Continuing its push to free up spectrum to support next-generation 5G services, the FCC plans to move forward on auctions of both mid- and high-band spectrum for commercial mobile use at its next open meeting scheduled for July 10, 2019. First, the FCC would establish new licensing rules for the 2.496-2.690 GHz band (“2.5 GHz Band”) currently used for educational television services to facilitate the auction of the spectrum next year. The FCC contends that the 2.5 GHz Band, which represents the largest contiguous block of mid-band spectrum considered for auction to date, has largely gone unused and should be opened up for commercial use. Second, the FCC would adopt application and bidding procedures for the auction of spectrum at 37.6-38.6 GHz (“Upper 37 GHz Band”), 38.6 GHz-40.0 GHz (“39 GHz Band”), and 47.2-48.2 GHz (“47 GHz Band”). This auction would be the FCC’s third auction of high-band spectrum, following the recent auctions of 24 GHz band and 28 GHz band spectrum. As we previously noted, this auction is complicated by the presence of incumbent licensees in the 39 GHz Band, who would be offered incentive payments to accept modified licenses or leave the Band under the FCC’s plan. Rounding out the major July actions, the FCC expects to seek comment on establishing a three-year, $100 million universal service pilot program to support telehealth services as well as eliminate pricing regulation and other restrictions on certain legacy data transport services offered by price cap carriers.

You will find more details on the most significant July meeting items after the break:


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The FCC’s proposed rulemaking to establish an overall budget cap on the Universal Service Fund (“USF”) was published in the Federal Register on June 13, 2019, which sets the comment deadline on July 15, 2019, and the reply comment deadline on August 12, 2019.  As we previously highlighted, the notice of proposed

On Friday, May 31, 2019, the FCC released a much-anticipated notice of proposed rulemaking (“NPRM”) to consider the adoption of an overall budget cap on the Universal Service Fund (“USF”), separate from any individual budgets for each of the four USF programs. The NPRM is in response to years-long advocacy on the part of Commissioner O’Rielly to impose budgets on USF spending, and it comes over dissent of the two Democratic Commissioners. While Commissioner O’Rielly justified the proposal as responsible stewardship of public money and said it would not limit funding in the near future, Commissioners Rosenworcel and Starks criticized the proposal as undermining the goals of Universal Service and, at worst, creating a “universal service hunger games” among the support programs.

The release of the NPRM was our first look at the specifics of a proposal that broke a month ago. The NPRM does not propose a specific budget, primarily raises questions about how to proceed, and does not contain any proposed rules. Nevertheless, opponents of the proposal have been most vocal since word of the NPRM came out, and we expect those USF stakeholders to continue in opposition to the approach. Meanwhile, proposals to reform USF contributions remain stalled (and lacking any consensus), while the contribution factor hovers around 20% of assessable revenues.


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The FCC plans to adopt an order eliminating the controversial rural “rate floor” that restricts the amount of Universal Service Fund (“USF”) support received by some carriers to build and maintain networks in underserved areas at its next meeting scheduled for April 12, 2019. The rural rate floor, which requires carriers receiving Connect America Fund (“CAF”) support to charge a minimum monthly rate or risk losing subsidies, has been a longstanding target of criticism by Chairman Pai as well as consumer groups, Tribal authorities, and rural carriers. The proposed order follows a nearly two-year freeze in the rate floor implemented soon after Chairman Pai assumed leadership and would avoid an almost 50% increase in the rate floor scheduled to take effect in July 2019. Rate floor elimination would provide significant regulatory relief to rural carriers by increasing flexibility over service rates, while reducing associated reporting and customer notification requirements.

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It’s once again full speed ahead on spectrum and 5G deployment at the FCC, as the agency plans to take action at its next open meeting scheduled for April 12, 2019 on a slew of measures aimed at making additional millimeter wave (“mmW”) frequencies available to support 5G wireless technologies, the Internet of Things, and other advanced services. Topping the agenda, the agency expects to propose procedures for the simultaneous auction of spectrum for commercial wireless services in three mmW bands encompassing 3400 megahertz. As we previously reported, the proposal would clear the way for the FCC’s second-ever incentive auction (the first being the March 2017 broadcast spectrum incentive auction) designed to clear out incumbent licensees by offering payments in exchange for relinquishing current spectrum holdings. The agency also anticipates reforming access to mmW bands to facilitate the auction and extending long-standing protections for over-the-air reception devices (“OTARD”) to hub and relay antennas essential to 5G network deployment. Rounding out the major actions on the April agenda, the FCC plans to forbear from certain legacy long-distance regulations in the face of increased competition and eliminate the controversial rural “rate floor” for high cost universal service support.

You will find more details on the significant April meeting items after the break:


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On February 4, 2019, the FCC announced a plan to create a new division housed in its Enforcement Bureau, dedicated to prosecuting fraud in the agency’s Universal Service Fund (“USF”) programs. Citing to recent USF-related proposed fines and voluntary settlements, the FCC asserted that the creation of a specialized Fraud Division was necessary to combat misuse of funds under the High Cost, E-Rate, Lifeline, and Rural Health Care programs that make up the USF. The FCC’s brief, two-page Order leaves many questions unanswered about the proposed Fraud Division’s ambit and the status of the “USF Strike Force” that preceded it. However, the Order signifies that the FCC plans to redouble its fraud enforcement efforts in 2019 following recent setbacks on the USF rulemaking front. As a result, eligible telecommunications carriers and other recipients of USF support should keep a close watch as the scope and function of the new Fraud Division starts to take shape.
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In a move certain to inflame the ongoing trade dispute between the United States and China, Justice Department officials announced criminal charges against Chinese telecommunications equipment manufacturer Huawei, several of its affiliates, and its chief financial officer for alleged theft of trade secrets from U.S. telecommunications providers, bank fraud, obstruction of justice, and other violations. The two indictments issued on January 28, 2019, represent just the latest pushback against foreign telecommunications interests by U.S. officials, citing national security concerns and unfair trade practice claims. The FCC already proposed rule changes last year that would prohibit the use of Universal Service Fund support to purchase equipment or services from foreign companies deemed national security threats, primarily targeting companies from China and Russia. Congress also recently passed legislation prohibiting federal agencies and those working with them from using components provided by Huawei and other Chinese manufacturers. With the Trump Administration reportedly poised to issue an executive order effectively barring American companies from using Chinese-origin equipment in critical telecommunications networks, domestic service providers should keep a close eye on their supply chain security and potential liability when working with foreign entities. A criminal conviction on these charges could lead to broader restrictions on trade in U.S. export-controlled products with the company. Given the presence of encryption in telecom equipment, export controls on such products are relatively widespread
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We attended the Audit Committee meeting at USAC’s quarterly business meeting this morning.  While much of the discussion concerned internal controls USAC has in place to oversee its functions, the business update portion of the meeting gave us a snapshot into contributor and beneficiary audit activity at USAC.  The presentation gave us some insight into a likely increased amount of activity over the next few months.

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As summer begins to wind down, the FCC will begin considering whether to revise or eliminate decade-old regulations, including certain rules related to the Universal Service Fund (“USF”), equipment authorization procedures, and disabilities access. The FCC kicked off its review with a Public Notice under the Regulatory Flexibility Act, which requires federal agencies to reexamine regulations within 10 years of their adoption to assess the continued need for the rules, the rules’ complexity, and whether the rules overlap or conflict with other federal regulations. The purpose of the review is to ensure that older, unnecessary rules do not remain on the books, lowering the compliance burden for smaller businesses. Although the FCC rarely eliminates a rule outright as part of this review, the comments received can help the agency identify improvements for future rulemakings or flag potential compliance issues.

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Echoing concerns raised by other parts of the federal government over the past several years, the FCC, at its open meeting on April 17, 2018, adopted a Notice of Proposed Rulemaking (“NPRM”) to consider a rule which would prohibit Universal Service Fund (“USF”) support from being used “to purchase or obtain any equipment or services produced or provided by a company posing a national security threat to the integrity of communications networks or the communications supply chain.”  The NPRM seeks comment on issues such as how such a rule can be implemented and enforced, what types of equipment and services should be covered, and how manufacturers covered by the rule are to be identified and made known to USF recipients.  Although this is only the start of the proceeding, the FCC’s action could have a broad-reaching impact for some communications equipment manufacturers and create potential liabilities for entities participating in any of the federal USF programs.  All companies purchasing equipment from certain countries – principally China and Russia – may be affected, even if they don’t receive federal USF money.

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