FCC Establishes Procedures for Challenging Subsidies to Incumbents Under the Connect America Fund

by Davis Wright Tremaine LLP
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The FCC has issued an order outlining the procedures by which broadband providers can challenge potential subsidies directed to incumbent providers in their service areas under the Connect America Fund (CAF) subsidy program.

Established under the USF/ICC Transformation Order, FCC 11-161, the CAF program is a mechanism for providing subsidies to certain incumbent providers operating in areas currently unserved by any broadband providers. Under Phase II of the CAF program the FCC will provide monthly support for a period of five years to those incumbent providers who make a state-level commitment to provide service in unserved areas.

Last week’s order establishes the procedures by which the FCC will finalize the list of areas eligible for support, and provide specific opportunities for existing providers to oppose subsidies directed to areas they already serve. The process will involve several discrete phases:

Phase 1 – First, the FCC will publish a list of census blocks eligible for funding that are presumptively unserved by any broadband competitors. This list of unserved census blocks will be derived from data currently set forth in the National Broadband Map, and in FCC filings. Although the Map currently only identifies broadband providers offering service at speeds of 3 Mbps down and 768 Kbps up, the FCC will accept such speeds as a proxy for its 4 Mbps down / 1 Mbps up mandate.

Phase 2 – Second, entities currently providing unsubsidized broadband and voice service within any census block identified as unserved will have forty-five (45) days to file a challenge to such designation. Only entities that provide both broadband and voice service, and who are identified on the National Broadband Map and in FCC Form 477 filings as providing such services, may file challenges to these census block designations. Further, the provision of voice services must be from the broadband provider itself or an affiliate or contracted third party provider. Mere association with an unaffiliated over-the-top voice provider is not sufficient to meet this part of the test.

Although the FCC denied a wireless industry request to include mobile broadband providers as unsubsidized broadband competitors, the agency will treat fixed wireless internet service providers (WISPs) as unsubsidized broadband competitors where they also provide voice service.

All challenges must be filed on the specified FCC forms, and must include additional information sufficient to demonstrate that the area in question is, in fact, served. The FCC explained that specific evidence regarding customers in the service area, such as certifications relating to number of customers, revenues, or customer lists (with personal information redacted), would be persuasive.

Phase 3 – Third, once all challenges have been filed the FCC will review all submissions to verify that the evidence submitted meets a prima facie showing, and will then issue a Public Notice identifying the contested census blocks. Incumbent providers seeking subsidies in these areas will then have forty-five (45) days to file rebuttal evidence demonstrating that the areas in dispute are in fact unserved.

The FCC has indicated that it will modify census block designations if it finds that it is “more likely than not” that the status of a census block should be changed. Once that decision has been made, a final list of unserved census blocks eligible for subsidy support will be published.

Providers of fixed wireline and wireless voice and broadband services should monitor this docket closely to ensure that the FCC does not identify portions of their territory as unserved, and thus subject to CAF subsidies. Davis Wright Tremaine attorneys are actively involved in this proceeding. Please contact us for any assistance with this matter.

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