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Last week, the Federal Communications Commission (FCC) entered into Consent Decrees with eight Covered 911 Service Providers for failing to timely file their required 911 reliability certification in 2020.

 

The Rules

As background, the FCC adopted rules in 2013 aimed at improving 911 network reliability. The rules require Covered 911 Service Providers (“Providers”) to take certain measures to provide reliable 911 service. The specific measures adopted by the agency attempt to address three network vulnerabilities identified by the FCC in the aftermath of the derecho storm that knocked out 911 service along the east coast in 2012.

The rules require Providers to promote reliable 911 service with respect to three network elements: circuit auditing, central-office backup power, and diverse network monitoring. Providers must certify annually that they have met the FCC’s safe harbor provisions for each of those elements, have taken reasonable alternative measures in lieu of those safe harbor protections, or that a specific element of the rules does not apply to the Provider’s network. The rules also require Providers to notify public-safety answering points (PSAPs) of any outage that impacts 911 service.

Providers subject to these rules include entities that provide 911, E911, or NG911 capabilities such as call routing, automatic location information (ALI), automatic number identification (ANI), or the functional equivalent of those capabilities, to a PSAP.

The FCC released a Public Notice a few years ago seeking comment on the efficacy of these rules and soliciting input on whether those rules need to be revised, though the rules have yet to be updated as part of this process.

Consent Decrees

Last week, the FCC announced that it had entered into Consent Decrees with eight Providers that had filed 911 reliability certifications in prior years but had neglected to do so in 2019, 2020, or both. A Consent Decree is a voluntary settlement between the Provider and the FCC. A Consent Decree typically requires the recipient to admit it violated an FCC rule, pay a fine to the federal government, and implement a compliance plan to guard against future rule violations.

In this instance, the Compliance Plan element of the Consent Decree may prove more onerous than the fine. In general, the Compliance Plans agreed to by these Providers have several burdensome components, including:

  • Compliance Officer – Designate a senior corporate manager to serve as the Compliance Officer.
  • Operating Procedures – Establish operating procedures that all covered employees follow to ensure compliance with the FCC’s 911 rules.
  • Compliance Manual – Develop and distribute a compliance manual to all covered employees.
  • Compliance Training Program – Establish and implement a compliance training program and train all covered employees on the FCC’s 911 rules.
  • Report Noncompliance – Report any noncompliance within 15 days of discovering such noncompliance.
  • Compliance Report – File periodic compliance reports with the FCC providing a detailed description of the steps the company has taken to promote compliance with the FCC’s 911 rules.

Conclusion

It is never good to be in the crosshairs of the FCC’s Enforcement Bureau. And these Consent Decrees are just the most recent example of the Commission’s prioritization of public safety issues.

For more information, please contact Wes Wright (wright@khlaw.com; +1 202.434.4239).

Photo of Wesley K. WrightPhoto of Kathleen Slattery Thompson

Last week, the House Energy & Commerce Committee released its portion of the Budget Reconciliation Act.  This includes a $10 billion appropriation for Next Generation 911 (NG911) grant programs.

A summary of the appropriation is below.

The proposed Section appropriates $10 billion for:

  • Implementing NG911;
  • Operating and maintaining NG911;
  • Training directly related to implementing, maintaining, and operating NG911 (if the cost does not exceed 3% of the total grant award);
  • Planning and implementation activities (if the cost does not exceed 1% of the total grant award); and,
  • Administrative Expenses associated with implementation of this Section (up to 2% of the total amount appropriated).

For an entity to be eligible to participate, it must comply with the following requirements:

  • The entity must not engage in 911 fee diversion (obligations and expenditures must be “acceptable” as determined by FCC Rules and Federal Law);
  • The entity must use funds to support the deployment of NG911 in a manner that ensures reliability, interoperability, and requires the use of commonly accepted standards; and,
  • No later than three years after funds are distributed, the entity must establish or commit to establish a sustainable funding mechanism for NG911 and effective cybersecurity resources.

There are additional requirements for State and Tribal Organizations, including:

  • The entity must designate a point of contact to coordinate the implementation of NG911; and,
  • The entity’s plan for NG911 must meet minimum standards for interoperability, reliability, data processing and storage, and cybersecurity, among other requirements.

In addition to the $10 billion, the proposed Section also appropriates:

  • $80 million to establish the Next Generation 9-1-1 Cybersecurity Center to coordinate with State, local, and regional governments to share cybersecurity information, analyze cybersecurity threats, and share guidelines and best practices for intrusion detection and prevention as it relates to NG911
  • $20 million to establish a 16-member Public Safety Next Generation 9-1-1 Advisory Board to make recommendations to the Assistant Secretary (NTIA) with respect to NG911, including administering the grant program.

Several hurdles remain to be cleared, but this is a positive development for NG911 funding nationwide.  Please contact Wes Wright (wright@khlaw.com; 202.434.4239) or Kathleen Slattery Thompson (slattery@khlaw.com; 202.434.4244) with questions.

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On Wednesday, July 28, the U.S. Senate voted to move forward on a bipartisan infrastructure bill (the “Infrastructure Investment and Jobs Act”) that includes $65 billion to support broadband deployment and adoption.  While a variety of procedural and political hurdles remain, we are cautiously optimistic about its prospects for enactment.

This blog entry highlights some of the key broadband-related provisions in the bill, derived from a draft copy of the bill that we obtained several days ago.  The bill was publicly released on Sunday, August 1, and is available here.

This summary is based upon legislation that has not yet passed either the Senate or the House. It will almost certainly change prior to adoption, perhaps in significant ways.  Even so, the draft bill provides a clear indication of how this once-in-a-generation investment in broadband infrastructure and adoption could play out.

We intend to provide a much more detailed analysis if and when the bill is enacted, likely over the course of several blog entries. For now, the key aspects of the broadband provisions of the draft bill may be summarized as follows.  (The remainder of this post discusses each in greater detail):

  • “Broadband Equity, Access and Deployment Program” ($42 billion): The centerpiece of the overall broadband investment, this massive program contemplates grants being made to States.  Significant local coordination would be required.  States would use grant funds to competitively award subgrants for qualifying broadband infrastructure, mapping, and adoption projects. It would be administered by NTIA.
  • “Enabling Middle Mile Broadband Infrastructure” ($1 billion): Directs NTIA to make available grants for “construction, improvement or acquisition of middle mile infrastructure.”
  • “Digital Equity Act of 2021” ($1.3 billion): Funds State-level digital equity planning and establishes a competitive digital equity grant program available to a wide range of public-sector and not-for-profit entities.
  • “Broadband Affordability”: The bill includes several initiatives relating to affordable broadband:
    • Extension and modification of the existing Emergency Broadband Benefit program, (including renaming it as the “Affordable Connectivity Program”);
    • Adoption of a “consumer broadband label” requirement, originally put forth by the FCC in 2016;
    • Digital discrimination. The bill would require the FCC to adopt rules within two years to address digital discrimination (i.e., redlining).
  1. BROADBAND EQUITY, ACCESS AND DEPLOYMENT PROGRAM (TITLE I, Section 801102) ($42 billion grant program, NTIA)

The centerpiece of the overall broadband funding initiative, the “Broadband Equity, Access and Deployment Program” tasks NTIA to administer a $40 billion grant program for which “eligible entity” is defined as “a State.”[1]  It directs NTIA to issue a Notice of Funding Opportunity within 180 days after the bill is enacted, establishing a process for States to submit a letter of intent, a single initial proposal, and a single final proposal for funding.

Funding Allocation.  Each State would receive a minimum of $100 million.  The remainder of the $40 billion would be allocated in accordance with a formula that considers the number of unserved and high-cost locations in the State, as compared to other States.  Twenty percent of the allocated amount would be released upon approval of the State’s initial proposal, with the remaining 80 percent released upon approval of the State’s final proposal.  Sec. (e)(3), (4). Funding is available to States for planning and administrative expenses. Sec. (e)(1)(C).

If a State fails to submit an application for funds by the applicable deadline, a political subdivision or consortium of political subdivisions may submit an application in its place.  Sec. (c)(5)(B).

Local Coordination Requirements.  The bill calls for significant local coordination on the part of the State.  A State must submit a “5-year action plan” as part of its initial proposal, which “shall be informed by collaboration with local and regional entities.”  Sec. (e)(1)(D).

An initial proposal must, among other things, “identif[y], and outline[] steps to support, local and regional broadband planning processes or ongoing efforts to deploy broadband or close the digital divide” and “describe[] coordination with local governments, along with local and regional broadband planning processes.”  Sec. (e)(3)(A).  In addition, NTIA “shall establish local coordination requirements for eligible entities to follow, to the greatest extent practicable.”  Sec. (e)(3)(A)(ii).  States must allow an opportunity for political subdivisions to submit plans for consideration by the State, and to comment on the State’s initial and final proposals.  Sec. (e)(4)(A).

In awarding subgrants, States “may not exclude cooperatives, nonprofit organizations, public-private partnerships, private companies, public or private utilities, public utility districts, or local governments from eligibility for such grant funds.”  Sec. (h)(1)(A).

Use of Funds. (Sec. (f)) A State may use grant funds “to competitively award subgrants” for:

  • Unserved service projects and underserved service projects.
    1. An “unserved location” lacks access to reliable broadband service offered with speed of not less than 25Mpbs/3Mbps. “Unserved service projects” are projects serving areas in which not less than 80% of locations are unserved. (a).
    2. An “underserved location” lacks access to reliable broadband service offered with speed of not less than 100Mbps/25Mbps. “Underserved service projects” serve areas in which not less than 80% of locations are underserved. (a).
  • Connecting eligible community anchor institutions. An “eligible” community anchor institution is defined as one that lacks access to gigabit service.   (a)(E).
    1. Notably, the definition of “community anchor institution” includes “public housing organization or community support organization….” (a)(E).  This suggests that support could be available for some urban areas that lack gigabit connectivity.
  • Data collection, broadband mapping, and planning;
  • Installing broadband infrastructure or providing reduced-cost service within a multi-family residential building, with priority given to a building that “has a substantial share” of unserved households or that is in a designated poverty area; and
  • Broadband adoption, including programs to provide affordable devices.

Funding Prioritization.  Subgrant awards are to be funded in accordance with the following prioritization (Sec. (h)(1)):

  • Unserved service projects;
  • Underserved service projects (after the State certifies that it will ensure universal coverage of all unserved locations); and
  • Eligible community anchor institutions (after prioritizing underserved service projects).

As another element of prioritization, a State “shall give priority to projects based on” deployment of a broadband network to persistent poverty counties or high-poverty areas; the speeds of the proposed broadband service; and the expediency of project completion. Sec. (h)(1).

Broadband Service Standards.  A subgrantee for the deployment of a broadband network must provide broadband service at a speed of not less than 100Mbps/20Mbps, with sufficiently low latency “to allow reasonably foreseeable, real-time, interactive applications.”  Sec. (h)(4).

Funded broadband networks must offer at least one low-cost broadband service option for eligible subscribers (as described in Sec. (h)(5)).

The network must be deployed and service commenced no later than four years after the date of the subgrant.  Sec. (h).

Subgrants.  The program authorizes a State to only use grant funds to competitively award subgrants involving a permitted use of the funds (in addition to planning and administrative expenses).  States are directed to ensure that subgrantees have the financial, managerial, technical and operational capability to carry out the activities contemplated in the subgrant.  Sec. (g)(2)(A).  Subgrantees must also comply with various obligations, including quality-of-service and broadband reliability and resilience “best practices,” as defined by NTIA.  Sec. (g).

Matching Requirement.  A State must provide, or must require a subgrantee to provide, a matching contribution equivalent to at least 25 percent of project costs, Sec. (h)(3).  NTIA may waive the matching contribution requirement and the match requirement does not apply in high-cost areas.

In general, the match must be derived from non-Federal funds.  However, the Act specifically provides that matching funds may come from a Federal regional commission or authority, as well as the CARES Act, the Consolidated Appropriations Act of 2021, or the American Rescue Plan Act of 2021, if the funds were for the purpose of deployment of broadband service.  Sec. (h)(3)(B)(iii).

The match “may include in-kind contributions.”  Sec. (h)(3)(B)(ii).

Relation to Other Public Funding. The Act explicitly allows a subgrant to be made to “an entity that has received amounts from the Federal Government or a State or local government for the purpose of expanding access to broadband service.”  Sec. (k).  Grant funds made available to States must “supplement, and not supplant,” amounts that the State would otherwise make available for broadband purposes.  Sec. (l).

Report on Future of Universal Service Fund (Sec. 801104).  Title I of the Act also directs the FCC to commence a proceeding within 30 days, and provide a report within 270 days, evaluating the implications of the Act on how the FCC “should achieve universal service goals for broadband.”  Sec. 004.  Notably, the term “universal service fund” is not used in Section 004 other than in the section title.

  1. ENABLING MIDDLE MILE BROADBAND INFRASTRUCTURE (TITLE IV, Sec. 80401 et seq.) ($1 billion for fiscal years 2022 through 2026, NTIA)

Title IV of the bill would establish a much smaller grant program to support the development of middle-mile infrastructure.  The bill directs NTIA to make grants available “on a technology-neutral, competitive basis to eligible entities for the construction, improvement, or acquisition of middle mile infrastructure.” Sec. (b).

The program has two stated purposes (Sec. (b)):

  • “to encourage expansion of middle mile infrastructure to reduce the cost of connecting unserved and underserved areas to the backbone of the internet (commonly referred to as the ‘last mile’) and
  • “to promote broadband connection resiliency through the creation of alternative network connection paths that can be designed to prevent single points of failure on a broadband network.”

“Middle Mile Infrastructure.”  The term “middle mile infrastructure” (Sec. (a)):

  • “means any broadband infrastructure that does not connect directly to an end-user location, including an anchor institution; and
  • includes –
  • leased dark fiber, interoffice transport, backhaul, carrier-neutral internet exchange facilities, carrier-neutral submarine cable landing stations, undersea cables, transport connectivity to data centers, special access transport, and other similar services; and
  • wired or private wireless infrastructure, including microwave capacity, radio tower access, and other services or infrastructure for a private wireless broadband network, such as towers, fiber, and microwave links.”

Eligible Entities.  For the middle mile grant program, an “eligible entity” includes “a State, political subdivision of a State, Tribal government, technology company, electric utility, utility cooperative, public utility district, telecommunications company, telecommunications cooperative, nonprofit foundation, nonprofit corporation, nonprofit institution, nonprofit association, regional planning counsel [sic], Native entity, or economic development authority”; or a partnership of two or more such entities.  Sec. (a)(4).

Prioritization.  An eligible entity must agree to prioritize (A) “connecting middle mile infrastructure to last mile infrastructure that provide or plan to provide broadband service to households in unserved areas; (B) connecting non-contiguous trust lands, or [sic] (C) the offering of wholesale broadband service at reasonable rates on a carrier neutral basis.” Sec. (e)(1).

Buildout must be completed within five years, although an extension may be available.  Sec. (e)(2).

Interconnection and Nondiscrimination Requirement.  An entity that receives a middle mile grant using fiber optic technology “shall offer interconnection in perpetuity, where technically feasible without exceeding current or reasonably anticipated capacity limitations, on reasonable rates and terms to be negotiated with requesting parties.”  Sec. (e)(3)(D).

Federal Share Limited to 70 Percent.  The amount of a middle mile grant may not exceed 70% of the total project cost.

  1. DIGITAL EQUITY ACT OF 2021 (Title III, Sec. 80301 et seq.)($1.3 billion over five years)

On the adoption side, the legislation includes the “Digital Equity Act of 2021.”  The Digital Equity Act creates a “State Digital Equity Capacity Grant Program” and a “Digital Equity Competitive Grant Program.”

The State Digital Equity Capacity Grant Program authorizes $60 million for planning grants to be made available to States for the development of State Digital Equity Plans, and $650 million over five years for grants to States to support the implementation of State Digital Equity Plans and digital inclusion activities.

The Digital Equity Competitive Grant Program makes available $650 million over five years for grants to a wide variety of public-sector and not-for-profit entities.  Sec. (b).  Funds may be used for a range of digital inclusion and broadband adoption activities.  Sec. (d)(2).

  1. BROADBAND AFFORDABILITY (TITLE V, Sec. 80501 et seq.)

Extension and Modification of Emergency Broadband Benefit (Sec. 80502).  Title V of the bill would indefinitely extend the Emergency Broadband Benefit Program, originally adopted as a COVID-relief measure.  It renames the program the “Affordable Connectivity Program,” and implements a variety of other changes.

Adoption of Consumer Broadband Labels (Sec. 80504).  The legislation would require the display of “consumer broadband labels,” as described by the FCC in April 2016.  Sec. 004.

Digital Discrimination (Sec. 80506) The bill includes a brief provision relating to “digital discrimination” (i.e., “redlining”).  It requires the FCC to adopt rules within two years “to facilitate equal access to broadband internet access service, taking into account the issues of technical and economic feasibility presented by that objective, including (1) preventing digital discrimination of access based on income level, race, ethnicity, color, religion or national origin and (2) identifying necessary steps for the [FCC] to take to eliminate such discrimination.”  Sec. (b).   It also directs the FCC to develop “model policies and best practices” for States and localities to prevent digital discrimination

[1]   The term “State” is defined with reference to 47 U.S.C. 942, which defines “State” as “any State of the United States, the District of Columbia, Puerto Rico, American Samoa, Guam, the United States Virgin Islands, the Northern Mariana Islands, and any other territory or possession of the United States,” but excludes the phrase “any other territory or possession of the United States.”

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We are witnessing a swing in the antitrust pendulum from minimalist to populist poles. This entry briefly highlights the dynamics, potential changes, and, perhaps more importantly from a counseling perspective, what will change and what will remain the same.

At the minimalist antitrust pole, markets are viewed as self-correcting, i.e., no monopolist or manipulator will last for long and, therefore, government intervention should be limited as enforcement is more likely to harm than help markets. At the populist antitrust pole, we find a distrust of concentrated economic power and how it may be wielded.

We can observe a 40-year cycle in the antitrust pendulum’s swing. The late 1970s marks the rise to the “Chicago School” (markets are self-correcting and consumer price is the key factor). Twenty years later, in the 1990s, the pendulum swung toward the center with a more moderate or broader interpretation of consumer welfare. We are now moving toward the populist pole of the antitrust pendulum, that some call the “New Brandeis” or “Neo-Brandeis” movement, which echoes Justice Brandeis’ concern with economic concentration and abuse of market power.

Of course, the pendulum analogy is an oversimplification, but a helpful one in making sense of the changes in antitrust enforcement. As we see the intertwined evolution of consumer preferences and technology (broadly defined to include transportation, logistics, manufacturing, and services), markets and commercial relationships will change. That, in turn, results in varying degrees of societal disruption and shifting economic power.

Federal Legislation: There are several bills in Congress that propose a variety of changes to the antitrust laws, mainly focused on tech giants, including Amazon, Google, etc. The prospects for Federal legislation range from maybe to unlikely, but there is considerable effort afoot with Hill hearings and Committee reports. Proposed remedies range from forced divestitures (remember AT&T and the Baby Bells?) to limits on future acquisitions by dominant firms, etc.

State Legislation: Proposed state legislation is instructive and more likely to be enacted. For example, New York’s “Twenty-First Century Anti-Trust Act” passed the New York Senate on June 7. The bill does not view big business as neutral or benevolent, but rather reflects a concern with unilateral action. Senate Bill 933 adopts an EU antitrust approach that makes “abuse of a dominant position” illegal. Under that approach, there is no need to demonstrate monopoly power, with dominance having a lower burden of proof.

Litigation: In antitrust litigation, it is mistakenly assumed that market power must be proven through an econometric analysis by antitrust economists defining the product or service market and the defendant’s market power as an essential foundation to any claim of injury to competition. But market power may also be demonstrated through evidence showing that a defendant charged supra-competitive prices. This type of evidence is considered direct proof of market power, that is, the ability to raise prices above competitive levels. See FTC v. Indiana Fed’n of Dentists, 476 U.S.447, 460-61 (1986); Rebel Oil Company Inc. v. Atlantic Richfield Company, 51 F.3d 1421 (9th Cir. 1995). But judges, lawyers, and antitrust economists are so anchored to the economic analysis approach that the ‘mere’ proof of anticompetitive power is often deemed inadequate to establish an antitrust claim. Similarly, while monopsony (monopoly buyer power) has always been actionable, claims of monopsony are greeted with skepticism. Much of the New York bill reflects an effort to correct the gap between existing law and how the law is commonly understood and enforced.

Implications: If legislation is enacted, it may encourage government challenges against mergers, acquisitions, and abuse of a company’s dominant position. This, in turn, may create a litigation environment where disgruntled or disadvantage competitors are more likely to challenge the dominant firm’s business practices.

As astute readers have already deduced, these changes in antitrust analysis address how competition laws apply to actions by a single company or mergers among companies. The law regarding anticompetitive joint action, such as price fixing and bid-rigging will remain the same, but the environment surrounding the populist pole of antitrust tends to similarly increase scrutiny of joint action as illegal ‘combinations in restraint of trade.’ See the U.S. Dept. of Justice & Fed. Trade Comm’n, Antitrust Guidelines for Collaborations Among Competitors (April 2000).

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At its Open Meeting on April 22, the FCC adopted a Third Notice of Proposed Rulemaking seeking comment on proposed rules changes to 911 outage reporting. The proposed rules aim to help 911 call centers maintain emergency services and inform the public when to use alternatives to calling 911.

Customer Notification

One of the biggest proposed change is an obligation for Covered 911 Service Providers (“C9SP”) to notify “potentially affected customers,” of a 911 outage “as soon as possible, but no later than within 60 minutes of discovering that 911 is unavailable.”  The notice should be posted on the main page of the provider’s website and any Internet- or web-based applications and include: (i) a statement that there is an outage affecting 911 availability; (ii) alternative contact information to reach emergency services at the request of the affected PSAP(s), if such information is available; (iii) the time 911 service became unavailable; (iv) the time the affected service provider estimates that 911 service will become available again; and (v) the locations where customers are—or are expected to be—experiencing 911 unavailability.

The Commission seeks a wide range of input on this requirement, such as whether an outage should include instances where text-to-911 is still available when traditional voice calls are not and whether loss of transmission of ALI or ANI prompts public notification. The FCC proposes these notification requirements take effect by June 1, 2022.

PSAP Notification

The proposed rules would also require C9SPs to maintain up-to-date contact information for 911 outage notifications for each 911 special facility served. This must be updated annually.

The information provided to these contacts would also expand under the proposed rules, though it would be limited to available information. The proposed rule change mentions: (i) the name of the C9SP notifying the PSAP; (ii) the name of the provider(s) experiencing the outage; (iii) the date and time when the incident began; (iv) the types of communications service(s) affected; (v) the geographic area affected by the outage; (vi) expectations for how the outage might affect the 911 special facility (ex: dropped calls, missing metadata); (vii) the expected date and time of restoration; (viii) the best-known cause of the outage; (ix) the name, phone number, and email address at which the C9SP can be reached for follow-up; and (x) a statement as to whether the communication is the initial notification, an update, or the final outage assessment.

The FCC also asks what safeguards should be in place to protect this sensitive information from public disclosure. The FCC proposes that these notification requirements take effect by April 1, 2022.

Reliability Certification Changes

The FCC also proposed some changes to the 911 reliability certification. Specifically, the FCC seeks comment on whether less frequent reliability certifications should be required of C9SPs (ex: requiring C9SPs to submit reliability certifications every other year while requiring C9SPs to submit certifications if they have performed a “material network change”). The Commission also proposes requiring C9SPs that cease being a C9SP to notify the FCC via an affidavit during the time period that the reliability certification portal is open. Finally, the FCC notes that the reliability certification portal is open form July 30 – October 15 and asks if this is an adequate duration for providers.

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President Biden has now signed the American Rescue Plan Act of 2021 (H.R 1319, “Act”) into law. As many are aware, the $1.9 trillion package includes $7.17 billion for an Emergency Connectivity Fund to enable remote learning, for which the FCC is to issue rules within 60 days of the Act’s enactment. This blog entry describes a few other aspects of the Act that present significant opportunities for broadband service providers and their partners, particularly state and local governments.

Coronavirus State and Local Fiscal Recovery Funds

A major component of the Act overall is the relief funding appropriated to state and local governments.   Subtitle M of the Act creates a “Coronavirus State Fiscal Recovery Fund,” providing for payment of $220 billion to states, territories and Tribal governments, and a “Coronavirus Local Fiscal Recovery Fund,” providing $130 billion to local governments (including “metropolitan cities, non-entitlement units of local government, and counties”).[1]

How those funds are to be allocated among the various states and units of local governments is prescribed in detail in the Act. Importantly, while distributed funds may only be used for certain purposes, this is not a grant program where a state or local government must describe and apply for funds to support a particular project. In general, distribution will be of a prescribed amount, and is essentially automatic.

As compared to local government funding provisions under consideration as part of the CARES Act in 2020, the new Act gives states and local governments significant flexibility in how the Fiscal Recovery Fund monies may be spent. For both states and local governments, the funds can be used for a variety of purposes relating to COVID-19 fiscal recovery, including (to paraphrase): (A) to respond to “negative economic impacts” and to aid impacted industries, (B) to provide premium pay and grants to essential workers, and (C) to address budget shortfalls stemming from the pandemic.[2]

Of most interest for our purposes is subsection (D), which states that the Fiscal Recovery Funds may be used “to make necessary investments in water, sewer, or broadband infrastructure.” The Act does not elaborate further.

In short, states and local governments are about to receive a massive infusion of funding. They may conclude that the development of necessary broadband infrastructure is a worthy use of some of that money, particularly if such infrastructure is necessary to support their other COVID-related programs, and under the Act, they would be permitted to do so.

Two other points are also worth noting. Unlike some of the other new programs under the NTIA and FCC, the funds would not need to be expended until December 31, 2024. The Act also specifically allows the funds to be transferred to a private nonprofit organization, or special-purpose unit of state or local government.[3]

Coronavirus Capital Projects Fund

The Act provides $10 billion to states, territories, and Tribal governments (not local governments) “to carry out critical capital projects directly enabling work, education, and health monitoring, including remote options, in response to the public health emergency.”[4] The scope of that appropriation plausibly includes broadband-related projects. The Act directs the Treasury Department to establish a grant process to access the funding within 60 days of enactment.

Economic Development Administration (EDA) Appropriation

Section 6001 of the Act provides $3 billion to the Economic Development Administration within the Department of Commerce. Broadband projects in economically distressed communities are eligible for funding under the Public Works and Economic Adjustment Assistance programs.

Homeowners Assistance Fund

The Act appropriates nearly $10 billion for a “Homeowners Assistance Fund” that states can use for payment assistance for “qualified expenses” of households that need help due to COVID-19, including mortgage payment assistance.[5] The fund can be used for “internet service, including broadband internet access service.”  It is to remain available until September 30, 2025.

__________________________________

[1] Section 9901.

[2] Section 9001 of the Act, adding Sections 602 and 603 of the Social Security Act (42 U.S.C. §  801 et seq.).

[3] Section 9901 of the Act; Sec. 602(c)(3).

[4] Id.; Sec. 604.

[5] Section 3206.

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Local governments committed to supporting their citizens most adversely impacted by the COVID-19 pandemic should be encouraging the broadband providers serving their communities to take the necessary steps in the next several weeks to establish eligibility to participate in the $3.2 billion Emergency Broadband Benefit Program. This Program is administered by the Federal Communications Commission (FCC) and the Universal Service Administrative Company (USAC).

The Program was established in the Consolidated Appropriations Act enacted by Congress in December of last year. It provides a $50 discount to the monthly recurring charges for broadband Internet access services to low-income households and others experiencing a substantial loss of income due to COVID-19. For low-income households on Tribal lands, the monthly discount is $75. In addition, each low-income household enrolled in the Program is eligible for a one-time device reimbursement of $100 for a desktop, laptop, or tablet. USAC will pay the discounts and device reimbursements to the broadband services providers.

The priority application window for many fixed broadband service providers began on March 8, 2021 and extends through March 22, 2021. Service providers filing within this window and whose applications are approved will be eligible to enroll low-income households as the enrollment period begins in late April, as projected by the FCC. While the FCC has stated it will act expeditiously on all other applications, it is not committing to act on later-filed applications before the enrollment start date.

Why the rush? The Program ends as $3.2 billion in discounts and reimbursements are paid out. The FCC will be establishing an expenditure tracker to be updated regularly so that service providers and the public will have a sense of when the Program funding will be expended.

In short, the Program promises to provide a substantial benefit for those who need it most, and local governments have an important role to play in spreading the word. Specifically, localities should consider registering as an “outreach partner” for the program on the FCC’s Emergency Broadband Benefit webpage.

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A federal court decision last week will allow California to enforce its own net neutrality rules. As other states follow suit, the desire for a more uniform approach could lead to federal legislation clarifying the scope of FCC regulatory authority over broadband Internet access service.

On February 23, Judge John Mendez of the U.S. District Court for the Eastern District of California denied a motion by trade associations representing the Nation’s major broadband providers and wireless carriers to delay enforcement of California’s net neutrality law. This followed the U.S. Department of Justice (DoJ) February 8 decision to drop its lawsuit challenging California’s regulatory authority, in which the DoJ had argued that California’s net neutrality law is preempted by the Federal Communication Commission’s (FCC’s) Restoring Internet Freedom Order (notwithstanding that the FCC insisted in that Order that it had no regulatory authority over broadband).

California’s net neutrality law is perhaps the most comprehensive in the country, going beyond the FCC’s previous net neutrality rules (adopted in the 2015 Open Internet Order) by prohibiting the practice of “zero rating,” in which an Internet Service Provider (ISP) does not count certain allied services and applications against a user’s monthly data cap.

Now, broadband providers face the prospect of enforcement of California’s law, as well as the emergence and enforcement of net neutrality laws in other states. To date, seven states have adopted net neutrality laws (California, Colorado, Maine, New Jersey, Oregon, Vermont, and Washington), and several other states have introduced some form of net neutrality legislation in the 2021 legislative session (among them Connecticut, Kentucky, Missouri, New York, and South Carolina).

Faced with a patchwork of net neutrality rules, broadband trade associations may well conclude that a consistent set of rules is desirable. Federal legislation would likely be needed to accomplish this objective, especially if the California decision is affirmed on appeal. A federal legislative effort would almost certainly confront the larger question: what will be the FCC’s role with respect to broadband communications services? The Telecommunications Act of 1996, meanwhile, is increasingly long in the tooth.

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The 31.8% Universal Service Fund (USF) contribution factor for 1st Quarter 2021 and the ascendency of broadband to that of an essential service for our Nation’s citizens during the Covid-19 pandemic may prove to be the tipping point on USF contribution reform. The multi-year funding commitments under several USF-funded programs underscore the need for reform, as noted in recent article in Bloomberg Law.

This blog entry assumes USF programs will retain a major role in supporting broadband availability and affordability for unserved and underserved communities and individuals, including possible expansion of the E-rate program to support broadband service for students of low-income families lacking broadband connectivity. Funding from other programs such as those administered by the Rural Utilities Service (RUS) and those enacted by Congress in the Consolidated Appropriations Act of 2021, the Coronavirus Response and Relief Supplemental Appropriations Act will likely continue for the foreseeable future.

Background

In the Telecommunications Act of 1996, Congress added a standalone provision (codified at 47 USC § 254) for funding, preserving, and advancing universal service. This provision directed the FCC to adopt a universal service program grounded on several principles, including that “consumers in all regions of the Nation, including low-income consumers and those in rural, insular, and high cost areas, should have access to telecommunications and information services … that are reasonably comparable to those services provided in urban areas and that are available at rates that are reasonably comparable to rates charged for similar services in urban areas.”

The generally accepted position that information services revenues are not USF-assessable is anchored in both the rigid, definition-based structure of the Communications Act and in § 254 (d) which establishes two classes of universal service contributors: telecommunications carriers that provide interstate telecommunications services (the “mandatory contributors”) and, as determined by the FCC (exercising its “permissive authority”) other providers of interstate telecommunications.  Telecommunications carriers and other providers are obligated to contribute, “on an equitable and nondiscriminatory basis…to preserve and advance universal service.”

The current funding mechanism implemented in 2000 is an adjustable percentage of end-user revenues for interstate (and most international) telecommunications services and telecommunications.  While likely based on trends in revenue generation during the mid-1990s, the unforeseen is now reality.  Revenues from interstate (and most international) telecommunications services and telecommunications are in decline as revenues from non-assessable information services (including Internet access services) are accelerating. The quarterly adjusted contribution factor has been on an upward trajectory for 20 years.

1st Quarter 2002        6.8 %

1st Quarter 2011        15.5 %

1st Quarter 2016        18.2 %

1st Quarter 2020        21.2 %

1st Quarter 2021        31.8 %

Since 2002, the FCC initiated several proceedings looking to expand the base of USF-assessable services. The most consequential is the 2006 Report and Order and Notice of Proposed Rulemaking in which the FCC extended USF contribution obligations to providers of interconnected VoIP services, exercising its permissive authority under Section 254(d) and concluding these entities are “providers of interstate communications” for purposes of universal service. The Commission determined that interconnected VoIP was a competitive alternative to legacy wireline voice services and, among other factors, stressed that USF contribution obligations should be assessed on a technology-neutral basis. Importantly, the FCC had not (and still has not) classified interconnected VoIP as either a telecommunications service or an information service. 

The 2012 Comprehensive Review

The FCC’s 2012 Further Notice of Proposed Rulemaking provides a comprehensive review of previous USF reform efforts and constitutes the Commission’s last serious effort to reverse the trajectory of the USF contribution factor. The FNPRM elicited comments looking to resolve long-standing questions of whether certain services are USF-assessable and, most importantly, approaches for establishing a more sustainable USF funding base, including:

  • a “value-added” approach in which each underlying service provider contributes based on the revenues it obtains rather than the current retail service model in which service providers contribute based on end-user revenues
  • attributing a dollar value to the transmission component of information services and assessing USF contributions on that value
  • relying on a case-by-case approach under its Section 254 (d) permissive authority to assess end-user revenues from other services per its decision on interconnected VoIP service revenues
  • by assessments based on assigned wireless and wireline telephone numbers
  • a connections-based system with multiple tiers based on speed or capacity increments

While a voluminous record was generated, no meaningful reforms or clarifications were adopted.

The Missed Opportunity

In the 2015 Open Internet Order, the FCC established net neutrality rules for the vast preponderance of Internet access service available in the United State, referred to as Broadband Internet Access Service (BIAS). The authority to adopt these rules was grounded in the Commission’s “re-classification” of BIAS from its longstanding status as an information service to a telecommunications service, subjecting BIAS providers to regulations under Title II of the Communications Act. However, the FCC punted on whether BIAS revenues would be subject to USF contribution rules, deferring the question to a subsequent proceeding.

The deferred proceeding on USF contributions was never initiated by Chairman Tom Wheeler and, subsequently, the Commission under Chairman Ajit Pai “re-classified” BIAS as an ‘information service” in its Restoring Internet Freedom Order. Despite fundamentally different conclusions on the status of BIAS under the Communications Act, in separate decisions, the D.C. Circuit affirmed the reclassification determinations in each of these FCC decisions.

Where Do We Stand in 2021?

At the close of his tenure as Chairman of the FCC, Ajit Pai acknowledged the challenges in funding USF programs and recommended $50 billion of the C-Band Auction receipts be set aside to fund these programs for up to five years. This contrasts to the decision of former FCC Commissioner Michael O’Reilly, as Chairman of the Federal-State Joint Board, refusing in 2019 to forward to the FCC USF contribution reform concepts offered by the Joint Board’s State Members.

USTelecom recently released its “First 100 Days: Building Our Connected Future; An Open Letter to President Biden and the 117th Congress,” setting out a series of telecom and technology proposals, including extending broadband to the 17 million school-age children lacking broadband connectivity in their homes. To secure reliable USF funding, USTelecom recommends “…direct Congressional appropriations and expanding the base of financial support for universal connectivity beyond just telephone consumers to include a broader cross-section of the Internet ecosystem, including its largest companies.” In part, the proposal tracks AT&T’s blog post from last summer recommending Congress directly appropriate funds to support USF programs. Another commentator recently suggested major technology companies that benefit from widespread highspeed Internet access should be USF contributors.

The Path Forward Remains to be Determined

For meaningful USF reform, two questions need to be answered: Whether Congress or the FCC should take the lead in establishing more sustainable and predictable funding mechanisms and how should those funding mechanisms be structured? A related goal should be to maintain the USF contribution factor within 3% to 6% of net service charges. Currently, the USF contribution factor, state transaction taxes, and carrier regulatory cost recovery charges, collectively add 35% to 40% to the monthly charges for interstate private line service.

Based on the Commission’s consideration of the question over the last two decades, the prevailing view is that the Communications Act limits the FCC’s authority/discretion to establish a more reliable funding mechanism. More creative approaches other than those already considered likely will be required to connect the separate universes of “information services” on the one hand and “telecommunications services” and “telecommunications” on the other. Thus, a legislative solution appears warranted.

Assuming predictability is important, direct appropriations by Congress may not be the best approach. Proposals to shift funds budgeted for USF support to other programs to meet overall budget restraints in subsequent years is a risk that should be minimized. On the other hand, Congress can amend the Communications Act to expand the USF funding base.

An approach that focuses on transmission capabilities, whether an information service or a telecommunications service, would be more inclusive and technology neutral. Funding derived under this approach could be supplemented by an annual assessment on technology companies that benefit most directly from the widespread availability of highspeed Internet access service, as noted above. The assessment could equal a meaningful, adjustable percentage of the annual projected USF program funding requirements.

Photo of Casey LidePhoto of Jason P. Chun

Enacted on December 27, 2020 as part of the Consolidated Appropriations Act of 2021, the Coronavirus Response and Relief Supplemental Appropriations Act (“Act”) establishes or re-appropriates a number of significant broadband-related support programs.  Reflecting the urgency of the COVID-19 situation, the Act calls for unusually prompt implementation by the administering agencies.  For example, solicitations of applications for the Broadband Infrastructure Deployment Grants and Tribal Broadband Connectivity Grants must be issued by the Department of Commerce within 60 days of the Act’s enactment.

While the details of participation are generally not yet known, interested broadband service providers—and potential partners—should take steps immediately to explore how to make the most of one or more of these opportunities, including how to structure a potential project and present a compelling case for funding, or how to qualify for a program and verify eligible customers.

The various programs are listed below.  For a more in-depth analysis of each program, please see our recent publication.

  • Broadband Infrastructure Deployment Grants (NTIA):  $300 million grant program for broadband projects by “covered partnerships” in eligible service areas. The term “covered partnership” is defined to mean (a) a State or one or more political subdivisions, and (b) a provider of fixed broadband service.
  • Tribal Broadband Connectivity Grants (NTIA):  $1 billion grant program for broadband infrastructure deployment, broadband affordability programs, distance learning, telehealth, and broadband adoption activities on Tribal land.
  • Emergency Broadband Benefit Program (FCC):  $3.2 billion for an Emergency Broadband Benefit Program providing a reimbursement subsidy for the provision of broadband service and associated equipment to qualified households in the form of a monthly discount not to exceed $50 ($75 for an eligible household on Tribal land).
  • Connecting Minority Communities Pilot Program(NTIA):  $285 million for grants to minority institutions, organizations, and consortia to support broadband development and adoption.
  • COVID-19 Telehealth Program(FCC):  An additional $250 million to the existing FCC Telehealth Program.
  • Amendments to Secure and Trusted Networks ReimbursementProgram (“Rip and Replace”):  $1.9 billion allocated to fully fund the program.  Adopted various amendments relating to reimbursement for providers obligated to remove and replace covered communications equipment.

For more information, please contact Casey Lide, lide@khlaw.com.