What Will The FCC be Tackling Next? "Storming Back Stronger."

Chairman Pai’s theme for the September 26, 2019 Open Meeting is “Storming Back Stronger,” a phrase the surely resonates with those of us on the east coast who have spent the last week or two fretting over Hurricane Dorian.  The “storm” agenda is anchored by the FCC’s consideration of an order to finalize Stage 2 of the FCC’s Uniendo a Puerto Rico and Connect USVI Funds.  Those funds were established in 2018 to assist carriers in Puerto Rico and the US Virgin Islands in restoring, improving, expanding, and hardening their networks after Hurricanes Irma and Maria.  Revisiting access issues for the first time in a while, the FCC is undoubtedly creating a storm of its own by considering an item that would adopt rules addressing access arbitrage a.k.a. access stimulation by shifting financial responsibility for paying these so-called excessive access charges to the carriers that are responsible for stimulating them.  And, the FCC will take another step forward to promote American leadership in 5G wireless services by seeking comment on draft procedures for an auction of 70 MHz of spectrum in the 3.5 GHz band, which is scheduled to begin on June 25, 2020.   The agenda is rounded out by an order further streamlining the rules for broadcast licensees and an order reforming the FCC’s rules for direct broadcast satellite (DBS) service.

Let’s take a closer look at the first three items.

As the next step in its network restoration efforts in Puerto Rico and the US Virgin Islands, the FCC is turning from post-storm restoration to facilitating the deployment and expansion of high-speed, storm-hardened networks throughout the two Territories.  The Report and Order would make available up to $950 million in funding for fixed broadband networks with speeds up to one gigabit and for 4G LTE and 5G mobile broadband and ensure that those networks are resilient.  To accomplish this, the FCC is proposing to:

• Create a competitive process to award up to $691.2 million over a 10-year term for fixed voice and up to gigabit broadband service to winning proposals submitted by eligible providers.  FCC staff will select winners based on objective scoring criteria in three categories: price per location served, network performance (speed and latency), and network resilience and redundancy.  Providers must propose to serve every home and business in the covered area.
• Provide up to $258.8 million over three years in high-cost support to eligible mobile voice and broadband providers in the Territories.  Eligible mobile providers may receive a percentage of the budget equal to their share of mobile subscribers in each Territory before the 2017 hurricanes and would be able to elect to use: (1) up to 75% of their support for hardening, expanding, and completing restoration to pre-hurricane coverage of 4G LTE networks with speeds of at least 10/1 Mbps; and (2) up to 25% of their share of support to deploy cutting-edge 5G network technology with speeds of at least 35/3 Mbps.

Support recipients would also have to maintain and implement a Disaster Preparation and Response Plan and perform mandatory reporting in the event of a hurricane or other disaster.

In the access stimulation order, the FCC is targeting what it characterizes as “schemes” that are “structured to ensure that IXCs pay high tandem switching and tandem switched transport  charges to access-stimulating LECs and to the intermediate access providers chosen by those access-stimulating LECs.”  Thus, the Report and Order proposes to adopt rules aimed at eliminating the financial incentives to engage in these activities. Specifically:

• To eliminate the use of the intercarrier compensation system to subsidize “free” high-volume calling services, the order would adopt rules requiring access-stimulating LECs—rather than IXCs—to bear financial responsibility for the tariffed tandem switching and transport charges associated with the delivery of traffic from an IXC to the access-stimulating LEC’s end office or its functional equivalent.  In particular, the text of the draft order explains that the rules “treat access-stimulating LECs as the customers of the intermediate access providers they select to terminate their traffic and allow those intermediate access providers to recover their costs from access-stimulating LECs.  Thus, we allow intermediate access providers to continue to apply their tariffs and tariffed rates to traffic bound for access-stimulating LECs, but those rates must be charged to the access-stimulating LEC, not the IXC that delivers the traffic to the intermediate provider for termination.”  The order would also make it clear that a LEC that is not itself engaged in access stimulation but is an intermediate access provider for a LEC that is engaged in access stimulation, will not itself be deemed a LEC engaged in access stimulation.
• Since access stimulation may occur even when there is no revenue sharing agreement between the LEC and the high-volume calling service provider, the order would expand the current definition of “access stimulation” to include situations in which the access-stimulating LEC does not have a revenue sharing agreement, but has at least 6 times more minutes of inbound calling traffic than outbound calling traffic.  This new access stimulation test would be in addition to the test currently codified in the FCC’s rules.  A LEC that has met the 6:1 ratio would continue to be considered to be engaging in access stimulation until it falls below that ratio for six consecutive months, and it does not qualify as an access stimulating LEC under any other trigger.
• The order would also eliminate decades-old requirements that force IXCs delivering traffic to access-stimulating LECs that subtend certain intermediate access providers (known as centralized equal access or CEA providers) to use those CEA providers for tariffed tandem switching and transport services.

In third item, the FCC is proposing application and bidding procedures for the auction of Priority Access Licenses (PALs) in the 3550-3650 MHz band.  The auction, designated Auction 105, is intended to promote the development of 5G, the Internet of Things, and other advanced spectrum-based services for the benefit of the public.  Bidding in the auction is scheduled to commence on June 25, 2020. The auction will offer seven PALs in each county-based license area, for a total of 22,631 PALs nationwide. Each PAL will consist of a 10-megahertz unpaired channel.  PALs are 10-year renewable licenses.  Bidders in Auction 105 will be allowed to bid for up to four generic blocks of spectrum per county. 

The auction will be conducted as an ascending clock auction, in which bidders indicate their demands for generic license blocks in specific counties.  The Notice proposes bidding credit caps of $25 million for small businesses and $10 million for rural service providers, as well as a $10 million cap on the overall amount of bidding credits that a small business bidder may apply to winning licenses in smaller markets.

After a frantic July and a sleepy August, it sounds like the FCC is back at work in full force!