and capital 
expenses.
    23. In establishing the MF-II annual budget, the Commission affirms 
its commitment to fiscal responsibility, and takes steps herein to 
ensure that the support awarded is not excessive. The Commission makes 
clear that there is discretion to set reserve prices as part of the 
procedures for the reverse auction, which will provide a backstop in 
the event there is insufficient competition to act as a restraint on 
the price of the support to be provided in particular cases. To 
safeguard the monies dedicated to this budget, the Commission adopts 
requirements to ensure that MF-II support recipients are meeting the 
service obligations and conditions associated with the ongoing award of 
such annual support. The Commission retains the discretion to 
distribute less than the total amount authorized in a given year if 
support recipients fail to meet performance or other program 
obligations.
    24. The Commission denies the Petition for Declaratory Ruling filed 
by United States Cellular Corporation, requesting that the Commission 
award to ``next-in-line'' bidders in Auction 901 more than $68 million 
of undisbursed MF-I support on which the winning bidders in that 
auction defaulted. The Commission will not award the unclaimed MF-I 
support to the next-in-line bidders in Auction 901. As the petitioner 
recognizes, the Commission addressed undisbursed support payments in 
the USF/ICC Transformation Order. Among the goals and purposes of the 
Universal Service program is the goal to award support in a fiscally 
responsible manner, thereby minimizing the universal service 
contribution burden on consumers and businesses. In its decision, the 
Commission adopts ongoing support with an annual budget of $453 million 
for MF-II and target support to areas where it is most needed, i.e., 
areas that lack 4G LTE service and areas where service only exists due 
to a subsidy. The Commission finds this is a better use of universal 
service funds than allocating funds to the next-in-line bidders in 
Auction 901, based on the outdated standards for eligible areas used in 
2012 for MF-I.

C. Tribal Mobility Fund Phase II

    25. The Commission reserves support to Tribal lands (excluding 
Alaska) as part of the overall MF-II budget. The Commission will 
calculate this budget by applying the ratio of square miles in eligible 
Tribal lands to square miles of all eligible areas (adjusting for a 
terrain factor) to the total budget it has chosen for MF-II. The 
Commission expects that Tribal lands likely will be more expensive to 
serve than non-Tribal lands due to their lower population density and 
income levels, as well as the lack of power or roads in some parts of 
Indian country and the need for federal approval (such as from the 
Bureau of Indian Affairs) before broadband can be deployed there. The 
Commission concludes that reserving this support within MF-II is a fair 
means and reasonable metric to ensure that Tribal lands are not left 
behind in the auction. Current estimates are that this ratio would be 
about 7%, so the Commission expects to reserve at least $340 million 
from the MF-II budget as support for Tribal Lands. The definitive 
budget will be set when the final set of eligible areas is determined 
after the challenge process.
    26. The Commission concludes that it is appropriate to freshly 
consider the size of the Tribal MF-II budget rather than seek to 
simplistically follow earlier Commission decisions pre-dating several 
important developments. The Commission originally proposed to set aside 
up to $100 million annually for Tribal lands, but then later dedicated 
$96 million annually to Tribal lands in remote areas of Alaska. 
Subtracting the latter from the former would leave a Tribal MF-II 
budget of only $4 million. If the Commission looked to the Tribal 
Mobility Fund Phase I auction as a way of apportioning the Commission's 
initial estimate, it would see that the vast majority of those funds 
(81 percent) were won by Alaskan bidders. Subtracting that proportion 
for the Commission's initial $100 million proposal would leave mainland 
Tribal lands with only $19 million. The Commission believes that 
premising the Tribal MF-II budget on the Commission's earlier actions 
is likely insufficient to reflect the need for funding to advance 4G 
LTE services on Tribal lands in 2017 and beyond. Rather, the Commission 
finds that the methodology described in the MF-II Order will better 
serve the public interest.
    27. Providers of service to eligible areas within Tribal lands will 
also be able to bid for general support in MF-II--so, with sufficient 
auction participation, the funds reserved as part of the Tribal 
Mobility Fund will be a floor, not a ceiling, on support for Tribal 
lands.
    28. The Commission adopts the proposal to award MF-II support for 
Tribal lands subject to the same terms and conditions as are applicable 
to all eligible areas in MF-II. The Commission declines to adopt the 
rules proposed in the USF/ICC Transformation FNPRM regarding special 
ETC designation treatment for Tribal MF-II participants because the 
Commission is revising the timing of its ETC designation requirement 
for all MF-II participants. The Commission declines to adopt separate 
coverage units for Tribal MF-II. The Commission declines to pursue the 
suggestion of one commenter that carriers serving Tribal lands be 
allowed to participate in an opt-in funding plan similar to the Alaska 
Plan. The unique basis for the Commission's adoption of the Alaska plan 
was not the existence of Tribal lands in Alaska, but rather its 
concerns about the need for support to be flexible enough to 
accommodate Alaska's unique conditions, including its ``remoteness, 
lack of roads, challenges and costs associated with transporting fuel, 
lack of scalability per community, satellite and backhaul availability, 
extreme weather conditions, challenging topography, and short 
construction season.'' The Alaska Plan is limited to addressing these 
unique challenges.
    29. The Commission will establish procedures for MF-II in 
consultation and coordination with the Commission's Office of Native 
Affairs and Policy. This will allow funds reserved for Tribal lands to 
be included as part of the MF-II auction. The Commission believes this 
path of conducting Tribal MF-II as a component of MF-II is best for 
quickly initiating support for mobile networks on tribal areas.
    30. The Commission declines to adopt a formal Tribal engagement 
obligation or a bidding credit preference for Tribally-

[[Page 15426]]

owned-and-controlled entities. The Commission agrees with commenters 
that a tribal engagement obligation is not necessary because it could 
create an excessive administrative burden, without a material 
countervailing benefit, when many carriers already have established 
relationships with Tribes. In addition, adopting formal Tribal 
engagement requirements could deter participation in Tribal lands and 
would likely divert providers' resources, thus potentially delaying 
their deployment of service to Tribal lands. The Commission expects 
carriers participating in the Tribal MF-II to work with Tribes to 
facilitate the deployment of the highest quality service to the people 
living on Tribal lands. The Commission finds that a bidding credit 
preference for Tribally-owned-and-controlled entities is unnecessary 
for the MF-II auction. Although several commenters assert that a 
bidding credit preference would create an incentive for bids and 
increase the likelihood of service to Tribal lands, the Commission 
finds that setting aside funds specifically to serve Tribal lands is 
likely to accomplish the Commission's goal of ensuring greater coverage 
on Tribal lands. The Commission also finds that layering an additional 
bidding credit for Tribal carriers on top of the funding exclusively 
available for service to Tribal lands could deter other entities from 
bidding to serve Tribal lands, reducing both the competitiveness of the 
auction and the potential reach of the Commission's finite funds for 
MF-II. Furthermore, commenters fail to demonstrate that the benefits of 
a bidding credit preference outweigh the costs of potentially depriving 
other eligible areas of MF-II support.

D. Identifying Geographic Areas Eligible for Support

1. Geographic Area as the Metric for Assessing Mobile Coverage
    31. The Commission will use geographic area expressed in square 
miles as the metric for measuring coverage, comparing bids, and 
assessing compliance with the corresponding coverage requirement for 
winning bids in MF-II. The Commission will only award support for those 
geographic areas without 4G LTE from an unsubsidized provider. The 
Commission will be making eligible for support only the unserved 
geographic areas within a census block, rather than the entire area 
within the block.
    32. Requiring coverage of a geographic area most closely reflects 
the Commission's goal to have mobile services available everywhere 
people live, work, and travel. A geographic area is a broad measure 
that encompasses all the alternative metrics proposed in the record, 
such as roads, population, farm land, and areas remote from roads or 
significant population centers. Targeting support for mobile broadband 
service based solely on where people may live or where roads of certain 
sizes may be located is not enough. Those narrower approaches would not 
direct support everywhere consumers need and use a mobile service. 
Basing the award of MF-II support on a bid for square miles takes into 
account many of the other areas where mobile service is important but 
for which standardized data are less available--such as business 
locations, recreation areas, work sites, and agricultural spaces. For 
example, precision agriculture relies on mobile networks for 
connectivity, so the value of having coverage in farmland is not 
directly related to the number of people or number of roads there.
    33. Using geographic areas as the metric for MF-II will be 
relatively simple to administer. The Commission will examine the areas 
that do not appear in the coverage shapefiles from providers' Form 477 
data. There will be no need to obtain and validate the accuracy of 
another data source (e.g., road maps or population data) and then 
overlay those data on the shapefiles. Although the Commission utilized 
road miles for MF-I, there were drawbacks to that approach. In 
particular, the Commission found that roads may not be consistently 
categorized by states into TIGER categories for which support is 
provided and that there are different opinions regarding the specific 
TIGER categories of roads that should be included. With respect to 
population, standardized data are available regarding total population 
per census block, but not with respect to where population is located 
within a census block. The difficulties in measuring compliance based 
on population stem from the fact that, while the Commission knows how 
many people are in a given census block, it does not know where in that 
census block they are located. While this challenge could be overcome 
by a 100 percent coverage requirement, commenters generally oppose such 
a coverage requirement.
2. Minimum Geographic Area for Bidding and Support
    34. The Commission concludes that the minimum geographic area for 
bidding should be census block groups or census tracts containing one 
or more census blocks with eligible areas for bidding and support for 
MF-II. The Commission expressed its intent to employ this same approach 
in the Connect America Phase II Auction Order, 81 FR 44413, July 7, 
2016. The full Commission will make the final decision on minimum 
geographic area in the pre-auction process. The Commission refers 
generally to the ``pre-auction process'' in the MF-II Order, which is 
the process through which final auction procedures will be implemented 
and the final list of eligible areas will be determined. The Commission 
may seek comment on, and/or resolve, certain final auction procedures 
in separate public notices if doing so better conduces to the proper 
dispatch of business. Any such public notices will be released during 
the pre-auction process and well in advance of the auction.
    35. Although the Commission continues to recognize that using 
census blocks allows it to target support to specific areas thereby 
providing bidders the ability to tailor their bids to their business 
plans, its experience with the MF-I auction demonstrates the need to 
limit the number of discrete biddable units. The Commission concludes 
it is best to set performance requirements based on an area larger than 
a census block. The Commission adopts a broader, more manageable 
approach that will combine one or more census blocks containing 
eligible areas into census block groups or census tracts.
3. Identifying Areas That Need Mobility Fund Phase II Support
    36. The Commission reaffirms its goals and now seeks to promote the 
deployment of 4G LTE in all areas where it would not be offered by the 
private sector in the absence of universal service support. The 
Communications Act directs the Commission to fund ``reasonably 
comparable'' services in rural areas to those commonly available in 
urban areas. Looking to the mobile speeds generally reported by 
nationwide carriers on their Form 477 submissions, the Commission finds 
that such carriers are generally reporting the deployment of 4G LTE 
reported at minimum advertised download speeds of at least 5 Mbps. The 
Commission will use this speed benchmark to identify areas eligible for 
MF-II. The Commission rejects requests to use the same 10/1 Mbps 
thresholds for determining area eligibility that it requires of MF-II 
support recipients for determining compliance with performance 
requirements.
    37. The Commission concludes that any census block that is not 
fully covered by unsubsidized 4G LTE will

[[Page 15427]]

contain areas that are eligible for support in the MF-II auction. This 
sub-census block approach to eligibility addresses long-standing 
concerns that current methods used to estimate network coverage may 
classify whole census blocks as served notwithstanding that they 
contain significant areas that remain unserved.
4. Source of Coverage and Subsidy Data
    38. The Commission concludes that Form 477 data is the most 
reliable data currently available for the purpose of determining the 
coverage levels of existing mobile services, including unserved areas, 
and areas served by the various technologies that provide 2G, 3G, 4G, 
and 4G LTE services. The Commission will use Form 477 mobile wireless 
coverage data and high-cost disbursement data available from the 
Universal Service Administrative Company (USAC) to determine coverage 
levels in individual census blocks and whether high-cost support is 
being awarded. Prior to an MF-II auction, the Commission will compile 
the list of potentially eligible areas from the data submissions that 
are most recently available for this purpose.
    39. In the 477 Report and Order, 78 FR 49126, August 13, 2013, the 
Commission made clear that the enhanced deployment data collection 
requirements it adopted were ``needed to fulfill [its] universal 
service mandate.'' The 477 Report and Order significantly enhanced the 
reliability of the data the Commission collects by requiring the 
submission of deployment shapefiles that depict ``the coverage 
boundaries where, according to providers, users should expect the 
minimum advertised upload and download data speeds associated with [a] 
network technology,'' such as LTE. Specifically, for each mobile 
broadband network technology (e.g., EV-DO, WCDMA, HSPA+, LTE, WiMAX) 
deployed in each frequency band (e.g., 700 MHz, Cellular, AWS, PCS, 
BRS/EBS), every facilities-based mobile broadband provider must submit 
polygons representing its nationwide coverage area (including U.S. 
territories) of that technology. While these coverage data provide the 
most accurate depiction the Commission has on the deployment of mobile 
networks, they do not indicate the extent to which providers 
affirmatively offer service to residents in the covered areas. By 
requiring a single, uniform filing format for the shapefiles, the 
Commission reduces the potential for distortion or misleading 
comparisons of the data. The Commission requires all facilities-based 
broadband providers to file Form 477 twice a year, and the Commission 
requires that the providers certify as to the accuracy of the data 
submitted. As Wireless Telecommunications Bureau staff has 
demonstrated, Form 477 data along with USAC CETC support data can 
provide sufficiently granular information to identify those areas of 
the country that lack 4G LTE service or where such service is only 
provided by a subsidized provider.
    40. The Commission has recently concluded that ``data from the Form 
477 . . . help [it] better analyze mobile broadband deployment than in 
years past.'' The Wireless Telecommunications Bureau determined that 
the Form 477 coverage data ``provide the most accurate depiction the 
Commission has on the deployment of mobile networks,'' and none of the 
commenters criticizing the Form 477 data has identified a better data 
source for moving forward expeditiously to implement MF-II. Recognizing 
that no data source--including Form 477--will be perfectly accurate, 
the Commission will utilize a challenge process to improve the accuracy 
of the coverage analysis underlying eligibility determinations reached 
in reliance on Form 477 data.
    41. Finally, one public service commission urges the Commission to 
seek input from states that have instituted programs to identify areas 
lacking coverage. The Commission recognizes that some state commissions 
have acquired detailed information about coverage within their states, 
and encourage states to submit information that is probative for 
determining eligibility during the challenge process. However, because 
individual state and territory information may not be uniform 
throughout the nation, the Commission declines to rely on such data to 
the exclusion of other sources and will continue to rely primarily on 
Form 477 data certified by providers. Nonetheless, the Commission will 
consider coverage data from states and other sources in its challenge 
process.
5. Applying Coverage and Subsidy Data to Census Blocks
    42. The Commission concludes that it will apply an actual coverage 
analysis to determine presumptive eligible areas for MF-II support, in 
lieu of the centroid method employed in MF-I. In the time that has 
passed since the Commission first proposed using the centroid method in 
MF-II, the Commission has been able to gather much more robust 
information about service coverage areas from the certified Form 477 
data that providers are required to submit twice a year. The Commission 
can now more reliably identify those areas within census blocks that do 
not today have unsubsidized 4G LTE coverage; use high-cost support data 
to determine where 4G LTE is provided without subsidy; and by 
overlaying the coverage and the support data, identify the areas 
presumptively lacking unsubsidized 4G LTE. The resulting analysis 
presents the most accurate data currently available on which areas 
should be eligible for MF-II. The Wireless Telecommunications Bureau 
staff released its analysis using providers' Form 477 data last fall 
and will publish a preliminary list of eligible areas as part of the 
pre-auction process. The data released on eligible square miles will be 
grouped by census blocks, which in turn will be grouped by census block 
group or census tract as the minimum geographic area for bidding, and 
include the total eligible square miles in each census block and the 
location of each eligible area. As explained in the MF-II Order, these 
groupings will be announced by public notice as part of the pre-auction 
process. The location of each presumptively eligible area will be 
necessary to define the service areas being auctioned and to define 
coverage obligations.
    43. In response to the USF/ICC Transformation FNPRM and Further 
Inquiry Public Notice, 77 FR 73586, December 11, 2012, some carriers 
express concern that the centroid method may not accurately reflect 
coverage. Some rural commenters note, for example, that in some cases 
the centroid of a block may be covered, but large areas outside the 
centroid are not and that such blocks may be unfairly excluded from 
support. Many of those commenters support the proportional method, 
which determines eligibility for support based on whether each census 
block's coverage percentage is below a certain threshold, as an 
alternative. Like the proportional method, the approach the Commission 
adopts in the MF-II Order examines coverage at the sub-census block 
level, thereby remedying the chief concern with the centroid method. 
Because it can identify specific areas within each census block where 
4G LTE coverage is absent, the actual area coverage approach is a 
significant improvement over the centroid method in reaching the 
Commission's universal service goals. It is a far more precise way to 
target the MF-II budget.
6. Challenge Process
    44. Consistent with the general approach adopted for MF-I and more 
recently, for Connect America Fund Phase II (CAF-II), the Commission 
concludes that it will provide a robust

[[Page 15428]]

process for interested parties to challenge the list of presumptively 
eligible areas for MF-II support. The challenge process will address 
challenges to coverage determinations only and will not address 
challenges to the allocation of legacy CETC support within study area 
geographies. To provide interested parties the opportunity to review 
the coverage analysis on which eligible areas are identified, the 
Commission directs the Bureaus to make an initial determination of 
eligible areas by census block as part of the pre-auction process. 
Subsequently, the Bureaus shall implement a process consistent with the 
decisions the Commission will make after review of the record received 
in response to the Further Notice of Proposed Rulemaking adopted along 
with the MF-II Order. The Commission defers making further decisions 
regarding the challenge process in the MF-II Order because, while 
commenters generally support a challenge process, they have different 
views with respect to how such a process should work, and the 
Commission finds that seeking further comment will be helpful in 
reaching decisions.
    45. The Commission expects that the challenge process will conclude 
by the end of January 2018. At the conclusion of the challenge process, 
the Commission directs the Bureaus to make a final determination of 
areas eligible for MF-II support.

E. Transition of CETC Support to MF-II Support and Preservation of 
Service

    46. The Commission amends its rules for the phase-down of identical 
support in order to smoothly transition to the Commission's provision 
of MF-II support, as well as to provide continuing support to those 
eligible areas that do not receive MF-II support. The Commission's 
phase-down rules have been designed so as not to be inconsistent with 
the provisions in 47 CFR 54.307(e)(5)-(6) (2015), unless and until the 
restrictions in Consolidated Appropriations Act, 2016, Public Law 114-
113, Div. E, Title VI, section 631, 129 Stat. 2242, 2470 (2015), are no 
longer in effect. The Commission adopts differing phase-down schedules 
for CETC support in ineligible and eligible areas.
    47. First, as part of the pre-auction process, the Commission 
directs the Bureaus to disaggregate each CETC's legacy support among 
the census blocks it serves using that support. Currently, legacy 
support is provided to a CETC's entire study area (SAC), with no 
attribution to particular sub-areas within the SAC. That creates a 
problem for comparing support among CETCs to serve a given area and for 
determining how much support is being used to compete with private 
capital. The Commission faced a similar problem when it decided to 
disaggregate support for legacy rate-of-return carriers last year and 
retarget that support to areas unserved by unsubsidized competitors.
    48. In choosing a disaggregation method, the Commission is 
persuaded that it should account for the relative costs of deploying a 
coverage-based network given the differing terrain throughout the 
United States. Specifically, the Commission declines to adopt a 
disaggregation method that assumes that support is allocated uniformly 
throughout a provider's SAC--doing so would specifically ignore the 
additional costs that wireless providers incur to deploy service in 
more difficult terrain. Instead, the Bureaus shall apply a more-refined 
methodology that uses a terrain factor as a proxy for determining 
higher cost areas. For example, more mountainous terrains with greater 
variations in slope are areas that tend to be more costly to serve than 
level plains. The terrain factor would be used to weight the area of a 
block such that eligible areas in more mountainous areas would be 
allocated a greater amount of a CETC's total legacy support to reflect 
the higher costs of serving such areas.
    49. Second, the Commission establishes the following schedule for 
the phase-down of legacy support and commencement of auction payments. 
In census blocks determined (after the completion of the challenge 
process) not to be eligible for MF-II support, legacy support will be 
phased down starting the first day of the month following release of a 
public notice announcing the close of the MF-II auction. On that same 
date, legacy support for current recipients in eligible census blocks 
shall either be converted to MF-II support (for the winning bidder), 
maintained (for one CETC in areas without a winning bidder), or subject 
to phase down (for all other CETCs). The Commission concludes that this 
schedule is fully consonant with its rules, which require that CETCs 
continue to receive support at current levels until MF-II and Tribal 
MF-II are implemented. MF-II and Tribal MF-II will be implemented when 
the public notice announcing the close of the MF-II auction and 
identifying the winning bidders has been released. This schedule will 
apply only to the recipients of legacy support. A different schedule 
will apply to winning bidders that do not receive legacy support in the 
areas of their winning bids.
    50. More specifically, in census blocks determined (after the 
completion of the challenge process) not to be eligible for MF-II, 
legacy support will be phased down starting the first day of the month 
following the close of the MF-II auction. For the first 12 months 
thereafter, phase-down support shall be \2/3\ of the legacy support for 
each CETC associated with that area. For the next 12 months, phase-down 
support shall be \1/3\ of the legacy support for each CETC associated 
with that area. All legacy support shall end thereafter.
    51. For a winning bidder that is a CETC receiving legacy support in 
the area of its bid, MF-II support shall commence on the first day of 
the month after the auction concludes. To ensure a smooth transition to 
MF-II support, and to the extent the Commission authorizes a winning 
bidder to receive MF-II support after that date, a winning bidder will 
receive support payments at the current legacy support level until such 
Commission action. A winning bidder that is also entitled to legacy 
support for an area subject to its winning bid will not be entitled to 
receive MF-II support until the Commission issues a public notice 
authorizing support to that bidder. In the public notice, the 
Commission will direct and authorize USAC to disburse monthly MF-II 
payments to the winning bidder and to cease paying it at the legacy 
support level. Furthermore, to ensure that the winning bidder receives 
the appropriate amount of MF-II support, the Commission will direct 
USAC to adjust, on a going-forward basis, the amount of the monthly MF-
II payments for a limited period of time to account for the difference 
between the payments at the legacy support level and the MF-II payments 
in the amounts to which the winning bidder has committed at auction, 
for the period between the close of the auction and the issuance of the 
public notice.
    52. If the Commission does not authorize the bidder to receive MF-
II support, it will direct USAC to adjust the amount of the bidder's 
preservation-of-service or phase-down support under the MF-II rules, on 
a going-forward basis, to account for the difference between the 
payments at the legacy support level and the preservation-of-service or 
phase-down payments for the period between the close of the auction and 
the Commission's denial of authorization. As an additional mechanism to 
prevent perverse incentives, however, the Commission finds that, in 
applying these rules, a winning bidder committing an auction default 
will be considered as having received support in the amount of its

[[Page 15429]]

winning MF-II bid if that bid is less than its level of CETC support 
for this area. In light of the Commission's experience with the MF-I 
auctions, it also adopts a contingency plan to address the possibility 
that such a winning bidder might default on its bid prior to the 
authorization of support or be denied such authorization. Under this 
contingency plan, no MF-II support will be awarded for the area. In 
that event, the Commission will, however, to the extent applicable, 
provide legacy support to CETCs under the preservation-of-service rule 
and the phase-down rule. The Commission concludes that this schedule is 
fully consonant with its rules, which mandate that a winning bidder 
``cease to be eligible for phase-down support in the first month for 
which it receives Mobility Fund Phase II support.''
    53. The Commission adopts a different schedule for winning bidders 
that are not CETCs in the areas of their winning bids. Because non-CETC 
winning bidders must meet the same construction deadlines as CETC 
winning bidders, the Commission will provide an initial balloon payment 
of MF-II support to non-CETC winning bidders to place non-CETC winning 
bidders on approximately the same footing as other winning bidders. The 
balloon payment will consist of the non-CETC winning bidder's monthly 
MF-II payment amount multiplied by the number of whole months between 
the first day of the month after the close of the auction and the 
issuance of the public notice authorizing support. Unlike other winning 
bidders, a non-CETC winning bidder will not receive MF-II support for 
the area of its winning bid on the first day of the month after the 
auction concludes because it would not necessarily be designated as an 
ETC in that area. A non-CETC winning bidder instead will receive MF-II 
support once the Commission issues a public notice authorizing MF-II 
support to the bidder. Based on this schedule, there is no need to 
adjust payments to account for the continued payments at the legacy 
support level. The remainder of the discussion in this section concerns 
the phase down of legacy support for mobile CETCs.
    54. In eligible areas where there is no winning bidder in MF-II, 
the CETC receiving the minimum level of sustainable support will 
continue to receive such support until further Commission action, but 
for no more than five years from the first day of the month following 
the close of the MF-II auction. The Commission defines the minimum 
level of sustainable support to be the lowest amount of legacy support 
among CETCs that have deployed the highest technology for that area. 
The Commission concludes maintaining such support is necessary to 
preserve service for consumers in such areas pending further Commission 
action.
    55. For CETCs receiving support in areas eligible for MF-II that do 
not either win MF-II support or receive the minimum level of 
sustainable support, the phase-down of support shall commence on the 
first day of the month after the auction concludes. For the first 12 
months, phase-down support shall be \2/3\ of the legacy support for 
each CETC associated with that area. For the next 12 months thereafter, 
phase-down support shall be \1/3\ of the legacy support for each CETC 
associated with that area. All legacy support shall end thereafter. The 
Commission concludes that this two-year phase-down schedule will ensure 
that the affected CETCs will have a smooth transition in areas that are 
too costly to serve absent universal service subsidies.
    56. The Commission adopts this phase-down schedule to fund new 
service obligations undertaken by new MF-II auction winners, protect 
customers of current support recipients from a potential loss of 
service, and minimize the disruption to legacy support providers from a 
loss of funding. The Commission balances the concerns recipients of 
legacy support express regarding a rapid termination of legacy support 
with its need to preserve its finite universal service funds and begin 
funding service under the terms and amounts established by winning bids 
in its MF-II reverse auction. Accordingly, in the Commission's 
implementation of MF-II support, it now establishes a certain path 
toward no longer paying such legacy support, except to preserve service 
where it exists on a subsidized basis in eligible areas where there is 
no winning bidder in the MF-II auction.
    57. Finally, in light of the phase down schedules the Commission is 
adopting, it sees no need to treat differently the phase down of 
support going to any mobile CETC for which high-cost support represents 
one percent or less of its wireless revenues. As a result, legacy CETC 
support to these providers will proceed on the same phase-down schedule 
as for other providers.

F. One Provider per Eligible Area

    58. The Commission limits support to a single provider for a given 
geographic area going forward. The Commission has a statutory 
obligation to ensure access to advanced telecommunications and 
information service in all regions of the country at reasonably 
comparable rates, and a related obligation to ensure that public 
funding is used effectively and efficiently in furtherance of the 
Commission's statutory mandate. It is therefore incumbent upon the 
Commission to adopt a structure for awarding universal service support 
that ensures the finite public funds available are directed in a way 
that sustains and expands the availability of mobile services to 
maximize consumer benefits.

V. Public Interest Obligations

    59. Having established the framework of MF-II, the Commission now 
addresses the public interest obligations that must be met by 
recipients of MF-II support, including performance metrics for minimum 
data speeds, maximum latency measurements, and minimum usage 
allowances, consistent with the provision of 4G LTE service. These 
performance requirements will be used to measure compliance with 
established benchmarks during the ten-year term of support.

A. Performance Metrics

    60. The Commission will require recipients of MF-II support to 
deploy 4G LTE. Around 84 percent of the nation's square miles 
(excluding Alaska) are covered by 4G LTE networks, as of December 2015. 
As the transition to 4G LTE service and the transition of voice to 
voice over LTE technology become widespread, the Commission anticipates 
that older devices will be retired and future devices will be LTE 
capable. With the nearly universal deployment of 4G LTE comes a broad 
record consensus that the network technology for any new deployment the 
Commission funds in MF-II should be 4G LTE. Targeting MF-II support to 
4G LTE will ensure that the Commission does not relegate rural areas to 
substandard service that is not comparable to urban LTE service, and 
that the supported service is technologically capable of supporting 
roaming on the industry LTE standard, including the networks of the 
four nationwide mobile wireless service providers. The Commission's 
standards for supported service should ensure that its finite universal 
service funds are used efficiently to provide consumers access to 
robust mobile broadband service that is comparable to the 4G LTE 
service being offered today in urban areas. By requiring the deployment 
of 4G LTE with on-going MF-II support, the Commission can better 
utilize universal service support to reach the approximately 575,000 
square miles that either lack 4G LTE coverage or only have coverage 
because of subsidized service.

[[Page 15430]]

    61. The Commission requires recipients of MF-II support to offer 
voice service, and it adopts minimum requirements for network 
performance and an offered service plan that, together with the 4G LTE 
requirement, will define the baseline 4G LTE performance standard for 
MF-II recipients. Recipients of MF-II funding will be required to meet 
minimum baseline performance requirements for data speeds, data 
latency, and data allowances in areas that receive support for at least 
one plan that they offer. The median data speed of the network for the 
supported area must be 10 Mbps download speed or greater and 1 Mbps 
upload speed or greater, with at least 90 percent of the required 
download speed measurements being not less than a certain threshold 
speed. For latency, at least 90 percent of the required measurements 
must have a data latency of 100 milliseconds or less round trip. 
Support recipients must offer at least one service plan that includes a 
data allowance comparable to mid-level service plans offered by 
nationwide providers. Currently, mid-level plans offer a data allowance 
of at least 2 GB of data per month. Because industry and consumer 
practices may evolve over time, the Commission will consider, after an 
opportunity for comment, whether to require a larger data allowance, 
initially or during the term of support, based on then-available mid-
level plans and/or the average per subscriber data usage. The 
Commission will conduct the initial consideration of these issues, with 
subsequent consideration occurring by the Bureaus on delegated 
authority. A support recipient's service plan with the required data 
allowance must be offered to consumers at a rate that is within a 
reasonable range of rates for similar service plans offered by mobile 
wireless providers in urban areas. These conditions will be defined 
more precisely in the pre-auction process. The Commission will retain 
its authority to look behind recipients' performance certifications and 
take action to address any violations that develop.

B. Term of Support

    62. The Commission adopts a ten-year term for MF-II support, which 
will begin on the first day of the month after the MF-II auction 
concludes. As the Commission approaches the end of the ten-year term, 
it can reassess the marketplace and determine whether a mechanism to 
provide future support for mobile services is needed. In addition, the 
Commission declines to adopt a renewal expectancy for winning bidders.
    63. A ten-year term of support is consistent with the term adopted 
by the Commission for Connect America Phase II support. As the 
Commission recognized in the 2014 CAF Order, 79 FR 39163, July 9, 2014 
providing support for a period of ten years is appropriate as it may 
stimulate greater interest in the competitive bidding process. 
Consequently, that ``[i]ncreased participation in the competitive 
bidding process will help ensure that funding is targeted efficiently 
to expand broadband-capable infrastructure throughout the country.'' 
The Commission is mindful of using the lessons learned from CAF in its 
implementation of MF-II.
    64. The Commission further agrees with commenters that a ten-year 
term of support is appropriate in light of the significant capital and 
effort needed to deploy and upgrade broadband networks and is 
consistent with the timeframe used by rural carriers to plan and 
schedule network upgrades. The certainty provided by a term of this 
length will help encourage more bidders--particularly smaller wireless 
carriers--to participate in the auction.
    65. Although the Commission does expect the marketplace to evolve 
over the next ten years, it will not adopt performance metrics that 
increase over the term of support. The Commission concludes that the 
disincentives to auction participation potentially created by evolving 
performance standards and the administrative complexity of establishing 
such standards outweigh the performance benefits to consumers during 
the latter portion of the support period. Winning bidders are required 
under section 254(e) of the Communications Act to use their support 
throughout their term for ``the provision, maintenance, and upgrading 
of facilities and services,'' and the Commission expects winning 
bidders, to the extent possible, to upgrade their networks to increase 
capacity and offer better services over time.
    66. The Commission declines to adopt any renewal expectancy or 
similar preference for winning bidders after their ten-year term of 
support expires. Although a few parties support a renewal that is based 
on whether a carrier has met its deployment and service obligations, a 
renewal expectancy might undermine the Commission's ability to satisfy 
fiscal management principles, such as the Anti-Deficiency Act. The 
Commission therefore declines to adopt a renewal expectancy, because to 
do so may undermine its ability to target future universal service 
support where it is most needed.

C. Construction Requirements/Benchmarks

    67. Consistent with the approach the Commission adopted in the 
Connect America Phase II Auction Order, the Commission adopts interim 
benchmarks as well as a final benchmark for deployment of service that 
meets the performance metrics detailed in the MF-II Order. 
Specifically, the Commission defines the starting point for the interim 
benchmarks as six months from the first day of the month that follows 
the month in which the MF-II auction closes. The Commission requires a 
winning bidder to demonstrate coverage of at least 40 percent by three 
years after the starting point, 60 percent by four years after the 
starting point, 80 percent by five years after the starting point, and 
85 percent by six years after the starting point across all areas for 
which it receives MF-II support in a state.
    68. The Commission concludes that the benchmarks serve as an 
appropriate construction schedule for MF-II recipients. Interim 
milestones ensure that sufficient progress is being made with the 
finite funds it has available. Aligning the MF-II deployment 
requirements with the CAF-II requirements not only strikes an 
appropriate balance among carriers' competing concerns, but also 
increases efficiency and eases administration by leveraging the 
knowledge and experience the Commission gained during the CAF-II 
process. The Commission finds that by setting these benchmarks, it will 
ensure that support recipients make consistent progress towards 
providing 4G LTE service to unserved areas of our nation, while still 
allowing winning bidders flexibility to address unforeseen problems or 
delays in reaching their overall coverage obligations. The Commission 
observes that while several commenters sought only a 75 percent 
coverage requirement with the expectation of providing 4G LTE mobile 
broadband within three years, the Commission concludes that its 85 
percent coverage requirement is more consistent with its policy 
objective of ubiquitous mobile coverage.
    69. Recipients that fail to meet and maintain these performance 
obligations within the time provided to submit their representative 
data and to certify to coverage requirements will be subject to defined 
measures, and must cure these failures to meet the deployment 
requirements or they will be in performance default.
    70. Consistent with the Commission's CAF-II framework, support 
recipients

[[Page 15431]]

must meet their required benchmarks across all areas for which they 
receive MF-II in a state. For the final benchmark, every census block 
group or census tract in a state (depending on minimum bidding unit) 
must also be at least 75 percent covered. This requirement will help 
ensure that the Commission's coverage requirements are meaningful for 
all consumers in supported areas.
    71. In accordance with the data the Commission will ultimately 
require for a successful challenge of the eligibility of an area, it 
will require parties awarded MF-II support to submit data sufficient to 
demonstrate compliance with its coverage requirements. Parties' 
demonstrations shall be consistent with the evidence the Commission 
determines to be necessary to be submitted in the challenge process. 
Concurrent with their submissions of data, recipients of support will 
have to certify that they have met the Commission's deployment 
benchmarks. The Commission directs the Bureaus to precisely define 
these requirements in the pre-auction process. This is consistent with 
the USF/ICC Transformation Order in which the Commission directed the 
Bureaus and the Office of Engineering and Technology to refine the 
methodology for broadband performance testing. The Commission is 
entrusted with distributing significant amounts of universal service 
contributions from consumers and businesses, and it must ensure that 
there is actual coverage for consumers in areas where it is paying 
support recipients.

D. Collocation and Voice and Data Roaming

    72. The Commission adopts the same collocation and voice and data 
roaming obligations for MF-II winning bidders as the Commission adopted 
for MF-I, with certain minor, non-substantive changes. With respect to 
collocation obligations, the Commission requires that recipients of MF-
II support allow for reasonable collocation by other providers on all 
towers that they own or manage in the areas for which they receive 
support. The Commission also requires that support recipients comply 
with its voice and data roaming requirements on networks that receive 
MF-II support. Specifically, consistent with the approach adopted for 
MF-I, the Commission requires that recipients of MF-II support provide 
roaming pursuant to 47 CFR 20.12 and comply with any modifications of 
the roaming rules that it makes during the period MF-II support is 
provided throughout networks that receive MF-II support.
    73. The Commission declines to expand the data roaming obligations 
as some commenters suggest, as the Commission's experience in MF-I 
indicates that the rules it adopted there provide sufficient 
safeguards. Violations of these obligations by support recipients could 
result in the withholding of monthly universal service support, a 
finding of performance default, and losing eligibility for future 
Mobility Fund or USF participation. The Commission's general 
enforcement tools are also available to redress any violation of its 
rules.

E. Reasonably Comparable Rates

    74. To implement the statutory principle for MF-II, the Commission 
adopts the proposed rules and will require recipients to certify in 
their long-form applications and annually that in areas where they 
receive support they offer service at rates that are within a 
reasonable range of rates for similar service plans offered by mobile 
wireless providers in urban areas. Recipients' service offerings will 
be subject to this requirement until the end of the term of support.
    75. The Commission adopts a presumption that if a given provider is 
offering the same rates, terms and conditions (including usage 
allowances, if any, for a specified rate) to both urban and rural 
customers, then that is sufficient to meet the statutory requirement 
that services be reasonably comparable.
    76. The Commission further concludes that a recipient can 
demonstrate compliance with the required certification if its stand-
alone voice plan and one service plan that offers data services is 
substantially similar to a service plan offered by that provider, if 
the provider has urban service areas, or by at least one mobile 
wireless provider in an urban area and is offered for the same or lower 
rate than the matching urban service plan. During the pre-auction 
process, the Commission may define more precisely the circumstances 
under which a provider can demonstrate compliance with this 
certification. The Bureaus will conduct any subsequent consideration of 
possible revisions regarding compliance with this requirement. The 
Commission retains its authority to look behind recipients' 
certifications and take action to address any violations that develop.

VI. Provider Eligibility Requirements

    77. The requirements the Commission adopts are essentially the same 
as those adopted for MF-I, with the limited exception that for MF-II, 
an applicant seeking to participate in the auction will be permitted to 
be designated as an ETC after it is announced as a winning bidder for a 
particular area in accordance with procedures it implements. Consistent 
with the eligibility requirements for MF-I, a qualified MF-II applicant 
must demonstrate access to spectrum capable of the appropriate level of 
service in the geographic areas to be served, and certify as to its 
financial and technical capability to provide service within the 
specified timeframe. The Commission concludes that it will not impose 
any additional eligibility requirements to participate in MF-II.

A. Designation as an ETC

    78. The Commission will permit a winning bidder in the MF-II 
auction to obtain its ETC designation after the close of the auction, 
provided it submits proof of its ETC designation within 180 days of the 
public notice identifying winning bidders. Before MF-II support is 
disbursed to a winning bidder, it must demonstrate that it has been 
designated an ETC covering each of the geographic areas for which it 
seeks to be authorized for support and that its ETC designation allows 
it to fully comply with the Commission's coverage requirements. The 
Commission declines to disturb the current system of state jurisdiction 
over ETC designations, even as the Commission permits winning bidders 
to obtain ETC status after being announced as winners in the MF-II 
auction.
    79. Although the Commission initially proposed to follow the 
approach it adopted for MF-I and require all applicants to demonstrate 
ETC designations prior to the auction, its experience after Auction 901 
and Auction 902, and its most recent conclusions regarding ETC 
designations in the CAF-II context, weigh in favor of a more flexible 
approach for MF-II.
    80. As the Commission concluded in the CAF-II context, permitting 
post-auction ETC designations for MF-II may improve applicant 
participation in the auction. It will also conserve participants' 
resources by avoiding obligations for auction participants who do not 
win any coverage areas in the auction, as well as safeguarding 
potential bidding strategies of applicants seeking ETC designation 
before an auction. The Commission will not provide any support until a 
winning bidder has obtained and demonstrated ETC designation for its 
entire winning bid area, and is not persuaded by the concerns raised by 
one commenter, which argues that allowing applicants to seek ETC 
designation after winning

[[Page 15432]]

would encourage speculation by carriers seeking to obtain federal 
funding to serve areas that are unfamiliar to them.
    81. Similar to the process adopted for CAF-II support, the 
Commission requires winning bidders of MF-II support to submit proof of 
their ETC designations within 180 days of the public notice announcing 
them as winning bidders. Failure to obtain ETC status and submit the 
required documentation by the deadline will be considered an auction 
default, though the Commission will consider applications for waiver of 
the 180-day deadline from entities who are diligently pursuing ETC 
designation.
    82. Based on what the Commission observed in the rural broadband 
experiments, when considering waivers of the 180-day timeframe for 
obtaining ETC designation, the Commission will presume that an entity 
will have acted in good faith if the entity files its ETC application 
within 30 days of the release of the public notice announcing that it 
is a winning bidder. Consistent with the rural broadband experiments, 
where the Commission delegated authority to the Wireline Competition 
Bureau to act on waivers, here, the Commission directs the Wireless 
Telecommunications Bureau to act on any such waivers.
    83. Any circumstances where a state will need more time due to 
procedural requirements or resource issues can be dealt with through 
the waiver process. Accordingly, to preserve the primary role that 
Congress gave the states in designating ETCs, the Commission reaffirms 
that it will act on an ETC designation petition pursuant to 47 U.S.C. 
214(e)(6) ``only in those situations where the carrier can provide the 
Commission with an affirmative statement from the state commission or a 
court of competent jurisdiction that the carrier is not subject to the 
state commission's jurisdiction.''

B. Forbearance From Service Area Redefinition Process

    84. The Commission concludes that forbearance from the 47 U.S.C. 
214(e)(5) service area conformance requirement for recipients of the 
MF-II competitive bidding process serves the public interest. The 
Commission has decided that providing MF-II support to only one 
provider in a given geographic area in exchange for its commitment to 
offer service that meets its requirements throughout the funded area 
achieves its objectives for fiscal responsibility.
    85. For those entities that obtain ETC designations as a result of 
being selected as winning bidders for the MF-II auction, the Commission 
forbears from applying 47 U.S.C. 214(e)(5) and 47 CFR 54.207(b). 
Forbearing from the service area conformance requirement eliminates the 
need for redefinition of any rural telephone company service areas in 
the context of the MF-II auction. Accordingly, Commission rules 
regarding the redefinition process are inapplicable to petitions that 
are subject to this order. However, if an existing ETC seeks support 
through the MF-II auction for areas within its existing service area, 
this forbearance will not have any impact on the ETC's pre-existing 
obligations with respect to other support mechanisms and the existing 
service area.
    86. The Commission concludes that forbearance is warranted in these 
limited circumstances. The Commission's objective is to distribute 
support to winning bidders as soon as possible so that they can begin 
the process of deploying mobile service to consumers in those areas. 
Case-by-case forbearance would likely delay the Commission's post-
auction review of entities once they are announced as winning bidders. 
The Communications Act requires the Commission to forbear from applying 
any of its requirements or the Commission's regulations to a 
telecommunications carrier if it determines that: (1) Enforcement of 
the requirement is not necessary to ensure that the charges, practices, 
classifications, or regulations by, for, or in connection with that 
telecommunications carrier or telecommunications service are just and 
reasonable and are not unjustly or unreasonably discriminatory; (2) 
enforcement of that requirement is not necessary for the protection of 
consumers; and (3) forbearance from applying that requirement is 
consistent with the public interest. The Commission's experience in MF-
I has shown that service area conformance forbearance was just and 
reasonable in accomplishing the goals of the Mobility Fund, did not 
harm consumer protections, and was in the public interest in the 
Mobility Fund context. The Commission concludes that each of these 
statutory criteria is met for winning bidders of the MF-II competitive 
bidding process, and the Commission incorporates by reference here the 
analysis of these forbearance factors that it considered and found 
warranted forbearance in MF-I and CAF-II.

C. Spectrum Access

    87. The Commission requires that an applicant for an MF-II auction 
have access to spectrum necessary to fulfill any obligations related to 
support. An MF-II applicant must describe its required spectrum access 
and certify that the description is accurate and that the applicant 
will retain such access for at least ten years from the date on which 
it is authorized to receive support. Specifically, an applicant will be 
required to disclose whether it currently holds or leases the spectrum, 
including any necessary renewal expectancy, and whether such spectrum 
access is contingent on obtaining support in a MF-II auction. The 
Commission specifies that any other contingency will render the 
relevant spectrum access insufficient for the party to meet the 
Commission's requirements for participation. For the described spectrum 
access to be sufficient, the Commission further concludes that the 
applicant must obtain any necessary approvals from the Commission prior 
to filing its short-form application.
    88. Because it would be inconsistent with the level of commitment 
the Commission thinks a serious applicant should demonstrate, the 
Commission declines to adopt the suggestion of some commenters to allow 
for a substantially more relaxed standard that would permit entities to 
seek to acquire access to spectrum on a ``fill-in'' basis after the 
short-form filing deadline.
    89. Consistent with the Commission's decision in MF-I, the 
Commission concludes that an applicant seeking MF-II support must have 
access to spectrum necessary to fulfill any MF-II obligations prior to 
participating in the MF-II auction because allowing otherwise would be 
inconsistent with the serious undertakings implicit in bidding for 
ongoing support. The Commission therefore requires applicants to ensure 
that if they become winning bidders, they will have the spectrum to 
meet their obligations as quickly and successfully as possible, and 
adopts the spectrum access rule proposed in the 2014 CAF Further 
Notice.
    90. The Commission will require that applicants identify the 
particular frequency bands and the nature of the access on which they 
assert their spectrum access necessary to demonstrate eligibility for 
support. The Commission will assess the reasonableness of those 
eligibility certifications based on information it will require to be 
submitted in short- and long-form applications. The Commission cautions 
applicants that if they make this certification and do not have or 
maintain access to the appropriate level of spectrum, they will be 
subject to the auction or performance default rules.

[[Page 15433]]

D. Financial and Technical Capability

    91. In MF-I, the Commission concluded that it would require a party 
to be financially and technically capable of satisfying the performance 
requirements of providing service within the specified timeframe in the 
geographic areas for which it sought support. In proposing that parties 
seeking MF-II support satisfy this same eligibility requirement, the 
Commission proposed to require an entity to certify, in the pre-auction 
short-form application and in the post-auction long-form application, 
that it is financially and technically capable of providing service 
within the specified timeframe in the geographic areas for which it 
seeks support. The Commission's experience with MF-I indicates that 
requiring these certifications is a reasonable protection for the 
auction process and to safeguard the award of universal service funds. 
The Commission adopts its proposed requirement and the proposed rule, 
with the clarification that the applicant must certify that it is 
financially and technically qualified to provide the services supported 
by MF-II within the specified timeframe in the geographic areas for 
which it sought support.

E. Encouraging Participation

    92. The Commission will permit all qualified eligible applicants to 
participate in the MF-II auction. In so doing, the Commission seeks to 
encourage participation by the widest possible range of applicants 
possible, regardless of their size. The Commission's commitment to 
fiscal responsibility requires that it distributes its finite budget to 
the provider that submits the superior, most cost-effective bid in the 
MF-II auction. The Commission will not limit eligibility for MF-II to 
smaller providers thereby potentially limiting the Commission's ability 
to further close the 4G LTE coverage gap. The Commission therefore 
declines to adopt the proposals of some small, rural providers that 
suggest that it should restrict the participation of certain classes of 
carriers in order to facilitate participation. Furthermore, as the 
Commission concluded in MF-I, it will not bar any party from seeking 
MF-II support based solely on the party's past decision to relinquish 
Universal Service Funds provided on another basis. Consistent with its 
approach in spectrum auctions, the Commission expects that its general 
auction rules and procedures will provide the basis for an auction 
process that will promote the Commission's objectives for MF-II and 
provide a fair opportunity for all serious, interested parties to 
participate.

F. Inter-Relationship With Other Universal Service Mechanisms and 
Obligations

    93. Consistent with the record, the Commission will allow 
recipients of MF-I support to participate in an MF-II auction. While 
the Commission does not anticipate that it will prohibit MF-II winning 
bidders from seeking support through other universal service mechanisms 
merely because they have received MF-II support, the Commission notes 
that the goals of Phase II of the Mobility Fund are to help ensure the 
availability of mobile voice and broadband services across the country. 
The Commission emphasizes that in establishing rules for each separate 
universal service funding mechanism, it is including rules to prevent 
the disbursement of redundant support.
    94. The Commission stresses that because Phase I provided strictly 
non-recurring support, the Commission required an MF-I participant to 
certify at the pre-auction, short-form stage that it was financially 
and technically capable of providing 3G or better service within the 
specified timeframe in the geographic areas for which it sought support 
without any assurance of ongoing support, but it did not foreclose the 
potential of such an entity subsequently receiving ongoing support to 
maintain that service after the five-year time frame expired. Insofar 
as it furthers the Commission's policy goals to expand and preserve 
service to areas that would not be covered absent government subsidies, 
the Commission concludes that a winning bidder in MF-I may participate 
in the auction to seek ongoing support in MF-II for any area deemed 
eligible.
    95. On the issue of the interrelationship of MF-II and the Remote 
Areas Fund (RAF), the Commission has not limited the availability of 
MF-II support based on the existence of the RAF, which is a concern for 
several commenters. Rather, the Commission has set the budget based on 
the reasons discussed in the MF-II Order. The Commission reaffirms the 
commitment to the RAF framework and rules adopted in the Connect 
America Phase II Auction Order. The Commission also concludes that it 
would not make sense to fund a mobile provider in an eligible area 
through MF-II and fund yet another such provider (or possibly the same 
one) in that same area in the RAF. Accordingly, the Commission decides 
that it shall structure the RAF so as not to award support to a mobile 
provider in any area where it has awarded MF-II support.

G. Partnerships

    96. The Commission concludes that the rules it is adopting for MF-
II are sufficiently flexible to allow recipients of MF-II to fulfill 
their public interest obligations associated with MF-II. The Commission 
is committed to preserving and expanding mobile voice and broadband 
coverage to those areas that lack services without subsidies, and 
concludes that allowing support recipients to reach agreements with 
other providers for this purpose may further that objective. The 
Commission recognizes based on its experience with MF-I that providers 
are best suited to determine the most efficient and cost effective 
manner to fulfill their public interest obligations, and the Commission 
has designed rules that should afford them the flexibility to consider 
arrangements that meet their individual business needs without 
prescribing any particular solutions or limitations, provided that such 
agreements otherwise comply with relevant statutory and regulatory 
requirements. The Commission cautions applicants seeking support, 
however, that regardless of any agreements they may enter, the winning 
bidder is the entity responsible for maintaining its eligibility, 
including but not limited to its ETC status, and meeting its 
performance obligations for MF-II support. Similarly, all monies 
awarded through the auction process must flow directly to the winning 
bidder as that is the entity upon which the Commission has assessed 
compliance with all support requirements, including its ETC status.

H. Bidding Preference for Small Businesses

    97. The Commission declines to adopt a bidding preference for small 
businesses for MF-II. In view of the Commission's experience with MF-I, 
where numerous smaller carriers placed winning bids to receive funding 
for service without the aid of bidding credits, the Commission 
concludes that it is unnecessary to adopt small business bidding 
credits for a MF-II auction. Also, a bidding credit for small 
businesses would potentially reduce the reach of the Commission's 
finite funds. The Commission is unwilling to forgo additional coverage 
expansion or preservation in order to favor smaller providers, 
particularly in light of the participation and success of small and 
rural businesses in MF-I.

[[Page 15434]]

VII. Auction Rules and Process

    98. The Commission adopts rules that govern the auction process for 
MF-II, including pre-auction requirements and general rules for auction 
design and the bidding process. These rules provide the basic framework 
and requirements for participating in an auction for MF-II support. 
Consistent with past practice, the specific procedures will be 
established as part of the pre-auction process, including determining 
auction-related timing and dates, identifying areas eligible for 
support, and establishing detailed bidding procedures consistent with 
the MF-II Order as well as any issues resolved following the Further 
Notice of Proposed Rulemaking adopted at the same time as the MF-II 
Order. This pre-auction process will be similar to those the Commission 
has used for spectrum auctions and to those used in Auction 901 to 
distribute MF-I support.

A. Pre-Auction Application Process

    99. Based on the Commission's experience with MF-I and the process 
it adopted in CAF-II, the Commission adopts a two-stage application 
process for an applicant seeking to participate in the MF-II auction. 
Under this process, interested parties will submit a pre-auction 
``short-form'' application, providing basic information and 
certifications regarding their eligibility to receive support. After 
the application deadline, Commission staff will review the short-form 
applications to determine whether applicants have provided sufficient 
information required at the short-form stage to be eligible to 
participate in a MF-II auction. Once review is complete, Commission 
staff will release a public notice indicating which short-form 
applications are deemed complete and which are deemed incomplete. 
Applicants whose short-form applications are deemed incomplete will be 
given a limited opportunity to cure defects and to resubmit correct 
applications. Only minor modifications to an applicant's short-form 
application will be permitted. Major modifications would include, for 
example, changes in ownership of the applicant that would constitute an 
assignment or transfer of control. The Commission will then release a 
second public notice designating the applicants that are qualified to 
participate in the MF-II auction. After the close of the auction, 
winning bidders will be required to submit ``long-form'' applications 
with more extensive information to allow for an in-depth review of 
their qualifications prior to authorization of support.
    100. The Commission also adopts the proposals, with certain 
amendments, in the USF/ICC Transformation FNPRM regarding the types of 
information bidders will be required to disclose in their MF-II auction 
short-form applications. The Commission concludes that, based on its 
experience with MF-I, this approach strikes an appropriate balance in 
ensuring that entities are legally, technically, and financially 
qualified, while at the same time minimizing the burden on applicants 
and Commission staff. Thus, the Commission will require that each 
auction applicant provide information to establish its identity, 
including disclosure of parties with ownership interests, consistent 
with the ownership interest disclosure required in Part 1 of the 
Commission's rules for applicants for spectrum licenses, as well as any 
agreements the applicant may have relating to the support to be sought 
through the auction. Applicants will only be able to make minor 
modifications to their short-form applications. Major amendments, for 
example, changes in an applicant's ownership that constitute an 
assignment or transfer of control, will make the applicant ineligible 
to bid.
    101. Each applicant will be required to disclose and certify its 
ETC status, although, the Commission does not require an applicant to 
obtain an ETC designation prior to bidding in MF-II. With respect to 
eligibility requirements relating to spectrum access, applicants will 
be required to disclose and certify the source of the spectrum they 
plan to use to meet Mobility Fund obligations in the particular area(s) 
for which they plan to bid. Specifically, applicants will be required 
to disclose whether they currently hold a license or lease the 
spectrum, including any necessary renewal expectancy, and whether such 
spectrum access is contingent on obtaining support in an MF-II auction. 
Applicants must have secured any Commission approvals necessary for the 
required spectrum access prior to submitting an auction application. 
Moreover, applicants will be required to certify that they will retain 
their access to the spectrum for at least ten years from the date 
support is authorized. The Commission notes that no commenters 
addressed the Commission's proposed pre-auction application process for 
MF-II, and therefore concludes that the rules it adopted will best 
serve the Commission's ability to hold a fair and efficient auction.

B. Bidding Process

1. Auction Design and Competitive Bidding Mechanisms and Procedures
    102. The Commission adopts, with certain minor non-substantive 
changes, the existing 47 CFR part 1 rules on competitive bidding for 
universal service support contained in Subpart AA. The high-level 
auction rules for competitive bidding procedures for universal service 
support that the Commission adopts set out a range of options and 
mechanisms that the Commission may use for such purposes. The 
Commission takes the opportunity to reorganize the way it articulates 
certain of the relevant rules, without altering the substance, to be 
consistent with the latest developments regarding the Commission's 
approach to competitive bidding in other contexts. Specifically, the 
Commission restructures the rules to present them in terms of auction 
procedures governing bid collection, assignment of winning bids, 
determination of support payment amounts, as well as particular 
mechanisms for conducting the auctions. The reorganized competitive 
bidding procedures rules will facilitate the development of procedures 
for the MF-II auction that are consistent with the universal service 
support technical requirements and policies generally and that address 
the needs of the Commission and interested bidders. The bidding 
procedures for the MF-II auction will include, among other things, 
details pertaining to multiple round bidding and package bidding.
2. Information and Communications
    103. To maximize competition and promote fairness, the Commission 
proposed to retain for MF-II its usual auction policies regarding 
permissible communications during the auction and the public release of 
certain auction-related information. The Commission adopts the proposed 
rules prohibiting auction applicants from communicating with one 
another regarding the substance of their bids or bidding strategies, 
and providing for limited public disclosure of auction-related 
information as appropriate.

C. Auction Cancellation

    104. In the USF/ICC Transformation FNPRM, the Commission proposed, 
consistent with its approach in spectrum auctions and Mobility Fund 
Phase I, that its rules provide discretion to delay, suspend, or cancel 
bidding before or after a reverse auction begins under a variety of 
circumstances, including natural disasters, technical failures, 
administrative necessity, or any

[[Page 15435]]

other reason that affects the fair and efficient conduct of the 
bidding. Based on its experience with spectrum license auctions and 
Mobility Fund Phase I, the Commission concludes that such a rule is 
necessary and adopts it.

VIII. Post-Auction Process and Support

    105. The Commission adopts rules to govern the post-auction process 
and the authorization of support for MF-II. These rules provide the 
basic framework and requirements for winning bidders to demonstrate 
their qualifications for MF-II support. This post-auction process will 
be similar to that used for MF-I support. Shortly after bidding has 
ended, the Bureaus will issue a public notice declaring the auction 
closed, identifying the winning bidders, and establishing details and 
deadlines for next steps, beginning with the long-form application.

A. Long-Form Application

    106. In the USF/ICC Transformation FNPRM, the Commission proposed 
to apply the same long-form application process for MF-II as it adopted 
for MF-I. Under this process, applicants for MF-II support would be 
required to demonstrate in their long-form applications that they are 
legally, technically, and financially qualified to receive MF-II 
support. The Commission concludes that winning bidders for MF-II 
support will be required to comply with the same long-form application 
process it adopted for MF-I, and adopts a rule to govern this process, 
modified from that originally proposed consistent with the Commission's 
stance on ETC designation timing and other rules adopted in the MF-II 
Order. Consistent with the Commission's standard practices, upon close 
of an MF-II auction, the Bureaus will release a public notice, which 
will provide further details regarding the submission and processing of 
the long-form application.
1. Ownership Disclosure
    107. The Commission also adopts the ownership disclosure 
requirements proposed in the USF/ICC Transformation Order for MF-II. 
Specifically, the Commission will require the same Part 1 ownership 
disclosure requirements that already apply in the spectrum license 
context, and therefore adopts the related proposed rule. Pursuant to 
these requirements, an applicant for MF-II support must fully disclose 
its ownership structure as well as information regarding the real 
party- or parties-in-interest of the applicant or application. The 
Commission anticipates that wireless providers that have participated 
in spectrum license auctions will already be familiar with the 
disclosure requirements. These companies will also have ownership 
disclosure reports (in the short-form application or FCC Form 602) on 
file with the Commission, which may simply need to be updated, 
minimizing the reporting burden on winning bidders.
2. ETC Eligibility
    108. Consistent with the eligibility requirements adopted in the 
MF-II Order, the Commission will permit a winning bidder in the MF-II 
auction to obtain its ETC designation after the close of the auction, 
provided that it submits proof of its ETC designation within 180 days 
of the public notice identifying winning bidders.
    109. Before MF-II support is authorized, a winning bidder must 
demonstrate that it has been designated an ETC covering each of the 
geographic areas for which it seeks to be authorized for support and 
that its ETC designation allows it to fully comply with the 
Commission's coverage requirements within the time provided to meet 
this requirement. A winning bidder must submit appropriate 
documentation of its ETC designation in all the areas for which it will 
receive support in its long form application or certify that it will do 
so within 180 days of the public notice identifying winning bidders. 
Appropriate documentation should include the original designation 
order, any relevant modifications (e.g., expansion of service area or 
inclusion of wireless), along with any name-change orders. Each winning 
bidder should connect the designations to the winning bids so that it 
is clear that the bidder has ETC status in each winning area. This 
obligation may be satisfied by providing maps of the recipient's ETC 
designation area, map overlays of the MF-II support areas, and 
narrative explanations explaining the connections between the ETC 
designations and MF-II support areas.
3. Financial and Technical Capability Certification
    110. As in the pre-auction short-form application stage, a long-
form applicant must certify that it is financially and technically 
capable of providing the required coverage and performance levels 
within the specified timeframe in the geographic areas in which it won 
support. An applicant should take care to review its resources and its 
plans before making the required certification and be prepared to 
document its review, if necessary. Thus, the Commission adopts the 
proposed rule regarding financial and technical capability 
certification, as amended.
4. Network Coverage Plan
    111. For winning bids, the applicant must submit a project 
description that describes the network to be built or upgraded; 
identifies the proposed technology; demonstrates that the project is 
technically feasible; discloses the complete project budget; and 
discusses each specific phase of the project (e.g., network design, 
construction, deployment, and maintenance). A complete project 
schedule, including timelines, milestones, and costs, must also be 
provided. Milestones should include the start and end date for network 
design; start and end date for drafting and posting requests for 
proposal (RFPs); start and end date for selecting vendors and 
negotiating contracts; and start date for commencing construction and 
end date for completing construction. Winning bidders may file as 
separate documents a public/redacted version of their project 
descriptions and a confidential version of their project descriptions, 
if necessary, accompanied by a Request for Confidentiality that aligns 
with existing Commission rules. Project descriptions must align project 
schedules with the required buildout milestones.
5. Spectrum Access
    112. The Commission adopts its proposed rule to require applicants 
to provide a description of the spectrum access that the applicant will 
use to meet its obligations in areas for which it is the winning 
bidder, including whether it currently holds a license or leases the 
spectrum, along with any necessary renewal expectancy, and certify that 
the description is accurate and that the applicant will retain such 
access for the entire ten year support term. The description should 
identify the license applicable to the spectrum to be accessed. The 
description of the license must include the type of service (e.g., AWS, 
700 MHz, BRS, PCS, etc.), the particular frequency bands and the call 
sign. This information should be verifiable in the Commission's 
Universal Licensing System. Reference to other Commission data 
repositories should not be necessary, as the complete information 
needed to determine on what licenses the applicant intends to rely 
should be included in the MF-II long-form application. Applications 
will be reviewed to assess the reasonableness of the certification.

[[Page 15436]]

6. Certifications as to Program Requirements
    113. With regard to certifications of program requirements, the 
Commission concludes that an applicant must certify in its long-form 
application that it has the funds available for all project costs that 
exceed the amount of support to be received, and that it will comply 
with all program requirements. These requirements include the public 
interest obligations contained in the Commission's rules and set forth 
in the MF-II Order. Applicants must certify that they will meet the 
applicable deadlines and requirements for demonstrating interim and 
final performance benchmarks set forth in the rules, and that they will 
comply with the MF-II collocation, voice and data roaming, and 
reasonably comparable rate obligations. The Commission will retain its 
authority to look behind recipients' certifications and take action to 
address any violations that develop.
7. Other Information
    114. Any additional information that is required to establish 
whether an applicant is eligible for MF-II support will be announced by 
public notice.
8. Transfers and Assignments
    115. The award of MF-II support is based upon the eligibility and 
performance of the winning bidder. Therefore, a recipient of MF-II 
support that later seeks to transfer control or assign its licenses in 
the winning bid area to another carrier should be aware that, if the 
buyer or assignee carrier is not eligible to receive MF-II funds or is 
uninterested in remaining in the program, the winning bidder will 
remain liable for its winning bid obligations and will be considered to 
have committed a performance default if it can no longer fulfill those 
obligations after completing the transfer or assignment. All assignees 
seeking to receive MF-II support will become subject to the 
eligibility, certification, and disclosure requirements included in the 
MF-II rules.

B. Authorization Requirements and Steps

    116. In the USF/ICC Transformation FNPRM, the Commission proposed 
to apply the same process for authorization of release of awarded funds 
for MF-II support as was adopted in Phase I. The Commission concludes 
that before being authorized for support, a winning bidder must submit 
an irrevocable standby letter of credit (LOC), which shall be 
acceptable in all respects to the Commission. Additionally, winning 
bidders must supply a legal counsel's opinion letter stating that the 
funds secured by the LOC will not be considered to be part of the 
recipient's bankruptcy estate in the event of a bankruptcy proceeding 
under section 541 of the Bankruptcy Code. These safeguards will allow 
us to utilize an LOC to resolve a performance default. Accordingly, the 
following authorization requirements must be satisfied in order for MF-
II support to be authorized.
1. Letters of Credit
    117. In MF-I, the Commission required all winning bidders to obtain 
LOCs ensuring the successful fulfillment of each winning bid and 
protecting the Commission's investment of universal service funds. In 
the CAF-II auction context, the Commission adopted LOC requirements 
with standards that initially cover the first year of support of a 
recipient's winning bid, and that are adjusted annually thereafter, 
reasoning that LOCs were an effective means for fulfilling the 
Commission's role as stewards of public funds.
    118. Consistent with the rules governing MF-I and CAF-II auctions, 
the Commission adopts a rule for MF-II requiring that, prior to the 
authorization of support, all winning bidders for support must provide 
us with an irrevocable standby LOC by a bank that is acceptable to the 
Commission in substantially the same form as the model Letter of Credit 
set forth in the appendix to the MF-II Order, and, in any event, must 
be acceptable in all respects to the Commission. Specifically, the 
Commission adopts requirements for a bank to be acceptable to the 
Commission to issue the LOC that are similar to the requirements 
adopted for MF-I, with the exception of the expansion of the acceptable 
banks noted below.
    119. The Commission concludes that an LOC meeting the requirements 
set out below is neither unreasonably burdensome nor excessively costly 
for a winning bidder to obtain in light of the benefit to the universal 
service program. While obtaining an LOC incurs costs, the Commission 
anticipates that bidders can incorporate these costs when determining 
their bids. As the Commission found in MF-I, and in considering this 
issue in other aspects of the Connect America Fund, companies with 
existing lending relationships often use LOCs in the normal course of 
operating their businesses and, generally, are able to maintain 
multiple forms of financing for varying purposes. Therefore, on 
balance, the Commission concludes that the government's need to 
safeguard the disbursement of these monies outweighs the limited burden 
incurred by winning bidders.
    120. In reaching this conclusion, the Commission carefully weighed 
the comments it received on whether it should require LOCs for MF-II. 
While the concerns expressed by some commenters do not warrant 
abandoning an LOC requirement altogether, they do support the 
Commission's decision to depart from the LOC provisions utilized in MF-
I, and to instead adopt LOC provisions that closely align with the CAF-
II LOC process and MF-II performance requirements. For instance, 
allowing the LOC to decrease over time as a support recipient satisfies 
its minimum coverage and service requirements, as the Commission 
allowed in the CAF-II context, should effectively protect public funds 
under less onerous terms than were applied in the MF-I auction. 
Moreover, the Commission can also incorporate other terms and processes 
adopted in the CAF-II auction context to address the concerns of 
commenters to achieve greater efficiencies in the MF-II LOC 
requirements. The Commission therefore requires an LOC for MF-II 
winning bids that will remain in place until USAC, in conjunction with 
the Commission, verifies that a MF-II winning bidder has met its 
minimum coverage and service requirements at the end of the six-year 
milestone.
    121. Consistent with the approach utilized in CAF-II, the 
Commission will require that the initial value of the LOC to be set to 
at least the amount of authorized MF-II support for the first year. 
Before the winning bidder can receive its next year's MF-II support, it 
must modify, renew, or obtain a new letter of credit to ensure that it 
is valued at a minimum at the total amount of money that has already 
been disbursed plus the amount of money that is going to be provided in 
the next year.
    122. Moreover, similar to the process adopted in CAF-II, the 
Commission will allow a support recipient to modestly reduce its LOC as 
it meets its interim benchmarks. The LOC must be maintained for 100 
percent of the total support amount disbursed plus the amount to be 
disbursed in the next year until USAC, in coordination with the 
Commission, has determined that the recipient has met its interim 
benchmark for deployment to 60 percent of the required coverage area; 
and subject to USAC's consent, the amount of the LOC may decrease to an 
amount equal to 90 percent of the total support amount already 
disbursed plus the amount that will be disbursed in the coming year.

[[Page 15437]]

Once USAC, in coordination with the Commission, has determined that the 
recipient has met its interim benchmark for deployment to 80 percent of 
the required coverage area, and subject to USAC's consent, the amount 
of the LOC may decrease to an amount equal to 80 percent of the total 
support amount already disbursed plus the amount that will be disbursed 
in the coming year. After USAC, in coordination with the Commission, 
has determined that the recipient has met its final benchmark for 
deployment to a minimum of 85 percent of the required coverage area by 
state and at least 75 percent by each census block group or census 
tract in a state included in the LOC, the recipient may relinquish its 
LOC. Recognizing that the risk of a default will lessen as a recipient 
makes progress towards building its network, the Commission finds that 
it is appropriate to modestly reduce the value of the letter of credit 
in an effort to reduce the cost of maintaining a letter of credit as 
the recipient meets certain service milestones. Such a system of modest 
reductions in the value of the LOC aligns with the LOC procedure 
adopted in CAF-II.
    123. These LOC requirements should help to achieve the Commission's 
goal of fiscal responsibility and should protect the disbursement of 
universal service funds while also being responsive to concerns 
expressed in the record that MF-II LOC requirements should not be 
onerous. The reporting and performance requirements that it has adopted 
for MF-II together with these LOC provisions, which are consistent with 
the CAF-II auction LOC requirements previously adopted by the 
Commission, should ensure that in the event of a performance default, 
monies are in place to satisfy a recipient's obligations for failing to 
comply with the terms of support. All MF-II recipients, along with the 
federal government, should bear the responsibilities of safeguarding 
these funds. However, the Commission nonetheless recognizes that there 
may be a need for greater flexibility regarding LOCs for Tribally-owned 
and controlled winning bidders. Thus, if any Tribally-owned and -
controlled MF-II winning bidder is unable to obtain a LOC, it may file 
a petition for a waiver of the LOC requirement. Waiver applicants must 
show, with evidence acceptable to the Commission, that the Tribally-
owned and -controlled winning bidder is unable to obtain a LOC.
    124. In addition to providing greater flexibility on the amount of 
support the LOC will cover, the Commission concludes that there are 
additional specific measures it can take to provide MF-II recipients 
greater flexibility in obtaining their LOCs. For instance, to reduce 
the number of LOCs that a winning bidder may need, the Commission will 
allow winning bidders to provide a single LOC covering all its winning 
bids within a single state. The Commission therefore directs the 
Bureaus to establish a reasonable means to permit a winning bidder to 
provide a single LOC that covers all its winning bids within a single 
state in the amount specified in the MF-II Order, if the recipient so 
desires. Moreover, consistent with the Commission's decision in the 
CAF-II context, if a winning bidder chooses to obtain a letter of 
credit for each of its bids that are located in a state and defaults 
after its failure to pay the recoupment calculation for non-compliance, 
the Bureaus will authorize a draw on all of the letters of credit 
covering all of the bids in that state.
    125. Furthermore, consistent with the acceptable bank standards 
recently adopted for the CAF-II auction process, the Commission amends 
and expands the definition of an ``acceptable bank'' for the purposes 
of MF-II LOC requirements. By expanding the list of banks eligible to 
provide LOCs, the Commission seeks to lower barriers for entities, 
particularly small and rural businesses that might otherwise face 
obstacles in obtaining an LOC from a smaller pool of banks, while still 
ensuring that there are adequate considerations given to the soundness 
of the bank issuing a letter of credit.
    126. Accordingly, the Commission will require that, for U.S. banks, 
the bank must be insured by the Federal Deposit Insurance Corporation 
(FDIC) and have a Weiss bank safety rating of B- or higher. This 
modification to the definition of acceptable banks expands the number 
of eligible U.S. banks from fewer than 70 banks, as were allowed in MF-
I, to approximately 3,600 banks for MF-II winning bidders. These 
provisions together should help to ensure that LOCs are secured by 
financially sound institutions. Moreover, unlike credit ratings 
obtained by banks in the commercial markets, Weiss rates all banks that 
report sufficient data for Weiss to analyze and, more importantly, is a 
subscription service and is not compensated by the banks that it rates. 
Weiss therefore offers an independent and objective perspective of the 
safety of the banks it rates based on capitalization, asset quality, 
profitability, liquidity, and stability indexes. Requiring that the 
banks have a Weiss rating of at least B- ensures that the bank has a 
rating that at a minimum demonstrates that the bank offers good 
financial security and has the resources to deal with a variety of 
adverse economic conditions. And requiring that U.S. issuing banks also 
be FDIC-insured has the added benefit of relying on the oversight of 
the FDIC and its protections. The Commission therefore concludes that 
this more expansive definition of acceptable banks achieves an 
appropriate balance between reducing burdens for winning bidders, 
particularly small and rural entities, while still protecting the 
public funds.
    127. For similar reasons, the Commission will also permit entities 
to obtain letters of credit from CoBank, ACB (CoBank) or the National 
Rural Utilities Cooperative Finance Corporation (CFC) as long as each 
of these two entities maintains assets that place them among the top-
100 U.S. banks in terms of the amount of assets, and they maintain a 
credit rating of BBB- or better from Standard & Poor's (or the 
equivalent from a nationally-recognized credit rating agency). The 
entity's assets will be determined on the basis of total assets as of 
the end of the calendar year immediately preceding the issuance of the 
letter of credit, determined on a U.S. dollar equivalent basis as of 
such date. The Commission has recognized that these entities are not 
traditional banks in that they do not accept deposits from members of 
the public. Thus, these entities do not have a Weiss bank safety rating 
and are not FDIC-insured. However, CFC and CoBank can be considered 
banks in the context of the Commission's program because they use their 
capital resources to make loans. Accordingly, the Commission finds 
these two entities to be sufficiently comparable to commercial 
depository banks to issue letters of credit in the MF-II program.
    128. CoBank has met the more stringent issuing bank eligibility 
requirements for MF-I and rural broadband experiments, and has issued a 
number of letters of credit for these programs. Although CoBank is not 
FDIC-insured, it is insured by the Farm Credit System Insurance 
Corporation, which the Commission found provides protections that are 
equivalent to those indicated by holding FDIC-insured deposits. As long 
as CoBank retains its standing with assets equivalent to a top-100 U.S. 
bank and a qualified credit rating, the Commission sees no reason to 
depart from its conclusion not to exclude CoBank from eligibility 
simply because CoBank is not rated by Weiss.
    129. CFC's assets also make it comparable to commercial depository 
banks that are in the top 100 based on

[[Page 15438]]

total assets, and it has a credit rating from Standard & Poor's of A. 
But because CFC is not a depository institution and it is not part of 
the Farm Credit System, it is not FDIC or FCSIC-insured. Nevertheless, 
CFC is uniquely situated and should be made eligible to the extent it 
retains its standing with assets equivalent to a top-100 U.S. bank and 
a qualified credit rating. CFC is ``owned by, and exclusively serves'' 
rural utility providers, and CFC manages and funds its affiliate, the 
Rural Telephone Finance Cooperative (RTFC), which lends primarily to 
telecommunications providers and affiliates across the nation. As the 
largest non-governmental lender for rural utilities, CFC has 
specialized institutional knowledge regarding the types of entities 
expected to participate in universal service competitive bidding to 
serve fixed locations and has demonstrated that it has significant and 
long-term experience in financing the deployment of rural networks. 
This unique and long-standing role in rural network deployment coupled 
with CFC's qualifications, provides the Commission with sufficient 
assurance that CFC has the qualifications to assess the financial 
health of winning bidders and honor the LOCs that it issues, without 
the need for the independent oversight of CFC's safety and soundness 
that would be offered by FDIC or FCSIC insurance or a Weiss safety 
rating. The Commission concludes that, based on the totality of these 
circumstances, CFC is eligible to issue LOCs despite the fact that it 
does not meet the FDIC and Weiss rating requirements. The decision to 
make CFC an eligible issuer is conditioned on CFC notifying the 
Commission of any significant change to any of the showings it has made 
to the Commission.
    130. The Commission further notes that it is not adopting 
alternative eligibility requirements that would permit banks that are 
not FDIC or FCSIC-insured or that do not have a Weiss bank safety 
rating to issue letters of credit. Instead, the Commission concludes 
that, for purposes of providing security for winning bidders, an LOC 
from CFC provides assurances that are equivalent to those provided by 
banks meeting the Commission's general criteria, due to CFC's uniquely 
extensive experience in financing rural networks, its significant 
participation in other federal government programs, and its long-
standing relationship with many entities that may become MF-II winning 
bidders.
    131. If a recipient seeks to obtain its LOC from a non-U.S. bank, 
the Commission requires that the bank be among the 100 largest non-U.S. 
banks in the world (determined on the basis of total assets as of the 
end of the calendar year immediately preceding the issuance of the 
letter of credit, determined on a U.S. dollar equivalent basis as of 
such date) and maintain a credit rating of BBB- or better from Standard 
& Poor's (or the equivalent from a nationally-recognized credit rating 
agency). The bank must also have a branch in the District of Columbia 
or such other branch office as agreed to by the Commission and must 
issue the letter of credit payable in United States dollars.
    132. As in the process permitted in the CAF-II rules and also 
followed in MF-I, if the winning bidder is not prepared to present its 
LOC at the time of the long-form application filing, the Commission 
will allow the submission of a commitment letter from the bank issuing 
the LOC in the long-form application filing. A winning bidder will, 
however, be required to have its LOC in place and approved by USAC 
before it is authorized to receive MF-II support.
2. Opinion Letters
    133. Consistent with the rules for MF-I and CAF-II, at the time a 
winning bidder for MF-II support submits its LOC, it also will be 
required to provide an opinion letter from legal counsel clearly 
stating, subject only to customary assumptions, limitations and 
qualifications, that, in a proceeding under the Bankruptcy Code, the 
bankruptcy court would not treat the LOC or proceeds of the LOC as 
property of the winning bidder's bankruptcy estate, or the bankruptcy 
estate of any other bidder-related entity requesting issuance of the 
LOC, under 11 U.S.C. 541. A winning bidder will be required to have its 
opinion letter in place before it is authorized to receive MF-II 
support and before any support is disbursed.

C. Disbursements

    134. Consistent with the process adopted in the CAF-II auction 
context, the Commission concludes that MF-II support should be 
disbursed in monthly installments over the course of the ten-year 
support term. For MF-II, support recipients will have made winning bids 
to provide service at established performance requirements to at least 
85 percent of the eligible square miles across all winning bid areas 
for which they win MF-II support in a state by the final milestone, to 
provide service to at least 75 percent of every census block group or 
census tract in a state (depending on minimum bidding unit), and to 
continue to provide service throughout the ten-year support term. 
During the ten-year support term, provided that the winning bidder 
files acceptable, complete, and timely annual and milestone reports, 
fulfills the milestone coverage requirements, and does not otherwise 
have a performance default, the recipient will receive monthly 
disbursements of 100 percent of the total winning bid(s).
    135. This approach provides MF-II recipients with reliable and 
predictable support payments that conform to a variety of business 
cycles and correspond to suggestions in the record. The Commission is 
mindful that some carriers might incur higher up-front project costs 
prior to their ability to commence the provision of service to the 
targeted area because infrastructure expansion projects might require 
larger payments in the earlier years of the disbursement term. The 
Commission concludes that MF-II monthly disbursements will best 
accommodate carriers' project schedules or ongoing expenses of 
providing service in a manner that is efficient from an administrative 
prospective. Moreover, because the Commission decides that support 
payments should be regular and predictable over the entire course of 
the ten-year term for all recipients, and because the Commission seeks 
to not exceed the budget in any one year of the term, recipients will 
not be able to receive accelerated payment of their support for 
attaining the interim milestones early. This determination aligns with 
the decision to reject accelerated payments in CAF-II as well.
    136. All MF-II recipients have a continuing obligation to maintain 
the accuracy and completeness of the information provided in their 
long-form applications and their annual and milestone reports. All 
winning bidders shall provide information about any substantial change 
that may be of decisional significance regarding their eligibility for 
MF-II support and compliance with MF-II requirements.
    137. The Commission reserves the right for USAC to cease monthly 
disbursements immediately should the winning bidder have a performance 
default, or if it fails to comply with any of the terms or conditions 
for the receipt of the support under any of the Commission's rules. In 
addition, the Commission directs the Bureaus and the Office of Managing 
Director to postpone disbursements and/or the incurrence of additional 
obligations, to preclude an ADA violation if the USF's current 
exemption expires or is repealed.

[[Page 15439]]

IX. Accountability and Oversight

    138. As the Commission recognized from the outset of this 
proceeding, the monies used to achieve the Mobility Fund goals come 
from American consumers and businesses, and therefore it is critical 
for the success of the program that support recipients meet their 
obligations. This task requires ongoing vigilance and oversight by the 
Commission together with the Fund administrator, USAC. As the 
Commission noted in the CAF-II proceeding, reporting obligations serve 
the public interest by enhancing the ability to monitor the use of 
Connect America Fund support and ensure its use for intended purposes.
    139. In the USF/ICC Transformation FNPRM, the Commission proposed 
applying the same general rules for accountability and oversight to MF-
II as were applied to recipients of MF-I support, including reporting, 
audit, and record retention requirements. The reporting requirements 
the Commission adopted for MF-I, and adopts here for MF-II, differ in 
certain respects from those adopted for CAF and CAF-II due to the 
specific requirements of the provision of mobile service. Therefore, 
the Commission excluded MF-I from the application of 47 CFR 54.313(k), 
which applies generally to recipients of high cost support, and now 
also excludes that provision for MF-II support recipients.
    140. The Commission also proposed that MF-II support recipients 
should be required to include in their annual reports the same 
information required of MF-I support recipients. The Commission adopts 
certification and reporting requirements relating to the performance 
obligations adopted in the MF-II Order. It also addresses consequences 
for failure to meet program reporting rules and discusses its record 
retention rules.

A. Mobile Reporting, Mobility Fund Phase II Annual Reports, and 
Mobility Fund Phase II Milestone Reports

    141. Annual Reports. The Commission adopts an annual reporting 
requirement that will enable the Commission and USAC to monitor the 
ongoing progress and performance of all MF-II recipients, similar to 
the annual reporting obligations of all other recipients of federal 
high-cost universal service support. Winning bidders of MF-II support 
will be subject to the annual reporting requirement, and recipients 
will be required to file their reports each year following the year in 
which the auction closes by July 1, including all the certifications 
required under the MF-II rules, and in which the recipient will update 
information, as required for the following year.
    142. Milestone Reports. In order to ensure that ongoing payment of 
MF-II support is warranted, and in alignment with the similar progress 
reporting system instituted for CAF-II, the Commission will require 
recipients to file a Milestone Report on or before its third, fourth, 
fifth, and sixth year performance deadline. These Milestone Reports 
will be where MF-II recipients report the data that demonstrates that 
they have met their interim benchmarks for deployment and their minimum 
final deployment requirement at the end of the construction term 
necessary to support the disbursements of MF-II funds. Reports should 
be filed via the portal that USAC is creating to receive filings by 
universal service support recipients. The Commission directs the 
Bureaus to define more precisely the content and format of the 
information, including substantiation that recipients are required to 
include in their Milestone Reports, such that it is consistent with the 
evidence that will be required in the challenge process.
    143. All recipients of MF-II support will also be subject generally 
to the same audit requirements as recipients of CAF-II support and all 
other high-cost support.
    144. Moreover, in line with the procedures adopted in CAF-II to 
address missed filing deadlines, the Commission adopts a rule to reduce 
the support for recipients that miss reporting, certification, and 
milestone filing deadlines. The Commission will impose a minimum 
reduction of seven days of total statewide support for a winning bid in 
any state for which a filing deadline is missed, given the importance 
of recipients meeting filing deadlines. In addition to the reduction of 
the initial seven days of support, support will be reduced further 
state-wide on a pro-rata daily basis until the MF-II recipient files 
the required report or certification. Reducing support on a day-by-day 
basis plus an additional seven-day reduction is an appropriate measure 
to create incentives for MF-II recipients to make their filings as soon 
as they have determined that they have missed the applicable deadlines.
    145. The Commission recognizes that despite its best efforts, a 
recipient may miss a deadline due to an administrative oversight but 
still file within a few days of the deadline. For a late filer, the 
Commission finds that it is appropriate to provide a one-time grace 
period of three days so that a recipient that quickly rectifies its 
error within three days of the deadline will not be subject to the 
seven-day minimum loss of support. The Commission directs USAC to send 
a letter to such a recipient notifying it that its filing was late but 
cured within the grace period. If the recipient again files any filing 
late, the grace period will not be available. Repeated mistakes, even 
inadvertent, are indicative of a lack of adequate policies and 
procedures to ensure timely filing. If a recipient misses a filing 
deadline more than once due to its inadvertence, the support reductions 
that the Commission adopts should provide an incentive to recipients to 
revise their procedures to ensure that such inadvertence does not 
become a pattern.
    146. Maintaining the Accuracy of Filings. To additionally safeguard 
the government's monthly disbursement of support, the Commission will 
require recipients to maintain the accuracy and completeness of the 
information they furnish in their long-form applications and their 
annual and milestone reports. Accordingly, the Commission will require 
recipients to update their annual reports and milestone reports to 
provide information about any substantial change that may be of 
decisional significance regarding their eligibility for MF-II support 
and compliance with MF-II requirements. Such notification of a 
substantial change, including any reduction in the percentage of 
eligible square miles being served or any failure to comply with any of 
the MF-II requirements, shall be submitted within 10 business days 
after the reportable event occurs, as is also required in CAF-II. A 
recipient that is required to provide such updated or supplemental 
information prior to having filed its first annual report, may 
nevertheless comply with the 10-day filing requirement by submitting 
that information to the entities listed in 47 CFR 54.1019(c). Moreover, 
while the Commission expects that it will be a rare occurrence, if a 
support recipient drops below the level of service to which it has 
certified in a milestone report or an annual report during the six-year 
deployment period, it will be subject to the provisions set out in the 
MF-II Order for non-compliance.

B. Defaults

    147. In MF-I, the Commission adopted two types of default payment 
obligations for MF-I winning bidders: An auction default payment owed 
by winning bidders if they failed to satisfy their auction obligations 
prior to being authorized to receive support, and a performance default 
payment owed by winning bidders authorized for support who subsequently 
failed to meet their

[[Page 15440]]

public interest obligations or other terms and conditions of MF-I 
support. As summarized below, for ease of administration, the 
Commission modifies its proposal and adopts default rules for MF-II 
that more closely parallel the CAF-II rules.
1. Forfeiture in the Event of an Auction Default
    148. MF-I winning bidders, like all winning bidders in Commission 
spectrum auctions, had a binding obligation to file a post-auction 
long-form application--by the applicable deadline and consistent with 
other requirements of the long-form application process--and failure to 
do so constituted an auction default. For MF-II, the Commission 
proposed that a winning bidder for MF-II support would be subject to 
the same auction default payment obligations adopted for winning 
bidders of MF-I support, including a default on a winning bid before 
authorizations, the failure to timely file a long-form application, 
being found ineligible or unqualified to be a recipient of MF-II 
support, or if a long-form application is dismissed for any reason 
after the close of the auction. For CAF-II, the Commission concluded 
that any entity that files a short-form application to participate in 
the CAF-II competitive bidding process will be subject to a forfeiture 
in the event of a default before it is authorized to begin receiving 
support.
    149. The Commission concludes that it will align the MF-II rules 
with its approach in CAF-II and adopts a rule that subjects a MF-II 
winning bidder to a forfeiture payment if it defaults on its bid(s) 
before it is authorized to begin receiving support. This forfeiture 
payment shall satisfy the requirements of 47 CFR 1.21004(b) with 
respect to default payments. The Commission holds that such an approach 
will ensure that each violation has a relationship to the area affected 
by the auction default, but will not be unduly punitive. Moreover, such 
an approach will also ensure that the total forfeiture for a default is 
generally proportionate to the overall scope of the winning bidder's 
bid. The Commission will determine the minimum geographic unit to be 
census block groups or census tracts in the pre-auction process. A 
winning bidder that fails to become authorized to receive MF-II support 
will then have violated the Commission's rules for each of the census 
block groups or census tracts included in its defaulted bid. If a 
winning bidder defaults on a bid that includes 10 census block groups/
census tracts, that entity could be subject to a base forfeiture of 
$30,000 (10 census block groups/census tracts multiplied by the base 
forfeiture of $3,000).
    150. An entity will be considered to have an auction default and 
will be subject to forfeiture if it fails to timely file a long-form 
application or meet the document submission deadlines outlined in the 
MF-II Order or is found ineligible or unqualified to receive Phase II 
support by the Bureaus, or otherwise defaults on its bid or is 
disqualified for any reason prior to the authorization of support. 
Specifically, as the Commission found in the CAF-II context, it is 
reasonable to subject all bidders to the same $3,000 base forfeiture 
per violation, subject to adjustment based on the criteria set forth in 
the Commission's forfeiture guidelines. A winning bidder will be 
subject to the base forfeiture for each separate violation of the 
Commission's rules.
    151. For MF-II competitive bidding purposes, the Commission defines 
a violation as any form of default with respect to each geographic unit 
subject to a bid. However, to ensure that the amount of the base 
forfeiture is not disproportionate to the amount of an entity's bid, 
the Commission limits the total base forfeiture that could be owed by a 
winning bidder to five percent of its total bid amount for the entire 
ten-year support term. This would occur in situations where the dollar 
amount associated with the bid is low. As an example, assume Bidder A 
bids to serve 100 census block groups (CBGs) for $100,000 over the ten-
year support term. The Commission would impose a base forfeiture of 
$5,000 (5 percent of $100,000) because otherwise the base forfeiture 
would be $300,000 ($3,000 x 100 CBGs), which is three times the entire 
bid amount. In contrast, if Bidder B bids to serve 100 census block 
groups for $7,000,000 over the support term, the Commission would 
impose a base forfeiture of $300,000 ($3,000 x 100 CBGs), which is 4.3 
percent of the total bid.
    152. By adopting such a forfeiture, the Commission impresses upon 
recipients the importance of being prepared to meet all requirements 
for the post-selection review process, and emphasizes the requirement 
that the recipients conduct a due diligence review to ensure that they 
are qualified to participate in the MF-II competitive bidding process 
and meet its terms and conditions.
    153. Failures by MF-II bidders to fulfill their auction obligations 
will undermine the stability and predictability of the auction process, 
and impose costs on the Commission and higher support costs for USF. 
The Commission therefore finds that subjecting entities to a forfeiture 
for an auction default is appropriate to ensure the integrity of the 
auction process and to safeguard against costs to the Commission and 
the USF. Thus, as a condition of participating in an MF-II auction, 
entities acknowledge that they are subject to a forfeiture in the event 
of an auction default.
    154. The Commission distinguishes between an MF-II winning bidder 
that is subject to an auction default, and a winning bidder whose long-
form application is approved but subsequently has a performance default 
or otherwise fails to comply with the terms and conditions of receiving 
MF-II support.
2. Measures for Non-Compliance
    155. In the USF/ICC Transformation FNPRM, the Commission proposed 
that a recipient of MF-II support would be subject to the same 
performance default payment provisions as recipients of MF-I support. 
For MF-I, the Commission required that in the event of a default, a 
recipient would be required to repay all the support that it had 
received plus an additional performance default of 10 percent of total 
support for which the recipient is eligible.
    156. In CAF-II, the Commission adopted a framework for reporting 
and support reductions for all CAF-II recipients that fail to meet the 
requisite service milestones. Specifically, the framework was adopted 
to calibrate support reductions to the extent of an ETC's non-
compliance with service milestones. The Commission subsequently 
extended that framework to rate-of-return carriers.
    157. Given the policy goals underlying MF-II support, the public 
interest benefit of establishing procedures for MF-II that are 
substantially the same as those adopted for CAF-II, and the record 
gathered on this issue, the Commission concludes that it should adopt a 
more measured approach to recouping payment in the event of default 
than the Commission employed in the MF-I auction. Accordingly, the 
Commission adopts a process by which the Wireline Competition Bureau or 
the Wireless Telecommunications Bureau will authorize USAC to draw on 
the LOC(s) to recover all the support that has been disbursed in a 
state in the event that the MF-II recipient does not meet the relevant 
service milestones and does not cure its compliance gap pursuant to the 
steps outlined below. For CAF-II, the Commission determined that USAC 
would recover support from ETCs

[[Page 15441]]

associated with their compliance gap in three separate circumstances. 
The Commission will adopt a corresponding approach for MF-II 
recipients. If, after six months, the ETC fails to repay in full, 
either the Wireline Competition Bureau or the Wireless 
Telecommunications Bureau will issue a letter authorizing USAC to draw 
on the letter of credit to recover 100 percent of the support that has 
been disbursed to the ETC within the state.
    158. First, for interim milestones, if the ETC has a compliance gap 
of 50 percent or more of the eligible square miles that the ETC is 
required to have covered by the relevant interim milestone (i.e., Tier 
4 status) at the state level, USAC will withhold 50 percent of the 
ETC's monthly support for that state, and the ETC will be required to 
file quarterly reports. If, after having 50 percent of support withheld 
for six months, the ETC has not reported that it has a compliance gap 
of less than 50 percent at the state level (i.e., the ETC is eligible 
for Tier 3 or lower or is in compliance), USAC will withhold 100 
percent of the ETC's support for the state and will commence recovery 
action for a percentage of support that is equal to the ETC's 
compliance gap plus 10 percent of the ETC's support that has been paid 
to that point. At this point, this ETC will have six months to pay back 
the amount of support that USAC seeks to recover. An ETC is encouraged 
to continue building out its MF-II projects during and after any 
recovery of funds by USAC. If, at any point during the six-year period 
for deployment, the ETC reports that it is eligible for Tier 1 status, 
and USAC is able to substantiate that report, the ETC will have its 
support fully restored including any support that had been withheld, 
USAC will repay any funds that were recovered, and the ETC will move to 
Tier 1 status. If, at the end of six months the ETC has not fully paid 
back the support, the Wireline Competition Bureau or the Wireless 
Telecommunications Bureau will issue a letter to that effect and USAC 
will draw on the letter of credit to recover all of the support that 
has been disbursed to the ETC. Consistent with CAF-II, the Commission 
will review compliance with build-out milestones on a state-wide basis. 
Accordingly, if a winning bidder chooses to obtain multiple letters of 
credit for separate bids that are located in a state and defaults, 
either of the Bureaus will authorize a draw on all the letters of 
credit covering all the bids in that state.
    159. Second, if an ETC misses the final milestone(s), it must 
identify by what percentage the milestone has been missed at the state 
level and/or any of the census block group(s) or census tract(s) in the 
state. The ETC will then have 12 months from that date to come into 
full compliance with both of those milestones. If it does not come into 
full compliance within 12 months because it fails to meet the 85 
percent benchmark (even if it meets the 75 percent benchmark for some 
or all the census block group(s) or census tract(s)), the Wireline 
Competition Bureau or the Wireless Telecommunications Bureau will issue 
a letter, and USAC will recover disbursement(s) in an amount of support 
that is equal to 1.89 multiplied by the average amount of support the 
ETC received per eligible square mile in the state over the six-year 
period multiplied by the number of square miles unserved in the ETC's 
winning areas in the state that would be required to meet the 85 
percent benchmark, plus 10 percent of the ETC's total MF-II support 
received in the state over the six-year period for deployment. It is 
reasonable to assume that many of the areas left unserved would have 
higher than the average cost per area of the winning bid. Therefore, a 
higher amount per area than the average is appropriate. Moreover, the 
Commission wants to provide more incentive to carriers to complete the 
build out for their winning bid. Thus, the Commission finds that the 
administrative simplicity and predictability of using one factor for 
all bidders outweighs the precision that would come from applying a 
factor specific to each winning bidder and area. This multiplier was 
adopted by the Commission for CAF-II.
    160. After the ETC has paid the calculated recovery amount for 
failure to comply with the final deployment milestone, the Bureaus will 
calculate a reduced support payment for the remaining support term 
based on the percentage of deployment coverage completed. The reduced 
ongoing annual support amount will be the total of the ETC's original 
winning bid amounts for annual support in the state multiplied by the 
sum of the actual deployment percentage plus 15 percent (i.e., the 
difference between 100 percent coverage and the required 85 percent 
minimum coverage), or (annual support) * (percentage covered + 0.15).
    161. If at the end of six months the ETC has not fully paid back 
the support for missing the relevant 85 percent benchmark, the ETC 
shall be liable for repayment of all the support that has been 
disbursed to the ETC for that state, the Wireline Competition Bureau or 
the Wireless Telecommunications Bureau will issue a letter to that 
effect, and USAC will draw on the LOC(s) to recover all the support 
that has been disbursed to the ETC for that state.
    162. A similar approach will apply if the ETC meets the 85 percent 
statewide benchmark but misses the 75 percent benchmark(s) for any 
census block group(s) or census tract(s) in the state at the final 
milestone and the ETC does not come into full compliance by meeting the 
75 percent benchmark within 12 months. The Wireline Competition Bureau 
or the Wireless Telecommunications Bureau will issue a letter for any 
such census block group(s) or census tract(s), and USAC will recover 
disbursement(s) in an amount of support that is equal to 1.89 
multiplied by the average amount of support the ETC received per 
eligible square mile in the census block group(s) or census tract(s) in 
the state over the six-year period multiplied by the number of square 
miles unserved in each of the ETC's winning census block group(s) or 
census tract(s) in the state that would be required to meet their 
respective 75 percent benchmarks, plus 10 percent of the ETC's total 
MF-II support received in the relevant census block group(s) or census 
tract(s) over the six-year period for deployment. At this point, the 
ETC will have six months to repay the support USAC seeks to recover. 
After the ETC has paid the calculated recovery amount, the Bureaus will 
calculate a reduced support payment for the remaining support term. The 
reduced ongoing annual support amount will be the ETC's original 
winning bid amount for annual support in any such census block group or 
census tract, multiplied by the sum of the actual deployment percentage 
plus 25 percent (i.e., the difference between 100 percent coverage and 
the required 75 percent minimum coverage), or (annual support) * 
(percentage covered + 0.25). If at the end of six months the ETC has 
not fully paid back the support for missing the relevant 75 percent 
benchmark(s), the ETC shall be liable for repayment of all the support 
that has been disbursed to the ETC for that state, the Wireline 
Competition Bureau or the Wireless Telecommunications Bureau will issue 
a letter to that effect, and USAC will draw on the LOC(s) to recover 
all the support that has been disbursed to the ETC for that state. In 
the event that USAC draws on a letter of credit to recover all the 
support that has been disbursed to the ETC for a state, the ETC's 
participation in MF-II in that state will immediately end and no 
further support will be paid.
    163. Third, after compliance with the final build-out milestones 
has been verified and the ETC closes its letter of

[[Page 15442]]

credit, if at any point during the remainder of the 10-year term of 
support it is determined that the ETC does not have sufficient evidence 
to demonstrate that it is offering the requisite service to the 
required percentage of square miles by census block group or census 
tract, or state, USAC will withhold support for a period not to exceed 
six months until the ETC demonstrates that it is again providing the 
requisite service to the required percentage of square miles. When the 
ETC's demonstration of coverage has been verified by USAC, USAC will 
pay any withheld support and resume ongoing disbursements. If the ETC 
cannot provide a verifiable demonstration of coverage within the 
permitted six-month period, USAC will recover an amount of support that 
is equal to 1.89 times the average amount of support per square mile 
received in the winning bid area over the six-year deployment period 
for the relevant number of square miles for which the ETC has failed to 
produce sufficient evidence, plus 10 percent of the ETC's total support 
received in that winning bid area over the six-year deployment time 
period, and will reduce ongoing annual support as described in the MF-
II Order. Because the ETC's build-out will have already been verified 
before it may close its letter of credit, the Commission does not find 
it necessary to require that the ETC continue to keep its letter of 
credit open in the event that the ETC does not repay the Commission 
after it is found to be lacking evidence of continued service 
deployment. Instead, if the ETC does not repay the Commission after a 
six-month period permitted for repayment, it may be subject to 
additional non-compliance measures, including the reduction of support 
payments for the remaining support term as discussed in the MF-II 
Order, and forfeitures.
    164. Drawing on the letter of credit in the event that the ETC 
fails to repay the support that USAC is instructed to recover will 
ensure that the Commission will be able to recover the support in the 
event that the ETC is unable to pay. Through the support reduction 
framework the Commission adopted for CAF-II, the ETC will have a number 
of opportunities to cure before the Commission will seek to recover the 
support that is associated with the compliance gap. And the Commission 
will only recover 100 percent of the support that has been disbursed 
via the LOC in those cases where the ETC is unable to repay the support 
associated with its compliance gap. Because an ETC that is unable to 
repay the support is also unlikely to be able to meet its obligations 
to use the support disbursed to offer service meeting the Commission's 
requirements, recovering 100 percent of the support will allow the 
Commission to re-award the support through an alternative mechanism to 
an ETC that will be able to meet its obligations. This decision is 
consistent with the conclusions reached by the Commission in the CAF II 
context, that if an entity fails to repay the support amount associated 
with its compliance gap, the risk becomes greater that the entity will 
be unable to continue to serve its customers or may go into bankruptcy, 
and thus it is necessary to ensure that the Commission can recover the 
entire amount of support that it has disbursed.
    165. If an ETC has a performance default for reasons other than 
compliance with its construction milestones, such as the failure to 
maintain its spectrum access, its LOC, or its ETC eligibility, these 
performance defaults are incurable. The ETC must report its incurable 
performance default within 10 days to the Commission, USAC will cease 
disbursing MF-II support payments in the following month for the 
affected area (whether one or more census block groups or a state), the 
ETC's participation in MF-II in the affected census block group(s) or 
census tract(s) will immediately end, and the amount of support subject 
to recoupment for the ETC's non-compliance will then be calculated 
based upon the final six-year milestone for either the relevant census 
block group(s) or census tract(s) or the entire state, depending upon 
the circumstances of the performance default. Specifically, the 
Wireline Competition Bureau or the Wireless Telecommunications Bureau 
will issue a letter for any census block group(s) or census tract(s) or 
the entire state in which there has been an incurable performance 
default. If the incurable performance default is only for some of the 
ETC's census block group(s) or census tract(s), USAC will recover 
disbursement(s) in an amount of support that is equal to 1.89 
multiplied by the average amount of support the ETC received per 
eligible square mile in the census block group(s) or census tract(s) in 
the state over the time period it has received MF-II disbursements 
multiplied by the number of square miles unserved in each of the ETC's 
winning census block group(s) or census tract(s) in the state that 
would be required to meet its respective 75 percent benchmarks, plus 10 
percent of the ETC's total MF-II support received in the relevant 
census block group(s) or census tract(s) over the relevant period for 
deployment. If the incurable performance default is for an entire 
state, USAC will recover disbursement(s) in an amount of support that 
is equal to 1.89 multiplied by the average amount of support the ETC 
received per eligible square mile in the state over the time period it 
has received MF-II disbursements multiplied by the number of square 
miles unserved in the ETC's winning areas in the state that would be 
required to meet the 85 percent benchmark, plus 10 percent of the ETC's 
total MF-II support received in the state over the relevant period for 
deployment. At this point, the ETC will have six months to repay the 
support USAC seeks to recover. If at the end of six months the ETC has 
not fully paid back the support for missing the relevant benchmark, the 
ETC shall be liable for repayment of all the support that has been 
disbursed to the ETC for that state, the Wireline Competition Bureau or 
the Wireless Telecommunications Bureau will issue a letter to that 
effect, and USAC will draw on the LOC(s) to recover all of the support 
that has been disbursed to the ETC for that state. After the ETC has 
paid the calculated recovery amount for an incurable performance 
default in a portion of a state, the Bureaus will calculate a reduced 
support payment for the remaining support term as set out in the MF-II 
Order.
    166. Finally, the Commission notes that MF-II recipients may also 
be subject to other sanctions for non-compliance with the terms and 
conditions of high-cost funding, including, but not limited to 
potential revocation of ETC designation and suspension or debarment.

C. Record Retention

    167. In the USF/ICC Transformation FNPRM, the Commission proposed 
that a recipient of MF-II support would be subject to the same rules 
for accountability and oversight (including reporting, audit, and 
record retention requirements) that apply to all recipients of CAF 
support. The Commission also proposed that recipients of MF-II support 
be required to include in their annual reports the same types of 
additional information that are required of recipients of MF-I support. 
In MF-I, the Commission adopted requirements that the record retention 
requirements for recipients of support apply to all agents of the 
recipient, and any documentation prepared for or in connection with the 
recipient's MF-I support. The Commission also adopted revised 
requirements that extend the record

[[Page 15443]]

retention period to 10 years for all recipients of high-cost and CAF 
support, including recipients of Mobility Fund support. The retention 
period runs from the date of the receipt of the final disbursement of 
Mobility Fund funds. The Commission concludes that MF-II recipients are 
subject to the same accountability and oversight requirements in 47 CFR 
54.320, including the same audit and record retention requirements as 
all other recipients of high-cost support.

X. Procedural Matters

A. Final Regulatory Flexibility Analysis

    168. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), an Initial Regulatory Flexibility Analysis (IRFA) was 
incorporated in the USF/ICC Transformation FNPRM and the 2014 CAF 
Further Notice. The Commission sought written public comment on the 
proposals in the USF/ICC Transformation FNPRM and 2014 CAF Further 
Notice, including comment on the IRFAs. The Commission did not receive 
any comments in response to these IRFAs. The Final Regulatory 
Flexibility Analysis (FRFA) in the MF-II Order conforms to the RFA.
1. Need for, and Objectives of, the Report and Order
    169. Despite the growing expansion of 4G Long Term Evolution (LTE) 
service, rural and high-cost areas of our country have been left 
behind. At the same time, the Universal Service Fund spends $25 million 
a month (a conservative estimate) distributing legacy subsidies to 
mobile carriers that compete with private capital and millions more 
distributing duplicative subsidies to multiple carriers in the same 
area.
    170. In the MF-II Order, the Commission adopts the framework for 
moving forward with the Mobility Fund Phase II (MF-II) and Tribal 
Mobility Fund Phase II (Tribal MF-II), which will allocate up to $4.53 
billion over the next decade to advance the deployment of 4G LTE 
service to areas that are so costly that the private sector has not yet 
deployed there and to preserve such service where it might not 
otherwise exist. The funding for this effort will come from the 
redirection of legacy subsidies and be distributed using a market-
based, multi-round reverse auction and will come with defined, concrete 
compliance requirements so that rural consumers will be adequately 
served by the mobile carriers receiving universal service support.

B. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFA

    171. There were no comments filed that specifically addressed the 
rules and policies proposed in the USF/ICC Transformation FNPRM IRFA or 
the 2014 CAF Further Notice IRFA.

C. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration

    172. Pursuant to the Small Business Jobs Act of 2010, which amended 
the RFA, the Commission is required to respond to any comments filed by 
the Chief Counsel of the Small Business Administration (SBA), and to 
provide a detailed statement of any change made to the proposed rule(s) 
as a result of those comments.
    173. The Chief Counsel did not file any comments in response to the 
proposed rules in this proceeding.

D. Description and Estimate of the Number of Small Entities To Which 
the Proposed Rules Will Apply

    174. The RFA directs agencies to provide a description of, and 
where feasible, an estimate of the number of small entities that may be 
affected by the rules adopted herein. The RFA generally defines the 
term ``small entity'' as having the same meaning as the terms ``small 
business,'' ``small organization,'' and ``small governmental 
jurisdiction.'' In addition, the term ``small business'' has the same 
meaning as the term ``small-business concern'' under the Small Business 
Act. A ``small-business concern'' is one which: (1) Is independently 
owned and operated; (2) is not dominant in its field of operation; and 
(3) satisfies any additional criteria established by the SBA.
    175. Small Entities, Small Organizations, Small Governmental 
Jurisdictions. The Commission's actions, over time, may affect small 
entities that are not easily categorized at present. The Commission 
therefore describes here, at the outset, three comprehensive small 
entity size standards that could be directly affected herein. As of 
2014, according to the SBA, there were 28.2 million small businesses in 
the U.S., which represented 99.7% of all businesses in the United 
States. Additionally, a ``small organization'' is generally ``any not-
for-profit enterprise which is independently owned and operated and is 
not dominant in its field.'' Nationwide, as of 2007, there were 
approximately 1,621,215 small organizations. Finally, the term ``small 
governmental jurisdiction'' is defined generally as ``governments of 
cities, towns, townships, villages, school districts, or special 
districts, with a population of less than fifty thousand.'' Census 
Bureau data for 2012 indicate that there were 89,476 local governmental 
jurisdictions in the United States. The Commission estimates that, of 
this total, as many as 88,761 entities may qualify as ``small 
governmental jurisdictions.'' Thus, the Commission estimates that most 
governmental jurisdictions are small.
    176. Wireless Telecommunications Carriers (except Satellite). This 
industry comprises establishments engaged in operating and maintaining 
switching and transmission facilities to provide communications via the 
airwaves. Establishments in this industry have spectrum licenses and 
provide services using that spectrum, such as cellular services, paging 
services, wireless internet access, and wireless video services. The 
appropriate size standard under SBA rules is that such a business is 
small if it has 1,500 or fewer employees. For this industry, census 
data for 2012 show that there were 967 firms that operated for the 
entire year. Of this total, 955 firms had employment of 999 or fewer 
employees and 12 had employment of 1000 employees or more. Thus under 
this category and the associated size standard, the Commission 
estimates that the majority of wireless telecommunications carriers 
(except satellite) are small entities. Similarly, according to 
internally developed Commission data, 413 carriers reported that they 
were engaged in the provision of wireless telephony, including cellular 
service, Personal Communications Service, and Specialized Mobile Radio 
Telephony services. Of this total, an estimated 261 have 1,500 or fewer 
employees, and 152 have more than 1,500 employees. Thus, using 
available data, the Commission estimates that the majority of wireless 
firms can be considered small.
    177. Internet Service Providers. Since 2007, these services have 
been defined within the broad economic census category of Wired 
Telecommunications Carriers; that category is defined as follows: 
``This industry comprises establishments primarily engaged in operating 
and/or providing access to transmission facilities and infrastructure 
that they own and/or lease for the transmission of voice, data, text, 
sound, and video using wired telecommunications networks. Transmission 
facilities may be based on a single technology or a combination of 
technologies.'' The SBA has developed a small business size standard 
for Wired Telecommunications Carriers, which consists of all such firms 
having 1,500

[[Page 15444]]

or fewer employees. Census Bureau data for 2012 shows that there were 
3,117 firms that operated for the entire year. Of this total, 3,083 
firms had employment of 999 or fewer employees, and 34 firms had 
employment of 1,000 employees or more. Thus, under this size standard, 
the majority of firms in this industry can be considered small. In 
addition, while Internet Service Providers (broadband) are a 
subcategory of the broader category of Wired Telecommunications 
Carrier, there is Census Bureau data specific to Internet Service 
Providers (broadband). For 2012, Census Bureau data shows there were a 
total of 1,180 firms in the subcategory of Internet Service Providers 
(broadband) that operated for the entire year. Of this total, 1,178 
firms had employment of 999 or fewer employees, and two firms had 
employment of 1000 employees or more. Consequently, the Commission 
estimates that the majority of these firms are small entities that may 
be affected by rules adopted pursuant to the MF-II Order.

E. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements

    178. In the MF-II Order, the Commission adopts the framework for 
moving forward with MF-II and Tribal MF-II, which will allocate up to 
$4.53 billion over the next decade to advance the deployment of 4G LTE 
service to areas that are so costly that the private sector has not yet 
deployed there and to preserve such service where it might not 
otherwise exist. The funding for this effort will come from the 
redirection of legacy subsidies and distributed using a market-based, 
multi-round reverse auction and will come with defined, concrete 
compliance requirements so that rural consumers will be adequately 
served by the mobile carriers receiving universal service support. The 
recordkeeping and other obligations of MF-II established in the MF-II 
Order are summarized in this FRFA. Additional information on each of 
these requirements can be found in the MF-II Order.
    179. Recipients of MF-II support will be required to deploy 4G LTE 
and to offer voice service. Recipients of MF-II funding will be 
required to meet minimum baseline performance requirements for data 
speeds, data latency, and data allowances in areas that receive support 
for at least one plan that they offer. Specifically, the median data 
speed of the network for the supported area must be 10 Mbps download 
speed or greater and 1 Mbps upload speed or greater, with at least 90 
percent of the required download speed measurements being not less than 
a certain threshold speed. For latency, at least 90 percent of the 
required measurements must have a data latency of 100 milliseconds or 
less round trip. For data allowances, support recipients must offer at 
least one service plan that includes a data allowance comparable to 
mid-level service plans offered by nationwide providers--currently at 
least 2 GB of data per month--and that is at a rate that is within a 
reasonable range of rates for similar service plans offered by mobile 
wireless providers in urban areas. These conditions will be defined 
more precisely in the pre-auction process.
    180. MF-II support recipients will be given a ten-year term of 
support with no renewal expectancy, which will begin on the first day 
of the month after the MF-II auction concludes. The Commission adopts 
interim benchmarks as well as a final benchmark for deployment of 
service that meets the performance metrics. The starting point for the 
interim benchmarks is defined as six months from the first day of the 
month that follows the month in which the MF-II auction closes. The 
Commission requires a winning bidder to demonstrate coverage of at 
least 40 percent by three years after the starting point, 60 percent by 
four years after the starting point, 80 percent by five years after the 
starting point, and 85 percent by six years after the starting point 
across all areas for which they receive MF-II support in a state. 
Support recipients must meet their required benchmarks across all areas 
for which they receive MF-II support in a state. However, for the final 
benchmark, every census block group or census tract in a state 
(depending on minimum bidding unit) must also be at least 75 percent 
covered. Recipients that fail to meet and maintain the performance 
obligations within the time provided to submit their representative 
data and to certify to coverage requirements will be subject to defined 
measures, and must cure these failures to meet the deployment 
requirements or they will be in performance default.
    181. Entities that are interested in participating in the MF-II 
auction will be required to file a short-form application in order to 
establish their eligibility to participate. Each auction applicant will 
be required to provide information to establish its identity, including 
disclosure of parties with ownership interests, consistent with the 
ownership interest disclosure required in 47 CFR part 1 for applicants 
for spectrum licenses, as well as any agreements the applicant may have 
relating to the support to be sought through the auction. Each 
applicant will also be required to disclose and certify its ETC status, 
although an applicant will not be required to obtain an ETC designation 
prior to bidding in MF-II. Applicants will be required to disclose and 
certify the source of the spectrum they plan to use to meet Mobility 
Fund obligations in the particular area(s) for which they plan to bid. 
Specifically, applicants will be required to disclose whether they 
currently hold a license or lease the spectrum, including any necessary 
renewal expectancy, and whether such spectrum access is contingent on 
obtaining support in an MF-II auction. Applicants must have secured any 
Commission approvals necessary for the required spectrum access prior 
to submitting an auction application. Moreover, applicants will be 
required to certify that they will retain their access to the spectrum 
for at least ten years from the date support is authorized. The short-
form application may also include additional certifications or 
requirements that are adopted in a public notice.
    182. Within a specified number of days of the release of a public 
notice identifying an entity as a winning bidder, that winning bidder 
will be required to file a long-form application. In this long-form 
application, an applicant for MF-II support will be required to fully 
disclose its ownership structure as well as information regarding the 
real party- or parties-in-interest of the applicant or application. An 
applicant will also be required to submit with its long-form 
application appropriate documentation of its ETC designation, including 
the original designation order and any relevant modifications or name-
change orders, in all the areas for which it will receive support or 
certify that it will do so within 180 days of the public notice 
identifying winning bidders. An applicant will be required to certify 
that it is financially and technically capable of providing the 
required coverage and performance levels within the specified timeframe 
in the geographic areas in which it won support.
    183. For winning bids, the applicant must submit a project 
description that describes the network to be built or upgraded; 
identifies the proposed technology; demonstrates that the project is 
technically feasible; discloses the complete project budget; and 
discusses each specific phase of the project (e.g., network design, 
construction, deployment, and maintenance). A complete project 
schedule, including timelines,

[[Page 15445]]

milestones, and costs, must also be provided.
    184. In addition, each applicant must provide in its long-form 
application a description of the spectrum access that it will use to 
meet its obligations in areas for which it is the winning bidder, 
including whether it currently holds a license or leases the spectrum, 
along with any necessary renewal expectancy, and certify that the 
description is accurate and that the applicant will retain such access 
for the entire ten-year support term. Each applicant must certify in 
its long-form application that it has the funds available for all 
project costs that exceed the amount of support to be received, and 
that it will comply with all program requirements, which include the 
public interest obligations contained in the Commission's rules. Each 
applicant must also certify that it will offer service in supported 
areas at rates that are within a reasonable range of rates for similar 
service plans offered by mobile wireless providers in urban areas 
during the term of support the applicant seeks.
    185. Applicants must certify that they will meet the applicable 
deadlines and requirements for demonstrating interim and final 
performance benchmarks set forth in the rules, and that they will 
comply with the MF-II collocation, voice and data roaming, and 
reasonably comparable rate obligations. The long-form application may 
also include additional certifications or requirements that are adopted 
in a public notice.
    186. Prior to the authorization of support, all winning bidders 
must provide the Commission with an irrevocable standby letter of 
credit (LOC) by a bank that is acceptable to the Commission in 
substantially the same form as the model Letter of Credit set forth in 
an appendix to the MF-II Order. The initial value of the LOC must be 
set to at least the amount of authorized MF-II support for the first 
year. Before the winning bidder can receive its next year's MF-II 
support, it must modify, renew, or obtain a new LOC to ensure that it 
is valued at a minimum at the total amount of money that has already 
been disbursed plus the amount of money that is going to be provided in 
the next year. The LOC must be maintained for 100 percent of the total 
support amount disbursed plus the amount to be disbursed in the next 
year until the Universal Service Administrative Company (USAC), in 
coordination with the Commission, has determined that the recipient has 
met its interim benchmark for deployment to 60 percent of the required 
coverage area; and subject to USAC's consent, the amount of the LOC may 
decrease to an amount equal to 90 percent of the total support amount 
already disbursed plus the amount that will be disbursed in the coming 
year. Once USAC, in coordination with the Commission, has determined 
that the recipient has met its interim benchmark for deployment to 80 
percent of the required coverage area; and subject to USAC's consent, 
the amount of the LOC may decrease to an amount equal to 80 percent of 
the total support amount already disbursed plus the amount that will be 
disbursed in the coming year. After USAC, in coordination with the 
Commission, has determined that the recipient has met its final 
benchmark for deployment to a minimum of 85 percent of the required 
coverage area by state and at least 75 percent by each census block 
group or census tract in a state included in the LOC, the recipient may 
relinquish its LOC. Each winning bidder will be allowed to provide a 
single LOC covering all its winning bids within a single state.
    187. At the time a winning bidder in MF-II submits its LOC, it also 
will be required to provide an opinion letter from legal counsel 
clearly stating, subject only to customary assumptions, limitations and 
qualifications, that in a proceeding under the Bankruptcy Code, the 
bankruptcy court would not treat the LOC or proceeds of the LOC as 
property of the winning bidder's bankruptcy estate, or the bankruptcy 
estate of any other bidder-related entity requesting issuance of the 
LOC, under 11 U.S.C. 541. If the winning bidder is not prepared to 
present its LOC at the time of the long-form application filing, it may 
submit a commitment letter from the bank issuing the LOC in the long-
form application filing.
    188. An entity will be considered to have an auction default and 
will be subject to a forfeiture payment if it fails to timely file a 
long-form application or meet the document submission deadlines, or is 
found ineligible or unqualified to receive MF-II support, or otherwise 
defaults on its bid or is disqualified for any reason prior to the 
authorization of support. All bidders will be subject to the same 
$3,000 base forfeiture per violation, subject to adjustment based on 
the criteria set forth in the Commission's forfeiture guidelines. A 
violation is defined as any form of default with respect to each 
geographic unit subject to a bid. However, the total base forfeiture 
that could be owed by a winning bidder is limited to five percent of 
its total bid amount for the entire ten-year support term.
    189. The Wireline Competition Bureau or the Wireless 
Telecommunications Bureau will authorize USAC to draw on the LOC(s) to 
recover all the support that has been disbursed in a state in the event 
that the MF-II recipient does not meet the relevant service milestones 
and does not cure its compliance gap. USAC will recover support from 
ETCs associated with their compliance gap in three separate 
circumstances. First, for interim milestones, if the ETC has a 
compliance gap of 50 percent or more of the eligible square miles that 
the ETC is required to have covered by the relevant interim milestone 
(i.e., Tier 4 status) at the state level, USAC will withhold 50 percent 
of the ETC's monthly support for that state, and the ETC will be 
required to file quarterly reports. If, after having 50 percent of 
support withheld for six months, the ETC has not reported that it has a 
compliance gap of less than 50 percent at the state level (i.e., the 
ETC is eligible for Tier 3 or lower or is in compliance), USAC will 
withhold 100 percent of the ETC's support for the state and will 
commence recovery action for a percentage of support that is equal to 
the ETC's compliance gap plus 10 percent of the ETC's support that has 
been paid to that point. At this point, this ETC will have six months 
to pay back the amount of support that USAC seeks to recover. If, at 
any point during the six-year period for deployment the ETC reports 
that it is eligible for Tier 1 status, and USAC is able to substantiate 
that report, the ETC will have its support fully restored including any 
support that had been withheld, USAC will repay any funds that were 
recovered, and the ETC will move to Tier 1 status. If, at the end of 
six months the ETC has not fully paid back the support, the Wireline 
Competition Bureau or the Wireless Telecommunications Bureau will issue 
a letter to that effect and USAC will draw on the letter of credit to 
recover all the support that has been disbursed to the ETC.
    190. Second, if an ETC misses the final milestone(s), it must 
identify by what percentage the milestone has been missed at the state 
level and/or any of the census block group(s) or census tract(s) in the 
state. The ETC will then have 12 months from that date to come into 
full compliance with both of those milestones. If it does not come into 
full compliance within 12 months because it fails to meet the 85 
percent benchmark (even if it meets the 75 percent benchmark for some 
or all the census block group(s) or census tract(s)), the Wireline 
Competition Bureau or the Wireless Telecommunications Bureau will issue 
a letter, and USAC will

[[Page 15446]]

recover disbursement(s) in an amount of support that is equal to 1.89 
multiplied by the average amount of support the ETC received per 
eligible square mile in the state over the six-year period multiplied 
by the number of square miles unserved in the ETC's winning areas in 
the state that would be required to meet the 85 percent benchmark, plus 
10 percent of the ETC's total MF-II support received in the state over 
the six-year period for deployment. After the ETC has paid the 
calculated recovery amount for failure to comply with the final 
deployment milestone, the Bureaus will calculate a reduced support 
payment for the remaining support term based on the percentage of 
deployment coverage completed. If, at the end of six months the ETC has 
not fully paid back the support for missing the relevant 85 percent 
benchmark, the ETC shall be liable for repayment of all the support 
that has been disbursed to the ETC for that state, the Wireline 
Competition Bureau or the Wireless Telecommunications Bureau will issue 
a letter to that effect, and USAC will draw on the LOC(s) to recover 
all the support that has been disbursed to the ETC for that state. A 
similar approach will apply if the ETC meets the 85 percent statewide 
benchmark but misses the 75 percent benchmark(s) for any census block 
group(s) or census tract(s) in the state at the final milestone and the 
ETC does not come into full compliance by meeting the 75 percent 
benchmark within 12 months. At this point, the ETC will have six months 
to repay the support USAC seeks to recover. After the ETC has paid the 
calculated recovery amount, the Bureaus will calculate a reduced 
support payment for the remaining support term. If, at the end of six 
months the ETC has not fully paid back the support for missing the 
relevant 75 percent benchmark(s), the ETC shall be liable for repayment 
of all the support that has been disbursed to the ETC for that state, 
the Wireline Competition Bureau or the Wireless Telecommunications 
Bureau will issue a letter to that effect, and USAC will draw on the 
LOC(s) to recover all the support that has been disbursed to the ETC 
for that state. In the event that USAC draws on a letter of credit to 
recover all the support that has been disbursed to the ETC for a state, 
the ETC's participation in MF-II in that state will immediately end and 
no further support will be paid.
    191. Third, after compliance with the final build-out milestones 
has been verified and the ETC closes its letter of credit, if at any 
point during the remainder of the 10-year term of support it is 
determined that the ETC does not have sufficient evidence to 
demonstrate that it is offering the requisite service to the required 
percentage of square miles by census block group or census tract, or 
state, USAC will withhold support for a period not to exceed six months 
until the ETC demonstrates that it is again providing the requisite 
service to the required percentage of square miles. When the ETC's 
demonstration of coverage has been verified by USAC, USAC will pay any 
withheld support and resume ongoing disbursements. If the ETC cannot 
provide a verifiable demonstration of coverage within the permitted 
six-month period, USAC will recover an amount of support that is equal 
to 1.89 times the average amount of support per square mile received in 
the winning bid area over the six-year deployment period for the 
relevant number of square miles for which the ETC has failed to produce 
sufficient evidence, plus 10 percent of the ETC's total support 
received in that winning bid over the six-year deployment time period 
and will reduce ongoing annual support. If the ETC does not repay the 
Commission after a six-month period permitted for repayment, it may be 
subject to additional non-compliance measures, including the reduction 
of support payments for the remaining support term and forfeitures. MF-
II recipients may also be subject to other sanctions for non-compliance 
with the terms and conditions of high-cost funding, including, but not 
limited to potential revocation of ETC designation and suspension or 
debarment.
    192. Once an MF-II recipient has been authorized to begin receiving 
support, it will be required to report certain information so that the 
Commission and USAC can track the progress of MF-II recipients and 
monitor their use of the public's funds before and after they meet 
service milestones. All MF-II recipients will be required to file 
annual reports. Recipients will be required to file their reports each 
year following the year in which the auction closes by July 1, 
including all the certifications required under the MF-II rules, and in 
which the recipient will update information, as required for the 
following year.
    193. MF-II recipients will be required to file a Milestone Report 
on or before its third, fourth, fifth, and sixth year performance 
deadline. The Bureaus will define more precisely the content and format 
of the information, including substantiation that recipients are 
required to include in their Milestone Reports, such that it is 
consistent with the evidence that will be required from challenging 
parties in the challenge process. Reports should be filed via the 
portal that USAC is creating to receive filings by universal service 
support recipients.
    194. Support will be reduced for recipients that miss reporting, 
certification, and milestone filing deadlines. A minimum reduction of 
support of seven days of total statewide support for a winning bid in 
any state for which a filing deadline is missed will be imposed. In 
addition to the reduction of the initial seven days of support, support 
will be reduced further state-wide on a pro-rata daily basis until the 
MF-II recipient files the required report or certification. For a late 
filer, a one-time grace period of three days will be provided so that a 
recipient that quickly rectifies its error within three days of the 
deadline will not be subject to the seven-day minimum loss of support. 
USAC will send a letter to such a recipient notifying it that its 
filing was late but cured within the grace period. If the recipient 
again files any filing late, the grace period will not be available.
    195. Each recipient will be required to maintain the accuracy and 
completeness of the information it furnishes in its long-form 
application and its annual and milestone reports. Recipients must 
update their annual reports and milestone reports to provide 
information about any substantial change that may be of decisional 
significance regarding their eligibility for MF-II support and 
compliance with MF-II requirements. Such notification of a substantial 
change, including any reduction in the percentage of eligible square 
miles being served or any failure to comply with any of the MF-II 
requirements, must be submitted within 10 business days after the 
reportable event occurs. If a support recipient drops below the level 
of service to which it has certified in a milestone report or an annual 
report during the six-year deployment period, it will be subject to the 
Commission rules for non-compliance.

F. Steps Taken To Minimize Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered

    196. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its approach, which may 
include the following four alternatives, among others: ``(1) the 
establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements

[[Page 15447]]

under the rule for small entities; (3) the use of performance, rather 
than design, standards; and (4) an exemption from coverage of the rule, 
or any part thereof, for small entities.''
    197. The Commission has considered the economic impact on small 
entities in reaching its final conclusions and taking action in this 
proceeding. The rules adopted in the MF-II Order will provide greater 
certainty and flexibility for all carriers, including small entities. 
For example, the Commission concludes that the minimum geographic area 
for bidding should be census block groups or census tracts containing 
one or more census blocks with eligible areas for bidding and support 
for MF-II. The Commission found that adopting a smaller geographic area 
would allow it to target support more efficiently to specific areas and 
provide bidders, including small entities, the ability to tailor their 
bids to their business plans. The Commission expects that the auction 
design will similarly account for the needs of small entities.
    198. To determine coverage levels in individual census blocks and 
whether MF-II support is being awarded, the Commission has decided to 
rely on Form 477 and high-cost disbursement data available from USAC. 
Not only is this information the most reliable data currently available 
for the purpose of determining the coverage levels of existing mobile 
services, but it can also provide sufficiently granular information to 
identify those areas of the country that lack 4G LTE service or where 
such service is only provided by a subsidized provider. Moreover, the 
Commission will utilize a streamlined challenge process to provide 
interested parties, including small entities, with an opportunity to 
challenge the coverage analysis and improve its accuracy. The Bureaus 
will make an initial determination of eligible areas by census block as 
part of the pre-auction process. Subsequently, the Bureaus will 
implement a process consistent with the decisions the Commission will 
make after review of the record received in response to the Further 
Notice of Proposed Rulemaking included with the MF-II Order. The 
Commission anticipates that this challenge process will be more 
streamlined for all parties, including small entities, as it will be 
based on Form 477 data, which use a uniform filing format.
    199. The Commission amends its rules for the phase-down of 
identical support to account for the relative costs of deploying a 
coverage-based network given the differing terrain throughout the 
United States. Wireless providers, including smaller providers, incur 
additional costs to deploy service in more difficult terrain. 
Accordingly, the Bureaus will apply a more-refined methodology that 
uses a terrain factor as a proxy for determining higher cost areas. In 
census blocks determined (after the completion of the challenge 
process) not to be eligible for MF-II support, legacy support will be 
phased down starting the first day of the month following release of a 
public notice announcing the close of the MF-II auction. On that same 
date, legacy support for current recipients in eligible census blocks 
shall either be converted to MF-II support (for the winning bidder), 
maintained (for one CETC in areas without a winning bidder), or subject 
to phase down (for all other CETCs). More specifically, in census 
blocks determined (after the completion of the challenge process) not 
to be eligible for MF-II, legacy support will be phased down starting 
the first day of the month following the close of the MF-II auction. 
For the first 12 months thereafter, phase-down support shall be \2/3\ 
of the legacy support for each CETC associated with that area. For the 
next 12 months, phase-down support shall be \1/3\ of the legacy support 
for each CETC associated with that area. All legacy support shall end 
thereafter. For a winning bidder that is a CETC receiving legacy 
support in the area of its bid, MF-II support shall commence on the 
first day of the month after the auction concludes. To ensure a smooth 
transition to MF-II support, and to the extent the Commission 
authorizes a winning bidder to receive MF-II support after that date, a 
winning bidder will receive support payments at the current legacy 
support level until such Commission action. A non-CETC winning bidder 
will receive MF-II support once the Commission issues a public notice 
authorizing MF-II support to the bidder. In eligible areas where there 
is no winning bidder in MF-II, the CETC receiving the minimum level of 
sustainable support will continue to receive such support until further 
Commission action, but for no more than five years from the first day 
of the month following the close of the MF-II auction. For CETCs 
receiving support in areas eligible for MF-II that do not either win 
MF-II support or receive the minimum level of sustainable support, the 
phase-down of support shall commence on the first day of the month 
after the auction concludes. For the first 12 months, phase-down 
support shall be \2/3\ of the legacy support for each CETC associated 
with that area. For the next 12 months thereafter, phase-down support 
shall be \1/3\ of the legacy support for each CETC associated with that 
area. All legacy support shall end thereafter. The Commission concludes 
that this two-year phase-down schedule will ensure that affected CETCs, 
including smaller providers, will have a smooth transition in areas 
that are too costly to serve absent universal service subsidies.
    200. The Commission has taken a number of steps to ensure that 
small entities have the opportunity to participate in the MF-II 
auction. For example, the Commission adopts more flexible eligibility 
requirements by permitting a winning bidder in the MF-II auction to 
obtain its ETC designation after the close of the auction, provided 
that it submits proof of its ETC designation within 180 days of the 
public notice identifying winning bidders. The Commission found that 
the benefits of encouraging greater participation in the competitive 
bidding process by all interested parties, including small entities, 
outweigh the possible risk that a winning bidder will not meet the 
necessary requirements to be designated as an ETC. The Commission also 
recognized that some qualified bidders, including small entities, may 
be hesitant to invest resources to apply for an ETC designation prior 
to the competitive bidding process without any sense of whether they 
are likely to be awarded MF-II support.
    201. While the Commission requested comment on whether to adopt a 
bidding credit preference for Tribally-owned-and-controlled entities, 
it finds that such a bidding credit preference is unnecessary for the 
MF-II auction. Setting aside funds specifically to serve Tribal lands 
is likely to accomplish the Commission's goal of ensuring greater 
coverage on Tribal lands. The Commission also finds that layering an 
additional bidding credit for Tribal carriers on top of the funding 
exclusively available for service to Tribal lands could deter other 
entities from bidding to serve Tribal lands, reducing both the 
competitiveness of the auction and the potential reach of the 
Commission's finite funds for MF-II. Furthermore, commenters fail to 
demonstrate that the benefits of a bidding credit preference outweigh 
the costs of potentially depriving other eligible areas of MF-II 
support.
    202. The Commission requested comment on the adoption of a small 
business bidding preference and the small business definition that 
should apply if it adopts such a bidding preference for MF-II. The 
Commission, however, declines to adopt a bidding preference for small 
businesses for MF-II. It agrees with commenters that

[[Page 15448]]

oppose a bidding preference for small businesses, concluding that such 
credits are unnecessary for an MF-II auction and would not further the 
objective of MF-II of encouraging the efficient use of universal 
support funds because a bidding credit for small businesses could 
potentially reduce the reach of the Commission's finite funds.
    203. The Commission adopts requirements for the short-form and 
long-form applications that will maximize the number and types of 
entities that can participate. For example, it adopts a two-stage 
application process for an applicant seeking to participate in the MF-
II auction under which interested parties will submit a pre-auction 
``short-form'' application, providing basic information and 
certifications regarding their eligibility to receive support, and then 
a long-form application, fully disclosing its ownership structure, 
information and certifications regarding applicant eligibility, and 
plans to meet performance requirements. This process is similar to that 
used in spectrum license auctions and for Mobility Fund Phase I. Since 
the Commission anticipates that many interested parties, including 
small entities, will already be familiar with these requirements, it 
expects that the application procedures will minimize burdens on 
applicants and encourage a wide variety of parties to participate.
    204. In light of concerns expressed by commenters, including small 
entities, the Commission adopts more flexible provisions for MF-II LOCs 
to help ease the administrative burden for support recipients. For 
example, the Commission adopts LOC provisions that closely align with 
the CAF-II LOC process and the MF-II performance requirements, allowing 
the LOC to decrease over time as a support recipient satisfies its 
minimum coverage and service requirements. The Commission also allows 
winning bidders to provide a single LOC covering all its winning bids 
within a single state, reducing the number of LOCs that a winning 
bidder may need. Moreover, the Commission amends and expands the 
definition of an ``acceptable bank'' for the purposes of MF-II LOC 
requirements, which will lower barriers for entities, particularly 
small and rural businesses that might otherwise face obstacles in 
obtaining an LOC from a smaller pool of banks. The Commission also 
allows the submission of a commitment letter from the bank issuing the 
LOC in the long-form application filing, if the winning bidder is not 
prepared to present its LOC at the time of the long-form application 
filing.
    205. Similarly, the Commission adopts more flexible measures for 
non-compliance that will better enable support recipients, including 
small entities, to meet the MF-II goals of preserving and expanding 
service. For example, the Commission adopts a more measured approach to 
recouping payment in the event of default than the Commission employed 
in the MF-I auction. The Commission also limits when USAC will be 
permitted to recover support from ETCs associated with their compliance 
gap and conclude that only if the ETC fails to repay in full after six 
months, USAC will be authorized to draw on the letter of credit to 
recover 100 percent of the support that has been disbursed to the ETC 
within the state.
    206. The Commission notes that the reporting requirements it adopts 
are tailored to ensuring that support is used for its intended purposes 
and so that the Commission and USAC can monitor the ongoing progress 
and performance of all MF-II recipients. The Commission finds the 
benefits in establishing annual and milestone reporting obligations 
outweigh any potential burdens on the recipients in filing these 
reports because the targeted information required will be the type of 
data that MF-II recipients will be already collecting for their own 
business purposes and will help to ensure that program goals are met. 
Nevertheless, to help minimize the burden of reporting requirements, 
including the burden on small businesses, the Commission has adopted 
annual and milestone reporting requirements that are consistent with 
the reporting requirements for MF-I and CAF-II support recipients, 
including grace periods for missed filing deadlines.

G. Report to Congress

    207. The Commission will send a copy of the MF-II Order, including 
the FRFA, in a report to be sent to Congress and the Government 
Accountability Office pursuant to the Congressional Review Act. In 
addition, the Commission will send a copy of the MF-II Order, including 
the FRFA, to the Chief Counsel for Advocacy of the Small Business 
Administration.

XI. Ordering Clauses

    208. Accordingly, it is ordered, pursuant to the authority 
contained in sections 1, 2, 4(i), 5, 10, 201-206, 214, 218-220, 251, 
252, 254, 256, 303(r), 332, 403, 405, and 503 of the Communications Act 
of 1934, as amended, and section 706 of the Telecommunications Act of 
1996, 47 U.S.C. 151, 152, 154(i), 155, 160, 201-206, 214, 218-220, 251, 
252, 254, 256, 303(r), 332, 403, 405, 503, 1302, and sections 1.1, 
1.427, and 1.429 of the Commission's rules, 47 CFR 1.1, 1.427, and 
1.429, that the MF-II Order is adopted. It is the Commission's 
intention in adopting these rules that if any of the rules that it 
retains, modifies, or adopts, or the application thereof to any person 
or circumstance, are held to be unlawful, the remaining portions of the 
rules not deemed unlawful, and the application of such rules to other 
persons or circumstances, shall remain in effect to the fullest extent 
permitted by law.
    209. It is further ordered that Parts 1 and 54 of the Commission's 
rules, 47 CFR 1 and 54, are amended as set forth in Appendix A of the 
MF-II Order, and such rule amendments shall be effective thirty (30) 
days after publication in the Federal Register, except to the extent 
they contain new or modified information collection requirements that 
require approval by the Office of Management and Budget under the 
Paperwork Reduction Act. The rules that contain new and modified 
information collection requirement subject to PRA review shall become 
effective after the Commission publishes a notice in the Federal 
Register announcing such approval and the relevant effective date.
    210. It is further ordered that the Petition for Declaratory Ruling 
filed by United States Cellular Corporation on March 21, 2014 is 
denied.
    211. It is further ordered that the Commission shall send a copy of 
the MF-II Order to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act, see 5 U.S.C. 801(a)(1)(A).
    212. It is further ordered, that the Commission's Consumer and 
Governmental Affairs Bureau, Reference Information Center, shall send a 
copy of the MF-II Order, including the Final Regulatory Flexibility 
Analysis, to the Chief Counsel for Advocacy of the Small Business 
Administration.

List of Subjects

47 CFR Part 1

    Administrative practice and procedures, Reporting and recordkeeping 
requirements, Telecommunications.

47 CFR Part 54

    Communications common carriers, Internet, Reporting and 
recordkeeping requirements, Telecommunications.


[[Page 15449]]


Federal Communications Commission.
Katura Howard,
Federal Register Liaison Officer. Office of the Secretary.

Final Rules

    For the reasons discussed in the preamble, the Federal 
Communications Commission amends 47 CFR parts 1 and 54 as follows:

PART 1--PRACTICE AND PROCEDURE

0
1. The authority citation for part 1 continues to read as follows:

    Authority: 15 U.S.C. 79, et seq.; 47 U.S.C. 151, 154(i), 154(j), 
155, 157, 160, 201, 225, 227, 303, 309, 310, 332, 1403, 1404, 1451, 
1452, and 1455.


0
2. In Sec.  1.21003, redesignate paragraphs (c) and (d) as paragraphs 
(d) and (e), remove paragraph (b), and add new paragraphs (b) and (c) 
to read as follows:


Sec.  1.21003   Competitive bidding process.

* * * * *
    (b) Competitive Bidding Procedures--Design Options. The public 
notice detailing competitive bidding procedures may establish the 
design of the competitive bidding utilizing any of the following 
options, without limitation:
    (1) Procedures for Collecting Bids. (i) Procedures for collecting 
bids in a single round or in multiple rounds.
    (ii) Procedures for collecting bids on an item-by-item basis, or 
using various aggregation specifications.
    (iii) Procedures for collecting bids that specify contingencies 
linking bids on the same item and/or for multiple items.
    (iv) Procedures allowing for bids that specify a support level, 
indicate demand at a specified support level, or provide other 
information as specified by the Commission.
    (v) Procedures to collect bids in one or more stage or stages, 
including for transitions between stages.
    (2) Procedures for Assigning Winning Bids. (i) Procedures for 
scoring bids by factors in addition to bid amount, such as population 
coverage or geographic contour, or other relevant measurable factors.
    (ii) Procedures to incorporate public interest considerations into 
the process for assigning winning bids.
    (3) Procedures for Determining Payments. (i) Procedures to 
determine the amount of any support for which winning bidders may 
become authorized, consistent with other auction design choices.
    (ii) Procedures that provide for support amounts based on the 
amount as bid or on other pricing rules, either uniform or 
discriminatory.
    (c) Competitive Bidding Procedures--Mechanisms. The public notice 
detailing competitive bidding procedures may establish any of the 
following mechanisms, without limitation:
    (1) Limits on Available Information. Procedures establishing limits 
on the public availability of information regarding applicants, 
applications, and bids during a period of time covering the competitive 
bidding process, as well as procedures for parties to report the 
receipt of non-public information during such periods.
    (2) Sequencing. Procedures establishing one or more groups of 
eligible areas and if more than one, the sequence of groups for which 
bids will be accepted.
    (3) Reserve Price. Procedures establishing reserve prices, either 
disclosed or undisclosed, above which bids would not win in the 
auction. The reserve prices may apply individually, in combination, or 
in the aggregate.
    (4) Timing and Method of Placing Bids. Procedures establishing 
methods and times for submission of bids, whether remotely, by 
telephonic or electronic transmission, or in person.
    (5) Opening Bids and Bid Increments. Procedures establishing 
maximum or minimum opening bids and, by announcement before or during 
the auction, maximum or minimum bid increments in dollar or percentage 
terms.
    (6) Withdrawals. Procedures by which bidders may withdraw bids, if 
withdrawals are allowed.
    (7) Stopping Procedures. Procedures regarding when bidding will 
stop for a round, a stage, or an entire auction, in order to terminate 
the auction within a reasonable time and in accordance with public 
interest considerations and the goals, statutory requirements, rules, 
and procedures for the auction, including any reserve price or prices.
    (8) Activity Rules. Procedures for activity rules that require a 
minimum amount of bidding activity.
    (9) Auction Delay, Suspension, or Cancellation. Procedures for 
announcing by public notice or by announcement during the reverse 
auction, delay, suspension, or cancellation of the auction in the event 
of a natural disaster, technical obstacle, network disruption, evidence 
of an auction security breach or unlawful bidding activity, 
administrative or weather necessity, or for any other reason that 
affects the fair and efficient conduct of the competitive bidding, and 
procedures for resuming the competitive bidding starting from the 
beginning of the current or some previous round or cancelling the 
competitive bidding in its entirety.
* * * * *

PART 54--UNIVERSAL SERVICE

0
3. The authority citation for part 54 continues to read as follows:

    Authority:  47 U.S.C. 151, 154(i), 155, 201, 205, 214, 219, 220, 
254, 303(r), 403, and 1302 unless otherwise noted.


0
4. In Sec.  54.307, revise paragraph (e)(5) and remove and reserve 
paragraph (e)(6).
    The revision reads as follows:


Sec.  54.307  Support to a competitive eligible telecommunications 
carrier.

* * * * *
    (e) * * *
    (5) Eligibility for Support after Mobility Fund Phase II Auction. 
(i) A mobile competitive eligible telecommunications carrier that 
receives monthly baseline support pursuant to this section and is a 
winning bidder in the Mobility Fund Phase II auction shall receive 
support at the same level as described in paragraph (e)(2)(iii) of this 
section for such area until the Wireless Telecommunications and 
Wireline Competition Bureaus determine whether to authorize the carrier 
to receive Mobility Fund Phase II support.
    (A) Upon the Wireless Telecommunications and Wireline Competition 
Bureaus' release of a public notice approving a mobile competitive 
eligible telecommunications carrier's application submitted pursuant to 
Sec.  54.104(b) and authorizing the carrier to receive Mobility Fund 
Phase II support, the carrier shall no longer receive support at the 
level of monthly baseline support pursuant to this section for such 
area. Thereafter, the carrier shall receive monthly support in the 
amount of its Mobility Fund Phase II winning bid, provided that USAC 
shall adjust the amount of the carrier's support to the extent 
necessary to account for any difference in support the carrier received 
during the period between the close of the Mobility Fund Phase II 
auction and the release of the public notice authorizing the carrier to 
receive Mobility Fund Phase II support.
    (B) A mobile competitive eligible telecommunications carrier that 
is a winning bidder in the Mobility Fund Phase II auction but is not 
authorized to receive Mobility Fund Phase II support shall receive 
monthly support as set forth in paragraphs (e)(5)(iii) and (iv) of this 
section for such area, as applicable, provided that USAC shall decrease 
such

[[Page 15450]]

amounts to account for support payments received prior to the Wireless 
Telecommunications and Wireline Competition Bureaus' authorization 
determination that exceed the amount of support for such area as set 
forth in paragraphs (e)(5)(iii) and (iv), and the monthly support in 
the mobile competitive eligible telecommunications carrier's winning 
Mobility Fund Phase II, which USAC shall treat as the carrier's monthly 
baseline support for purposes of paragraphs (e)(5)(iii) and (iv) to the 
extent the carrier's winning bid is below that amount.
    (ii) A mobile competitive eligible telecommunications carrier that 
receives monthly baseline support pursuant to this section shall 
receive the following monthly support amounts for areas that are 
ineligible for Mobility Fund Phase II support, as determined by the 
Wireless Telecommunications and Wireline Competition Bureaus:
    (A) For 12 months starting the first day of the month following the 
close of the Mobility Fund Phase II auction, each mobile competitive 
eligible telecommunications carrier shall receive two-thirds (\2/3\) of 
the carrier's support pursuant to paragraph (e)(2)(iii) of this section 
for the ineligible area.
    (B) For 12 months starting the month following the period described 
in paragraph (e)(5)(ii)(A) of this section, each mobile competitive 
eligible telecommunications carrier shall receive one-third (\1/3\) of 
the carrier's support pursuant to paragraph (e)(2)(iii) of this section 
for the ineligible area.
    (C) Following the period described in paragraph (e)(5)(ii)(B) of 
this section, no mobile competitive eligible telecommunications carrier 
shall receive monthly baseline support for the ineligible area pursuant 
to this section.
    (iii) Except as provided in paragraph (e)(3) of this section, to 
the extent Mobility Fund Phase II support is not awarded at auction for 
an eligible area, as determined by the Wireless Telecommunications and 
Wireline Competition Bureaus, the mobile competitive eligible 
telecommunications carrier receiving the minimum level of sustainable 
support for the eligible area shall continue to receive support at the 
level described in paragraph (e)(2)(iii) of this section until further 
Commission action, but such support shall not extend for more than 60 
months from the first day of the month following the close of the 
Mobility Fund Phase II auction. The ``minimum level of sustainable 
support'' is the lowest monthly baseline support received by a mobile 
competitive eligible telecommunications carrier that deploys the 
highest technology for the eligible area.
    (iv) All other mobile competitive eligible telecommunications 
carriers shall receive the following monthly support amounts for areas 
that are eligible for Mobility Fund Phase II support, as determined by 
the Wireless Telecommunications and Wireline Competition Bureaus:
    (A) For 12 months starting the first day of the month following the 
close of the Mobility Fund Phase II auction, each mobile competitive 
eligible telecommunications carrier shall receive two-thirds (\2/3\) of 
the carrier's support pursuant to paragraph (e)(2)(iii) of this section 
for the eligible area.
    (B) For 12 months starting the month following the period described 
in paragraph (e)(5)(iv)(A) of this section, each mobile competitive 
eligible telecommunications carrier shall receive one-third (\1/3\) of 
the carrier's support pursuant to paragraph (e)(2)(iii) of this section 
for the eligible area.
    (C) Following the period described in paragraph (e)(5)(iv)(B) of 
this section, no mobile competitive eligible telecommunications carrier 
shall receive monthly baseline support for the eligible area pursuant 
to this section.
    (v) Notwithstanding the foregoing schedule, the phase-down of 
identical support below the level described in paragraph (e)(2)(iii) of 
this section shall be subject to the restrictions in Consolidated 
Appropriations Act, 2016, Public Law 114-113, Div. E, Title VI, section 
631, 129 Stat. 2242, 2470 (2015), unless and until such restrictions 
are no longer in effect.
* * * * *

0
5. In Sec.  54.313, revise paragraph (k) to read as follows:


Sec.  54.313  Annual reporting requirements for high-cost recipients.

* * * * *
    (k) This section does not apply to recipients that solely receive 
support from Phase I and Phase II of the Mobility Fund.
* * * * *

0
6. Amend subpart L by adding Sec. Sec.  54.1011 through 54.1021 to read 
as follows:

Subpart L--Mobility Fund

Sec.
* * * * *
54.1011 Mobility Fund--Phase II.
54.1012 Geographic areas eligible for support.
54.1013 Provider eligibility.
54.1014 Application process.
54.1015 Public interest obligations.
54.1016 Letter of credit.
54.1017 Compliance for Mobility Fund Phase II.
54.1018 Mobility Fund Phase II disbursements.
54.1019 Annual reports.
54.1020 Milestone reports.
54.1021 Record retention for Mobility Fund Phase II.


Sec.  54.1011   Mobility Fund--Phase II.

    The Commission will use competitive bidding, as provided in part 1, 
subpart AA of this chapter, to determine the recipients of support 
available through Phase II of the Mobility Fund and the amount(s) of 
support that they may receive for specific geographic areas, subject to 
applicable post-auction procedures.


Sec.  54.1012  Geographic areas eligible for support.

    (a) Mobility Fund Phase II support may be made available for 
eligible geographic areas as identified by public notice prior to 
auction.
    (b) Coverage units for purposes of conducting competitive bidding 
and disbursing support based on designated square miles in a geographic 
area will be identified by public notice for each area eligible for 
support prior to auction.


Sec.  54.1013  Provider eligibility.

    (a) An applicant shall be an Eligible Telecommunications Carrier in 
an area in order to receive Mobility Fund Phase II support for that 
area. An applicant may obtain its designation as an Eligible 
Telecommunications Carrier after the close of the Mobility Fund Phase 
II auction, provided that the applicant submits proof of its 
designation within 180 days of the public notice identifying the 
applicant as a winning bidder. An applicant shall not receive Mobility 
Fund Phase II support prior to the submission of proof of its 
designation as an Eligible Telecommunications Carrier. After such 
submission, the Eligible Telecommunications Carrier shall receive a 
balloon payment that will consist of the carrier's monthly Mobility 
Fund Phase II payment amount multiplied by the number of whole months 
between the first day of the month after the close of the auction and 
the issuance of the public notice authorizing the carrier to receive 
Mobility Fund Phase II support.
    (b) An applicant shall have access to spectrum in an area that 
enables it to satisfy the applicable performance requirements in order 
to receive Mobility Fund Phase II support for that area. The applicant 
shall describe its access to spectrum and certify, in a form acceptable 
to the Commission, that it has such access at the time it applies to 
participate in competitive bidding and

[[Page 15451]]

at the time that it applies for support and that it will retain such 
access for at least ten (10) years after the date on which it is 
authorized to receive support.
    (c) An applicant shall certify that it is financially and 
technically qualified to provide the services supported by Mobility 
Fund Phase II within the specified timeframe in the geographic areas 
for which it seeks support in order to receive such support.


Sec.  54.1014  Application process.

    (a) Application to Participate in Competitive Bidding for Mobility 
Fund Phase II Support. In addition to providing information specified 
in Sec.  1.21001(b) of this chapter and any other information required 
by the Commission, an applicant to participate in competitive bidding 
for Mobility Fund Phase II support shall:
    (1) Provide ownership information as set forth in Sec.  1.2112(a) 
of this chapter as well as information on any agreement the applicant 
may have relating to the support to be sought through the auction;
    (2) Certify that the applicant is financially and technically 
capable of meeting the public interest obligations of Sec.  54.1015 in 
each area for which it seeks support;
    (3) Disclose its status as an Eligible Telecommunications Carrier 
in any area for which it will seek support or as an entity that will 
file an application to become an Eligible Telecommunications Carrier in 
any such area after winning support in Mobility Fund Phase II, and 
certify that the disclosure is accurate; and
    (4) Describe the spectrum access that the applicant plans to use to 
meet obligations in areas for which it will bid for support, including 
whether the applicant currently holds or leases the spectrum, including 
any necessary renewal expectancy, and whether such spectrum access is 
contingent upon receiving support in a Mobility Fund Phase II auction, 
and certify that the description is accurate and that the applicant 
will retain such access for the entire ten (10) year Mobility Fund 
Phase II support term.
    (b) Application by Winning Bidders for Mobility Fund Phase II 
Support--(1) Deadline. Unless otherwise provided by public notice, 
winning bidders for Mobility Fund Phase II support shall file an 
application for Mobility Fund Phase II support no later than ten (10) 
business days after the public notice identifying them as winning 
bidders.
    (2) Application contents. An application for Mobility Fund Phase II 
support must contain:
    (i) Identification of the party seeking the support, including 
ownership information as set forth in Sec.  1.2112(a) of this chapter;
    (ii) Certification that the applicant is financially and 
technically capable of providing the required coverage and performance 
levels within the specified timeframe in the geographic areas in which 
it won support;
    (iii) Proof of the applicant's status as an Eligible 
Telecommunications Carrier, or a statement that the applicant will 
become an Eligible Telecommunications Carrier in any area for which it 
seeks support within 180 days of the public notice identifying them as 
winning bidders, and certification that the proof is accurate;
    (iv) A description of the spectrum access that the applicant plans 
to use to meet obligations in areas for which it is winning bidder for 
support, including whether the applicant currently holds or leases the 
spectrum, along with any necessary renewal expectancy, and 
certification that the description is accurate and that the applicant 
will retain such access for the entire ten (10) year Mobility Fund 
Phase II support term;
    (v) A detailed project description that describes the network to be 
built or upgraded, identifies the proposed technology, demonstrates 
that the project is technically feasible, discloses the complete 
project budget, and discusses each specific phase of the project (e.g., 
network design, construction, deployment, and maintenance), as well as 
a complete project schedule, including timelines, milestones, and 
costs;
    (vi) Certifications that the applicant has available funds for all 
project costs that exceed the amount of support to be received from 
Mobility Fund Phase II and that the applicant will comply with all 
program requirements, including the public interest obligations set 
forth in Sec.  54.1015;
    (vii) Any guarantee of performance that the Commission may require 
by public notice or other proceedings, including but not limited to the 
letters of credit required in Sec.  54.1016, or a written commitment 
from an acceptable bank, as defined in Sec.  54.1016(a)(2), to issue 
such a letter of credit;
    (viii) Certification that the applicant will offer service in 
supported areas at rates that are within a reasonable range of rates 
for similar service plans offered by mobile wireless providers in urban 
areas during the term of support the applicant seeks;
    (ix) Certification that the party submitting the application is 
authorized to do so on behalf of the applicant; and
    (x) Such additional information as the Commission may require.
    (3) Application processing. (i) No application will be considered 
unless it has been submitted in an acceptable form during the period 
specified by public notice. No applications submitted or demonstrations 
made at any other time shall be accepted or considered.
    (ii) Any application that, as of the submission deadline, either 
does not identify the applicant seeking support as specified in the 
public notice announcing application procedures, or does not include 
required certifications, shall be denied.
    (iii) An applicant may be afforded an opportunity to make minor 
modifications to amend its application or correct defects noted by the 
applicant, the Commission, the Administrator, or other parties. Minor 
modifications include correcting typographical errors in the 
application and supplying non-material information that was 
inadvertently omitted or was not available at the time the application 
was submitted.
    (iv) Applications to which major modifications are made after the 
deadline for submitting applications shall be denied. Major 
modifications include, but are not limited to, any changes in the 
ownership of the applicant that constitute an assignment or change of 
control, or the identity of the applicant, or the certifications 
required in the application.
    (v) After receipt and review of the applications, a public notice 
shall identify each winning bidder that may be authorized to receive 
Mobility Fund Phase II support, after the winning bidder submits a 
Letter of Credit and an accompanying opinion letter as required by 
Sec.  54.1016, in a form acceptable to the Commission, and any final 
designation as an Eligible Telecommunications Carrier that any 
applicant may still require. Each such winning bidder shall submit a 
Letter of Credit and an accompanying opinion letter as required by 
Sec.  54.1016, in a form acceptable to the Commission, and any required 
final designation as an Eligible Telecommunications Carrier no later 
than ten (10) business days following the release of the public notice.
    (vi) After receipt of all necessary information, a public notice 
will identify each winning bidder that is authorized to receive 
Mobility Fund Phase II support.


Sec.  54.1015   Public interest obligations.

    (a) First interim deadline for construction. A winning bidder 
authorized to receive Mobility Fund

[[Page 15452]]

Phase II support shall, no later than 42 months from the first day of 
the month that follows the month in which the Mobility Fund Phase II 
auction closes, submit to the entities listed in Sec.  54.1020(c) any 
required data covering all areas for which they receive support in a 
state demonstrating mobile transmissions supporting voice and data to 
and from the network covering at least 40 percent of the square miles 
associated with the eligible areas and meeting or exceeding the 
following:
    (1) Outdoor median data transmission rates of 1 Mbps upload and 10 
Mbps download, with at least 90 percent of the required download speed 
measurements not less than a certain threshold speed that will be 
defined prior to the Mobility Fund Phase II auction; and
    (2) Transmission latency of 100 ms or less round trip for at least 
90 percent of the measurements.
    (b) Second interim deadline for construction. A winning bidder 
authorized to receive Mobility Fund Phase II support shall, no later 
than 54 months from the first day of the month that follows the month 
in which the Mobility Fund Phase II auction closes, submit to the 
entities listed in Sec.  54.1020(c) any required data covering all 
areas for which they receive support in a state demonstrating mobile 
transmissions supporting voice and data to and from the network 
covering at least 60 percent of the square miles associated with the 
eligible areas and meeting or exceeding the thresholds in paragraphs 
(a)(1) and (2) of this section.
    (c) Third interim deadline for construction. A winning bidder 
authorized to receive Mobility Fund Phase II support shall, no later 
than 66 months from the first day of the month that follows the month 
in which the Mobility Fund Phase II auction closes, submit to the 
entities listed in Sec.  54.1020(c) any required data covering all 
areas for which they receive support in a state demonstrating mobile 
transmissions supporting voice and data to and from the network 
covering at least 80 percent of the square miles associated with the 
eligible areas and meeting or exceeding the thresholds in paragraphs 
(a)(1) and (2) of this section.
    (d) Final deadline for construction. A winning bidder authorized to 
receive Mobility Fund Phase II support shall, no later than 78 months 
from the first day of the month that follows the month in which the 
Mobility Fund Phase II auction closes, submit to the entities listed in 
Sec.  54.1020(c) any required data covering all areas for which they 
receive support in a state demonstrating mobile transmissions 
supporting voice and data to and from the network covering at least 85 
percent of the square miles associated with the eligible areas and 
meeting or exceeding the thresholds in paragraphs (a)(1) and (2) of 
this section. A winning bidder shall also submit representative data 
demonstrating that its network covers at least 75 percent of every 
census block group or census tract for which it receives support in a 
state.
    (e) Coverage data. Coverage data submitted in compliance with a 
recipient's public interest obligations shall demonstrate coverage of 
the square miles designated in the public notice announcing the final 
list of eligible areas for the competitive bidding that is the basis of 
the recipient's support. Any data submitted in compliance with a 
recipient's public interest obligations shall be in compliance with 
standards set forth in the applicable public notice.
    (f) Collocation obligations. During the period when a recipient 
shall file annual reports pursuant to Sec.  54.1019, the recipient 
shall allow for reasonable collocation by other providers of services 
that would meet the technological requirements of Mobility Fund Phase 
II on all towers it owns or manages in the area for which it receives 
support. In addition, during this period, the recipient may not enter 
into facilities access arrangements that restrict any party to the 
arrangement from allowing others to collocate on the facilities.
    (g) Voice and data roaming obligations. During the period when a 
recipient shall file annual reports pursuant to Sec.  54.1019, the 
recipient shall comply with the Commission's voice and data roaming 
requirements that are currently in effect on networks that are built 
through Mobility Fund Phase II support.
    (h) Reasonably comparable rates obligations. Beginning no later 
than the deadline set forth in paragraph (a) of this section and 
continuing throughout the remaining period when a recipient shall file 
annual reports pursuant to Sec.  54.1019, the recipient shall offer 
service in supported areas at rates that are within a reasonable range 
of rates for similar service plans offered by mobile wireless providers 
in urban areas.
    (i) Data allowance obligations. Beginning no later than the 
deadline set forth in paragraph (a) of this section and continuing 
throughout the remaining period when a recipient shall file annual 
reports pursuant to Sec.  54.1019, recipient shall offer at least one 
service plan in supported areas that includes a data allowance 
comparable to mid-level service plans offered by nationwide providers.
    (j) Liability for failing to satisfy public interest obligations. A 
Mobility Fund Phase II support recipient's failure to comply with the 
public interest obligations in this paragraph or any other terms and 
conditions of the Mobility Fund Phase II support constitutes a 
performance default.


Sec.  54.1016   Letter of credit.

    (a) Before being authorized to receive Mobility Fund Phase II 
support, a winning bidder shall obtain an irrevocable standby letter of 
credit which shall be acceptable in all respects to the Commission.
    (1) Each recipient authorized to receive Mobility Fund Phase II 
support shall maintain the standby letter of credit or multiple standby 
letters of credit in an amount equal to at a minimum the amount of 
Mobility Fund Phase II auction support that has been disbursed and that 
will be disbursed in the coming year, until the Universal Service 
Administrative Company has verified that the recipient met the final 
service milestone as described in Sec.  54.1015(d) of this chapter.
    (i) Once the recipient has met its 60 percent service milestone as 
described in Sec.  54.1015(b) of this chapter, it may, subject to the 
consent of the Universal Service Administrative Company, obtain a new 
letter of credit or renew its existing letter of credit so that it is 
valued at a minimum at 90 percent of the total support amount already 
disbursed plus the amount that will be disbursed in the coming year.
    (ii) Once the recipient has met its 80 percent service milestone as 
described in Sec.  54.1015(c) of this chapter, it may, subject to the 
consent of the Universal Service Administrative Company, obtain a new 
letter of credit or renew its existing letter of credit so that it is 
valued at a minimum at 80 percent of the total support amount already 
disbursed plus the amount that will be disbursed in the coming year.
    (2) Acceptability. The bank issuing the letter of credit shall be 
acceptable to the Commission. A bank that is acceptable to the 
Commission is:
    (i) Any United States Bank--
    (A) Whose deposits are insured by the Federal Deposit Insurance 
Corporation; and
    (B) That has a Weiss bank safety rating of B- or higher, or
    (ii) CoBank, ACB--
    (A) As long as it maintains assets that would place it among the 
top-100 U.S. banks in terms of the amount of assets, determined on the 
basis of total assets as of the end of the calendar year immediately 
preceding the issuance of the letter of credit;

[[Page 15453]]

    (B) Its obligations are insured by the Farm Credit System Insurance 
Corporation; and
    (C) It has a long-term unsecured credit rating of BBB- or better 
from Standard & Poor's (or the equivalent from a nationally-recognized 
credit rating agency); or
    (iii) The National Rural Utilities Cooperative Finance 
Corporation--
    (A) As long as it maintains assets that would place it among the 
top-100 U.S. banks in terms of the amount of assets, determined on the 
basis of total assets as of the end of the calendar year immediately 
preceding the issuance of the letter of credit; and
    (B) It has a long-term unsecured credit rating of BBB- or better 
from Standard & Poor's (or the equivalent from a nationally-recognized 
credit rating agency); or
    (iv) Any non-U.S. bank that--
    (A) Is among the 100 largest non-U.S. banks in the world, 
determined on the basis of total assets as of the end of the calendar 
year immediately preceding the issuance of the letter of credit 
(determined on a U.S. dollar equivalent basis as of such date);
    (B) Has a branch office in the District of Columbia or such other 
branch office agreed to by the Commission;
    (C) Maintains a credit rating of BBB- or better from Standard & 
Poor's (or the equivalent from a nationally-recognized credit rating 
agency); and
    (D) Issues the letter of credit payable in United States dollars.
    (b) Before being authorized to receive Mobility Fund Phase II 
support, a winning bidder shall provide with its letter of credit an 
opinion letter from legal counsel clearly stating, subject only to 
customary assumptions, limitations, and qualifications, that in a 
proceeding under Title 11 of the United States Code, 11 U.S.C. 101 et 
seq. (the ``Bankruptcy Code''), the bankruptcy court would not treat 
the letter of credit or proceeds of the letter of credit as property of 
the winning bidder's bankruptcy estate, or the bankruptcy estate of any 
other bidder-related entity requesting issuance of the letter of 
credit, under section 541 of the Bankruptcy Code.
    (c) Authorization to receive Mobility Fund Phase II support is 
conditioned upon full and timely performance of all the requirements 
set forth in this section, Sec.  54.1015, and any additional terms and 
conditions upon which the support was granted.
    (1) If a Mobility Fund Phase II recipient has triggered a recovery 
action by USAC as set out in Sec.  54.1017 and has failed to repay the 
requisite amount of support within six (6) months, USAC will be 
entitled to draw the entire amount of the letter of credit and may 
disqualify the Mobility Fund Phase II recipient from the receipt of 
Mobility Fund Phase II auction support or additional universal service 
support.
    (2) The default will be evidenced by a letter issued by the Chief 
of either the Wireless Telecommunications Bureau or Wireline 
Competition Bureau or their respective designees, which letter, 
describing the performance default and attached to a standby letter of 
credit draw certificate, shall be sufficient for a draw on the standby 
letter of credit.


Sec.  54.1017   Compliance for Mobility Fund Phase II.

    (a) Mobile eligible telecommunications carriers subject to defined 
build-out milestones in Sec.  54.1015 must notify the Commission and 
USAC, and the relevant state, U.S. Territory, or Tribal government, if 
applicable, within ten (10) business days after the applicable deadline 
if they have failed to meet a build-out milestone.
    (1) Interim build-out milestones. Upon notification that a mobile 
eligible telecommunications carrier has defaulted on an interim build-
out milestone after it has begun receiving Mobility Fund Phase II 
support, the Wireline Competition Bureau or Wireless Telecommunications 
Bureau will issue a letter evidencing the default. For purposes of 
determining whether a default has occurred, any service a mobile 
eligible telecommunications carrier offers must meet the performance 
obligations in Sec.  54.1015(a)(1) and (2). The issuance of this letter 
shall initiate reporting obligations and withholding of a percentage of 
the mobile eligible telecommunication carrier's total monthly Mobility 
Fund Phase II support, if applicable, starting the month following the 
issuance of the letter:
    (i) Tier 1. If a mobile eligible telecommunications carrier has a 
compliance gap of at least five (5) percent but less than 15 percent of 
the eligible square miles that the mobile eligible telecommunications 
carrier is required to have covered by the relevant interim milestone 
at the state level, the Wireline Competition Bureau or Wireless 
Telecommunications Bureau will issue a letter to that effect. Starting 
three (3) months after the issuance of this letter, the mobile eligible 
telecommunications carrier will be required to file a report every 
three (3) months identifying the eligible square miles to which the 
mobile eligible telecommunications carrier has newly deployed 
facilities capable of meeting the requisite Mobility Fund Phase II 
requirements at the state level in the previous quarter. Mobile 
eligible telecommunications carriers that do not file these quarterly 
reports on time will be subject to support reductions as specified in 
Sec.  54.1019(f). The mobile eligible telecommunications carrier must 
continue to file quarterly reports until the mobile eligible 
telecommunications carrier reports that it has reduced the compliance 
gap to less than five (5) percent of the eligible square miles for that 
interim milestone at the state level and the Wireline Competition 
Bureau or Wireless Telecommunications Bureau issues a letter to that 
effect.
    (ii) Tier 2. If a mobile eligible telecommunications carrier has a 
compliance gap of at least 15 percent but less than 25 percent of the 
eligible square miles that the mobile eligible telecommunications 
carrier is required to have covered by the interim milestone at the 
state level, USAC will withhold 15 percent of the mobile eligible 
telecommunications carrier's monthly support for that state and the 
mobile eligible telecommunications carrier will be required to file 
quarterly reports. Once the mobile eligible telecommunications carrier 
has reported that it has reduced the compliance gap to less than 15 
percent of the eligible square miles for that interim milestone at the 
state level, the Wireline Competition Bureau or Wireless 
Telecommunications Bureau will issue a letter to that effect, and the 
mobile eligible telecommunications carrier will then move to Tier 1 
status.
    (iii) Tier 3. If a mobile eligible telecommunications carrier has a 
compliance gap of at least 25 percent but less than 50 percent of the 
eligible square miles that the mobile eligible telecommunications 
carrier is required to have covered by the interim milestone at the 
state level, USAC will withhold 25 percent of the mobile eligible 
telecommunications carrier's monthly support for that state and the 
mobile eligible telecommunications carrier will be required to file 
quarterly reports. Once the mobile eligible telecommunications carrier 
has reported that it has reduced the compliance gap to less than 25 
percent of the eligible square miles for that interim milestone at the 
state level, the Wireline Competition Bureau or Wireless 
Telecommunications Bureau will issue a letter to that effect, and the 
mobile eligible telecommunications carrier will move to Tier 2 status.
    (iv) Tier 4. If a mobile eligible telecommunications carrier has a

[[Page 15454]]

compliance gap of 50 percent or more of the eligible square miles that 
the mobile eligible telecommunications carrier is required to have 
covered by the interim milestone at the state level:
    (A) USAC will withhold 50 percent of the mobile eligible 
telecommunications carrier's monthly support for that state, and the 
mobile eligible telecommunications carrier will be required to file 
quarterly reports. As with the other tiers, as the mobile eligible 
telecommunications carrier reports that it has lessened the extent of 
its non-compliance, and the Wireline Competition Bureau or Wireless 
Telecommunications Bureau issues a letter to that effect, it will move 
down the tiers until it reaches Tier 1 (or no longer is out of 
compliance with the relevant interim milestone).
    (B) If, after having 50 percent of its support withheld for six (6) 
months, the mobile eligible telecommunications carrier has not reported 
that it has a compliance gap of less than 50 percent, USAC will 
withhold 100 percent of the mobile eligible telecommunications 
carrier's monthly support for the state and will commence a recovery 
action for a percentage of support that is equal to the mobile eligible 
telecommunications carrier's compliance gap plus 10 percent of the 
mobile eligible telecommunications carrier's support that has been 
disbursed to that date.
    (v) Restoration of full support. If at any point during the support 
term, the mobile eligible telecommunications carrier reports that it is 
eligible for Tier 1 status, it will have its support fully restored, 
USAC will repay any funds that were recovered or withheld, and it will 
move to Tier 1 status.
    (2) Final milestone. Upon notification that the mobile eligible 
telecommunications carrier has not met a final milestone, the mobile 
eligible telecommunications carrier will have twelve (12) months from 
the date of the final milestone deadline to come into full compliance 
with this milestone.
    (i) If the mobile eligible telecommunications carrier does not 
report that it has come into full compliance with this milestone within 
twelve (12) months because it fails to meet the 85 percent benchmark 
(even if it meets the 75 percent benchmark for some or all the census 
block group(s) or census tract(s)), the Wireline Competition Bureau or 
the Wireless Telecommunications Bureau will issue a letter, and USAC 
will recover disbursement(s) in an amount of support that is equal to 
1.89 multiplied by the average amount of support the mobile eligible 
telecommunications carrier received per eligible square mile in the 
state over the six year period multiplied by the number of square miles 
unserved in the mobile eligible telecommunications carrier's winning 
areas in the state that would be required to meet the 85 percent 
benchmark, plus 10 percent of the mobile eligible telecommunications 
carrier's total Mobility Fund Phase II support received in the state 
over the six-year period for deployment. After the mobile eligible 
telecommunications carrier has paid the calculated recovery amount for 
failure to comply with the final deployment milestone, the Bureaus will 
calculate a reduced support payment for the remaining support term 
based on the percentage of deployment coverage completed. The reduced 
ongoing annual support amount will be the total of the mobile eligible 
telecommunications carrier's original winning bid amounts for annual 
support in the state multiplied by the sum of the actual deployment 
percentage plus 15 percent (i.e., the difference between 100 percent 
coverage and the required 85 percent minimum coverage), or (annual 
support) * (percentage covered + 0.15). If at the end of six months the 
mobile eligible telecommunications carrier has not fully paid back the 
support for missing the relevant 85 percent benchmark, the mobile 
eligible telecommunications carrier shall be liable for repayment of 
all the support that has been disbursed to the mobile eligible 
telecommunications carrier for that state, the Wireline Competition 
Bureau or the Wireless Telecommunications Bureau will issue a letter to 
that effect, and USAC will draw on the letter(s) of credit to recover 
all the support that has been disbursed to the mobile eligible 
telecommunications carrier for that state.
    (ii) If the mobile eligible telecommunications carrier does not 
report that it has come into full compliance with this milestone within 
twelve (12) months because it fails to meet the 75 percent benchmark(s) 
for any census block group(s) or census tract(s) in the state at the 
final milestone (even if it meets the 85 percent statewide benchmark), 
the Wireline Competition Bureau or the Wireless Telecommunications 
Bureau will issue a letter for any such census block group(s) or census 
tract(s), and USAC will recover disbursement(s) in an amount of support 
that is equal to 1.89 multiplied by the average amount of support the 
mobile eligible telecommunications carrier received per eligible square 
mile in the census block group(s) or census tract(s) in the state over 
the six year period multiplied by the number of square miles unserved 
in each of the mobile eligible telecommunications carrier's winning 
census block group(s) or census tract(s) in the state that would be 
required to meet their respective 75 percent benchmarks, plus 10 
percent of the mobile eligible telecommunications carrier's total 
Mobility Fund Phase II support received in the relevant census block 
group(s) or census tract(s) over the six-year period for deployment. 
The mobile eligible telecommunications carrier will have six months to 
repay the support USAC seeks to recover. After the mobile eligible 
telecommunications carrier has paid the calculated recovery amount, the 
Bureaus will calculate a reduced support payment for the remaining 
support term. The reduced ongoing annual support amount will be the 
mobile eligible telecommunications carrier's original winning bid 
amount for annual support in any such census block group or census 
tract, multiplied by the sum of the actual deployment percentage plus 
25 percent (i.e., the difference between 100 percent coverage and the 
required 75 percent minimum coverage), or (annual support) * 
(percentage covered + 0.25). If at the end of six months the mobile 
eligible telecommunications carrier has not fully paid back the support 
for missing the relevant 75 percent benchmark(s), the mobile eligible 
telecommunications carrier shall be liable for repayment of all the 
support that has been disbursed to the mobile eligible 
telecommunications carrier for that state, the Wireline Competition 
Bureau or the Wireless Telecommunications Bureau will issue a letter to 
that effect, and USAC will draw on the letter(s) of credit to recover 
all the support that has been disbursed to the mobile eligible 
telecommunications carrier for that state. In the event that USAC draws 
on a letter of credit to recover all the support that has been 
disbursed to the mobile eligible telecommunications carrier for a 
state, the mobile eligible telecommunications carrier's participation 
in Mobility Fund Phase II in that state will immediately end and no 
further support will be paid.
    (3) Compliance reviews. If, subsequent to the mobile eligible 
telecommunications carrier's final milestone but during the remaining 
support term, USAC determines in the course of a compliance review that 
the mobile eligible telecommunications carrier does not have sufficient 
evidence to demonstrate that it is offering service to the required 
percentage of square miles by census block group or census

[[Page 15455]]

tract, or state, USAC shall withhold support for a period not to exceed 
six months until the mobile eligible telecommunications carrier 
demonstrates that it is again providing the requisite service to the 
required percentage of square miles. Once the mobile eligible 
telecommunications carrier demonstrates that it is providing the 
requisite service to the required percentage of square miles and USAC 
has verified the demonstration, USAC will pay any withheld support and 
resume ongoing disbursements. If the mobile eligible telecommunications 
carrier does not provide a verifiable demonstration of coverage within 
the permitted six-month period, USAC shall recover an amount of support 
that is equal to 1.89 times the average amount of support per square 
mile received in the winning bid area over the six-year deployment 
period for the relevant number of square miles for which the mobile 
eligible telecommunications carrier has failed to produce sufficient 
evidence, plus 10 percent of the mobile eligible telecommunications 
carrier's total support received in that winning bid area over the six-
year deployment time period, and will calculate a reduced ongoing 
annual support amount as set out in paragraphs (a)(2)(i) and (ii) of 
this section, as appropriate.
    (b) [Reserved].


Sec.  54.1018  Mobility Fund Phase II disbursements.

    (a) A winning bidder for Mobility Fund Phase II support will be 
advised by public notice whether it has been authorized to receive such 
support. The public notice will detail how disbursements will be made.
    (b) Mobility Fund Phase II support will be available for monthly 
disbursement to a winning bidder authorized to receive such support for 
ten years from the first day of the month that follows the month in 
which the Mobility Fund Phase II auction closes.


Sec.  54.1019   Annual reports.

    (a) A winning bidder authorized to receive Mobility Fund Phase II 
support shall submit an annual report no later than July 1 in each year 
for the ten (10) years after it is so authorized.
    (b) The party submitting the annual report must certify that it has 
been authorized to do so by the winning bidder.
    (c) Each annual report shall be submitted to the Office of the 
Secretary of the Commission, clearly referencing the appropriate docket 
for Mobility Fund Phase II reporting; the Administrator; and the 
relevant state commissions, relevant authority in a U.S. Territory, or 
Tribal governments, as appropriate, until such time that the 
Administrator announces that annual reports shall be filed solely via 
the Administrator's online portal.
    (d) In each annual report, a recipient of Mobility Fund Phase II 
support shall certify that it is in compliance with all requirements 
for receipt of such support to continue receiving Mobility Fund Phase 
II disbursements.
    (e) Winning bidders have a continuing obligation to maintain the 
accuracy and completeness of the information provided in their long-
form applications and their annual reports. All winning bidders shall 
provide information about any substantial change that may be of 
decisional significance regarding their eligibility for Mobility Fund 
Phase II support and compliance with Mobility Fund Phase II 
requirements as an update to their annual report submitted to the 
entities listed in Sec.  54.1019(c). Such notification of a substantial 
change, including any reduction in the percentage of eligible square 
miles being served or any failure to comply with any of the Mobility 
Fund Phase II requirements, shall be submitted within ten (10) business 
days after the reportable event occurs.
    (f) In order for a recipient of Mobility Fund Phase II support to 
continue to receive support for the following calendar year, it must 
submit the annual report required by this section annually by July 1 of 
each year. Mobile eligible telecommunications carriers that file their 
reports after the July 1 deadline shall receive a reduction in support 
pursuant to the following schedule:
    (1) A mobile eligible telecommunications carrier that files after 
the July 1 deadline, but by July 8, will have its support reduced in an 
amount equivalent to seven (7) days of support;
    (2) A mobile eligible telecommunications carrier that files on or 
after July 9 will have its support reduced on a pro-rata daily basis 
equivalent to the period of non-compliance, plus the minimum seven-day 
reduction.
    (f) A mobile eligible telecommunications carrier that submits the 
annual reporting information required by this section within three (3) 
days of the July 1 deadline will not receive a reduction in support if 
the mobile eligible telecommunications carrier has not missed the July 
1 deadline in any prior year.


Sec.  54.1020   Milestone reports.

    (a) A winning bidder authorized to receive Mobility Fund Phase II 
support shall submit the reports required in Sec.  54.1015(a) through 
(d) as well as certifications that it has met the construction 
requirements in Sec.  54.1015(a) through (d).
    (b) The party submitting the report must certify that it has been 
authorized to do so by the winning bidder.
    (c) Each report shall be submitted to the Office of the Secretary 
of the Commission, clearly referencing the appropriate docket for 
Mobility Fund Phase II reporting; the Administrator; and the relevant 
state commissions, relevant authority in a U.S. Territory, or Tribal 
governments, as appropriate, until such time that the Administrator 
announces that such reports shall be filed solely via the 
Administrator's online portal.
    (d) Winning bidders have a continuing obligation to maintain the 
accuracy and completeness of the information provided in their long-
form applications and their milestone reports. All winning bidders 
shall provide information about any substantial change that may be of 
decisional significance regarding their eligibility for Mobility Fund 
Phase II support and compliance with Mobility Fund Phase II 
requirements as an update to their milestone report submitted to the 
entities listed in paragraph (c) of this section. Such notification of 
a substantial change, including any reduction in the percentage of 
eligible square miles being served or any failure to comply with any of 
the Mobility Fund Phase II requirements, shall be submitted within ten 
(10) business days after the reportable event occurs.
    (e) In order for a recipient of Mobility Fund Phase II support to 
continue to receive support for the following calendar year, it must 
submit the milestone reports required by this section by the deadlines 
set forth in Sec.  54.1015(a) through (d). Mobile eligible 
telecommunications carriers that file their reports after the relevant 
deadlines shall receive a reduction in support pursuant to the 
following schedule:
    (1) A mobile eligible telecommunications carrier that files after 
the deadline, but within seven days of the deadline, will have its 
support reduced in an amount equivalent to seven (7) days of support;
    (2) A mobile eligible telecommunications carrier that files on or 
after the eighth day following the deadline will have its support 
reduced on a pro-rata daily basis equivalent to the period of non-
compliance, plus the minimum seven-day reduction.
    (g) A mobile eligible telecommunications carrier that submits the 
milestone reporting information required by this section within three 
(3)

[[Page 15456]]

days of the deadline will not receive a reduction in support if the 
mobile eligible telecommunications carrier has not missed the deadline 
in any prior year.


Sec.  54.1021   Record retention for Mobility Fund Phase II.

    A winning bidder authorized to receive Mobility Fund Phase II 
support and its agents are subject to the record retention requirements 
in Sec.  54.320.

[FR Doc. 2017-05665 Filed 3-27-17; 8:45 am]
BILLING CODE 6712-01-P