Some Connect America funding contemplated once policies, standards are set in second phase of proceeding.

The FCC is looking for proposals to bring advanced telecommunications services to rural Americans . . . and it’s planning on providing governmental cash to worthy proponents. To help it determine what projects will get funded and how much funding will be available, the Commission has launched a two-phase process. In the now-open first phase, prospective proponents have been invited to submit “expressions of interest” describing what they have in mind. In the second stage, the FCC will seek more detailed and definite applications, subject to resolution of certain policy issues in the Further Notice of Proposed Rulemaking (FNPRM) component of the Technology Transition Order. Comments on the FNPRM are due March 31.

The Commission’s invitation is addressed to the widest range of communications service providers, including ILECs, CLECs, cable, utilities, fixed and mobile wireless, municipalities, Tribes, WISPs, and others. So if you’re interested in building high-speed, scalable IP-based networks in rural areas and maybe getting at least some federal funding in the process, listen up.

In its call for proposals, the FCC is focusing on proposals to build robust last-mile broadband, rather than middle mile projects. Proposed experiments described in expressions of interest must be for rural areas currently lacking Internet access service that delivers at least 3 Mbps downstream/768 kbps upstream.

The major goal here is to determine how the use of “tailored economic incentives” might encourage the deployment of next gen networks, wireline and wireless, in rural, high cost areas to which such networks have historically been slow to spread. In the FCC’s words, the experiment will “test, on a limited scale, the use of an application-based competitive bidding process with objective selection criteria”.

The Commission is currently considering what mechanism(s) to use in the award of Connect America funding support in price cap territories where the incumbent declines the offer of model-based support. One possibility would be for the FCC to use application-based competitive bidding, rather than a reverse auction. Another innovation: while such funding has previously been available only in areas served by price cap incumbent local exchange carriers, in this program it will also be made available in areas where the incumbent is a rate-of-return carrier.

How much money will ultimately be on the line? Because it is in the earliest stages of launching this experimental process, the Commission is vague on that point. It does say that it anticipates only a “limited” number of Connect America funded experiments, with total Connect America support of perhaps $50-100 million. Applicants could propose either a one-time allocation of support or on-going annual support for up to ten years.

By dangling the possibility of Connect America funding, the FCC hopes to get answers to the following questions:

  • Under what conditions will consumers or providers prefer next generation wireless services over wireline alternatives?
  • What are the viable business models that could support the deployment of fiber or other next generation wired technology in rural areas?
  • What is the interest among non-incumbents to provide rural high speed IP-based networks?

As noted, the FCC contemplates a two-stage process for determining how to dole out this funding. Before the second, “formal proposal” phase, the initial “expression of interest” phase will provide the Commission with at least a sense of what types of proposes it might expect at the formal proposal stage. In the initial stage which has now commenced, interested parties may file non-binding “expressions of interest”. Such proposals must be filed electronically (go to the FCC’s ECFS filing site and upload in Proceeding Number 10-90). While an initial deadline of March 7, 2014 was announced for such expressions, the Commission has made clear that expressions of interest may be filed on a “rolling basis” thereafter.

Information to be included in an expression of interest should include:

  • The nature of the submitting entity or entities (e.g., incumbent LEC, municipality, utility, cable operator, wireless provider);
  • Identification of the proposed service area for the experiment, including census block number, with any relevant information regarding the number of locations that could be served, including schools, libraries, and other anchor institutions;
  • The broadband technology or technologies to be deployed;
  • Contemplated service offerings (e.g., description of voice service, broadband speed tiers, nature of video service, if any) and pricing of such offerings;
  • If known, expected State and/or local or Tribal governmental participation in and/or support for the project (e.g., expedited permitting, access to rights of way, matching funds, etc.); and
  • Whether the proposal is expected to require one-time or continuing funding and a high-level estimate of the amount of funding requested.

Applicants must already be designated as an “eligible telecommunications carrier” for purposes of receiving support, or must obtain that designation once their application is selected.

In designing their proposals, prospective applicants should consider the geographic areas that will be eligible for support. Those areas must currently lack any broadband service. (It is likely that the final application process will include an opportunity to challenge an applicant’s claim that particular areas are unserved.)

Applicants will also have to consider the size of the proposed service area.

In price cap ILEC areas, proposals will be considered at the census tract level, although funding will be provided only for locations in eligible census blocks with any census tract covered by the proposal. A census block will be eligible if (a) it lacks broadband and (b) the “average cost per location is equal to or exceeds the likely funding threshold in the forward-looking cost model”. (The Commission advises that its work on developing the “forward-looking cost model” to be used in this context is “nearing completion”.)

In rate-of-return service areas, proposals will be considered at the census block (rather than the census tract) level.

Shortly after announcing the experimental process, the FCC released a list of the census tracts in price cap areas potentially available for the rural broadband experiments. (Note: Clicking on the link will provide access to a comma-separated-values – “csv” – file that can be opened with Excel or other spreadsheet software.)

The submission of an expression of interest is not a pre-condition for submitting a formal proposal when the second phase of the process begins. This two-step approach is expected to help the FCC to plan in advance for how much funding they need to set aside when the second, “formal proposal”, stage arrives.

While first phase “expressions of interest” may be filed now, a number of issues must be resolved before the second phase “formal proposals” will be accepted and considered. In the FNPRM component of the Technology Transition Order the FCC is seeking comments on those issues. With respect to the criteria to be used in evaluating formal proposals, the Commission asks:

  • If cost effectiveness is a criterion, how should it be measured?
  • How should “robust, scalable networks” be defined?
  • What should the minimum throughput speed be for the funded networks: 4 mbps             downstream/1 mbps upstream; 6 mbps down/1.5 mbps up?
  • Should applicants be required to leverage other funding – from states, localities, or Tribes?

Comments are also sought on:

  • whether an application-based competitive bidding system (as opposed to a reverse auction) should be used to select proposals to be funded;
  • the amount of Connect America funding that should be made available; and
  • whether an initial window should be opened for proposals by rate of return ILECs.

As noted above, comments in response to the FNPRM are due by March 31, 2014, with reply comments due by April 14.

The FCC’s invitation for proposals presents significant opportunities for entities that participate in the rural broadband experiments. Participants may discover important facts about the transition process in their service area. At a minimum, they will at least have a voice in the fact-finding process that will underlie the ultimate criteria to be used. Indeed, parties filing non-binding “expressions of interest” may shape the transition in their area by putting some “facts on the ground” that may be difficult for the FCC to ignore. Lastly, of course, a successful “formal proposal” could lead to additional Connect America funding to facilitate the transition in their service area.

It’s time for interested companies – those that may be interested in proposing rural broadband experiments and those that just want to shape the application process – to get busy preparing either expressions of interest and/or comments in response to  the FNPRM. We here at Fletcher Heald are well positioned to assist you. Feel free to contact us.