USF Tracker - July 2020

Commentary
 

As we were finalizing this month’s Tracker, USAC held its quarterly board meeting for July.  This is the second quarterly board meeting to be held since the COVID-19 restrictions were implemented and USAC again held this meeting via webinar and conferencing services.  Unlike the April meeting, however, which we found perfunctory, at least in the open session portions, the July meeting was much more like a typical USAC board meeting.  There was more discussion of the information items than in April.  Also, having the public sessions back-to-back was quite helpful and much more efficient than the in-person process. 
 
A few COVID-19 impacts appeared to be present.  Principally, USAC’s internal audits seemed to slow somewhat.  USAC appears to have completed only 20 audits between March 30 and June 25 and, according to the materials, only one new audit (a contribution audit) was initiated in the quarter.  For the fiscal year, USAC reported 41 completed audits through nearly three quarters of the year, which is below its pace in 2019, when 85 audits were completed in the fiscal year.  Notably, contributions audits continue to have the greatest financial impact, which is not surprising given the high contribution factor.  Recommended contributions recoveries were two-thirds of the recovery amounts in terms of dollars despite being only 12% of the completed audits.  Improper reseller revenue classifications continue to be the most common audit finding in contributions, while inadequate competitive bidding processes are the predominant finding in the E-rate program.
 
Moving forward, USAC discussed challenges in moving to a distance learning model for its E-rate training activities, noting that most schools and libraries are continuing with remote work for the fall.  USAC will only conduct online training in the fall, and is hoping to present more on-demand training modules for interested entities.  The USAC board received an update on implementation plans for the Connected Care Pilot Program, and included a demand projection for the pilot in its 4Q demand estimates.  This is the first time that Connected Care Pilot funds will be included in USAC’s projections. 


Recent News

General

  • On July 16, the FCC adopted (FCC 20-99) a Declaratory Ruling and Second Further Notice of Proposed Rulemaking, integrating provisions of the Secure and Trusted Communications Networks Act of 2019 (“Secure Networks Act”) into its existing supply chain rulemaking proceeding. The FCC adopted a prohibition on the use of universal service funds for equipment and services produced or provided by companies, such as Huawei and ZTE, designated as a national security threat, upholding the 2019 Supply Chain Order.  The prohibition covers the use of USF funds to purchase, obtain, maintain, improve, modify or otherwise support equipment or services provided by these companies.  This prohibition takes effect with FY 2020 USF funding.
  • On July 1, the third quarter USF contribution factor of 26.5% went into effect.  The WCB issued a Public Notice (DA 20-617) announcing the USF contribution factor on June 12 and the rate took effect automatically.  This is the highest the USF factor has ever been and is the second time in the past 12 months that the contribution factor exceeded 25%.
  • On June 30, the WCB issued its monthly Public Notice (DA 20-656) entitled Streamlined Resolution of Requests Related to Actions by the Universal Service Administrative Company.  As its title suggests, the document announces summary dispositions of pending appeals, requests for review, requests for waiver, and petitions for reconsideration stemming from the actions of the Universal Service Administrative Company (USAC).  This Public Notice features actions related to Contribution Methodology, and the E-Rate and Rural Health Care programs. 

Telehealth

  • On July 8, the FCC’s Wireline Competition Bureau (WCB) approved 25 additional funding applications for the COVID-19 Telehealth Program.  Under the latest funding round, $10.73 million will go to health care providers across 19 states and Guam.  Since the start of Program funding on April 16, the FCC approved 539 applications in 47 states plus Washington, D.C. and Guam for a total of $200 million in funding — the amount of money appropriated by Congress for the Program in the CARES Act.  There are no immediate plans to provide additional funding for the Program.

Lifeline

  • On July 20, the WCB announced via Public Notice (DA 20-762) the counties in which conditional forbearance from the obligation to offer Lifeline-supported voice service applies.  In the 2016 Lifeline Order, the FCC granted forbearance from High Cost/Lifeline eligible telecommunications carrier’s (ETC) obligation to offer and advertise Lifeline voice service in counties where certain competitive conditions are met.  The Appendix lists the counties where the Commission’s conditional forbearance from High Cost/ Lifeline ETCs’ Lifeline voice obligation will apply effective on September 18, 2020. 
  • On July 13, the WCB granted (DA 20-732) the request of Buffalo-Lake Erie Wireless Systems Co., LLC d/b/a Blue Wireless (Blue Wireless) to relinquish its ETC designation in New York, effective July 30, 2020.

High Cost/Connect America Fund (CAF)

  • On July 17, the WCB, Rural Broadband Auctions Task Force (RABTF) and the Office of Economics and Analytics (OEA) authorized (DA 20-747) CAF Phase II (Auction 903) support for 483 additional winning bids.  A list of the latest set of winning bids is available here
  • On July 17, the WCB released an Order (DA 20-748) granting a limited waiver of the performance testing requirements for CAF Phase II carriers.  Specifically, the Bureau will allow those carriers that are electing a seventh year of support to extend pre-testing through the third and fourth quarters of 2020, with a waiver of certain sampling requirements. 
  • On June 30, the WCB adopted an Order (DA 20-694) granting a limited waiver of the filing deadline for rate-of-return carriers receiving support pursuant to Alternative Connect America Model (A-CAM) I and II and the Alaska Plan to file their line count data. Specifically, the WCB will allow carriers until July 31, 2020 to file. 
  • On June 30, the WCB, RABTF and OEA adopted an Order (DA 20-684) denying a petition for waiver filed by Johnson Telephone Company of the rule that prohibits entities that defaulted on all of their Auction 903 bids from participating in the Rural Digital Opportunity Fund (Auction 904). 
  • On June 26, the WCB adopted an Order (DA 20-674) granting a limited waiver of the July 1, 2020 annual certification requirement for competitive ETCs who receive legacy High Cost support.  The FCC will allow these carriers to file FCC Form 481 once USAC amends the filing portal for these carriers. 
  • On June 26, the WCB, RBATF and OEA, resolved petitions (DA 20-677) filed by the Connect America Fund (“CAF”) Phase II Coalition and Skybeam, LLC (“Skybeam”) seeking waiver of the letter of credit rules for the CAF Phase II auction (“Auction 903”) and Rural Broadband Experiments.  Petitioners requested that the FCC allow them to comply with the recently adopted letter of credit rules for the Rural Digital Opportunity Fund instead.  The FCC found good cause to grant a limited waiver to all Auction 903 and Rural Broadband Experiments funding recipients until December 31, 2021, because of the increased consumer demand for robust broadband services and severe financial hardship on the companies imposed by the COVID-19 pandemic. 
  • On June 25, the WCB, RBATF and OEA announced via Public Notice (DA 20-665) an updated list of census blocks and a map of areas that have been deemed initially eligible for the Rural Digital Opportunity Fund Phase I auction (Auction 904).  The list of census blocks, census block groups, and the map can be found on the Auction 904 website at: https://www.fcc.gov/auction/904.  Also on June 25, the FCC granted (DA 20-664) a request by Charter Communications, Inc. that the FCC remove 2,127 census blocks from the eligible areas list for the auction because Charter has deployed or will soon deploy service to these blocks under a settlement agreement with the State of New York.

Schools and Libraries (E-Rate)

  • On July 21, the WCB issued a Public Notice (DA 20-767) seeking comment on  the proposed eligible services list (ESL) for the E-Rate program for funding year 2021.  Changes to the list include supply chain rules and budget calculations. Interested parties should file comments on or before August 20, 2020 and reply comments on or before September 4, 2020. 
  • On July 6, the WCB announced via Public Notice (DA 20-712) that that there is sufficient funding available to fully meet USAC’s estimated demand for category one and category two requests for E-Rate supported services for funding year 2020.  On May 1, USAC submitted a demand estimate for the E-Rate program for funding year 2020.  It estimates the total demand for funding year 2020 will be $2.91 billion, which includes estimated demand for category one services of $1.74 billion and of $1.17 billion for category two services.

Rural Health Care

  • On June 30, the WCB provided directions (DA 20-697) to USAC on how to administer the RHC program, and in particular, how to treat services and data when identifying rural and urban rates for the Telecommunications Program.
  • On June 30, the WCB directed (DA 20-688) USAC to carry over up to $197.98 million in unused funds from prior funding years to the extent necessary to satisfy funding year 2020 demand for the Rural Health Care Program.  In 2018, the FCC adopted rules to adjust the Rural Health Care Program funding cap annually for inflation and allow unused funds from previous years to be carried forward into new funding years.  FCC Chairman Pai highlighted this funding flexibility as critical to supporting COVID-19 telehealth measures.

Awards Granted – COVID-19 Telehealth Program

The CARES Act, signed by President Trump on March 27, 2020, appropriated $200M to the Federal Communications Commission for the purpose of providing health care providers funding to purchase eligible telehealth devices and services during the COVID-19 pandemic.  On April 2, 2020, the Commission adopted an order establishing the COVID-19 Telehealth Program, which began accepting applications for up to $1M in funding on April 13, 2020.  As of July 29, 2020, the Commission has, in fourteen rounds, approved 539 applications in 47 states plus Washington, D.C. and Guam for a total of $200 million.

The attached PDF contains three charts. The first shows total award amounts by funding round, the second shows total award amounts by state, and the third is a list of all awardees so far.

[View source.]

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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