For additional information, please contact Ken Johnson.

The Federal Communications Commission’s (FCC or Commission) Wireless Telecommunications Bureau and Wireline Competition Bureau (Bureaus) have released a Public Notice announcing and seeking comment on proposed procedures and eligible areas for the $300 million Mobility Fund Phase I reverse auction, designated Auction 901.[1]  Auction 901 is scheduled for Thursday, September 27, 2012.   

Bottom Line:  The race to obtain Phase I mobility funding has begun.  Interested wireless carriers should begin their auction preparations now by investigating eligible areas and filing comments on the proposed auction procedures.

BACKGROUND

In its November 18, 2011 Report and Order and Further Notice of Proposed Rulemaking (CAF Order) the Commission adopted actions that would, among other things, reform the universal service fund (USF) and create a broadband-based Connect America Fund (CAF).  The CAF Order also established that a reverse auction would be the mechanism to grant one-time support of $300 million to carriers that have committed to provide 3G or 4G voice and broadband services in areas where these services are unavailable, based on their bids to cover maximum road miles.  As further detailed below, areas eligible for Mobility Fund Phase I support are considered not economically sufficient to attract private investment.  Eligible areas also may not have a federal funding commitment for 3G or better wireless service, such as the Broadband Technology Opportunities Program and (BTOP) or Broadband Initiatives Program (BIP).  Participation in Mobility Fund Phase I also will be conditioned on tower collocation, data roaming and other obligations to minimize anticompetitive behavior.   Following the auction, winning bidders will need to submit long-form applications with an irrevocable, stand-by Letter of Credit to secure the Phase I support.  3G service needs to be deployed within two years and 4G or better service would need to be deployed within three years. 

THE PUBLIC NOTICE

In the Auction 901 Public Notice, the Bureaus propose and seek comment on procedures for (a) identifying geographic areas eligible for support; (b) determining the basic auction design, including the round format, how eligible areas may be aggregated for bidding, and how awardees will be selected; and (c) establishing certain other bidding procedures.  Following the comment period initiated by the Auction 901 Public Notice, the Bureaus will release another public notice detailing the final procedures for Auction 901 and providing a final list of eligible areas.

Eligible Areas

For Auction 901, the Bureaus have determined that they will use American Roamer data from January 2012.  Though the Bureaus have not completed analyzing this data, they expect this to be done in short order.  In the interim, the Bureaus have released a preliminary list of potentially eligible census blocks based on earlier data from October 2011.  Bennet & Bennet has already obtained the American Roamer 2012 data that the FCC will be relying on and has started working with it to develop products and services that will be useful to its client base (see below).  The FCC expect to release a revised list of potentially eligible areas based on the January 2012 data soon.  However, a copy of the preliminary list is available here (this list should not be relied on for Auction 901 and is just presented for sampling purposes), and a preliminary map of potentially eligible areas is available on the FCC’s website (again do not rely on the 2011 data as it will be updated at a later date).

The Bureaus ask commenters to indicate if they believe certain blocks in the revised list should not be eligible for support and to provide supporting evidence of that belief.  Additionally, areas that are shown as covered may be challenged and a showing can be made as to why these areas are not served.  Note:  Challenges to the revised list of potentially eligible areas will only be entertained in the form of comments to the Auction 901 Public Notice, which are due by February 24, 2012. 

Road Miles

To establish the road miles for each census block eligible for Phase I support, the Bureaus will use the TIGER road miles data made available by the Census Bureau.  To correlate with the census blocks identified in the preliminary list of eligible areas, the Bureaus have provided a list of TIGER road categories,[2] descriptions, and total miles.  This road miles list is available here.  To calculate road miles, the Bureaus included the total linear road miles within the block plus half of the sum of any linear road miles that form a border with an adjacent block to avoid double counting.  Regarding categories of roads to include as part of the calculation, the Bureaus propose using only Primary Roads (S1100); Secondary Roads (S1200); and local and rural roads and city streets (S1400).  According to the Bureaus, support for these classes of roads would comprise 84 percent of all roads captured in the nine TIGER road categories and would target areas that tend to be most regularly traveled.  Comment is sought on these proposals and rural carriers need to attempt to get additional classes of road miles included.  The more road miles included, the lower the bid will be per linear mile. 

Auction Structure and Procedures

The proposed procedures for Auction 901 generally resemble those used in spectrum auctions, but with a single-round reverse auction design because the Bureaus believe that multiple bidding rounds would be unnecessary for bidders to make informed bid decisions or submit competitive bids.  The Bureaus propose no maximum acceptable per-unit bid amounts, reserve amounts, or maximum opening bid amounts.  Placed bids may be removed only within the single round of bidding, but not after the bidding ends. 

Regarding auction default payments, which would be imposed on bidders that fail to meet auction obligations, the Bureaus propose a rate of five percent of the total defaulted bid.  Regarding performance default payments, which would be imposed on winning bidders that fail to satisfy performance obligations, the Bureaus propose assessing a 10 percent default payment applied to the total amount of Phase I support for which the winning bidder is eligible. 

The Bureaus also propose to withhold, until after the close of bidding and announcement of auction results, the public release of (1) information from bidders’ short-form applications regarding their interest in particular eligible census blocks and (2) information that may reveal the identities of bidders placing bids and taking other bidding-related actions.

Aggregation of Census Blocks

The preliminary list of potentially eligible areas contains approximately 491,000 census blocks that the Bureaus indicate are on average smaller than the minimum areas for which carriers seeking support are likely to want to extend service.  Because carriers bidding for support will likely want to bid on aggregated groups of census blocks, the Bureaus propose and seek comment on bidder-defined aggregations and, alternatively, predefined aggregations.

Bidder-Defined Aggregation

The Bureaus’ preferred approach to aggregation is the bidder-defined approach, whereby bidders would be permitted, with some restrictions, to create their own aggregations of census blocks and submit all-or-nothing package bids on those aggregations.  This would give bidders the opportunity to configure their bids to the geographic coverage of the cell sites that would be upgraded or built out with Phase I support.  If a bidder submitted multiple bids that partially overlapped (i.e., some of the same eligible census blocks were included in more than one bid), then the Bureaus propose that only one of the overlapping bids could be awarded to the bidder.  Aside from this restriction, a bidder could win any or all of its package bids.  Under this proposed approach, any given bid could cover census blocks only with a single cellular market area (CMA), and bidders would not be allowed to submit more than three bids per CMA.  In addition to package bids, the Bureaus ask whether bidders should be allowed to bid on individual census blocks in addition to the limited number of package bids per CMA, and if so, whether there should be a limit.

In any instances of overlap in areas specified by two or more bidders and where more than one bidder is selected, then competing providers in the same area could reduce revenues for the bidders.  Comment is sought on whether this sufficiently concerns bidders that the Bureaus should take action (i.e., allow them to make bids contingent on the overlap being less than some percentage of the total road miles associated with their package bid). 

Coverage Requirement for Bidder-Defined Aggregations 

The Bureaus seek comment on a requirement that each awardee meet a coverage threshold of 100 percent of road miles associated with the supported census blocks versus a different coverage requirement, such as 95 percent, but not lower than 75 percent.  The Bureaus ask that commenters proposing anything less than 100 percent justify this threshold in light of a bidder’s ability to create packages of the specific eligible blocks for which it seeks support. 

Predefined Aggregations

Alternatively, the Bureaus seek comment on a predefined aggregation approach.  For purposes of bidding, all eligible census blocks would be grouped by the census tract in which they are located, and bidders would bid by census tracts, not on individual blocks.          The lone exception here would be Alaska census blocks, which would not be aggregated due to their large size.  Under this approach, the bidder would indicate for each census tract a per-unit price to cover the road miles in the eligible census blocks within that census tract.  Support to awardees would be equal to the per-road mile rate of their bid multiplied by the number of road miles associated with the eligible census blocks within the tract.  Under this approach, bidders would be able to bid on multiple census tracts and win support for any or all of them.  The auction system would then rank all bids from lowest to highest based on per-road mile bid amount and assign support first to the bidder making the lowest per-road mile bid and then to the next lowest per-unit bids.  Here, awardees would be required to cover at least 75 percent of road miles associated with the supported census tracts. 

Reasonably Comparable Rates

Mobility Fund Phase I recipients must certify that they offer service in supported areas at consumer rates that are within a reasonable range of rates for similar service plans offered by mobile wireless providers in “urban areas.”   As proposed, a recipient could demonstrate compliance with the required certification that its rates are reasonably comparable if each of its service plans in supported areas is substantially similar to a service plan offered by at least one mobile wireless service provider in an urban area and is offered for the same or a lower rate than the matching urban service plan.  Here, the Bureaus propose defining an “urban area” as one of the nation’s 100 most populated CMAs.  A list of these top 100 CMAs is available here.  The Bureaus seek comment on this definition.  Additionally, they ask whether these reasonably comparable rates should be determined by looking at the closest of these CMAs to the supported area (e.g., the closest top 30 or 50 CMAs), which they believe may protect against distortions due to regional economic variations. 

NEXT STEPS

Comments on the Auction 901 Public Notice are due by February 24, 2012 and reply comments by March 9, 2012.  Parties interested in participating in the auction should consider filing comments in support of auction rules that will enhance their auction participation.  In addition, interested parties should begin to immediately explore their options for participating in the auction, and determine whether a challenge to the FCC’s covered/uncovered census blocks is in order.  These challenges are also due to be filed with the FCC by February 24, 2012.

Bennet & Bennet has developed several products and services to assist licensees and mobile operators in analyzing whether they are prime candidates to apply for Auction 901 support.  If you have any questions regarding Auction 901, wish to file comments, or require assistance in determining Phase I eligibility, please contact us.

[2] The nine categories include (1) Primary Road; (2) Secondary Road; (3) Local Neighborhood Road, Rural Road, City Street; (4) Vehicular Trail (4WD); (5) Ramp; (6) Service Drive usually along a limited access highway; (7) Alley; (8) Private Road for service vehicles (logging, oil fields, ranches, etc.); and (9) Internal U.S. Census Bureau use.

For additional information, please contact Tony Veach.

The proposed procedures for Auction 901 generally resemble those used in spectrum auctions, but with a single-round reverse auction design.  The Bureaus seek comment on these procedures, as well as (i) coverage requirements with respect to how eligible areas may be aggregated and (ii) a target rate for determining whether rates in rural, insular and high-cost areas are reasonably comparable to urban areas.  The Public Notice also provides:  (a) a preliminary list of potentially eligible census blocks; (b) a table of road categories, descriptions, and total miles identified in the preliminary list of potentially eligible census blocks; and (c) a list of top 100 CMAs as proposed “urban areas” for determining reasonably comparable rates.   A map of Phase 1 potentially eligible areas is available on the FCC’s website.  Comments on the Auction 901 Public Notice are due by February 24, 2012 and reply comments by March 9, 2012.

For additional information, please contact Bob Silverman.

The Federal Communications Commission (FCC or Commission) has published 24 Petitions For Reconsideration (Petitions) filed in opposition to the USF/ICC Order in the Federal Register, establishing deadlines for filing comments on the Petitions.  Initial oppositions to and comments on the Petitions are due on February 9 and replies are due February 21.

Bottom Line:  The opportunity to comment on these petitions gives carriers another opportunity to challenge some controversial provisions of the FCC’s USF order.  Please contact us if you are interested in filing oppositions or comments.

Petitions were filed by a variety of parties including large and small wireless carriers, wireline providers and associations, satellite carriers, state public utility commissions, and fixed wireless and VoIP providers.  While the Petitions express a range of concerns about the potential effects of the USF/ICC Order, the over-arching theme of many of the Petitions is that the reforms adopted in the order fail to provide sufficient support for current Eligible Telecommunications Carriers (ETCs).  A number of filers criticized the Commission’s new tribal rules, the April 1 deadline for financial reporting, unclear VoIP and access stimulation rules, and the structure of phased-out support for CETCs.  A brief summary of the issues raised in each of the petitions is set forth below.

WIRELESS PROVIDERS

General Communication, Inc. (GCI)

GCI’s Petition asked the Commission to reconsider rules regarding Alaskan and Tribal carriers as well as VoIP traffic.  The Petition asked the Commission to rethink the downward transition from current support levels in Alaska because there is “no evidence or public model showing that support is excessive.”  GCI urged the Commission to establish the remote Alaskan CETC cap based on current lines, rather than lines served in 2010.  The Petition also asked the Commission to revise the VoIP access transition to harmonize rates, and extend bidding credits to all entities serving tribal lands, not just those that are “Tribally-owned and controlled.”

MetroPCS Communications, Inc.

MetroPCS’s Petition focused on access stimulation.  It asked the Commission to broaden the definition of “access stimulation” beyond arrangements where revenue payment is “directly based on the billing or collection of access charges.”  According to the Petition, the Commission should make it clear that access stimulation also includes arrangements involving affiliates of CETCs.  On reconsideration, MetroPCS believes the Commission should make it clear that a carrier cannot defeat the traffic imbalance standard by creating distinct businesses.  Its Petition also criticized the FCC for failing to consider traffic stimulation in the intrastate access market.

MTPCS, LLC

MTPCS argued for reconsideration of phased-down support for CETCs.  MTPCS believes an exception for phased-down support should be allowed for CETCs in states that have imposed network coverage requirements as a condition of ETC designation.  The Petition also asks for an alternative calculation for CETCs whose baseline would result in a first-year phase down of more than 25%.

Nexus Communications

Nexus asked the Commission to clarify that its new definition of “supported services” does not prohibit states from certifying ETCs whose facilities are used to provide operator services or directory assistance.  Nexus also asked the Commission to state that its Order will have no effect on the status or operation of existing low-income ETCs.

NTCH, Inc.

NTCH asked the Commission to accelerate the “generous” glide-paths for LECs and CETCs, and prohibit LECs from charging excessive roaming rates while receiving public funds. The Petition asked the FCC to prioritize AWS-3 spectrum for service to unserved areas with a strong preference toward carriers without large holdings.  NTCH also asked the Commission to broaden the definition of an “unsubsidized competitor” to include “any competitor” which provides broadband communications at levels set by the Commission, without regard to whether the service is fixed or mobile.

Sprint Nextel Corporation

Sprint focused heavily on traffic pumping.  It sought clarification that the Order does not overturn previous Commission rulings or standards for determining whether a LEC’s free service provider is a legitimate end-user/customer under its access tariff.  Sprint also asked the Commission to reconsider the use of price-cap LEC benchmarks for those carriers that meet the traffic pumping triggers.  It provided suggestions for a more effective true-up mechanism for CLEC stimulated traffic that exceeds the price-cap LECs traffic volume, and asked that LECs have 15 days after meeting the triggers to file a revised access tariff.

T-Mobile USA, Inc.

Like MTPCS, T-Mobile’s Petition addressed support for CETCs.  T-Mobile argued that changes in the rules freezing support for CETCs fail to account for carriers that were designated either: (1) for part of 2011; or (2) too late to receive 2011 support.  For the first category, T-Mobile suggested that the rules be revised to direct that the baseline level of monthly support be calculated by dividing the total amount of support by the number of months in 2011 it received support.  For the second category, it suggested that the baseline level be calculated at the monthly average it would have received under the prior rules.

Townes Telecommunications, Inc.

Townes’ Petition said the Commission should clarify that unlicensed spectrum may be used by Mobility Fund applicants to comply with the “spectrum availability” requirement, so long as the wireless technology will support 3G or better.

Verizon Communications, Inc.

Verizon filed to get clarification on whether the Commission’s CETC phase down applies to Verizon. The Petition cites the Alltel Order, which says that its conditions will be replaced by any “subsequent rule of general applicability.” Verizon then argues that its baseline support should be calculated at its 2011 level and then phased out in equal steps until 2016 – a longer timeline than provided by the Alltel merger Order.

Blooston Rural Carriers

The Blooston carriers addressed reverse auctions, Tier 1 support, the Verizon Petition, and handset competition. The carriers cautioned against the use of reverse auctions because they create a “race to the bottom.”  They asked the Commission to prevent Tier 1 carriers from participating in the Mobility Fund and enforce the original Verizon and Sprint CETC timelines.  The Petition also asked the Commission to require that providers certify that they will not engage in exclusive handset arrangements as a condition of receiving support.

WIRELINE PROVIDERS

Alaska Rural Coalition (ARC)

ARC addressed Alaskan and Tribal issues as well as the Order’s reporting deadlines. The Petition asked the Commission to reconsider denying rate-of-return carriers the same extension it granted to CLECs in Alaska. It asked the Commission to reconsider its two-year delay of additional limitations on loop costs and operations expenses for Alaska carriers, and its treatment of the capacity of middle-mile services. ARC suggested the Commission find a remedy other than waivers and called the reporting deadlines unrealistic for small carriers serving remote areas. Like many others, it asked the Commission to clarify its tribal consultation obligations.

Comporium

Comporium addressed the Commission’s reporting requirements. It requested that the FCC clarify the Order to ensure that rate-of-return carriers can file a single, consolidated financial report at the parent company level.  Like many others, it also argued that the Commission should revise its April 1 filing deadline to comport with the practices and realities of rate-of-return carriers.

Independent Telephone & Telcommunications Alliance (ITTA)

ITTA expressed concern that the Commission plans to use the National Broadband Map (NBM) to determine which areas are unserved for CAF Phase I because it overstates fixed broadband coverage.  Providers, it argues, should have the ability to rebut the NBM.

NECA, OPASTCO, and WTA

NECA, OPASTCO, and WTA’s Petition asked the Commission to reconsider many aspects of its planned reduction in support.  They stated that there is “no CAF for [rate-of-return] carriers regulated RLECs,” who are subject to new public interest obligations and that the Order “consists entirely of cuts to existing support mechanisms and additional limits on cost recovery.”  The Petition argued that the Commission failed to provide a detailed determination or explanation of its $4.5 budget, and the Commission’s $2.2 billion budget for RLECs will ensure an “ever-widening digital divide.”  It asked the Commission to rethink its application of regression analysis and dynamic caps, and proposed reductions in safety-net-additive support and the imposition of a $250 per month high-cost cap.  It also asked the Commission to change its April 1 filing deadline and clarify its VoIP rules.

Rural ILECS Serving Tribal Lands

The Rural ILECs focused their Petition on the Commission’s Tribal rules.  They called the Commission’s requirement to “meaningfully engage” with Tribal governments vague and arbitrary and argued that the requirement to market services in a “culturally sensitive manner” is without a substantial government interest and violates the First Amendment.  The Rural ILECs also called the requirement that ETCs demonstrate compliance with Tribal business and licensing requirements illegal and beyond the scope of the Commission’s jurisdiction.

U.S. Telecom Association (USTA)

USTA primarily focused on the sufficiency of support, Tribal rules, filing deadlines, VoIP, and access stimulation.  Its petition contained arguments that deploying broadband costs more than $775 per household; CAF Phase II support amounts to a “flash cut” because support could disappear when another provider is committed to serving a few census blocks; declining future support should be connected to the elimination of public interest obligations for ETCs; the waiver process is onerous; the Commission adopted Tribal rules without adequate notice and comment; the April 1 filing deadline is improper; safety net additive support is needed; and VoIP-PSTN rules should be clarified regarding customer premises equipment.

Windstream and Frontier

Like USTA, Windstream and Frontier filed to request that the Commission reconsider its “one location per $775” Phase I deployment requirement.  They asked that the Commission apply regression analysis to the entire pool of high-cost price-cap funding while holding carriers harmless when distributing support. Their Petition also asked the Commission to confirm that it did not intend to displace intrastate originating access rates for PSTN-originated calls that are terminated over VoIP facilities.

Wyoming Telecommunications Association (WTA)

WTA asked the Commission to clarify what price components must be compared with the “two standard deviations above the applicable urban rate” standard.  It also requested that the Commission modify its rules to recognize that certain state statutes and regulations have resulted in rates that are higher than two standard deviations.

STATE PUBLIC UTILITY COMMISSIONS

D.C. Public Service Commission

The D.C. Public Service Commission filed to complain that the rules unfairly permit holding companies to pass on intrastate access charge recovery to jurisdictions, like D.C., that have no intrastate access.

Wyoming Public Service Commission

Wyoming challenged the “two standard deviations” formula for determining whether urban and rural rates are reasonably comparable.  The PSC argued that despite it having taken all possible steps to reduce rates, Wyoming carriers still have rates that are, on average, $11 above the two standard deviations.

SATELLITE

ViaSat and Wildblue

ViaSat’s and Wildblue’s Petition said the Commission should reconsider its decision to categorically preclude satellite providers from establishing that their services are viable competitive alternatives.  The FCC should, according to the Petition, rethink its decision not to impose strong accountability measures (e.g. performance bonds, refusal to fund “partial” buildout, etc.) on ILECs prior to the distribution of funds. They argue that the Commission should reconsider its decision to demand reasonable comparability of usage limits, rather than broadband in general.

FIXED WIRELESS AND VOIP

Wireless Internet Service Providers Association (WISPA)

WISPA asked the Commission to modify the definition of an “unsubsidized competitor.” WISPA believes the Order’s definition should look to market conditions, rather than focus on areas without companies that provide fixed voice and broadband.

Onvoy, Inc.

Onvoy filed mainly to suggest that the Commission reconsider any intended increase in rates by LECs for the exchange of VoIP-PSTN traffic.

If you are interested in filing oppositions or comments in response to any of the Petitions, please contact us.  This represents an additional opportunity to persuade the FCC to reconsider some of its recent USF rulings.

For additional information, please contact Bob Silverman.

For additional information, please contact Bob Silverman.

Telecommunications Reporting Worksheet

Quarterly Filing for Universal Service Contributors

FCC Form 499-Q

Due February 1, 2012

            All telecommunications carriers (wireless and wireline) who do not meet the FCC’s de minimis exception must file a Telecommunications Reporting Worksheet (FCC Form 499-Q) with the Federal Communications Commission’s Data Collection Agent, the Universal Service Administrative Company (USAC), on or before Wednesday, February 1, 2012.  The worksheet should contain interstate and international end-user telecommunications revenue information for the period of October 1, 2011 to December 31, 2011, and projected revenue information for the period of April 1, 2012 to June 30, 2012.  Carriers are encouraged to file online at http://forms.universalservice.org/.  If you wish to file manually, send your FCC Form 499-Q to:

In addition, interconnected VoIP and CMRS providers may rely on traffic studies if they are unable to determine their actual interstate and international revenues.  Traffic study filings are due for review by both the FCC and USAC as follows:

File One Copy with:

And File One Copy with:

Should you have any questions regarding the worksheet, traffic study guidelines and filings, or require assistance completing them, please contact Ken Johnson at kjohnson@bennetlaw.com.

North American Numbering Plan

Numbering Resource Utilization / Forecast (NRUF) Report

Form 502

Due February 1, 2012

            All telecommunications carriers that receive numbering resources from North American Numbering Plan Administrator (NANPA) (i.e., code holders) or receive numbering resources from a Pooling Administrator in thousands blocks (i.e., block holders) must report utilization and forecast data to NANPA for these numbers.  All reporting carriers must file Numbering Resource Utilization and Forecast Reports with NANPA on or before Wednesday, February 1, 2012.  The report should reflect the preceding six (6) month period from July 1, 2011 to December 31, 2011.  Carriers are encouraged to file the Form 502 electronically at: https://www.nationalnanpa.com/nas/security/authUser.do?function=verifySignIn.           

            Should you have any questions regarding the report or require assistance in its preparation and/or filing, please contact Ken Johnson at kjohnson@bennetlaw.com.

For additional information, please contact Daryl Zakov.