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MDU developers and owners know they are on the frontline of the broadband revolution. During the pandemic, working from home with expansive use of online conferencing is the new normal. With school starting across the country, online learning will place more demands on local broadband networks. E-commerce is booming as owners can attest by virtue of resident expectations for enhanced package receiving and storage capabilities. Even as the pandemic is controlled, elevated demand for higher speeds, particularly upload speeds (as compared to prior Covid-19 demand), likely will persist. Adding fuel to this fire are overpriced cable and satellite television programming packages and the popularity of online streaming services.

Owners whose properties lack adequate broadband connectivity are in an unenviable position, whether due to unavailable robust broadband service or limited property infrastructure such as inadequate risers, pathways, or lack of spare conduit to accommodate more than one service provider. Old copper telephone wire has limited utility.  In some instances, a saving grace is that other multi-family property owners in the area likely suffer from the same lack of robust broadband options.

Many developers and owners are not ready to “cut the cord” on linear video,  as they are not yet comfortable with providing a “streaming-only” video option for residents.[1] This is particularly true among operators of retirement communities. For new developments, retrofits, and when otherwise feasible, sophisticated MDU developers and owners are inviting multiple broadband service providers to extend their networks into their communities and offer 21st century broadband services to their residents. [In many ways, this is the “next act” in the “play” that began 15-20 years ago when cable broadband offerings overwhelmed the local telephone companies that were wedded to DSL technology.]

Whether engaging with established triple-play providers or emerging broadband providers, developers and owners should frame their broadband strategies based on the following considerations:

  1. Robust broadband service (and meaningful competition) is a challenge for MDU developers and owners outside of major urban areas. Substantial cable industry consolidation has occurred in recent years.  Charter acquired Time Warner and Bright House Networks in 2016. Altice acquired Cablevision the same year.   Unfortunately, these cable operators rarely compete against each other in the same market. In urban markets the major telephone companies, AT&T and Verizon, offer competitive (typically fiber-based) triple-play services and Century Link is building out fiber-based networks in some urban areas.  To date, new broadband-focused providers are concentrated in urban areas. In many 2nd and 3rd tier markets, the video and broadband offerings of the major telcos rely on aging in-place DSL technology; thus, the sole option is the local cable operator. Only in recent years is a semblance of competition emerging in 2nd and 3rd tier markets.[2]

a. The business and legal terms and conditions of the major service providers’ standard MDU access and marketing agreements range from unreasonable and a challenge to read to those that are reasonably balanced and comprehensible.  Competitive broadband providers’ agreements tend to be balanced and readable. These providers appear focused on reducing the “friction” in implementing relationships with MDUs.

  1. Plan for the future. Properties should be constructed to support inbuilding wiring/facilities of multiple service providers (even if today there are no viable competitors to the local triple-play when the property is being built).

a. State and Federal laws and policies largely prohibit exclusive access arrangements, but exclusive of use of inside wiring by a single provider is the predominant regulatory policy and industry practice today.

  1. Beware of exclusive marketing agreements with triple-play providers or other broadband providers. These agreements may discourage competitors from extending facilities and services to a development or community.

a. Franchise cable operators typically leverage their cable franchise to provide broadband service throughout their franchise service areas.

b. Except for rural broadband services providers that are recipients of Federal USF or RUS broadband funding or similar state programs, emerging broadband providers are not obligated to extend broadband service to MDU developments.

  1. Critically evaluate bulk video service arrangements. Ten years ago, bulk linear video deals provided owners positive revenue streams while delivering a valued amenity for many prospective residents. The migration to online streaming and the rising costs of linear video programming (increasing programming fees, add-on fees, and annual price increases) are undercutting the value of bulk video arrangements in MDUs.
  2. Triple-play and broadband-only agreements should not restrict developer/owner flexibility in selecting IoT services or IoT service providers. The Internet of Things (IoT) is the integration of wireless technology, remote sensing devices, and analytics that either monitor or control property-wide or unit-specific systems such as HVAC, access, video surveillance, and electricity or water usage or both. The applications and efficacy of these applications are evolving. Whether a property’s broadband service provider(s) can best deploy and manage these systems or whether focused IoT providers can do a better job remains to be determined.
  3. Experienced consultants can bridge owners’ and developers’ knowledge gap in assessing services providers’ business offers. Excluding the largest REITs, most developers and owners do not enter into agreements with broadband providers on a continuing basis to develop a “sense of the market.” We have two thoughts regarding consultants. First, understand the roles/services the consultant will perform. Second, in our view, flat fee or hourly rate arrangements are preferable to “percentage of savings” compensation schemes. The latter can be challenging to define and can result in an unexpected case of “buyer’s remorse.”

[1] This entry is not intended to speak to the off-campus student housing segment of the MDU industry.

[2]In unserved rural markets (no broadband at 25/3 Mbps or higher or 10/1 Mbps or higher and no wireline voice), the FCC and the Rural Utility Service (RUS) of the United States Department of Agriculture are funding fiber-based and fixed wireless networks capable of providing up to 1 Gbps/500 Mbps to residential (including MDUs) and small business users. In October of this year, the FCC will make available up to $16.0 Billion over ten years for broadband deployments in unserved rural areas via a reverse auction.

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On Monday, August 3rd, the White House withdrew its (re)nomination of FCC Commissioner Michael O’Rielly for another term. This unusual White House action has sparked discussion about the process and rationale for the withdrawal.

FCC Composition. The full slate of FCC leadership includes five Commissioners. The Chair and two Commissioners are of the same political party as the President. The two other Commissioners are members of the other political party.

Appointing Commissioners. When a Commissioner position is vacant, there are dozens (if not hundreds) of people interested in pursuing the vacancy and qualified to hold the position by their political connections and past work experience. Ultimately, the President nominates an individual to fill a vacant Commissioner position and this person must then be confirmed by a majority vote of the Senate.

The three Commissioners in the majority involve significant vetting by the White House, particularly in an election year like this one where FCC issues (e.g. broadband and telehealth) have significant political importance. Commissioner O’Rielly is completing his first full term as a Commissioner and was re-nominated for a second term in a Republican seat by the President on March 18th. His nomination was approved by Senate Commerce Committee on July 22nd.

The Ligado Decision. Late last month, and before the full Senate could consider his nomination, the Republican Chair of the Senate Armed Services Committee, Sen. James Inhofe (R-OK), announced a hold on Commissioner O’Reilly’s nomination. This hold precluded Mr. O’Rielly’s Senate confirmation vote.

Sen. Inhofe initiated the hold because of concerns about the FCC’s April 22, 2020 decision approving applications from Ligado Networks to deploy a low-power terrestrial nationwide network in the L-Band. The FCC’s Ligado decision was contentious and received several objections, including from the Department of Defense and aviation interests concerned about potential interference to the GPS system that is critical to their operations.

Section 230 Petition. As O’Rielly’s nomination was playing out in the Senate, President Trump issued an Executive Order in May. On July 27th, the National Telecommunications and Information Administration (“NTIA”) filed a Petition for Rulemaking with the FCC pursuant to the Executive Order. The Petition asks the FCC to clarify the provisions of Section 230 of the Communications Decency Act of 1996. This Section of the Act generally provides liability protections for companies like Twitter and Facebook from being considered a publisher of third-party content when they remove content for being illegal, violating their terms and conditions, or as objectionable for other reasons. The NTIA Petition asked the FCC to further define the circumstances under which these companies are entitled to the liability protections.

On the same day, Chairman Ajit Pai and Republican Commissioner Brendan Carr welcomed the Petition. The two Democratic Commissioners – Starks and Rosenworcel – expressed concerns and argued that the FCC should not adopt NTIA’s proposal.

Two days later, on July 29th, Commissioner O’Rielly gave a speech as part of The Media Institute’s Luncheon series. Near the end of his speech, he expressed concern about the Petition. “The First Amendment protects us from limits on speech imposed by the government—not private actors—and we should all reject demands, in the name of the First Amendment, for private actors to curate or publish speech in a certain way,” he said. Less than a week later, the White House withdrew his nomination for a second full term.

Next Steps. Commissioner O’Rielly’s term expired on June 30, 2019. By statute, if he is not confirmed to another term, he is allowed to continue serving until the end of the current legislative session or the confirmation of a successor. Though we have heard rumors of President Trump nominating a successor, we believe it’s unlikely any successor could be confirmed by the Senate before the election in November.

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If you missed the first two blog posts about the FCC’s most recent 5G Declaratory Ruling, please check out Part 1 and Part 2. This third and final entry focuses on the Notice of Proposed Rulemaking portion of the Commission’s release.

Notice of Proposed Rulemaking

In addition to the pro-industry decisions set forth in its Declaratory Ruling, the Commission is considering going even further to assist wireless carriers in deploying facilities to advance 5G and other telecommunications technologies. Current rules provide that a modification to an eligible support structure that requires excavation or deployment outside the current site is not eligible for streamlined review under Section 6409(a).

Prompted by a petition for rulemaking by WIA that asks the Commission to amend its rules so that a modification will not be a “substantial change” where it involves excavation or deployment at locations of up to 30 feet outside the boundaries of a macro tower compound, the Commission is proposing amendments to its facility rules. Specifically, the definition of “site” would include “the boundary of the leased or owned property surrounding the tower and any access or utility easements currently related to the site” as of the last approval. In addition, “modification of an existing facility that entails ground excavation or deployment of up to 30 feet in any direction outside the facility’s site will be eligible for streamlined processing.”

The Commission has proposed an expedited timeline for filing comments and reply comments in response to this Notice of Proposed Rulemaking. Comments will be due 20 days after the document is published in the Federal Register and reply comments will be due ten days after that.

Conclusion

These actions are the latest steps by the FCC to facilitate the deployment of wireless infrastructure to support the proliferation of 5G technology. With each Commission order the balance of power on siting decisions continues to shift toward the wireless industry and away from localities. Unless Congress and/or the Courts intervene, the inevitable result will be that local governments will have less and less say about infrastructure that so directly impacts their communities.

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If you missed the background, please check out Part 1 of this series of blog posts on the FCC’s most recent 5G Declaratory Ruling. This entry focuses on the key issues addressed by the Commission’s Ruling.

Commencement of Shot Clock

Current rules provide for a 60-day shot clock for local authorities to review requests to modify existing facilities and a “deemed granted” remedy for failing to act within the allowable review period, which can be tolled under certain circumstances. In its Declaratory Ruling, the Commission issued a series of clarifications designed to reduce the opportunity for a local authority to delay the start of the 60-day review period or otherwise toll the period.

The FCC clarified that the shot clock commences when: (1) the applicant takes the first procedural step required by a local jurisdiction’s 6409(a) review process and to the extent it is not done as part of the first step; and (2) submits written documentation showing that a proposed modification is an eligible facilities request under 6409(a). Documentation to start the shot clock could include, “a description of the proposed modification and an explanation of how the proposed modification is an eligible facilities request.”

The Commission specifically addressed a number of procedures that cannot be utilized to delay the commencement of, or otherwise toll, the 60-day review period for a 6409(a) review of existing facilities.

  • The triggering of the shot clock cannot be delayed by establishing a “first step” that is outside of the applicant’s control or not objectively verifiable. For example, if a first step is to meet with a municipal official, that step can be satisfied by making a written request for the meeting. According to the Commission, in this example the shot clock would be trigged by the written request and by providing the requisite documentation addressing the proposed modification.
  • The start of the shot clock cannot be delayed by defining the first step as a combination or a series of steps – such as requiring meetings or consultations with a number of local officials or entities.
  • The shot clock may not be delayed by declining to accept an applicant’s submission intended to demonstrate it has met the criteria established by the Commission for starting the clock.
  • A local jurisdiction may not delay the start of the shot clock by requiring documentation that is not reasonably related to determining whether the proposed modification is an eligible facilities request.
  • Conditional authorizations are acceptable but will not delay the start of the shot clock.

For those jurisdictions that do not have a specific review process for existing facilities under Section 6409(a), the Commission found that for purposes of triggering the shot clock, the applicant can consider the “first procedural step to be the submission of the type of filing that is typically required to initiate a standard zoning or siting review of a proposed deployment that it is not subject to section 6409(a).”

Height Increases for Towers Outside the Public Rights-of-Way

Adding equipment to an existing tower changes the tower’s physical dimension. The Commission found that if that “change is not ‘substantial’ then a request to implement it would qualify as an eligible facilities request, and a locality would be required to approve it.” Under existing rules, a modification of a tower outside of a public ROW would cause a substantial change if it “increases the height of the tower by more than 10% or by the height of one additional antenna array with separation from the nearest existing antenna not to exceed twenty feet, whichever is greater.”

The Commission clarified that “the word ‘separation’ refers to the distance from the top of the existing antenna to the bottom of the proposed antenna.” According to the FCC, interpreting “separation” to “include the height of the new antenna could limit the number of proposed height increases that would qualify for section 6409 (a) treatment given typical antenna sizes and separation distances between antennas.” The Commission found that such an interpretation would undermine “the statute’s objective to facilitate streamlined review of modifications of existing wireless structures.”

This clarification only applies to towers outside the ROWs. A different height standard continues to apply to structures within the public rights of way and base stations outside the ROWs.

Equipment Cabinets

Wireless carriers often must add equipment cabinets to existing wireless sites as part of the 5G upgrade. Current rules provide that a proposed modification to a support structure constitutes a substantial change if “it involves installation of more than the standard number of new equipment cabinets for the technology involved, but not to exceed four cabinets.” The Commission found that local jurisdictions are interpreting the phrase “equipment cabinet” too broadly in “treating the equipment itself as a cabinet simply because transmission equipment may have protective housing.” The Commission determined that “small pieces” of equipment, including remote radio units, radio transceivers, amplifiers and similar devices mounted on a structure, are not considered “equipment cabinets” under the rules “if they are not used as physical containers for smaller, distinct devices.”

Finally, the Commission clarified that the maximum number of additional cabinets that can be added is based on each separate request and is not a cumulative number for the facility involved.

Concealment Elements

Under current rules a modification “substantially changes” the physical dimensions of an existing structure if it defeats “the concealment elements” of the structure. In its 2014 Infrastructure Order, the FCC noted that for concealed or “stealth-designed” facilities – facilities designed to look like some feature other than a wireless tower or base station – a change that defeats the concealment elements would be considered a “substantial change.”

The Declaratory Ruling clarified that concealment elements are those elements of a wireless facility installed for the purpose of making the facility appear as “something fundamentally different than a wireless facility.” The Commission rejected the interpretation advanced by numerous localities that any attribute that minimizes the visual impact of a facility – such as placement behind a tree line – should be considered a concealment element.

The Commission further clarified that to be treated as a concealment element in a modification application the element itself must have been part of the facility that the local jurisdiction previously approved. There is, however, no requirement that a concealment element must have been specifically articulated as a condition by the locality in a prior approval. While specific words are not necessary, “there must be express evidence in the record” to show that a locality considered in its approval a stealth design that a facility would look like “a pine tree, flag pole, or chimney.”

Finally, the FCC clarified that to “defeat concealment,” a proposed modification “must cause a reasonable person to view the structure’s intended stealth design as no longer effective after the modification.” If the modified structure would continue to appear as something other than a wireless facility – such as a pine tree – then the modification would not defeat concealment.

Conflicts in Siting Rules Resolved in Favor of Allowing Existing Facility Modifications

Interpreting Section 1.6100 (b)(7) of its rules, the Commission found that an aesthetics related condition permitted under section 1.6100 (b)(7)(vi) cannot be used to prevent a “non-substantial” change to an eligible existing structure otherwise allowed under sections 1.6100 (b)(7)(i-iv). When a conflict exists, the aesthetic condition otherwise allowed under (vi) should be enforced only to the extent that it does not prevent the modification to the existing structure.

*       *       *

Please check out Part 3 of this blog post to learn more about the FCC’s Notice of Proposed Rulemaking in this same proceeding.

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The FCC has made another ruling that will expedite the wireless industry’s deployment of 5G infrastructure. In September 2018, the Commission released its order on “small cells” allowing for the proliferation of 5G transmitters on lights, poles, and other structures located in municipal rights-of-way (“ROWs”) across the country (for more on that, see our previous blog post). That order was appealed by dozens of local jurisdictions from coast-to-coast and remains on appeal in the U.S. Ninth Circuit Court of Appeals. Now prompted by petitions from the wireless industry, in a Declaratory Ruling the FCC’s seeks to “interpret and clarify” rules with respect to modifications of existing infrastructure. As part of the same document, the Commission included a Notice of Proposed Rulemaking that seeks to expand even further the infrastructure rights of wireless carriers at the expense of local authorities.

The analysis of this Declaratory Ruling and Notice of Proposed Rulemaking will be broken down into three parts. This is Part 1.

Declaratory Ruling

Background

Intending to assist FirstNet in deploying its wireless public safety network, Congress enacted Section 6409(a) of the Spectrum Act. That provision provides that a “State or local government may not deny, and shall approve, any eligible facilities request for a modification of an existing wireless tower or base station that does not substantially change the physical dimensions of such tower or base station.” In its 2014 Infrastructure Order the FCC adopted rules implementing Section 6409(a). Nevertheless, the interpretation of what constitutes a “substantial change” has resulted in continuing disputes between wireless carriers and local siting authorities. Issues have also arisen over the commencement and tolling of the 60-day period established by the Commission for section 6409(a) reviews of existing facilities conducted by local authorities. Both CTIA and WIA petitioned the Commission to resolve these issues in favor of the wireless industry. In response, the FCC issued a Declaratory Ruling rejecting procedural arguments by local authorities that the Administrative Procedure Act (“APA”) required a notice and comment rulemaking for what amounts to new rules. Below are some of the key issues addressed in the Commission’s Declaratory Ruling.

The second blog post in this series will highlight some of the key issues addressed in the Commission’s Declaratory Ruling. Part three of this post will focus on the Notice of Proposed Rulemaking.

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As policymakers work to help Americans cope with the COVID-19 pandemic, some of these efforts are rightfully directed at broadband funding. Congress and the Agencies continue to build on the programs described in our blog post, “The Increasing Importance of Broadband and Federal Funding in Uniting the Country,” with a focus on distance learning. Below is a description of new programs, as well as updates on the programs we covered in our previous blog post.

Education Stabilization Fund

The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) allotted $30.75 billion to the Education Stabilization Fund and created four grant programs to support education during the pandemic: Education Stabilization Fund Discretionary Grants; Governor’s Emergency Education Relief Fund; Elementary and Secondary School Emergency Relief Fund; and Higher Education Emergency Relief Fund. Additionally, Congress set aside one-half of 1% of the $30.75 billion for the Outlying Areas of the United States.

The FCC issued a statement describing how the Commission is assisting the Department of Education with these programs to promote remote learning. Through the Elementary and Secondary School Emergency Relief (ESSER) Fund and the Governor’s Emergency Education Relief (GEER) Fund, more than $16 billion is available in grants for purposes that include remote learning. The ESSER Fund provides approximately $13.2 billion in grants, which can be used to purchase educational technology including hardware, software, and connectivity. The Notice Announcing Availability of Funds specifically mentions “addressing the digital divide, including securing access to home-based connectivity and remote-use devices.” The GEER Fund makes approximately $3 billion available to Governors for flexible emergency block grants.

The Higher Education Emergency Relief Fund (HEERF) provides aid to students and institutions to cover costs associated with COVID-19. Half of the funding will go directly to institutions and half will be used as financial aid grants to students. Guidance for the funds going directly to institutions states that “institutions may use the funds for Recipient’s Institutional Costs to purchase equipment or software, pay for online licensing fees, or pay for internet service to enable students to transition to distance learning as such costs are associated with a significant change in the delivery of instruction due to the coronavirus.”

In addition to these specific programs, Congress set aside funds for discretionary grants, which will go to states with the highest coronavirus burden, and for grants to the Outlying Areas, specifically the US Virgin Islands (VI), Guam (GU), the Commonwealth of the Northern Mariana Islands (CNMI), and American Samoa (AS). The discretionary grants will make grants available through two programs. The Education Stabilization Fund-Rethink K12 Education Models Grants (ESF-REM Grants) will provide support to States with the highest coronavirus burden to address specific educational needs of students, their parents, and teachers. The Education Stabilization Fund-Reimagining Workforce Preparation Grants (ESF-RWP Grants) will “provide support to help States leverage the power of entrepreneurship to create new educational opportunities and pathways that help citizens return to work, small businesses recover, and new entrepreneurs thrive.” Regarding the grants to Outlying Areas, each area will receive a grant to the Governor’s office and a grant to the State Education Agency.

FCC Telehealth Funding Update

Since our last blog post, the FCC has funded 30 healthcare providers in 16 states through the COVID-19 Telehealth Program. This program helps healthcare providers “providers purchase telecommunications services, information services, and devices necessary to provide critical connected care services, whether for treatment of coronavirus or other health conditions during the coronavirus pandemic.” As of April 29, 2020, the FCC had awarded a total of $13.7 million in funding.

NTIA Updates Broadband Funding Resources

On April 27, 2020, NTIA announced that they have updated their comprehensive guide to federal broadband funding. The database, BroadbandUSA, provides information on all federal broadband programs. The most recent update will include programs implemented due to the COVID-19 pandemic.

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The Covid-19 crisis is highlighting the importance of broadband connectivity for all Americans. High capacity broadband service enables essential connectivity supporting telemedicine, distance education, telework, e-commerce, and essential social interactivity. During this pandemic, it is more important than ever that critical broadband services are available to all Americans. Primarily through programs administered by the Federal Communications Commission (“FCC”) and the Rural Utilities Service (“RUS”), the Federal government has long focused to bring internet access to rural America. To respond to the current health emergency and help restore economic activity, Congress has made available additional broadband funding that includes enhanced telehealth capabilities. Below is a summary of longstanding, newly established, and prospective federal initiatives to promote broadband connectivity.

The Coronavirus Aid, Relief, and Economic Security Act (“CARES ACT”) 

The CARES Act became law on March 27, 2020. The main goal of the legislation is to stimulate the economy and assist those affected by the economic impact of the coronavirus pandemic. There are several broadband funding initiatives included in the law.

FCC Telehealth Funding

The CARES Act appropriated $200 million to the FCC for telehealth purposes. Shortly after passage of the bill, the Commission adopted an Order establishing the COVID-19 Telehealth Program. This program aims to “help eligible health care providers purchase telecommunications services, information services, and devices necessary to provide critical connected care services, whether for treatment of coronavirus or other health conditions during the coronavirus pandemic.” Eligible applicants are nonprofit and public health care providers eligible under section 254(h)(7)(B) of the Telecommunications Act:

  • post-secondary educational institutions offering health care instruction, teaching hospitals, and medical schools
  • community health centers or health centers providing health care to migrants
  • local health departments or agencies
  • community mental health centers
  • not-for-profit hospitals
  • rural health clinics
  • skilled nursing facilities
  • consortia of health care providers consisting of one or more entities falling into the first seven categories

Eligible services and devices include connected devices and equipment, voice and internet services, and other information services such as remote monitoring platforms and video communication platforms. The funding awarded can be used to fund services and devices for both providers and patients. Funding is derived from a separate appropriation, not Universal Service Fund (“USF”) monies. The Commission does not anticipate awarding more than $1 million to any single applicant.

The initial wave of funding under the program includes:

  • Grady Memorial Hospital, Atlanta, GA – $727,747 to implement telehealth video visits, virtual check-ins, remote patient monitoring, and e-visits to patient’s hospital rooms
  • Hudson River HealthCare, Peekskill, NY – $753,367 for telehealth services to expand its frontline COVID-19 testing and treatment programs serving a large volume of low-income, uninsured, and/or underinsured patients throughout southeastern New York State
  • Mount Sinai Health System, New York City – $312,500 for telehealth devices and services to geriatric and palliative patients who are at high risk for COVID-19
  • Neighborhood Health Care, Cleveland, OH – $244,282 to provide telemedicine, connected devices, and remote patient monitoring to patients and families impacted by COVID-19 in Cleveland’s West Side neighborhoods, targeting low-income patients
  • Ochsner Clinic Foundation, New Orleans, LA – $1,000,000 for telehealth services and devices to serve high-risk patients and vulnerable populations in Louisiana and Mississippi
  • UPMC Children’s Hospital, Pittsburgh, PA – $192,500 to provide telehealth services to children who have received organ transplants and are thus immune compromised and at high risk for COVID-19

Although not directly related to the new legislation, the FCC’s Order also adopted a longer-term Connected Care Pilot Program, making available up to $100 million of USF support. The program will help defray costs health care providers incur in providing connected care services with an emphasis on services for low-income Americans and veterans. Eligible applicants are the same as those for the COVID-19 Telehealth Program.

RUS Distance Learning and Telemedicine

The CARES Act appropriated $25 million for the USDA’s Distance Learning and Telemedicine Program. This program helps rural communities by funding connectivity to combat the effects of remoteness and low population density. Program funds may be used for acquisition of broadband facilities including audio/video equipment, computer hardware, network components, and software. Non-profits, for profit businesses, most state and local governments, Federally Recognized Tribes, and a consortium of these entities are eligible. The CARES Act extended the program’s application window to July 13, 2020.

RUS Broadband Deployment Pilot Program (“ReConnect”)

The CARES Act also appropriated an additional $100 million to the RUS Rural Connect Pilot Program (“ReConnect”). This program provides funding to entities seeking to deploy broadband in rural areas. In order to be eligible, a project must serve an area in which 90% of the households lack access to internet service with speeds of at least 10 Mbps download and 1 Mbps upload. Eligibility is similar to the Distance Learning and Telemedicine Program.

This is a supplement to the December 12, 2019, ReConnect Funding Opportunity Announcement (“FOA”) for which the second-round application filing window closed earlier this month. The additional funding remains available until September 30, 2021. The Agency will establish a set-aside for the $100 million for priority processing for applicants that submitted grant applications during the first round of funding. For the application to be eligible for priority processing, the round one application must have been unsuccessful due to there being limited access to broadband in the proposed service area. Applicants were required to reapply during the second round of finding.

Department of Veterans Affairs Telehealth Funding

In addition to FCC and RUS programs, the CARES Act also provided $17.2 billion for the Veterans Health Administration, authorizing the VA to use these funds to enter into short-term contracts with telecom providers to deliver free or subsidized support for mental health services through telehealth connections or VA’s Video Connect Service.

Institute of Museums and Library Services

The CARES Act also appropriates $50 million for the Institute of Museums and Library Services (IMLS) to be spent by September 30, 2021. The first phase of funding will be allocated to all 50 states, D.C., and the U.S. territories based on population. States and territories will be able to “use the funds to expand digital network access, purchase internet accessible devices, and provide technical support services to citizens to address digital inclusion efforts and related technical support”. Funds should be prioritized based on poverty/Supplemental Nutrition Assistance Program (“SNAP”), unemployment, and broadband availability.

Broadband Deployment Accuracy and Technological Availability (“DATA)” Act Accurate broadband data is critical to the application and funding process for broadband grants. On March 23, 2020, the DATA Act became law. This new law requires the FCC to issue final rules regarding the collection and dissemination of granular broadband service availability data within six months. The goal is to establish a “Broadband Serviceable Location Fabric,” which will facilitate the reporting of broadband service availability data.

Under the law, the Commission must establish rules that require biannual collection and dissemination of granular data showing the availability and quality of broadband internet access service. This data will be used to compile coverage maps. The basis for the coverage maps will be the Broadband Serviceable Location Fabric. This will be a dataset of all locations in the country where fixed broadband internet access service can be installed. Within the rules, the Commission must include uniform standards for reporting broadband internet access service data from various service providers. Terrestrial fixed, fixed wireless, and satellite broadband internet access service providers must provide documents showing where they have built out broadband network infrastructure and where they could provide service.

In 2019, the Commission initiated a proceeding to establish improved broadband data collection and reporting procedures, Digital Opportunity Data Collection (“DODC”) (WC Docket No. 19-195). In a Second Notice of Proposed Rulemaking released last August, the Commission sought comment on many subjects included in the Broadband DATA Act. It is likely the Commission will adopt a Further Notice of Proposed Rulemaking to align the DODC proceeding with the requirements mandated by the Broadband DATA Act.

Conclusion

COVID -19 has highlighted the nation’s need for increased broadband connectivity in health care, education, social interaction, and commerce. While broadband can bring people together for these critical interactions, all Americans must have access to the internet for it to be effective. These new programs and broadband reporting processes all look to promote high speed broadband connectivity throughout underserved sectors of the economy.

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About a year ago, the FCC adopted a Notice of Proposed Rulemaking (NPRM) proposing to subdivide the 900 MHz band into a broadband segment and two narrowband segments. The broadband segment would be 3 MHz x 3 MHz from 897.5-900.5 MHz/936.5-939.5 MHZ. The two narrowband segments would consist of 1 ½ MHz x 1 ½ MHz segments (896-897.5/935-936.5 MHZ) below the broadband segment and ½ x ½ MHz segments (900.5-901/939.5-940 MHz) above the broadband segment.

This would differ significantly from the current composition of the band, which includes 159 site-based channel 12 ½ kHz pairs and twenty 10-channel pair systems for a total of 359 pairs.

The predecessor to Anterix – pDv – filed a petition for rulemaking in 2014 outlining its proposal to establish the 3 MHz x 3 MHz broadband allocation. Under the proposal, site-based 900 MHz licensees in this portion of the band would have to be relocated to comparable frequencies in the narrowband segment. At roughly the same time, pDv acquired many 900 MHz SMR licenses in several large metropolitan areas. These 10 MHz channels were previously held by Sprint. The company also is working on agreements with narrowband licensees around the country to acquire their 900 MHz licenses consistent with the FCC’s rules governing the assignment of 900 MHz licensees.

The ultimate objective is to establish the 3 x 3 MHz broadband channel to provide service directly to critical infrastructure firms or lease this swath of spectrum. But before a 3 MHz x 3 MHz broadband allocation can become a reality, it is necessary to accommodate incumbents in the 900 MHz band.

The degree to which the 900 MHz band is licensed and is in use around the country varies dramatically. Several large “NFL cities” have modest use of the 900 MHz band and many rural areas have little to no operations in the band. However, several major metropolitan areas rely extensively on the 900 MHz narrowband channels. Relocating incumbents to the narrowband portion of the rebanded 900 MHz band – or finding similar dedicated spectrum to meet the needs of all incumbents – could prove incredibly challenging, if not impossible, in some of these areas. These saturated markets with several incumbents may prove to be the biggest hurdle to Anterix securing its requested rule changes from the FCC.

Projecting outcomes of FCC proceedings is always risky. But one helpful way to consider and project likely outcomes of this proceeding may be through brief summaries of the various positions that have been espoused by different parties throughout this proceeding.

Critical Infrastructure Supporters of the NPRM. Many investor owned utilities expressed interest in having access to the 3 MHz x 3 MHz channel for a range of data applications.

Critical Infrastructure 900 MHz Licensees. By contrast, some utilities that operate multi-site 900 MHz systems have argued that relocating 900 MHz incumbents would be extremely challenging. Some of these licensees are adamant that the FCC should not adopt Anterix’s proposed rule changes, while others are indifferent to the proposal if comparable facilities can be obtained by Anterix on behalf of existing 900 MHz licensees.

Another major sticking point for the parties is how the FCC would require incumbent relocation. Several parties have suggested the Commission permit voluntary relocation and arms-length negotiations between Anterix and existing licensees. The Commission is also considering adopting mandatory relocation procedures to ensure the 3 MHz x 3 MHz broadband allocation comes to fruition even if commercial negotiations fail.

Either way, an FCC decision is expected soon.

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Covid-19 is driving an unplanned, hopefully temporary, shift in enterprise telecommunications management. Plans to install Gig Ethernet access and MPLS ports at major locations can wait. The pressing matters are establishing and maintaining connectivity and network security for hundreds or thousands of new full-time teleworkers. Basically, it’s time to play defense rather than offense. Telecom/IT staffs are more important today than ever. The ability to communicate and interact with others during the Covid-19 pandemic is an “essential service.”

The escalating demand for audio and video conferencing services raises a range of issues:

  1. How many participants can join an audio conference?
  2. Can the number of participants be increased? If so, how soon?
  3. Can additional conferencing services be secured and deployed?
  4. What about online conferencing platforms such as Zoom, Skype, WebEx, and Teams?
  5. Should use of Zoom be restricted in some instances?
  6. How long will it take to expand IP addresses for the corporate VPN?
  7. Are the Internet’s core networks holding up? Based on peering point exchange data, the answer is “Yes.”

In light of the demand for online conferencing, the FCC has issued a temporary waiver of its so-called “access arbitrage rules” so as not to penalize the underlying service provider that carries the burgeoning conferencing traffic for Zoom and WebEx. Similar waivers may be in the offing.

What about call centers? Are call centers considered “essential services” in some states or in all states? What about in other countries such as India?

The emptying of offices and closure of public transport and nonessential businesses are also driving the demand for wireless services. The FCC has granted “Special Temporary Authority” to wireless carriers so they can access additional frequencies to support the surging demand for their services and to wireless internet services providers (WISPs) to access to spectrum at 5.9 GHz (currently reserved for Dedicated Short Range Communications (DSRC)) to meet the increased demand for broadband access in their service areas.

What About Enterprise Cost Containment Goals? As Enterprise Telecom/IT staffs focus on the connectivity needs of quintupling remote workforces, this may not be the optimum time to initiate a wireline or wireless services RFP. However, cost containment may now be critical for many organizations. To address this emerging concern, we recommend Telecom/IT staffs review their wireline and wireless service agreements, focusing on three considerations:

  1. Review bills or billing reports to determine if the enterprise is trending toward a potential shortfall in its minimum commitment level or in achieving a discount threshold. If this review indicates a shortfall may be on the horizon, we recommend (a) reviewing the business downturn provision in your agreement, focusing on the triggering conditions and agreed upon resolutions or outcomes; and (b) reviewing the force majeure clause to determine whether a pandemic qualifies as a force majeure event and whether this clause excuses a customer’s payment obligations, however unlikely. In today’s environment, this concern likely will arise in connection with wireline services agreements.
  2. If a wireline or wireless services agreement is expiring or the agreement is in its final renewal term or transition period, enterprise staff have two options. First, request a one-year extension or exercise the right for an additional one-year renewal term. Enterprises should avoid obtaining service on a month-to-month basis or face a 60%+ increase in rates at contract expiration. Second, if the agreement has six months to a year remaining in the term and cost savings are paramount, initiate efforts to issue a timely RFP to secure a new agreement.
  3. Conduct or propose/agree to a short extension of time to conduct the scheduled competitive pricing review. The carriers should not be looking for windfalls during the pandemic. Presumably, they want to keep your business as the pandemic passes.

Keller and Heckman represents enterprises in negotiating telecommunications services agreements. Please contact the author to discuss these or related procurement considerations.

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Introduction

On February 7, 2020, the Federal Communications Commission (FCC) released a Report and Order which established the Rural Digital Opportunity Fund (RDOF) under which up to $20.4 billion will be made available at auction to help bring high-speed broadband to the Nation’s unserved rural areas. $16 billion will be made available through the Phase I reverse auction (also referred to as Auction 904) that is scheduled to begin on October 22, 2020. At least $4.4 billion, plus the remaining funds from the Phase I auction and, possibly, other funds will be available under the Phase II auction, which has yet to be scheduled.

Despite adopting a telework policy earlier this month, the FCC is taking the necessary steps to meet its October 22, 2020 Auction 904 start date. On March 2, 2020, the FCC released its Procedures Public Notice requesting comments on proposed bidding procedures and related program requirements for Auction 904. The most significant issue raised in this Public Notice is whether the FCC should establish census tracts as the minimum bidding areas, or the census block groups used in the Connect America Fund Phase II (CAF II) auction (also referred to as Auction 903).

On March 17, 2020, the FCC released the preliminary list of census blocks and a map of areas initially eligible for Auction 904 (Preliminary List.) The areas identified in the Preliminary List are subject to limited challenges. First, existing providers may identify any census blocks as ineligible that have become served with voice and 25/3 Mbps or better broadband service since their June 2019 Forms 477 were filed. Second, FCC staff will determine whether areas identified on the Preliminary List are obtaining 25/3 Mbps or better service by providers supported by state broadband programs or other Federal programs, such as the Rural Utilities Service ReConnect Loan and Grant Program, Auction 903, and the Rural Broadband Experiments. These areas will not be eligible for Auction 904.

Report and Order

The FCC adopted four performance tiers for the Phase I auction, adding a new “baseline” tier of 50/5 Mbps. It also increased the weight for high latency services, adversely impacting satellite-based services.

Performance Tiers, Latency, and Weights

Performance Tier                  Speed                                      Usage                              Weight                      

 

Minimum ≥ 25/3 Mbps ≥ 250 GB or U.S. average, whichever is higher 50
Baseline ≥ 50/5 Mbps ≥ 250 GB or U.S. average, whichever is higher 35
Above Baseline ≥ 100/20 Mbps ≥ 2 TB 20
Gigabit ≥ 1 Gbps/500 Mbps ≥   2 TB 0

 

      Latency                             Requirement                           Weight
Low ≤ 100 ms 0
High ≤ 750 ms &
MOS ≥ 4
40

As outlined above, areas eligible for Phase I support are those wholly lacking broadband services at 25/3 Mbps and wireline voice services from a terrestrial provider. The FCC is relying on data from providers’ Form 477 reports to determine whether a census block will be eligible. These reports have been criticized because a census block is considered “served” if only one location obtains fixed voice and 25/3 Mbps broadband services, but the Form 477 data do allow the agency to identify wholly-unserved areas. The Commission believes that the new reporting rules and mapping procedures adopted in its ongoing Digital Opportunity Data Collection proceeding will make more granular data available. It predicts that unserved locations in many areas nominally classified as “served” will be identified and included in the Phase II auction.

Apart from the substantial $16 billion 10-year budget (up to $1.6 billion per year), the Phase I auction is expected to provide more money per bid than Auction 903 for three main reasons: (1) new bid assignment procedures, (2) the reduced high cost threshold and increased cap in maximum support per location, and (3) the opportunity for substantially lower Letter of Credit (LOC) carrying costs as compared to the LOC carrying costs imposed on CAF II auction winners.

  1. Bid Assignment Procedures

The most significant difference between the bidding procedures for Auction 904 and Auction 903 is the change in bid assignment rules. While the lowest price point bid in the clearing round will still be awarded support, when two bids are each placed at the base clock percentage or at any other price point in the clearing round, the bid will be assigned to the bed having the lowest weight performance and latency combination (“T&L combination”). Under Auction 903, when two bids having different T&L combinations were placed at the same price point, the bids were carried forward to the next round. Under the revised bidding assignment rules, more bids are expected to be assigned during the clearing round of Auction 904.

  1. High Cost Thresholds and Caps

To include more unserved areas than the CAF II auction, the FCC lowered the high-cost threshold from $52.50 to $40 per location. For Tribal areas and those entirely lacking 10/1 Mbps connectivity, the threshold is $30 per location. The $52.50 high-cost threshold is the price the FCC believes end-users should be obligated to pay based on what urban area customers pay. This threshold was reduced because the FCC determined there are several million customers in totally unserved areas where the estimated cost of service is less than $52.00, but 25/3 Mbps and fixed voice services are not available.

Additionally, the high-cost support cap per location is increased $212.50, up from $146.10, with the cap for Tribal areas and areas without any broadband service set at $222.50. The effect of reducing the high cost threshold and increasing the high cost cap is that far more locations will be eligible for Auction 904, as compared to those eligible for the CAF II auction. This makes sense as up to eight times more money is being made available in Auction 904 ($16.0 billion) as compared to Auction 903 ($1.98 billion).

  1. Letter of Credit Obligation

The FCC adopted a noticeable reduction in the carrying costs for the required Letter of Credit (LOC). In the CAF II auction, the amount of the LOC increased annually until the buildout was complete. That is, if a buildout is completed in six years, the LOC, during the last year, would equal six times the winning bidder’s annual support amount. In Auction 904, the Commission retained the LOC requirement, but the Commission provided RDOF winning bidders an incentive to limit the amount of the LOC; as an award recipient satisfies its buildout milestone (as verified by USAC), the LOC is reduced to an amount equal to only one year of support payments.

Recognizing that the initial buildout milestone is 40% at the end of year three, the FCC established an optional 20% buildout milestone. This means that once a winning bidder meets the 20% buildout threshold, the LOC will be reduced to an amount equal to one year’s support.

Conclusion

The Phase I auction is an important opportunity for existing and prospective rural broadband providers. The $16 billion Phase I budget will likely exceed any other Federal or state broadband funding program for at least 10 years, so service providers that have sought federal or state funding opportunities in the past should strongly consider Auction 904, particularly in light of the auction process refinements that have been adopted by the Commission.

For further information, please contact the authors: Doug Jarrett (Jarrett@khlaw.com; 202.434.4180) or Timothy Doughty (doughty@khlaw.com; 202.434.4271).