[Federal Register Volume 83, Number 80 (Wednesday, April 25, 2018)]
[Rules and Regulations]
[Pages 17934-17942]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-08689]


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FEDERAL COMMUNICATIONS COMMISSION

47 CFR Part 54

[WC Docket No. 10-90, WT Docket No. 10-208; FCC 18-19]


Connect America Fund; Universal Service Reform--Mobility Fund

AGENCY: Federal Communications Commission.

ACTION: Final rule; petition for reconsideration.

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SUMMARY: In this document, the Federal Communications Commission 
(Commission) resolves the remaining petitions for reconsideration 
regarding the requirements for Mobility Fund Phase II (MF-II). The 
Commission revises the language of its rule for collocation, and 
reduces the value of the letter of credit that a Mobility Fund Phase II 
support recipient is required to hold after the Universal Service 
Administration Company (USAC), together with the Commission, has 
verified that the MF-II support recipient has achieved significant 
progress toward completing their buildout and service provision 
requirements. The Commission affirms its Mobility Fund Phase II rules 
in all other respects.

DATES: Effective May 25, 2018, except for the amendment to Sec.  
54.1016 (a)(1)(ii), which contains information collection requirements 
that have not been approved by OMB. The Commission will publish a 
document in the Federal Register announcing the effective date.

FOR FURTHER INFORMATION CONTACT: Wireless Telecommunications Bureau, 
Auction and Spectrum Access Division, Audra Hale-Maddox, 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].

SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Second 
Order on Reconsideration (MF-II Second Order on Reconsideration), WC 
Docket No. 10-90, WT Docket No. 10-208; FCC 18-19, adopted on February 
22, 2018 and released on February 27, 2018. The complete text of this 
document is available for public

[[Page 17935]]

inspection and copying from 8:00 a.m. to 4:30 p.m. Eastern Time (ET) 
Monday through Thursday or from 8 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 website at http://transition.fcc.gov/Daily_Releases/Daily_Business/2017/db0804/FCC-17-102A1.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 Supplemental Final Regulatory Flexibility 
Analysis (FRFA) of the possible significant economic impact on small 
entities of the policies and rules adopted in this document. The 
Supplemental FRFA is set forth in an appendix to the MF-II Second Order 
on Reconsideration, and is summarized below. The Commission's Consumer 
and Governmental Affairs Bureau, Reference Information Center, will 
send a copy of this MF-II Second Order on Reconsideration, including 
the Supplemental FRFA, to the Chief Counsel for Advocacy of the Small 
Business Administration (SBA).

Paperwork Reduction Act

    The MF-II Second Order on Reconsideration 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 Second Order on 
Reconsideration in a report 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 Second Order on Reconsideration, the Commission 
addresses the remaining issues raised in petitions for reconsideration 
filed in response to the MF-II Report & Order, 82 FR 15422, March 28, 
2017. Resolving these petitions is a significant step toward holding an 
auction in which service providers will compete for Mobility Fund Phase 
II (MF-II) support to offer 4G Long Term Evolution (LTE) service in 
primarily rural areas that lack qualified unsubsidized 4G LTE service.

II. Background

    2. In February 2017, the Commission adopted rules to move forward 
expeditiously to an MF-II auction. The Commission established a budget 
of $4.53 billion to be disbursed monthly over a term of ten years to 
provide ongoing support for the provision of service in areas that lack 
adequate mobile voice and broadband coverage absent subsidies. The 
Commission further decided that geographic areas lacking unsubsidized, 
qualified 4G LTE service would be deemed ``eligible areas'' for MF-II 
support, and that it would use a competitive bidding process 
(specifically, a reverse auction) to distribute funding to providers to 
serve those areas. The Commission also decided that, prior to an MF-II 
auction, it would compile a list of areas that were presumptively 
eligible for MF-II support and it would provide a limited timeframe for 
challenges to areas that were found to be ineligible for support during 
the pre-auction process.
    3. Seven petitions were filed seeking reconsideration of the MF-II 
Report & Order, and petitions for reconsideration of issues related to 
the MF-II challenge process were addressed in the MF-II Challenge 
Process Order on Reconsideration and Second Report and Order (MF-II 
Challenge Process Order or MF-II Order on Reconsideration), adopted on 
August 3, 2017, released on August 4, 2017, 82 FR 42473, September 8, 
2017. The Commission deferred addressing the petitions, or portions 
thereof, requesting reconsideration of aspects of the MF-II Report & 
Order outside of the challenge process.

III. Second Order on Reconsideration

    4. We now resolve the remaining issues raised by petitioners. We 
grant the requests of petitioners, insofar as we amend the rules to 
apply the collocation requirement for MF-II recipients to ``all newly 
constructed'' towers. We affirm our decision to require that MF-II 
recipients obtain a letter of credit (LOC), but grant the petitions 
insofar as we modify the LOC requirements to align our MF-II rules with 
recent changes made in the Connect America Fund Phase II (CAF-II) 
proceeding. These modifications should provide MF-II support recipients 
with some additional relief from the costs of maintaining an LOC and 
alleviate some of the concerns raised by petitioners and commenters. 
Additionally, for the reasons explained below, we deny the petitions 
seeking reconsideration of the Commission's decisions to: (i) Establish 
an MF-II budget of $4.53 billion over a term of ten years; (ii) 
disburse annual support on a monthly basis; (iii) adopt performance 
metrics for supported networks requiring a median data speed of 10/1 
megabits per second (Mbps) and data latency of 100 milliseconds (ms) 
round trip; (iv) not adopt bidding credits for the auction; and (v) not 
prevent MF-II support recipients from entering into equipment 
exclusivity arrangements. We also decline to clarify or limit the role 
of the Universal Service Administrative Company (USAC) in testing 
winning bidders' compliance with MF-II performance metrics, public 
interest obligations, or other program requirements.

A. Tower Collocation

    5. First, we clarify that the MF-II collocation rule, 47 CFR 
54.1015(f), should require a recipient of MF-II funds to allow for 
reasonable collocation by other providers of services that meet the 
technological requirements of MF-II on all towers that the MF-II 
recipient owns or manages that it ``newly constructed'' to satisfy MF-
II performance obligations in the areas for which it receives support. 
The Commission stated its intent to adopt the same collocation and 
voice and data roaming obligations for MF-II winning bidders as it had 
adopted for MF-I. However, the rule in MF-I required reasonable 
collocation by other providers of services that met the technological 
requirements of MF-I on ``all newly constructed towers that the 
recipient owns or manages in the area for which it receives support,'' 
while the language of the rule adopted in the MF-II Report & Order 
applies to ``all towers.'' We make this clarification in order to 
promote our goal of ensuring that publicly funded investments can be 
leveraged by other service providers. Accordingly, we amend the 
language of section 54.1015(f) to provide that the MF-II collocation 
requirement applies to ``all newly constructed'' towers that the MF-II 
recipient owns or manages in the areas for which it receives support.

B. Letters of Credit

    6. We affirm the Commission's decision to require an MF-II 
recipient to obtain an LOC before it begins receiving support 
disbursements, but we modify the Commission's rules to provide some 
additional relief from the burden

[[Page 17936]]

associated with maintaining an LOC. Specifically, we will permit an MF-
II recipient to reduce the value of an LOC to 60 percent of the total 
support already disbursed plus the amount of support that will be 
disbursed in the coming year once it has been verified that the MF-II 
recipient has met the 80 percent service milestone for the area(s) 
covered by the LOC. This modification should alleviate some of the 
concerns raised by petitioners and commenters and aligns our MF-II 
requirements with recent changes made to the CAF-II requirements. We 
also clarify, consistent with the Commission's stated intent in the MF-
II Report & Order, that an MF-II recipient may further reduce its costs 
by canceling the LOC as soon as USAC, in coordination with the 
Commission, verifies that the recipient has met the final performance 
milestone (i.e., we do not require that the LOC be maintained after its 
purpose is no longer served). We deny the petitions for reconsideration 
to the extent they seek other changes to our LOC requirements.
    7. In the MF-II Report & Order, the Commission adopted an LOC 
requirement for all winning bidders. Specifically, before a winning 
bidder can be authorized to receive MF-II support, it must obtain an 
irrevocable stand-by LOC(s) from an eligible bank that covers the first 
year of support for all of the winning bids in the state. Before a 
recipient can receive its MF-II support for the coming year, the 
recipient must modify, renew, or obtain a new LOC to ensure that it is 
valued at a minimum at the total amount of support that has already 
been disbursed plus the amount of support that is going to be provided 
in the next year. Once the MF-II recipient has met its 60 percent 
service milestone, its LOC may be valued at 90 percent of the total 
support amount already disbursed plus the amount that will be disbursed 
in the coming year. Once the MF-II recipient has met its 80 percent 
service milestone, it may reduce the value of the LOC to 80 percent of 
the total support amount already disbursed plus the amount that will be 
disbursed in the coming year. The LOC must remain open until USAC, in 
coordination with the Commission, has verified that the MF-II recipient 
has met its final benchmark: 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. If an MF-II recipient 
fails to meet a required service milestone after it begins receiving 
support, then fails to cure within the requisite time period, and is 
unable to repay the support that USAC seeks to recover, either the 
Wireline Competition Bureau or the Wireless Telecommunications Bureau 
will issue a letter evidencing the failure and declaring a default. 
USAC will then draw on the LOC(s) to recover 100% of the support that 
has been disbursed to the ETC for that state. The MF-II Report & Order 
provides that if service ceases after the final deployment milestone 
has been reached and the LOC has been terminated, the Commission will 
cease payment of ongoing support until service resumes. At the time 
these MF-II rules were adopted, they were consistent with the 
requirements for CAF-II recipients.
    8. We are convinced by claims of petitioners and commenters that 
the Commission's existing MF-II LOC requirements may warrant additional 
relief on reconsideration. We continue to conclude that MF-II bidders 
will take into account the costs associated with program requirements, 
including an LOC, as they formulate their bids, and that many bidders 
can do so without the consequences alleged by some petitioners and 
commenters. We nonetheless recognize that the costs associated with 
maintaining an LOC may pose a greater financial burden on those bidders 
that lack the resources of larger, more established companies. Such 
bidders may have to factor relatively higher LOC-related costs into 
their bids. One purpose of using competitive bidding to select support 
recipients is that it promotes providing support to those parties that 
can accomplish the MF-II program goals in the most cost-effective 
manner. However, we recognize that the exact cost of any requirement, 
including obtaining and maintaining an LOC, will affect each 
prospective bidder in the MF-II auction differently. A bidder's LOC-
related costs will likely vary based on the amount of support that it 
is authorized to receive, and the impact of those costs on the bidder 
will also vary based on its size and creditworthiness. Thus, we cannot 
reasonably predict the costs of our LOC requirements for each potential 
winning bidder and weigh them relative to the benefit to the public of 
protecting the funds from default. The fees associated with maintaining 
an LOC can range by several percentage points and, when applied to the 
sizable amounts of support that may be awarded to bidders here, the 
costs may become substantial over time, particularly for winning 
bidders that are small businesses and new entrants.
    9. Accordingly, consistent with the rule modifications we recently 
adopted in the Connect America Fund Phase II Auction Order on 
Reconsideration, WC Docket No. 10-90 et al., FCC 18-5, we modify our 
LOC requirements to permit an MF-II recipient to reduce the value of an 
LOC to 60 percent of the total support already disbursed plus the 
amount of support that will be disbursed in the coming year once it has 
been verified that the MF-II recipient has met the 80 percent service 
milestone for the area(s) covered by the LOC. In the MF-II Report & 
Order, the Commission indicated that it would require MF-II recipients 
to demonstrate compliance with our coverage requirements by submitting 
data consistent with the evidence we determined to be necessary in the 
MF-II challenge process. Once USAC is able to verify that a recipient's 
80 percent service milestone has been met, the recipient will be able 
to reduce the value of its LOC.
    10. By increasing the amount by which an LOC may be reduced after 
verification that an MF-II recipient has met a significant portion of 
its performance obligations, we can provide MF-II recipients with a 
measure of relief from the costs of maintaining an LOC without posing 
undue risks to the Universal Service Fund. As the Commission stated in 
the MF-II Report & Order, we expect that the risk of default will 
decrease as an MF-II recipient meets its deployment milestones. We 
therefore conclude that the benefits of providing additional relief 
from some of the costs associated with maintaining an LOC outweigh the 
risk that we will not be able to recover an additional portion of the 
support if the recipient is unable to repay the Commission in the event 
of a default. Moreover, as we discuss below, an MF-II recipient that is 
affected by high LOC-related costs may also choose to build out its 
network more quickly so that its LOC can be terminated sooner. We 
therefore find it reasonable to grant the petitions for 
reconsideration, in part, to reduce the burden associated with 
maintaining an LOC until the final performance benchmark has been met 
and verified by USAC.
    11. We are not, however, persuaded by arguments that we should 
eliminate the requirement for an MF-II recipient to obtain an LOC 
because they are unnecessary to protect the public interest. Our 
obligation to safeguard the disbursement of universal service support 
justifies requiring an LOC and outweighs the limited burden incurred by 
winning bidders. For this same reason, we are not convinced by the 
contentions that an MF-II LOC requirement is unnecessary for rural 
telephone companies based on their history of providing service and 
using

[[Page 17937]]

universal service support without default. Our responsibility to 
protect universal service funds does not diminish based on a support 
recipient's past performance, the nature of its business, or its size. 
We are equally unpersuaded by a petitioner's suggestion that because 
the Commission has not yet had to draw on any LOC in MF-I, it is 
unnecessary for us to require one for MF-II. To the contrary, we find 
that premise supports our conclusion that an LOC requirement deters 
defaults and fulfills its intended purpose of protecting the public 
funds.
    12. Similarly, we disagree with the assertion that the Commission 
should eliminate the LOC requirement and instead ensure the security of 
program funds by imposing a monetary forfeiture on the defaulting MF-II 
recipient or using the threat of revocation or non-renewal of its 
licenses as leverage to demand repayment of the funds. The exercise of 
our forfeiture, revocation, and licensing authority requires additional 
procedures and standards that are not well suited to the prompt action 
required in enforcing our milestones because, among other reasons, such 
authority does not effectively address the regulatory purpose behind 
our adoption of the LOC--making the Universal Service Fund whole if a 
support recipient failed to fulfill its MF-II performance requirements. 
Without an LOC, the Commission has no security to protect itself 
against the risks of default. Accordingly, we affirm the Commission's 
prior conclusion that the LOC requirement is necessary to ensure the 
recovery of a significant amount of MF-II support should such a need 
arise, and we find that, on balance, our commitment to fiscal 
responsibility supports the limited burden faced by support recipients.
    13. We also decline to grant requests in the petitions for 
reconsideration to take further steps to modify our LOC requirements. 
In the MF-II Report & Order, the Commission already took a number of 
steps to help lessen LOC costs, including expanding the number and 
types of banks eligible to issue LOCs so that winning bidders can 
obtain LOCs from banks with which they have existing relationships. 
Although some entities may still find that participating in the MF-II 
auction is cost-prohibitive or that they are less likely to place 
winning bids, we are not convinced that we should jeopardize our 
ability to recover a significant amount of support if such entities 
were to participate and later become unable to meet the MF-II 
performance milestone obligations and to repay the Commission for their 
compliance gap. While we have not implemented any of the specific 
proposals of these petitioners, we conclude that, on balance, the 
relief provided above should adequately address the nature of the 
concerns they raise. The approaches suggested by petitioners would add 
greater complexity and testing expenses for support recipients and 
would impose increased verification burdens on USAC without the 
corresponding benefit of significantly speeding the completion of MF-II 
performance requirements. Finally, we decline to adopt the request by a 
mobile provider to accelerate the service milestones, eliminate the LOC 
requirement, and pay a recipient only after compliance with a milestone 
has been verified. Such an approach, like the other suggestions we 
reject above, would require us to disburse universal service funds 
without being able to recoup support from a recipient if the recipient 
subsequently defaulted on its remaining performance requirements.
    14. In reviewing arguments regarding the costs of maintaining an 
LOC, we also emphasize that the Commission's LOC requirements already 
include an incentive for a recipient to meet its final performance 
milestone as soon as possible, because once it has been verified that a 
support recipient has met its final performance milestone, the 
recipient can further reduce costs by no longer maintaining that LOC. 
In this regard, we note that the Commission provided in the MF-II 
Report & Order that the LOC must remain in place until it has been 
verified that an MF-II participant has met its minimum coverage and 
service requirements at the end of the six-year milestone. We interpret 
this language to allow the MF-II recipient to further reduce its costs 
by no longer maintaining the LOC as soon as USAC, in coordination with 
the Commission, verifies that the recipient has met the final 
performance milestone (i.e., we do not require that the LOC be 
maintained after its purpose is no longer served). We anticipate that 
this clarification, together with the rule modification we adopt above, 
should provide MF-II recipients with additional relief from the burden 
of maintaining an LOC.

C. Mobility Fund Phase II Budget

    15. We affirm the MF-II total budget amount of $4.53 billion that 
the Commission adopted in the MF-II Report & Order, and we deny the 
petition seeking to increase it. Petitioners addressing the budget 
contend that this amount is insufficient to achieve ubiquitous 
availability of mobile services and reasonable comparability of service 
between urban and rural areas. They also argue that the budget was not 
supported by actual carrier cost data related to coverage needs. The 
Commission established the amount of the MF-II budget by starting with 
the $483 million of current annual legacy high-cost support received by 
wireless providers, excluding Alaska. It multiplied that amount over 
the ten-year term of MF-II and then subtracted $300 million, 
representing the estimated amount needed for the phase-down of 
competitive eligible telecommunications carrier (CETC) support in areas 
already fully covered with unsubsidized 4G LTE, for a total budget of 
$4.53 billion over ten years. The Commission reasoned that basing its 
budget upon this amount best balanced its goal of preserving and 
advancing mobile broadband service with its obligation to be fiscally 
responsible with limited universal service funds.
    16. We are not persuaded that we should reconsider that decision 
and base the MF-II budget on carriers' projected costs for deployment 
as some parties advocate. Phase II of the Mobility Fund is a 
considerable departure from the prior method of distributing CETC 
funding, and we anticipate that a $4.53 billion budget, distributed in 
a more efficient and targeted manner, will lead to significant 
expansion and improvement in the provision of mobile voice and 
broadband services to areas that would otherwise be underserved or 
unserved without support. After the Commission has the opportunity to 
evaluate the impact of the MF-II auction, it can determine whether 
additional funding (and if so, how much) is needed. Furthermore, while 
we believe that the total budget of $4.53 billion will be sufficient to 
address a more targeted set of eligible areas, we reiterate that MF-II 
is only one component of our broader universal service reform efforts, 
and we need not wait until the end of the MF-II support term to 
determine if additional funding is necessary.
    17. Moreover, the proposal to base the MF-II budget on carriers' 
projected costs for providing service to all census blocks throughout 
the U.S. unserved by 4G LTE fails to address the Commission's long-
standing commitment to fiscal responsibility and would be inconsistent 
with extensive 4G LTE deployment through private investment in recent 
years. As a responsible steward of the Universal Service Fund, the 
Commission adopted a budget that reflected its priorities in allocating 
finite funds to areas of

[[Page 17938]]

greatest need to maintain and expand critical mobile voice and 
broadband services. To increase the size of the MF-II budget 
significantly above the amount of legacy support currently provided to 
mobile CETCs would improperly ignore the burden on those paying for the 
fund, thereby abandoning one of the main concerns the Commission sought 
to address through universal service reform. Indeed, if the Commission 
were to adopt this proposal, consumers and businesses would shoulder 
the burden of potentially increasing the MF-II budget by tens of 
billions of dollars. This increase would not be consistent with the 
Commission's stated intention to limit universal service expenditures 
in light of extensive 4G LTE deployment in recent years.
    18. Recognizing that the Universal Service Fund is limited, the 
Commission has consistently determined the amount of the MF-II budget 
by starting with the amount of existing CETC support, subtracting the 
support going to areas where support is not needed, and redirecting 
that amount to the areas in need. By weighing the need to distribute 
support to areas that would otherwise be unserved against the burden 
that consumers and businesses must bear by contributing to the 
Universal Service Fund, the Commission has demonstrated a commitment to 
fiscal responsibility while acknowledging that its efforts are needed 
to supplement private investment. Taking this type of balanced approach 
has been previously upheld by the Tenth Circuit Court of Appeals, which 
noted that, in challenging the sufficiency of the MF-II budget, the 
petitioners in In re FCC 11-161, 753 F.3d 1015, 1098-100 (10th Cir. 
2014), had failed to discredit (i) the Commission's reliance on its 
finding that then-current CETC funding was being misallocated or (ii) 
the Commission's predictive judgment that redirecting those funds would 
be sufficient to sustain and expand mobile broadband service. In the 
MF-II Report & Order, the Commission similarly relied on staff analysis 
of data that continued to reveal that current mobile CETC funds remain 
misallocated, and it again exercised its predictive judgment in 
determining that an MF-II budget of $4.53 billion, when distributed 
cost effectively, should make meaningful progress in eliminating 
lingering coverage gaps. The petitioners have failed to convince us 
that this decision to apply a balanced approach in setting the MF-II 
budget is in error. We continue to maintain that using the current 
level of mobile CETC support, minus the phase-down amount needed for 
areas where support is not needed, and redirecting funding to areas 
unserved by qualified 4G LTE will provide a significant improvement in 
mobile coverage while not increasing the burden on those contributing 
to universal service funding.
    19. For similar reasons, we further conclude that the claim that 
the amount of the MF-II budget is not supported by data related to 
coverage needs is equally flawed. While it is true that, for the 
reasons explained above, the Commission did not base the amount of its 
MF-II budget upon carrier cost deployment data, it did use data 
regarding the provision of service to eligible areas when establishing 
the budget. Specifically, the Commission relied on a 2016 analysis by 
the Wireless Telecommunications Bureau (Wireless Bureau) of mobile 
broadband providers, which revealed that, conservatively, three 
quarters of support currently distributed to mobile providers is being 
directed to areas where it is not needed. Moreover, the Wireless 
Bureau's analysis showed that, as of 2016, 1.4 million people in the 
U.S. have no LTE coverage and another 1.7 million live in areas where 
LTE coverage is provided only on a subsidized basis, so that 3.1 
million people (or approximately 1 percent of the U.S. population) live 
in areas with no LTE or only subsidized LTE. Thus, staff analysis of 
data regarding the provision of service revealed that, despite 
extensive private investment spurring 4G LTE deployment generally, 
certain areas remain unserved without government subsidies, which the 
Commission took into consideration when it chose to reallocate current 
CETC support and derive greater coverage from the limited amount of 
funding.
    20. In addition, to ensure that the MF-II support is directed 
specifically to areas that lack unsubsidized qualifying 4G LTE 
coverage, we have adopted a challenge process that is administratively 
efficient and fiscally responsible, and will enable us to resolve 
eligible area disputes quickly and expeditiously, so that limited funds 
are focused on the areas that need it the most. As part of the 
challenge process, we have also undertaken a new, one-time collection 
of standardized, up-to-date 4G LTE coverage data from mobile wireless 
providers. These actions, taken together with the use of competitive 
bidding to distribute support, will focus MF-II funds on areas that 
lack unsubsidized qualified 4G LTE service, thereby providing 
additional funds for those targeted areas that warrant such funding. 
These actions also will ensure the budget is used to minimize service 
disparities between rural and urban areas, while continuing our 
obligation to be a fiscally responsible steward of universal service 
funding. Therefore, we decline to revise the MF-II budget at this time.

D. Monthly Disbursement Schedule

    21. We decline to alter the Commission's monthly disbursement 
schedule for MF-II. The Commission, in deciding to provide support in 
monthly disbursements as it had adopted for the CAF program, including 
CAF-II, reasoned that such an approach would provide MF-II recipients 
with reliable and predictable support payments that conform to a 
variety of business cycles. We are not persuaded that, instead of 
monthly disbursements of MF-II support to winning bidders, the program 
should provide larger installment payments early in the construction 
process that are more closely matched to some providers' expected 
outlays. Although the Commission recognized that some MF-II support 
recipients might incur higher up-front project costs, it also observed 
that the timing of project expenses varies. Thus, it is 
administratively burdensome, if not impossible, for the Commission, 
USAC, and the winning bidders to try to match payments to expenses in a 
manner that would synchronize precisely with the budgetary needs of all 
bidders. Further, the Commission observed that, in Mobility Fund Phase 
I (MF-I), even with support payments based on deployment milestones, 
disbursements were not tied to the timing of expenditures, as 
petitioners request. A shift to a front-loaded disbursement mechanism 
or a cost reimbursement process, as requested by petitioners, would 
place undue strains on the universal service budget, and would thereby 
undermine the ability of the Commission to ensure continued program 
compliance over the entire 10-year term. We note that the Commission 
also purposefully aligned its disbursement schedule with the schedule 
adopted for CAF-II, which established regular and predictable monthly 
payments that would not exceed the budget in any one year of the term. 
We believe that this approach best balances the burdens on the 
Commission and USAC with the budgetary needs of recipients.

[[Page 17939]]

E. Minimum Baseline Performance Requirements for Data Speeds and 
Latency

    22. We also decline to reconsider the minimum baseline performance 
requirements for recipients of MF-II funding. In the MF-II Report & 
Order, the Commission decided that a recipient of MF-II support must 
provide a minimum level of service with a median data speed of 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 to be specified as part of the pre-
auction process. In addition, an MF-II support recipient must provide 
reports of speed and latency demonstrating that at least 90 percent of 
the required measurements have a data latency of 100 milliseconds (ms) 
or less round trip. The Commission determined that recipients of MF-II 
support must provide service that meets the minimum baseline 
performance requirements of 4G LTE or better, and concluded that these 
requirements will ensure that finite universal service funds are used 
efficiently to provide rural consumers access to robust mobile 
broadband service at speeds reasonably comparable to the 4G LTE service 
being offered in urban areas.
    23. We are not persuaded that the minimum baseline performance 
requirement for median data speeds should be reduced to \5/1\ Mbps, as 
one provider urges. The Commission seeks to ensure that the performance 
of broadband service in rural and high-cost areas is reasonably 
comparable to that in urban areas, and the Commission's own analysis at 
the time the MF-II Report & Order was adopted indicated that customers 
of nationwide carriers were receiving data at median speeds of around 
10/1 Mbps or faster. Furthermore, in our more recent MF-II Order on 
Reconsideration, we explained that, in contrast to the 5 Mbps 
eligibility benchmark in the challenge process, which serves to target 
support where it is currently needed most, the 10 Mbps minimum baseline 
performance requirement makes sure that service in eligible areas is 
reasonably comparable to future urban offerings.'' This forward-looking 
approach is consistent with past Commission decisions in the universal 
service context and recognizes that consumer demand for faster mobile 
wireless services is growing. Moreover, MF-II funding provides on-
going, long-term support over a 10-year period, and reducing the 
performance requirement to a 5 Mbps download speed increases the risk 
of directing funds to areas that are already receiving download speeds 
just below the 5 Mbps eligibility threshold because such areas could 
require very little investment to meet the lowered performance 
requirement and would, accordingly, be more competitive at auction. 
Awarding funds to such areas increases the risk of only marginally 
benefiting consumers in those areas by not significantly improving the 
status quo download speeds for a decade. Further, a lowered performance 
requirement would reduce the final performance milestone for median 
data speeds in all areas, thereby increasing the likelihood that those 
areas will not receive service that is reasonably comparable to urban 
areas by the end of the support term, despite the distribution of 
potentially significant MF-II support. We therefore conclude that 
reducing the performance benchmark to a median data speed of only 5/1 
Mbps would risk relegating rural areas with the greatest need to a 
lower standard of service that is not comparable to urban 4G LTE 
service.
    24. Similarly, with respect to latency, the Commission has noted 
that latency is important for a variety of real-time, interactive 
applications, including Voice over internet Protocol (VoIP), video 
calling, and distance learning, which ``may be effectively unusable 
over high latency connections, regardless of the download/upload speeds 
being offered.'' Contrary to petitioner's assertion that the Commission 
failed to account for the inherent differences between wireless and 
wireline technologies in adopting the 100 ms latency standard, the 
Commission established the performance metrics, including latency, to 
ensure reasonably comparable service. According to petitioner's own 
data analysis, the majority (approximately 75 percent) of existing 
networks already meet the 100 ms standard with 90 percent probability 
in Metropolitan Statistical Areas (MSAs). Further, technological 
improvements, including newly available 600 MHz spectrum, will likely 
enable more carriers to exceed this performance requirement in the near 
future. Thus, reducing the performance benchmark for data latency to 
220 ms would risk relegating rural areas to a lower standard of service 
that is not comparable to urban 4G LTE service, which includes support 
for advanced mobile applications. Accordingly, in light of the 
statutory mandate with respect to reasonably comparable service, we 
affirm that the minimum baseline performance requirement for data 
latency is that at least 90 percent of all required measurements must 
be at or below 100 ms round trip.

F. Bidding Credits

    25. We decline to reconsider the Commission's decision not to adopt 
bidding preferences for the MF-II auction. In the MF-II Report & Order, 
the Commission rejected the notion that small and rural carriers needed 
targeted assistance to secure MF-II support based, in part, on its 
observation that numerous smaller carriers had placed winning bids in 
the Mobility Fund Phase I (MF-I) auction without the aid of bidding 
credits. Contrary to petitioners' assertions, the Commission 
specifically noted that commenters had advocated for bidding 
preferences for other entities, including rural carriers, for the MF-II 
auction. The Commission also reasoned that small business bidding 
credits would potentially decrease the reach of MF-II funding, and 
thereby decrease additional coverage expansion or preservation. This 
rationale is equally applicable to any type of bidding preference, 
including those for rural service providers.
    26. We reject petitioners' claims that the Commission has a 
statutory obligation under section 309(j) of the Act to promote small 
business and rural carrier participation in the universal service 
context. The Commission's authority to award universal service support 
through competitive bidding is not derived from section 309(j), which 
authorizes the use of competitive bidding for granting spectrum 
licenses or construction permits, not for reverse auctions to award 
universal service funding. Moreover, even in spectrum auctions, where 
section 309(j) does apply, the Commission does not always provide 
bidding credits, and courts have held that the statutorily prescribed 
objectives in section 309(j)(3) are not mandatory. Additionally, the 
Commission's primary goal in using competitive bidding in MF-II is to 
maximize the impact of the funding to increase and preserve mobile 
coverage. Since bidding preferences for any entities (be they small 
businesses or rural service providers) would hamper that goal by 
effectively decreasing the number of eligible areas covered by the 
finite level of funding, the Commission chose not to award bidding 
preferences in lieu of greater coverage. Accordingly, we are not 
persuaded that section 309(j) obligates us to overlook this concern and 
adopt bidding preferences for the MF-II auction.
    27. Likewise, we reject petitioner's assertion that the Commission 
should not have factored into its decision for

[[Page 17940]]

MF-II the fact that numerous small and rural carriers participated 
successfully in the MF-I auction without bidding credits. We find it 
reasonable, and certainly useful, to consider past auction 
participation in formulating our policy concerning bidding preferences 
in future auctions. Moreover, even if we were to accept petitioner's 
claim that MF-II is fundamentally different from MF-I because it 
involves ongoing support provided for more significant projects, the 
petitioner has failed to demonstrate that small and rural carriers 
would be less inclined, or able, to compete effectively in the auction 
absent bidding preferences. In the absence of such a demonstration, and 
in light of our concerns about the most efficient use of limited 
universal service funds, we affirm the decision in the MF-II Report & 
Order not to provide bidding credits in the MF-II auction.

G. Equipment Exclusivity Arrangements

    28. We dismiss a provider's request to impose a new certification 
requirement on all MF-II support recipients that they do not and will 
not participate in equipment exclusivity arrangements. The petition 
relies on comments that the provider filed in this proceeding in 2014; 
however, those 2014 comments make no reference to exclusivity 
arrangements. Thus, to the extent that the provider raises this 
argument for the first time in its Petition, we dismiss it as untimely. 
Further, in its 2012 Fourth Order on Reconsideration in the MF-I 
proceeding, adopted and released July 18, 2012, 77 FR 48453, August 14, 
2012, the Commission previously considered and rejected this provider's 
request for adoption of a bar on equipment exclusivity arrangements. In 
the MF-II Report & Order, the Commission again rejected proposals to 
restrict participation in an MF-II auction through additional 
eligibility requirements and confirmed its intention to encourage 
participation by the widest range of applicants. Petitioner has 
identified no substantive basis upon which to reconsider the 
Commission's prior decisions not to restrict participation in the 
Mobility Fund by adopting additional requirements, including a bar on 
equipment exclusivity arrangements.

H. USAC's Role in Testing Winning Bidder Buildout Performance

    29. We decline to limit USAC's role in testing winning bidders' 
compliance with MF-II performance metrics, public interest obligations, 
or other program requirements as requested by a provider. We find no 
merit in contentions that we should limit USAC's responsibility for 
conducting compliance reviews in order to ensure a cost-efficient 
process.
    30. In the MF-II Report & Order, the Commission determined that it 
would require MF-II support recipients to submit data sufficient to 
demonstrate compliance with the MF-II coverage requirements. 
Specifically, section 54.1015 of our rules requires an MF-II support 
recipient to provide the data necessary to support its certifications, 
and that the submitted data must be in compliance with the standards 
set forth in the applicable public notice. In our role as a responsible 
steward of public funds, we are obligated to ensure that the funds 
disbursed through universal service programs are used for the purposes 
for which they were intended and that the recipients of support have 
met the terms and conditions under which the funds were awarded. 
Accordingly, in the USF/ICC Transformation Order or FNPRM, adopted 
October 27, 2011, released November 18, 2011, 76 FR 78384, December 16, 
2011, the Commission directed USAC to test the accuracy of 
certifications made pursuant to the new reporting requirements, noting 
that any oversight program to assess compliance should be designed to 
ensure that support recipients are reporting accurately to the 
Commission. The Commission specifically stated that such oversight 
should be designed to test some of the underlying data that form the 
basis for a recipient's certification of compliance with various 
requirements.
    31. In the case of MF-I, USAC's compliance reviews did not entail 
duplication of a recipient's drive tests as the petitioner contends, 
but rather verification of data transmission rates and transmission 
latency for a statistically valid random sample of a small portion of 
the total road miles for which a recipient claimed it was entitled to a 
support payment. Although the petitioner argues that USAC's role was 
redundant because USAC's drive tests ultimately validated the data the 
provider had already submitted for MF-I, we are not persuaded by the 
petitioner's claim that the benefits of USAC compliance review testing 
in the context of MF-I were outweighed by the time and expense spent 
conducting such testing. We decline to draw a conclusion about the 
overall value of USAC's compliance testing based only on the experience 
of one MF-I participant. Further, we find it lacking in logic to argue 
that it serves no purpose to attempt to verify, even by sampling, 
recipients' compliance with program requirements, merely because some 
recipients have been found, through such testing, to be in compliance. 
Compliance reviews, like audits, are an essential tool for the 
Commission and USAC to ensure program integrity and to detect and deter 
waste, fraud, and abuse. Therefore, we will not limit USAC's role in 
verifying the data that recipients submit to demonstrate compliance 
with our MF-II coverage requirements.

IV. Procedural Matters

A. Paperwork Reduction Act Analysis

    32. This Second Order on Reconsideration contains new or modified 
information collection requirements subject to the Paperwork Reduction 
Act of 1995 (PRA), Public Law 104-13. It will be submitted to the 
Office of Management and Budget (OMB) for review under section 3507(d) 
of the PRA. OMB, the general public, and other Federal agencies will be 
invited to comment on the new or modified information collection 
requirements contained in this proceeding. In addition, the Commission 
notes that pursuant to the Small Business Paperwork Relief Act of 2002, 
Public Law 107-198, we previously sought specific comment on how the 
Commission might further reduce the information collection burden for 
small business concerns with fewer than 25 employees.
    33. In this present document, we have assessed the effects of the 
modifications that the Commission is making to the letter of credit 
rule and the collocation rule adopted by the Commission in the MF-II 
Report & Order regarding the information collection burdens on small 
business concerns. The Commission describes impacts that might affect 
small businesses, which include most businesses with fewer than 25 
employees, in the Supplemental Final Regulatory Flexibility Analysis 
(FRFA) in Appendix B of the Second Order on Reconsideration.

B. Congressional Review Act

    34. The Commission will send a copy of the Second Order on 
Reconsideration to Congress and the Government Accountability Office 
pursuant to the Congressional Review Act.

C. Supplemental Final Regulatory Flexibility Analysis

    35. As required by the Regulatory Flexibility Act of 1980, as 
amended (RFA), the Commission prepared Initial Regulatory Flexibility 
Analyses (IRFAs) in connection with the USF/ICC Transformation FNPRM, 
the CAF Further Notice, adopted April 23, 2014, released June 10, 2014, 
79 FR 39195,

[[Page 17941]]

July 9, 2014, and the MF-II FNPRM (collectively, MF-II FNPRMs). The 
Commission sought written public comment on the proposals in the MF-II 
FNPRMs including comments on the IRFAs and Supplemental IRFA. The 
Commission included Final Regulatory Flexibility Analyses (FRFAs) in 
connection with the CAF Report & Order, adopted April 23, 2014, 
released June 10, 2014, 79 FR 39163, July 9, 2014, the MF-II Report & 
Order, and the MF-II Challenge Process Order (collectively, the MF-II 
Orders). This Supplemental Final Regulatory Flexibility Analysis 
(Supplemental FRFA) supplements the FRFAs in the MF-II Orders to 
reflect the actions taken in the Second Order on Reconsideration and 
conforms to the RFA.
1. Need for, and Objectives of, the Second Order on Reconsideration
    36. The Second Order on Reconsideration addresses the remaining 
issues raised by parties in petitions for reconsideration of the 
Commission's MF-II Report & Order that adopted the framework for the 
Mobility Fund Phase II (MF-II) and the Tribal Mobility Fund Phase II. 
These universal service funding mechanisms will provide on-going high-
cost support to extend mobile voice and broadband coverage to unserved 
and underserved areas. In the Second Order on Reconsideration, the 
Commission amends the collocation rules adopted in the MF-II Report & 
Order to apply the collocation requirement for MF-II recipients to 
``all newly constructed'' towers and modifies the letter of credit 
(LOC) requirements to align our MF-II rules with recent changes made in 
the CAF-II Order on Reconsideration. These LOC modifications should 
provide MF-II support recipients with some additional relief from the 
costs of maintaining an LOC. Moreover, by resolving these petitions, 
the Commission takes another significant step toward holding an MF-II 
auction in which service providers will compete for support to offer 
service meeting the minimum baseline performance requirements of 4G LTE 
or better in primarily rural areas of the country that lack qualified 
unsubsidized 4G LTE service.
2. Summary of Significant Issues Raised by Public Comments in Response 
to the IRFAs
    37. There were no comments filed that specifically addressed the 
IRFAs that are relevant to the issues discussed here.
3. Response to Comments by the Chief Counsel for Advocacy of the Small 
Business Administration
    38. 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 for Advocacy of the Small Business Administration 
(SBA), and to provide a detailed statement of any change made to the 
proposed rules as a result of those comments.
    39. The Chief Counsel did not file any comments in response to the 
proposed rules in this proceeding.
4. Description and Estimate of the Number of Small Entities to Which 
the Procedures Will Apply
    40. 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.
    41. As noted above, FRFAs were incorporated into the MF-II Orders. 
In those analyses, we described in detail the small entities that might 
be significantly affected. Accordingly, in this Supplemental FRFA we 
hereby incorporate by reference the descriptions and estimates of the 
number of small entities from the previous FRFAs in the MF-II Orders.
5. Description of Projected Reporting, Recordkeeping, and Other 
Compliance Requirements for Small Entities
    42. We expect the amended rules in the Second Order on 
Reconsideration will not impose any new or additional reporting or 
recordkeeping or other compliance obligations on small entities and, as 
described below, will reduce their costs.
6. Steps Taken To Minimize the Significant Economic Impact on Small 
Entities, and Significant Alternatives Considered
    43. The RFA requires an agency to describe any significant 
alternatives that it has considered in reaching its proposed approach, 
which may include the following four alternatives (among others): ``(1) 
The establishment of differing compliance or reporting requirements or 
timetables that take into account the resources available to small 
entities; (2) the clarification, consolidation, or simplification of 
compliance or reporting requirements under the rule for small entities; 
(3) the use of performance, rather than design, standards; and (4) and 
exemption from coverage of the rule, or any part thereof, for small 
entities.''
    44. The Commission has taken steps which will minimize the economic 
impact on small entity MF-II recipients because we recognize that the 
costs associated with maintaining an LOC may pose a greater financial 
burden on those bidders that lack the resources of larger, more 
established companies. Such bidders may have to factor relatively 
higher LOC-related costs into their bids. One purpose of using 
competitive bidding to select support recipients however is that it 
promotes providing support to those parties that can accomplish the MF-
II program goals in the most cost-effective manner. Therefore, in the 
Second Order on Reconsideration we have made a modest reduction in the 
required value of the letter of credit for MF-II recipients that have 
met the 80 percent service milestone for the area(s) covered by the 
LOC. Moreover, we clarify that small entity and other MF-II recipients 
may further reduce their costs by no longer maintaining the LOC as soon 
as USAC, in coordination with the Commission, verifies that the 
recipient has met the final performance milestone (i.e., we do not 
require that the LOC be maintained after its purpose is no longer 
served). These steps should alleviate some of the economic impact for 
small entity MF-II recipients and aligns our MF-II requirements with 
recent changes made to the CAF-II requirements.
7. Report to Congress
    45. The Commission will send a copy of the Second Order on 
Reconsideration, including this Supplemental FRFA, in a report to 
Congress pursuant to the Congressional Review Act. In addition, the 
Commission will send a copy of the Second Order on Reconsideration, 
including this Supplemental FRFA, to the Chief Counsel for Advocacy of 
the SBA.

VI. Ordering Clauses

    46. 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

[[Page 17942]]

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 Sec. Sec.  1.1, 1.427, and 1.429 of the Commission's rules, 
47 CFR 1.1, 1.427, and 1.429, that the Second Order on Reconsideration 
is adopted.
     The parameters set forth in the Second Order on 
Reconsideration, along with all associated requirements also set forth 
therein, go into effect May 25, 2018, except for the 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 approval of those information 
collection requirements and the date they will become operative.
     The Petition for Reconsideration and/or Clarification 
filed by Rural Wireless Association, Inc. on April 12, 2017, is granted 
in part and denied in part to the extent described herein.
     The Petition for Reconsideration filed by Blooston Rural 
Carriers on April 27, 2017, is granted in part and denied in part to 
the extent described herein.
     The Petition for Reconsideration filed by Rural Wireless 
Carriers on April 27, 2017, is granted in part and denied in part to 
the extent described herein.
     The Petition for Reconsideration filed by T-Mobile USA, 
Inc. on April 27, 2017, is denied to the extent described herein.
     The Petition for Reconsideration filed by Buffalo-Lake 
Erie Wireless Systems L.L.C. dba Blue Wireless on April 27, 2017, is 
granted in part and denied in part to the extent described herein.
     The Commission's Consumer and Governmental Affairs Bureau, 
Reference Information Center, shall send a copy of the Second Order on 
Reconsideration, including the Supplemental Final Regulatory 
Flexibility Analysis, to the Chief Counsel for Advocacy of the Small 
Business Administration.

List of Subjects in 47 CFR Part 54

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

Federal Communications Commission.
Marlene Dortch,
Secretary.

Final Rules

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

PART 54--UNIVERSAL SERVICE

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

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


0
2. Amend Sec.  54.1015 by revising paragraph (f) to read as follows:


Sec.  54.1015   Public interest obligations.

* * * * *
    (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 newly constructed 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.
* * * * *

0
3. Amend Sec.  54.1016 by revising paragraph (a)(1)(ii) to read as 
follows:


Sec.  54.1016   Letter of credit.

    (a) * * *
    (1) * * *
    (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 60 percent of the total support amount already 
disbursed plus the amount that will be disbursed in the coming year.
* * * * *
[FR Doc. 2018-08689 Filed 4-24-18; 8:45 am]
 BILLING CODE 6712-01-P