Broadband Providers Must Guard Against Subsidized Overbuilds as FCC Readies $9 Billion to Deploy Broadband to “Unserved” Areas

by Davis Wright Tremaine LLP
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Phase II of the FCC’s Connect America Fund (“CAF”) program will disburse up to $9 billion in support (i.e., subsidies) over the next five years to price cap incumbent local exchange carriers (“ILECs”). This support will be provided to those ILECs that agree to deploy broadband-capable networks to “unserved” areas the FCC has identified.

To ensure that this support is not used to overbuild areas already served by existing broadband providers, the FCC has initiated a process to “challenge” its initial list of areas without broadband and voice service (“unserved areas”). As noted below, “unserved” areas are those census blocks without broadband that allows for at least 4 Mbps download and 1 Mbps upload speeds. We outlined the challenge process in a previous advisory, and explain below that it will permit broadband providers challenge the FCC’s designation of an area as unserved.

If the broadband provider is an unsubsidized competitor already serving the area that has been erroneously designated as “unserved,” the FCC will not direct subsidies to that area. Notably, experience demonstrates that although well intended, the FCC may inadvertently direct subsidies to areas already served by existing providers. During Phase I of the CAF program, the FCC initially identified thousands of areas as unserved, although most were already served by cable and fixed wireless broadband providers. Those providers successfully challenged the FCC’s designation and the FCC decided that funding should not be directed to those areas.

To ensure the same result these time, broadband providers must file a successful “challenge” to the FCC’s designation of unserved areas in Phase II. To do so broadband providers must take the following action:

Step 1: Review FCC’s List of Unserved Areas Slated for Support
The FCC’s list of unserved areas is designated on a census block basis, and is available here. The census blocks on this list meet the FCC’s criteria for unserved areas in that they are blocks in high cost rural areas where an unsubsidized competitor is not providing voice and broadband service. All broadband providers should review the FCC’s list of unserved areas to ensure that subsidies are not improperly directed to ILECs attempting to overbuild the broadband provider’s service area.

In order to challenge any erroneously designated block, the broadband provider must be providing fixed voice and broadband service of at least 4/1 Mbps in that census block, and meet certain performance and pricing metrics. Specifically, the provider must show that it: (1) holds itself out as a provider of fixed voice and broadband services in that block; (2) has voice and broadband capable network assets in the block; and, (3) that it has existing, or past, customers in the block. Further, the broadband service must meet the following pricing and performance metrics: (i) speed of 4 Mbps/1; (ii) usage allowance of at least 100 GB; (iii) latency of 100 milliseconds or less; (iv) offered at a price that is reasonably comparable to similar services in urban areas.

If service meeting these characteristics is provided in any census block on the FCC’s list, the broadband provider should make a challenge filing.

Step 2: Gather Evidence of Service to Affected Census Block(s)
The FCC does not require a specific type of evidence showing that a broadband provider is serving a particular census block. However, it has stated that the most persuasive form of evidence is that which shows the provider is providing voice and broadband services to existing customers in the census block. For example, certifications relating to the number of customers, revenues received from customers, or customer lists would be considered persuasive. Note that any customer-related information should be properly redacted to ensure the disclosure is consistent with customer privacy rules.

Other evidence, such as propagation/network/plant maps, advertisements, or officer statements (without any other evidence) is less persuasive, but may still be useful.
 
Step 3: Complete and File Form 505
All challenges must be filed via FCC Form 505, which is available here. Form 505 filers must identify each census block that is challenged by its 15 digit FIPs code and include a narrative description of the type of supporting evidence that will be filed along with the form. In addition, respondents must certify to the accuracy of the information in the Form 505.

Copies of the filed challenge form, and accompanying evidence, must be served on all interested parties. For broadband providers challenging the designation of an area as unserved, that would require service of the challenge papers on the price cap ILEC serving such areas.

Step 4: Act Now Because the Challenge Process Deadline is August 14
The FCC has provided only 45 days (from June 30, 2014) to file any challenges. Therefore, broadband providers who identify census blocks on the FCC list that are incorrectly classified as unserved must act quickly—the deadline to file a challenge is August 14. The FCC will not accept challenge evidence or other arguments after that date.

Following the filing of challenges on August 14, 2014 the FCC will permit interested parties to respond to any challenges. Thus, respondents will have 45 days to offer any evidence contrary to the challenge evidence offered by the broadband provider. The FCC will then consider the challenge evidence, and any responses, to determine whether the census block is already served and therefore not eligible for CAF Phase II support.

Note that the FCC is also permitting interested persons to challenge the FCC’s initial determination that a census block is served. In other words, interested parties will have an opportunity to demonstrate that a census block is not served by broadband, even if it is shown as served on the National Broadband Map.

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DWT attorneys have filed numerous successful challenges (at a success rate of over 95%) in Phase I of this proceeding.  Please contact the authors if you require assistance with preparation and filing of your Phase II challenges.

 

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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