FCC Eases Restrictions on Broadband Deployment Support for Rate-of-Return Carriers; Faces Challenges to Connect America Fund Phase II Auction

As part of its continued focus on accelerating broadband deployment, the Federal Communications Commission (FCC) eased restrictions on its universal service support for deployments by rate-of-return carriers in rural and other high-cost areas.  In a unanimous Order on Reconsideration issued at its April meeting, the FCC found that the restrictions drove providers to exclude high-cost areas from planned deployments, “stranding” communities without broadband.  Rate-of-return carriers will be able to receive support for broadband deployments up to certain thresholds, so long as they cover any additional expenses themselves.  Rate-of-return carriers should factor in this potential support when assessing broadband deployment plans or expanding existing buildouts.  As for providing support in areas served by price cap incumbent carriers, the FCC faces challenges to its recent order on instituting the Connect America Fund (CAF) Phase II auction, under which it will provide support to deploy broadband in unserved areas where the price cap carriers did not elect receive support.  Comments on the CAF challenges are due on May 18, 2017, with replies due on May 29, 2017.

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International Bureau Temporarily Waives Section 43.62 International Traffic and Revenue Reporting Requirement

World Global ConnectionsBy an International Bureau (Bureau) Order (Order) released yesterday that temporarily waives the International Traffic and Revenue Reporting (the Traffic and Revenue Report) requirement, the Federal Communications Commission (FCC) appears to be moving steadily toward its overhaul of the Section 43.62 international reporting requirements.  As Kelley Drye reported in recent posts (here and here), in late March the FCC released a Notice of Proposed Rulemaking (NPRM) initiating a proceeding and seeking comments on proposals to eliminate the Section 43.62 Traffic and Revenue Report and further streamline the International Circuit Capacity Report.  By today’s Order, on the Bureau’s own motion and well before the rulemaking’s May 17 comment and June 1 reply comment due dates, the Bureau temporarily waived the Traffic and Revenue Report requirement until 60 days after the FCC issues an order in the pending rulemaking proceeding.  The Traffic and Revenue Report is filed annually and is due by July 31.  However, as a result of the reporting waiver and unless the FCC ultimately decides to retain the reporting requirement, filers may have seen the last of the Traffic and Revenue Report.

Stating that it was not attempting to prejudge the outcome of the rulemaking proceeding, the Bureau noted the FCC’s belief that the benefits of the Traffic and Revenue Report no longer outweighed the costs of its preparation.  In particular, the Bureau cited the FCC’s positions in the NPRM asserting that preparation of the Traffic and Revenue Report imposed significant burdens on filers and the FCC and questioning the Traffic and Revenue Report’s accuracy in providing insight into international markets.  The Bureau explained that the reporting waiver would avoid subjecting filers to “potentially unnecessary expenses” associated with preparing the Traffic and Revenue Report in the event the FCC eliminates the reporting requirement.   While filers are not totally off the hook – the waiver still requires filers to retain the data in case the FCC identifies a need for some type of reporting requirement – the Bureau’s waiver of the reporting requirement this early in the rulemaking process suggests the FCC’s proposed elimination of the Traffic and Revenue Report likely will be realized.

Until the FCC rules in the rulemaking proceeding, there is no guarantee the Traffic and Revenue Report will be eliminated.  Accordingly, filers interested in sharing their thoughts on the Section 43.62 reporting requirements should consider if they want to participate in the rulemaking proceeding.  Additional details regarding the NPRM can be found in Kelley Drye’s client advisory.

Should you have any questions about this proceeding and what the proposed rules may mean for your business, feel free to contact a member of Kelley Drye’s Communications practice group.

FCC Releases Draft of “Internet Freedom” Item in Advance of May Open Meeting

iStock_000006131068MediumOn April 27, 2017, the Federal Communications Commission (FCC or Commission) released the draft text of a notice of proposed rulemaking (NPRM) that would launch a new FCC proceeding (WC Docket No. 17-108) to roll back the Commission’s 2015 Open Internet Order and take steps to “restore Internet freedom” by deregulating broadband Internet access service (BIAS).  As discussed in more detail below, in the NPRM, the Commission proposes to restore the regulatory framework in place before the 2015 Open Internet Order (which the NPRM calls the “Title II Order”), and seeks comment on how best to achieve that outcome.

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FCC Provides Guidance on Inability to Pay Analysis in Enforcement Actions; Significantly Reduces Slamming/Cramming Penalty

CashThe Federal Communications Commission (FCC) reduced the penalty assessed against a long distance carrier by over $6 million in a Forfeiture Order issued earlier this week, after the carrier demonstrated an inability to pay the proposed fine.  In doing so, the FCC provided rare insight into how it assesses inability to pay claims raised by enforcement action targets and balances such claims against other forfeiture adjustment factors.  The Forfeiture Order provides the most recent detailed guidance about how a company’s finances can impact the FCC’s forfeiture analysis, but offers little comfort to low-margin businesses with limited net revenues.

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Client Advisory: The FCC Initiates Close Look at Wireless Infrastructure Deployment and Investment Issues

At its April 20, 2017 Open Meeting, the Federal Communications Commission (“Commission” or “FCC”) initiated two proceedings to review ways in which the Commission might alleviate obstacles wireless providers face at the state, local, and Tribal levels when trying to install new or upgrade existing wireless infrastructure. FCC Chairman Ajit Pai welcomed new ideas for “updating state, local, and Tribal infrastructure review to meet the realities of the modern marketplace.” The Commission’s release, a combined notice of proposed rulemaking (“NPRM”) and notice of inquiry (“NOI”), explains that wireless providers need to be able to deploy many wireless cell sites across the country in response to growing demand for wireless broadband to support high-bandwidth applications and the growth of the Internet of Things. The NPRM and NOI on wireless infrastructure deployment complement a second pair of proceedings that will be looking at wireline infrastructure, also adopted at the FCC’s Open Meeting. A blog and advisory on the wireline counterpart is forthcoming.

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Previewing the (Net Neutrality) Road Ahead: Chairman Pai Announces a Plan to Reverse the 2015 Open Internet Order

On April 26, 2017, Ajit Pai, Chairman of the Federal Communications Commission (FCC or the Commission) announced his plans to launch a rulemaking proceeding reassessing the FCC’s Open Internet rules.

During an event at the Newseum in Washington, D.C., Chairman Pai announced that he would present a Notice of Proposed Rulemaking (NPRM) to reassess many aspects of the 2015 Open Internet Order, which reclassified broadband Internet access service (BIAS) as a Title II telecommunications service and imposed a number of common-carrier style regulations on BIAS.  On May 18, 2017, Chairman Pai will ask for a Commission vote on the NPRM at the Commission’s monthly open meeting. Continue Reading

Podcast: TCPA Update Spring 2017

This podcast episode is the second in the Kelley Drye Full Spectrum series devoted to covering noteworthy developments relating to the Telephone Consumer Protection Act (TCPA). This series covers decisions from the FCC and federal courts, as well as any TCPA-related activity on Capitol Hill. In this episode, partner Steve Augustino and associate Jennifer Wainwright start off by discussing the 2015 Declaratory Ruling and Order. Second, they provide an update on the exemption from the TCPA for Federal debt collectors. Third, they examine Chairman Pai and his likely approach to robocalls. Fourth, they discuss the pending appeal of disclosure rules on “solicited” faxes and finally, they look at two recent TCPA petitions. Please click here to listen to this episode.

Pai Directs USAC to Improve E-Rate Productivity Center

Federal Communications Commission (FCC or Commission) Chairman Ajit Pai sent a letter this week to Chris Henderson, CEO of the Universal Service Administrative Company (USAC) expressing concern about flaws in USAC’s administration of the E-Rate Productivity Center (EPC), the online application and account portal. In the letter, Chairman Pai noted his support for E-Rate as a program that is a key component of the Universal Service Fund but said that major problems exist in the process through which schools and libraries apply for E-Rate funding.

The EPC was established in response to a 2014 FCC directive to make the E-Rate process faster, simpler, and more efficient. In his letter, the Chairman stated that the EPC was supposed to be fully operational for the funding year 2016 filing window and that today it is still not adequately functional. According to Pai, “EPC implementation issues have created major headaches for applicants requesting E-Rate funding.” As an example, the Chairman cited the fact that USAC has been unable to meet a Commission directive to process funding requests by September 1 of the funding year, resulting in a number of applicants who are still awaiting decisions for funding year 2016. The Chairman also noted similar delays with other matters including issuance of commitment adjustments, revisions to funding commitment decision letters, and appeals resolutions.

Chairman Pai also took issue with the cost of the EPC project. He emphasized the fact that the project was originally supposed to cost $19 million, has already cost over $30 million and is projected to cost $60 million or more. Pai further criticized USAC for a lack of transparency with the FCC “about program issues that directly and materially affect applicants, such as system outages during critical application periods.”  In one instance, E-Rate stakeholders, and not USAC, informed the FCC about a problem with invoice deadline extensions using USAC’s Invoice Deadline Extension Tool and the Wireline Competition Bureau had to devise an impromptu solution.

In the letter, Pai seeks the following specific commitments from USAC going forward:

  • Guarantee to take all necessary steps to quickly resolve any issues with the EPC, with a focus on supporting and completing basic functionality for applicants to apply for and receive funds;
  • Be transparent with and accountable to the Commission by providing timely and accurate information; and
  • Work to proactively identify and implement alternative options to assist applicants when EPC fails, including manually processing items if needed (which should fall to SOLIX under its $38 million contract to process applicant funding applications).

USAC is directed to provide a response to this letter and outline its plan to address these matters by May 18, 2017.

Comment Deadlines Set for FCC’s Latest International Reporting Streamlining Rulemaking

World Global ConnectionsAs Kelley Drye reported in a post late last month, the Federal Communications Commission (FCC) is considering eliminating the FCC Rule 43.62(b) annual International Traffic and Revenue reporting obligation and streamlining the Rule 43.62(a) annual Circuit Capacity reporting requirements.  The FCC last overhauled these international reporting requirements a mere four years ago.  The FCC’s Notice of Proposed Rulemaking (NPRM) now solicits comments on a number of issues including, but not limited to, the effect on U.S. consumers and carriers of eliminating the annual International Traffic and Revenue report, the costs of complying with the two annual reporting requirements, and options for streamlining the annual Circuit Capacity reporting obligations.  Kelley Drye will be preparing an advisory delving deeper into the issues for which the FCC is seeking comment so be sure to check the Kelley Drye Communications practice group page for more details.

The NPRM was published this morning in the Federal Register, establishing the comment deadline at May 17, 2017 with reply comments due by June 1, 2017.  International telecommunications providers subject to the reporting requirements should review the NPRM and consider whether to participate in the comment cycle to ensure their views are heard.

Should you have any questions about this proceeding and what the proposed rules may mean for your business, feel free to contact a member of Kelley Drye’s Communications practice group.

FCC Announces the Results of the $19.8 Billion Broadcast Incentive Auction

On Thursday, April 13, 2017, the Federal Communications Commission (“FCC” or the “Commission”) announced the results of its broadcast incentive auction.  The FCC raised approximately $19.8 billion through the auction.  While the gross revenues were considerably less than the nearly $45 billion the Commission raised in 2015 from the Advanced Wireless Services 3 (“AWS-3”) auction, the spectrum incentive auction still had one of the highest grossing auction results in agency history.

The 50 winning bidders won a combined total of 70 MHz of licensed spectrum nationwide in the 600 MHz range.  The largest spenders were T-Mobile at $8 billion, Dish at $6.2 billion, and Comcast at $1.7 billion.  Notably, AT&T spent less than $1 billion, and Verizon did not bid at all.  Continue Reading