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A coalition of rural and independent telephone and wireless service providers (Petitioner) has filed a Petition for Reconsideration of the Federal Communications Commission’s (FCC or Commission) 600 MHz Broadcast Incentive Auction (Incentive Auction or Auction 1000) Bidding Procedures Public Notice. Petitioner has expressed concern that the Public Notice: (1) requires small businesses and rural service providers participating in the forward auction to be active on at least 95% of their total eligibility from the start of the auction; and (2) does not provide these bidders with any activity rule waivers.
Bottom Line: Requiring bidders to use at least 95% of their bidding eligibility could unnecessarily limit the ability of small and rural carriers to pursue alternative bidding strategies as bidding in markets of interest develops. The lack of activity rule waivers puts undue pressure on smaller bidders because it creates the risk of forward auction elimination as a result of unforeseen circumstances that are beyond bidders’ control. Entities planning to participate in the Incentive Auction should consider filing comments in support of the Petition.
The Commission will use upfront payments to determine initial (maximum) bidding eligibility – the maximum number of blocks as measured by their associated bidding units a bidder may bid on at the start of the auction. Bidding eligibility will be reduced as the auction progresses if a bidder does not meet the activity requirement.
Petitioner requests that the Commission reconsider its decision to require smaller carriers to have at least 95% activity in the clock phase of the forward auction, and to instead allow them to maintain their current level of bidding eligibility if they are active on 80% of their total eligibility. The Petition also argues that smaller bidders should receive at least two activity rule waivers to account for unforeseen circumstances and to protect them from possible elimination from the auction if they are forced to miss a single round of bidding.
95% ACTIVITY RULE
Petitioner contends that a 95% activity threshold will disproportionally disadvantage small and rural carriers because when an applicant has a smaller bidding focus, and it submits a commensurately smaller upfront payment, a 95% activity requirement will make it impossible to move bids between markets. Moreover, if the 95% activity rule is not met, this will result in a substantial reduction in the bidder’s eligibility, possibly curtailing or eliminating the bidder’s ability to place additional auction bids. For example, if a rural bidder has targeted two Partial Economic Areas, the smaller of which contains more of the bidder’s existing rural service areas, the bidder may devote its early bidding efforts to obtaining the smaller market. If bidding on that market rises to a level above the bidder’s budget, it will likely be unable to switch its bidding effort to the larger market under the 95% activity rule.
ACTIVITY RULE WAIVERS
A “zero waiver” policy in the context of a stringent 95% activity rule means that a small bidder will have no flexibility, and will not be able to push “pause” on the auction if it needs additional time to confirm a higher bidding budget with its board of directors, or make some other major change in bidding strategy. It means that small bidders – entities that generally don’t have the resources for backup bidding systems or large bidding teams – could be disqualified from the Incentive Auction as a result of circumstances they cannot control, such as if they run into an unexpected technical or communications glitch, or if the individual responsible for bidding gets caught in traffic or has a sudden illness. The risk of such circumstances arising will be greater in the Incentive Auction, which is by far the most complex auction in the Commission’s history. Allowing small and rural bidders one or two waivers will be vital to allow them to overcome bidding glitches and complexities, without creating the risk of undue gaming of the auction’s progress.
Oppositions to the petitions must be filed with the FCC by December 16, 2015 and replies to an opposition by December 28, 2015. If you would like to file comments, please contact us.
 Broadcast Auction Scheduled to Begin March 29, 2016; Procedures for Competitive Bidding in Auction 1000, Including Initial Clearing Target Determination, Qualifying to Bid, and Bidding in Auctions 1001 (Reverse) and 1002 (Forward), AU Docket No. 14-252, GN Docket No. 12-268, WT Docket No. 12-269, Public Notice, 30 FCC Rcd 8975 (2015) (Public Notice).
 Id. at ¶ 209.
For additional information, please contact Erin Fitzgerald.
The Federal Communications Commission’s (FCC or Commission) Wireless Telecommunications Bureau (WTB or Bureau) has denied petitions filed by four parties, including Sheyenne River Valley National Scenic Byway, and the North Country Trail Association, alleging that AT&T Mobility Services, Inc. (AT&T) failed to comply with the FCC’s environmental and historic preservation review requirements in connection with a tower constructed in late 2012 in Fort Ransom, North Dakota.
Bottom Line: Although the FCC found that AT&T failed to comply with a number of procedural requirements, it found no material errors or omissions in the historic preservation and environmental review process, and rejected the complaints.
In early 2012, AT&T commenced the environmental review required by the Commission’s rules implementing the National Environmental Policy Act (NEPA) and other federal environmental statutes, including historic preservation review under the National Historic Preservation Act (NHPA), for the Fort Ransom Tower. On March 6, 2012, AT&T contacted the Tribal Nations with an interest in the geographic area containing the proposed tower site through the Tower Construction Notification System (TCNS). None of these Tribal Nations identified an interest in any historic or cultural property that might be affected by the then-proposed tower. On April 22, 2012, AT&T submitted its FCC Form 620 (historic preservation review packet) to the State Historical Society of North Dakota (NDSHPO) as part of the Section 106 NHPA review process required under the Nationwide Programmatic Agreement (NPA). The NDSHPO agreed with AT&T’s recommendation that the proposed Fort Ransom Tower would have no effect on historic properties within the tower’s area of potential effects. AT&T published notice of its historic preservation review, which is required under the NPA, in a local newspaper on April 30, May 7, and May 14, 2012.
In April 2012, AT&T contacted the U.S. Fish and Wildlife Service North Dakota Field Office and the ND Game and Fish Department, asking whether the proposed Fort Ransom Tower site was in or near a designated wilderness area, wildlife preserve, or critical habitat and whether the site sustained plant or animal species that had been designated or proposed as threatened or endangered. The agencies responded that the proposed tower site was not in or near a designated wilderness area, wildlife preserve, or critical habitat and that the tower should not have significant environmental effects on wildlife or wildlife habitat.
Because AT&T was required to notify the Federal Aviation Administration of the tower’s proposed construction, FCC rules require the tower to be registered in the Antenna Structure Registration (ASR) system. The registration process involves both a national public notice that the Commission publishes on its website and a local notice that the applicant is required to publish in a newspaper of general circulation or by other appropriate means. AT&T’s ASR application file confirms that national notice was published on July 17, 2012, and AT&T certified in its application that local environmental notice was also published on July 17, 2012. However, a copy of this local notice included in AT&T’s pleadings indicates that it was published on July 23, 2012.
The ASR Application was granted on August 28, 2012. AT&T transferred ownership of the tower to Skyway Towers, LLC (Skyway), and on October 2, 2012, Skyway filed a Notice of Construction in the ASR system. As constructed, the Fort Ransom Tower is a latticework structure with lighting and an overall height above ground level of 320 feet.
Four parties (the Complainants) filed complaints against the constructed Fort Ransom Tower between November 2012 and March 2013: the Sheyenne River Valley National Scenic Byway (Sheyenne), Don Busta, Judith L. Morris, and the North Country Trail Association (NCTA). All four Complainants argue that AT&T failed to: (1) provide adequate notice of the proposed Fort Ransom Tower to interested parties; and (2) adequately assess whether the proposed tower would have a significant environmental effect or impact on historic properties.
Notice Issues. The Competition and Infrastructure Policy Division of the Wireless Telecommunications Bureau (Division) reviewed the complaints and found that the Fort Ransom Tower was correctly determined to have no significant environmental impact and no adverse effects on historic properties. As such, the Division dismissed in part and denied in part the complaints. The Division did note, however, that AT&T failed to adhere fully to all procedural requirements, and advised that all applicants are responsible for ensuring full compliance with environmental review requirements.
The Division rejected the Complainants’ assertions that AT&T was required to provide any notice to the local public or to specific individuals or organizations beyond publication in the newspaper. The Division found that the record shows AT&T satisfied these requirements through publication in the local newspaper. The Division also rejected Complainants’ assertion that AT&T failed to comply with the Commission’s requirement to contact local government as part of the Section 106 process. The NPA requires applicants to provide written notice to “the local government that has primary land use jurisdiction over the site,” which in this case is the City of Fort Ransom (City). AT&T’s NEPA Report documented that its consultant wrote to the City using an email address that Sheyenne believed may have been a tourism hotline email address. The record did not establish that the email address AT&T used was incorrect or that AT&T should have used a different email or other address to contact the City. Further, the City has not complained about lack of written notice under the NPA.
Despite these findings, the Division did observe that AT&T fell short of the notice requirements in Section 17.4(c) and the NPA in several respects. First, the NPA notices did not include a street address, as required. Instead, AT&T described the location of the then-proposed tower as “near the intersection of Sorby Hill Rd and Valley Rd, Fort Ransom, ND 58033.” The Division noted that a street address was available, as it was included in AT&T’s July 23, 2012 local public notice pursuant to the Commission’s ASR rules.
In addition, both notices were untimely. The NPA requires applicants to provide local public notice of their proposed towers on or before the date on which the applicant submits its FCC Form 620 to the SHPO, thereby giving the SHPO the opportunity to consider any public comments. AT&T published local public notice describing the proposed tower and inviting public comments with respect to its potential effects on historic properties on April 30, May 7, and May 14, 2012. However, it failed to publish this notice on or before April 22, 2012 – the date on which it submitted its FCC Form 620 to the NDSHPO.
Further, FCC rules require a prospective ASR applicant to provide local public notice containing specific details about the proposed tower and instructions for filing requests for further environmental review “through publication in a newspaper of general circulation or other appropriate means.” On or after the date on which local notice is published, the FCC posts notification of the proposed construction on its website. This national environmental notice remains on the Commission’s website for 30 days, after which interested members of the public may no longer submit requests for further environmental review. Thus, in order to ensure compliance with these timing provisions, the applicant must publish local notice on or before the date on which it requests that the Commission publish national notice, and the applicant is required to inform the FCC that it supplied the required local notice when it completes its application. Although AT&T’s application included this information, as well as a general certification that all information in the application was true, complete, correct, and made in good faith, it in fact published local public notice pursuant to the Commission’s ASR rules on July 23, 2012. As such, the public comment period remained open for only 24 days following local notice – not 30 or more days, as would be the case in a fully compliant scenario.
The Division found that the procedural notice defects did not invalidate AT&T’s review. While the Section 106 notice did not contain a street address, it accurately described the tower’s location, and there is no evidence that the lack of a street address misled any potential commenter. Furthermore, the Division found there was no evidence that any party attempted to file a comment or request for review within 30 days of either notice but was prevented from doing so.
Section 106 and Environmental Review. The Division found no evidence that the applicant committed any material error or omission in completing the 106 process prescribed under the NPA that precluded the NDSHPO’s effective review, and therefore declined to reopen the NDSHPO’s final determination that no historic properties were affected. Further, because no timely public comments or objections were received, the Division dismissed each complaint as untimely filed with respect to claims of potentially significant environmental impacts.
 47 C.F.R. Part 1, Subpart I.
 42 U.S.C. §§ 4321-4370h.
 54 U.S.C. § 300101 et seq.; see 47 C.F.R. § 1.1307(a)(4) and (5).
 See 47 C.F.R. § 1.1307(a)(4) and 47 C.F.R. Pt. 1, App. C (Nationwide Programmatic Agreement for Review of Effects on Historic Properties for Certain Undertakings Approved by the Federal Communications Commission) (NPA).
 47 C.F.R. Pt. 1, App. C, § V(C).
 47 C.F.R. § 17.4(c)(3).
For additional information, please contact Erin Fitzgerald.
The Federal Communications Commission (Commission) has denied three applications for review that were filed by three companies that sought rural broadband experiment support: Rural Broadband Services Corporation (RBSC), Lennon Telephone Company (Lennon), and Last Mile Broadband LLC (Last Mile). In its decision, the Commission concluded that strict enforcement by the Bureau of the rural broadband experiment requirements was appropriate.
Bottom Line: One of the most repeated aphorisms of all time has reared its ugly head in the Commission’s Order – never assume anything. Those carriers that are considering making a run at universal service support in the Connect America Fund Phase II reverse auction should be sure they are fully aware of what happened to Lennon Telephone Company in the rural broadband experiment proceeding.
POST-SELECTION REVIEW PROCESS
Provisional winners of rural broadband experiment support were required to submit financial and technical review information within a specified period of time following their awards. For the financial information, winners were required to submit three consecutive years of audited financial statements, including balance sheets, net income, and cash flow. For the technical information, winners were required to submit a description of the technology and system design used to deliver voice and broadband service, including a network diagram certified by a professional engineer. After meeting the financial and technical requirements, winners were required to submit a letter from an acceptable bank committing to issuing an irrevocable stand-by letter of credit in the amount of their provisionally selected bids.
DENIAL OF WAIVER REQUESTS
In December 2014, Last Mile requested a waiver of the requirement that provisionally selected winners of rural broadband experiment funding provide three years of audited financial statements during the post-selection review process and sought additional time to submit a professional engineer-certified network design. RBSC filed a request for waiver of the three-year audited financial statements requirement. On January 30, 2015, the Wireline Competition Bureau (Bureau) denied Last Mile’s and RBSC’s waiver petitions. It also removed Lennon from further consideration for rural broadband experiments support for failing to file the required financial information and not submitting a waiver request. The three entities then filed applications for review of the Bureau’s decision.
APPLICATIONS FOR REVIEW: RBSC AND LAST MILE
The Commission has denied RBSC’s and Last Mile’s applications for review. According to the Commission, “[s]trict enforcement by the Bureau of the filing requirements adopted by the Commission was appropriate given the purpose of the rural broadband experiments and our commitment not to allow the rural broadband experiments to delay the offer of model-based support to price cap carriers.” In its explanation, the Commission recounted its explicit decision to require winners of rural broadband experiment support to submit three years of audited financial statements during the post-selection review process; by definition, this meant that entities with less than three years of operating history, such as RBSC and Last Mile, would be unable to meet that requirement. RBSC was incorporated in 2013 and Last Mile was incorporated in 2012. In other words, had the Commission intended to allow newly formed ventures to compete for rural broadband experiment support, it would have explicitly adopted requirements allowing that. The Commission went on to include other justifications for its decision to deny both applications for review, including the fact that neither RBSC nor Last Mile included sufficient alternative evidence showing they are financially qualified to undertake their respective rural broadband experiment projects.
APPLICATIONS FOR REVIEW: LENNON
The Commission also denied Lennon’s application for review, but for different reasons. Lennon is a privately held rate-of-return incumbent local exchange carrier (ILEC) which pursuant to Section 54.313(f) of the FCC’s rules is required to annually submit a full and complete annual report of its financial condition and operations as of the end of the preceding fiscal year. It relied on this financial information to meet the rural broadband experiment post-selection review financial requirement instead of providing three years of audited financial statements or seeking a waiver. Unfortunately, the Bureau and Commission did not find Lennon’s financial showing to be sufficient. In its Order, the Commission explained that “Lennon mistakenly believed that because the Commission allows privately held rate-of-return carriers to submit reviewed financial statements in their annual FCC Form 481, it was permissible to submit reviewed statements for the rural broadband experiments as well.” While the Commission’s choice of terminology was not particularly clear, the bottom line was that it chose to strictly enforce the letter of its requirements.
It does seem silly that a nearly 70-year old rate-of-return ILEC that has been providing financial information to the Commission for years, and furthermore, has been properly receiving and using universal service support for years should be denied the rural broadband experiment support that it was awarded because it failed to submit three consecutive years of audited financial statements. In her dissent, FCC Commissioner Mignon Clyburn sums up her view of what she believes is a rather puzzling decision by the Commission:
So, reviewed financial statements are sufficient for rate-of-return carriers to receive approximately $2,000,000,000 in universal service annually, but not sufficient to provide $60,000 in support to the same carrier for a rural broadband experiment? This not only defies logic, it ignores the fact that since Lennon Telephone receives universal service every month, the Commission has ample means to address its stated policy concerns.
Nevertheless, this is a great lesson to anyone that deals with the FCC and anyone that may participate in the Connect America Fund (CAF) Phase II reverse auction – never assume anything. Lennon should have immediately reached out the FCC following its award to ask whether its FCC Form 481 financial information could be used to meet the post-selection review requirements. When it didn’t receive an answer, it should have kept knocking on the FCC’s door. Alternatively, it should have gone ahead and filed a waiver.
There is one more thing to add. The lessons learned from the rural broadband experiment proceeding are expected to heavily impact the CAF II reverse auction. If an ILEC wins support as part of that, it may be able to use the information Lennon wanted to use to meet any post-selection requirements. The Commission alluded to this in the second-to-last paragraph of its Order:
We therefore uphold the Bureau’s decision with respect to Lennon’s participation in the experiment, while emphasizing that the Commission wants to encourage small entities to participate in the Phase II competitive bidding process. In the months ahead, we will take into account the arguments that Lennon and other parties have presented on various aspects of the experiments when considering rules that will make it possible for providers of all types to bid on support to upgrade and expand their networks in high-cost areas.
 Connect America Fund, WC Docket No 10-90, Rural Broadband Experiments, WC Docket No. 14-259, Order, DA 15-139 (Jan. 30, 2015) (Order). Even though the Bureau had already announced on January 30, 2015, that RBSC was no longer under consideration for rural broadband experiment support, RBSC subsequently also sought a waiver of the requirement to provide a letter of credit. Similarly, after the Bureau had removed Last Mile from further consideration, Last Mile sought a 90- to 180-day extension to submit its letter of credit commitment letter or, in the alternative, a waiver of the requirement to provide the letter from a top 100 bank. Order at ¶2.
 Order at ¶2.
 Order at ¶12.
 Connect America Fund, WC Docket No 10-90, Rural Broadband Experiments, WC Docket No. 14-259, Statement Of Commissioner Mignon L. Clyburn Approving In Part And Dissenting In Part, FCC 15-107.
 Order at ¶12.
The U.S. Government Accountability Office (GAO) has submitted a report to the Chairman of the Senate Committee on Commerce, Science and Transportation which summarizes the results of GAO’s examination of the Federal Communications Commission’s (FCC) efforts to reform the universal service Lifeline program. Specifically, the GAO report discusses (1) the status of Lifeline reform efforts and the extent to which the FCC has evaluated the effectiveness of the Lifeline program; (2) how the Lifeline program verifies household eligibility and addresses associated privacy and data security; (3) the extent to which households participate in Lifeline and the challenges, if any, they face in accessing and retaining Lifeline benefits; and (4) how the FCC plans to evaluate the Lifeline broadband pilot program and the extent to which the pilot program will enable the FCC to decide whether and how to include broadband in the Lifeline program. At the conclusion of the report, GAO “recommend[s] that [the] FCC conduct a program evaluation to determine the extent to which the Lifeline program is efficiently and effectively reaching its performance goals of ensuring the availability of voice service for low-income Americans while minimizing the contribution burden on consumers and businesses.”
For additional information, please contact Tony Veach.
Comcast CEO Brian Roberts announced on CNBC that the nation’s largest cable operator has abandoned its attempted $45 billion acquisition of Time Warner, the nation’s second largest cable operator. Comcast’s decision to walk away from the proposed merger follows discussions with federal regulators which provided indications that both the FCC and the Justice Department were preparing to oppose the deal. It is estimated that acquisition of Time Warner would have given Comcast control of more than half of the nation’s broadband subscribers as well as 30% of the nation’s pay television customers. The opposition to the deal comes as the over-the-top broadband video services are making substantial inroads in cutting into cable’s historic dominance of the video distribution market.
For additional information, please contact Howard Shapiro.
The FCC has announced that Wireline Competition Bureau (WCB) Chief Julie Veach will be leaving the FCC on May 22, 2015 and that Chairman Wheeler will name WCB Deputy Bureau Chief Matt DelNero as the new chief. Additionally, current Acting Chief of the Consumer and Governmental Affairs Bureau (CGB) Kris Monteith will become Deputy Chief of the WCB and Alison Kutler will become Acting Chief of the CGB.
For additional information, please contact Bob Silverman.
The Federal Communications Commission has announced that interested parties have until May 14, 2015 to submit further comment on various industry proposals and changes to the FCC’s Designated Entity (DE) and bidding credit rules, which are outlined in the FCC’s recent public notice. The FCC is seeking comments and data on a number of proposals, including bidding credits specifically for rural telcos, bidding preferences for rural and unserved areas, and other possible rule changes regarding the attributable material relationship rule and joint bidding arrangements.
For additional information, please contact Bob Silverman.
The Federal Communications Commission (FCC or Commission) has adopted a Public Notice seeking further comment in its Competitive Bidding/Designated Entity proceeding. The Commission is seeking comment on various industry proposals, regarding how it can meet its statutory obligation to ensure that small businesses, rural telephone companies, and businesses owned by members of minority groups and women (collectively, “designated entities” or “DEs”) have an opportunity to participate in the provision of spectrum-based services, while at the same time ensuring that there are adequate safeguards to protect against unjust enrichment to ineligible entities. Comments will be due 21 days after Federal Register publication of the Public Notice, which has not yet occurred. Reply comments will be due 7 days later.
For additional information, please contact Erin Fitzgerald.
The Federal Communications Commission (FCC or Commission) has adopted rules for the Citizens Broadband Radio Service (3.5 GHz band). The Report and Order adopts spectrum sharing techniques to create a new three-tiered commercial radio service spanning 3550-3700 MHz. The use of advanced spectrum-sharing technology will allow wireless broadband systems to share spectrum with military radars and other incumbent systems, while protecting important federal missions. The Commission also adopted a Second Further Notice of Proposed Rulemaking that seeks comment on several related implementation issues.
For additional information, please contact Erin Fitzgerald.