If you have any urgent questions, please contact your usual Kelley Drye attorney or any member of the Communications Practice Group. For more information on other aspects of the federal and state response to the COVID-19 pandemic, as well as labor and employment and other issues, please visit Kelley Drye’s COVID-19 Response Resource Center.

FCC Approves Tenth Set of COVID-19 Telehealth Applications, Surpassing $100 Million in Funding Out of the $200 Million Allocated

On June 10, the Wireline Competition Bureau (“WCB”) approved 67 additional funding applications for the COVID-19 Telehealth Program. Under the latest funding round, $20.18 million will go to health care providers across 27 states and Washington, D.C. With this latest set of approvals, the FCC’s COVID-19 Telehealth Program has funded 305 health care providers in 42 states, plus D.C., for a total of $104.98 million in funding awarded so far. Congress appropriated $200 million for the Program and the FCC continues to evaluate applications and distribute funding on a rolling basis.

In the most recent episode of Kelley Drye’s Full Spectrum podcast, Special Counsel Denise Smith discussed the COVID-19 Telehealth Program, including healthcare provider eligibility criteria, funding coverage, and key application considerations.

WCB, OMD Defer Form 470 Changes

On June 8, the WCB and the Office of the Managing Director (“OMD”) issued a Public Notice (DA 20-598) notifying E-Rate program participants that the FCC Form 470 will remain unchanged for funding year 2021. Form 470 is the form that E-Rate program applicants use to solicit bids from service providers for eligible services. This is the latest FCC action aimed at allowing schools and libraries to continue to focus their time and resources on responding to the pandemic.

WCB Waives Filing Requirement for RoR ETCs

On June 8, the WCB released an Order (DA 20-641) granting a temporary waiver of the requirement for privately held rate-of-return (“RoR”) eligible telecommunications carriers (“ETCs”) that receive loans from the Rural Utilities Service (“RUS”) to file electronic copies of their annual RUS Operating Report for Telecommunications Borrowers filings by July 1. The RUS is a unit within the United States Department of Agriculture (“USDA”). In the USF/ICC Transformation Order, the FCC required all privately held rate-of-return ETCs to provide a full and complete annual report on their financial condition and operations. The Order notes that it is “not in the public interest to require these carriers to submit a copy of a report that has not yet been required by or reported to the USDA.” These carriers must submit a copy of this report to USAC at the time it is due to USDA. The FCC still requires all ETCs, including those who are RUS loan recipients, to complete the remainder of their Form 481 filing and submit it to USAC by the July 1 deadline.

Commissioner Starks Announces Digital Opportunity Equity Recognition Program

On June 8, FCC Commissioner Geoffrey Starks announced the Digital Opportunity Equity Recognition (“DOER”) Program to commend organizations, institutions, companies and individuals who, through their actions and responses to the COVID-19 crisis, have helped to make quality affordable broadband service available to unserved or underserved communities. Nominations for the first round of recognitions are due to [email protected] by July 8.

The Telecommunications Act of 1996 (the “Act”) introduced numerous regulatory provisions designed to prevent BOCs from leveraging their monopoly status to disadvantage competitor long distance providers and some requirements subsequently were applied to independent incumbent local exchange carriers. Certain provisions have automatically sunset and, over time, the FCC eliminated or forbore from enforcing many, but not all, of the requirements. USTelecom has sought forbearance from BOC obligations on several occasions including, prior to the current request, in a 2014 request that all BOCs receive forbearance from all remaining Section 272 obligations in all regions. If adopted in its current form, the draft Order would forbear from enforcing three requirements, including effectively eliminating the remaining Section 272 obligations.

First, independent RoR carriers currently are subject to structural separations requirements for their in-region long distance services. The FCC rule Section 64.1903 separate long distance affiliate requirement was designed to prevent independent RoR carriers from misallocating local and long-distance operational costs, a practice that could result in overearnings or increased rates for competitors relying on critical service inputs from the independent RoR carriers. Describing the structural separations requirement as burdensome and ineffective at preventing cost misallocation, the draft Order instead cites to regulatory and marketplace changes, and Commission enforcement mechanisms as sufficient to address cost misallocation concerns. The Commission notes the existence of “numerous accounting, cost allocation and separations requirements” that act to require separate accounting, prevent cross-subsidization of services, and prescribe cost allocation procedures. The draft Order asserts that, should these methods fail, the RoR carriers are subject to investigation and enforcement pursuant to several provisions of the Act. Finally, the draft asserts that Commission rule changes and increasing RoR carrier conversion to price cap regulation has reduced the incentive, and made it easier to identify, cost misallocation. Unlike prior Commission forbearance grants of the structural separations requirement, the draft Order does not propose special access charge imputation filing or performance metric reporting requirements on independent RoR carriers. Consistent with the Commission’s prior forbearance of the imputation condition for price cap LECs and because, as discussed below, the performance metric reporting requirements are proposed to be forborne for BOCs and price cap LECs, the Commission proposes to forbear them for RoR carriers also.

Second, the draft Order proposes to grant forbearance from the Section 272(e)(1) provisioning interval requirement and related special access performance metric reporting requirement. Although not requested by USTelecom, the Commission takes the opportunity to propose forbearance of similar provisions and reporting requirements applied to price cap LECs. Section 272(e)(1) of the Act prohibits BOCs from discriminating in the speed at which the BOC provisions telephone exchange service and exchange access to unaffiliated carriers as compared to fulfilling requests for the BOC or its own affiliates. The special access performance metric reporting was intended to assist in enforcing Section 272(e)(1)’s nondiscrimination requirement. USTelecom had sought similar forbearance in 2014 and the proposed grant marks a departure from the Commission’s 2015 order denying USTelecom’s 2014 request for forbearance from all remaining Section 272 BOC obligations (“2015 USTelecom Forbearance Order”).

Similar to the justification for the structural separations forbearance for RoR carriers, the draft Order relies on the presence of existing regulations, enforcement mechanisms, and marketplace changes as supporting the proposed forbearance. The FCC explains that Sections 201 and 202 of the Act prohibit unreasonably discriminatory behavior and Section 251(b)(1) has been interpreted as prohibiting discriminatory provisioning of services for resale. The 2015 USTelecom Forbearance Order previously asserted that Sections 201 and 202 were insufficient to protect competition. Responding to opposition references to the 2015 decision on this point, the draft Order characterizes the prior statements regarding Sections 201 and 202 as “outdated,” particularly in light of later Commission orders including the 2017 Business Data Services Order. The Commission’s Section 208 complaint process and Market Disputes Resolution process are mentioned as additional methods of preventing discriminatory provisioning. The draft Order also notes that facilities-based competition, including in the business data services market, supports elimination of the BOC and price cap LEC provisioning safeguards and renders unpersuasive commenter concerns regarding possible BOC and price cap LEC motives to discriminate. USTelecom did not seek forbearance from Sections 272(e)(2) and (4), the last remaining Section 272 provisions applicable to a BOC’s Section 272 separate affiliate. However, the draft Order suggests those provisions essentially will become irrelevant because, upon forbearance of the special access performance metric reporting requirement, there will be no reason for a BOC to continue operating a Section 272 long distance affiliate.

The draft Order’s third proposed forbearance grant would relieve BOCs of the Section 271(c)(2)(B)(iii) requirement to provide nondiscriminatory access to pole attachments in accordance with Section 224 of the Act. Like the structural separations issue, this request received little attention in proceeding comments. The FCC explains that Section 271(c)(2)(B)(iii) is typically applied as a condition for BOCs seeking to provide in-region long-distance service. Because the draft Order finds the provision to be redundant of Section 224, which remains in effect, the FCC proposes to forbear from enforcement of Section 271(c)(2)(B)(iii). The draft Order highlights that the only distinction between Section 271(c)(2)(B)(iii) and Section 224 is the former statute’s 90-day complaint period, which the Commission notes has never been used for a Section 271 pole attachment complaint. The FCC asserts there is no need to single out BOCs for “duplicative pole access regulation” in light of pole ownership competition from electric service providers and the nondiscrimination safeguards in Section 224. Commenter observations that BOCs have been using enforcement remedies to obtain pole access were considered insufficient to support retaining Section 271’s duplicative enforcement remedy.

Finally, the Commission expressly declined to rule on USTelecom’s forbearance request regarding Section 251(c) obligations applicable to UNEs and resale. This issue has garnered the most attention, including staff briefing requests from the House Commerce Committee and House Communications Subcommittee, opposition filings from many industry members, and potentially more than 8,000 letters, many individualized, from consumers. Industry members opposing UNE and resale forbearance have asserted a variety of concerns, including that the petition was procedurally deficient because it was not “complete-as-filed”, the lack of “economically viable alternatives” for certain UNEs, and USTelecom’s failure to provide granular, localized data to support assertions of market competition.

The few comments supporting USTelecom’s petition asserted the presence of facilities-based competitors and the decline in use of UNEs, particularly as consumers seek higher-speed services, and argued the Commission is not required to “undertake any particular geographic or product market analysis” when reviewing a forbearance request. In light of the significant and ardent positions on potential UNE/resale forbearance – including sustained ex parte communications, as recently as yesterday, with the Commission – it’s not surprising that the Commission has chosen to delay deciding on this issue. Rather, addressing the issue in a footnote, the FCC notes that the UNE/resale request remains pending, subject to an August 2, 2019 statutory deadline, and that the draft Order should not be “construed as prejudging” the issue. The Commission does appear to be moving on the request, however, as just last week it released a Public Notice stating that the Commission intends to incorporate into the USTelecom forbearance proceeding confidential and highly confidential information submitted in the BDS proceeding. The Public Notice notes that USTelecom “relies on the Commission’s analysis of the data submitted in the BDS proceedings for the factual basis of its forbearance request” and the Commission expects that the BDS data “will significantly enhance the Commission’s ability to analyze competitive facilities deployment.” Consequently, we expect the Commission will take up this request in a future order.

The draft Order is subject to change before being released, so be sure to check back for any updates on the final Order.

Rounding out the major actions that will be voted on later this month at the Open Meeting, the FCC released a draft item that would offer regulatory relief to rate-of-return carriers providing Business Data Services (“BDS”). The proposed items are sure to impact every sector of the communications industry, from the largest wireless carriers to the smallest broadband providers and device manufacturers to business, industrial, and public safety radio users, while potentially transforming large-scale data transport services.

Enabling Unlicensed Use of the 6 GHz Band: The FCC has long been pressed to expand unlicensed use of the 6 GHz Band. It now seems poised to commence a rulemaking to consider just that, while ensuring incumbent licensees are protected. The draft proposed rulemaking would allow unlicensed devices to operate in the 6 GHz Band, subject to certain restrictions that vary depending on the specific frequencies used. The FCC proposes that devices using the 5.925-6.425 GHz and 6.525-6.875 GHz sub-bands would only be allowed to transmit if an automated frequency control (“AFC”) system determines that such use will not cause harmful interference. The FCC noted that these sub-bands currently are occupied by licensees operating point-to-point microwave links and some satellite systems. Meanwhile, devices using the 6.425-6.525 GHz and 6.875-7.125 GHz sub-bands would only be allowed to operate indoors and at lower power levels, but use of these frequencies would not depend on an AFC system. The FCC asserted that these sub-bands are used for mobile and satellite services whose itinerant operations make the use of an AFC system impracticable, while the proposed operating restrictions would seem to offer sufficient protection to incumbents.

Reforming the 3.5 GHz Band Rules: Major wireless carriers have peppered the FCC for almost two years with proposed changes to the geographic license areas for PALs, favoring auctions over larger geographic areas, with longer license periods and expectations of renewal. Smaller providers have supported retaining the smaller census tract licenses adopted in the original PAL framework several years ago. The FCC draft order contains a compromise approach that would issue PALs across the country at the county level. The FCC also would increase the license term for PALs from three years to ten years and make PALs renewable in order to foster long-term investment. Moreover, the FCC would seek to promote greater spectrum utilization through the enhancement of secondary markets in PALs by permitting partitioning and disaggregation of the licenses.

Expanding PLMR Operations in the 800 MHz Band: The FCC has worked for years to increase the efficiency of PLMR operations in the 800 MHz Band. A draft order would, among other things, add 318 new “interstitial” PLMR channels in the 800 MHz Band and terminate a freeze put in place in 1995 that prevented PLMR licensees from gaining access to other license category pool frequencies the 800 MHz Band without a waiver. The FCC also would extend conditional licensing authority above 470 MHz to PLMR stations that operate in the 800 MHz Band and the 700 MHz narrowband, allowing entities to operate for up to 180 days while their applications remain pending. In addition, other changes included in the draft include making new channels available in the 450-470 MHz band for industrial/business radio use in gaps located between PLMR spectrum and other services.

Restructuring Rate-of-Return BDS: The FCC took action in 2017 to deregulate most BDS, which provide dedicated point-to-point transmissions at guaranteed speeds over high-capacity data connections for major businesses, governments, and other large institutions. Under the draft order and proposed rulemaking, certain small rural carriers would be allowed to move from longstanding rate-of-return regulation to “incentive” price cap regulation for some of their BDS offerings. Critically, the FCC would not require these carriers to comply with tariffing, cost assignment, and jurisdictional separations requirements. The draft item would also seek comment on the appropriate regulatory treatment for these carriers’ other transport services, including the need for price controls.

Nearly a year after it ordered sweeping deregulation of the business data services (“BDS”) market, the Federal Communications Commission (“FCC”) proposed new rules that would allow certain small rural carriers to move from longstanding rate-of-return regulation to price cap regulation for their BDS offerings. The transition would reduce the regulatory obligations of such carriers, including the need to prepare and file complex cost studies, which the FCC stated would allow carriers to rededicate resources to building and maintaining networks in underserved areas. The FCC also proposed removing pricing restrictions on lower-speed BDS offerings in areas with sufficient competition and sought input on whether pricing restrictions for higher-speed DBS offerings also should be eliminated.

Unlike prior BDS actions, where the issue was hotly contested for years and deregulation passed on a party-line vote, the proposed rulemaking was supported by all five Commissioners, at least for purposes of gathering a record. It’s not clear if this unanimity will hold throughout the proceeding, but the FCC may be on the verge of turning a page in its focus on these services, which are a bedrock for both retail offerings and for competitive carriers extending their networks.

BDS are dedicated point-to-point transmissions at guaranteed speeds over high-capacity connections used by major businesses, governments, and other large institutions to move their data. Last year, the FCC generally deregulated BDS and eliminated price controls in areas that satisfied a new competitive market test. However, these actions did not extend to the more than 200 smaller carriers predominately located in rural areas that received universal service funding under the Alternative Connect America Model (“A-CAM”). A-CAM carriers previously operated under rate-of-return regulation, where they reported costs annually to the FCC and received a specified return based on those costs. This system required the carriers to prepare and submit complex cost studies to the FCC to justify their returns. However, these carriers elected in 2016 to move to price cap regulation under the A-CAM, which sets the price that the carriers can charge for services. With a cap on prices, the A-CAM carriers possessed strong incentives to become more efficient and reduce costs to increase profits. However, the price cap regulation of A-CAM carriers did not cover their BDS offerings and these carriers continued to be obligated to conduct cost studies for BDS.

The FCC’s proposed rules eliminate this disparity and take additional steps to lessen the regulatory oversight of A-CAM carriers and other BDS providers:

First, the FCC proposed allowing all A-CAM carriers to move their BDS offerings to price cap incentive-based regulation, creating regulatory uniformity among their services and eliminating the time and resources spent on annual cost studies. The FCC proposed that carriers would move to incentive regulation at the holding company level in all states where they receive A-CAM support. Under the proposal, the election would take effect on the July 1st following the FCC’s adoption of a final order setting out the incentive regulation transition rules. As a result, it is likely that the move to incentive regulation may not take place until next year. The FCC intends to use A-CAM carriers’ current rates and demand levels as the basis for the initial DBS rates under incentive regulation, but sought comment on alternative price-setting methodologies.

Second, the FCC proposed eliminating price restrictions for lower-speed DBS offerings in areas with sufficient competition. As with its BDS reforms last year, the FCC plans to adopt a competitive market test that dictates, on a county-by-county basis, whether a carrier will still be subject to price cap restrictions and tariffing obligations. The FCC sought comment on the specifics of the competitive market test and asked whether it should apply the two-pronged test it adopted last year, which looked at whether 50 percent of the locations with BDS demand in a county were within a half mile of a location served by a competing provider or, alternatively, whether a cable provider offered sufficiently fast broadband service in 75 percent of the census blocks in the county. The competitive market test adopted last year drew considerable fire from critics alleging that it deregulated BDS offerings in areas lacking meaningful consumer choice. These concerns certainly will be raised again, especially because the A-CAM carriers generally serve rural areas with limited competition. The FCC also asked whether it should remove pricing restrictions from higher speed BDS offerings and whether it should allow other carriers still operating under rate-of-return regulation to move their services to incentive regulation.

The FCC requested input on how to best transition A-CAM carriers to incentive regulation and ensure consumers do not see a flash cut to increased prices. Specifically, the FCC proposed a three-year transition period during which carriers may (but are not required to) de-tariff their BDS offerings, a six-month freeze of tariffed rates in areas newly deregulated under the competitive market test, and a grandfathering of existing contractual or other long-term BDS arrangements. Consequently, the FCC’s proposed rules mark just the first step in what potentially will be a years-long transition of the BDS offerings of A-CAM carriers.

Comments on the FCC’s planned BDS reforms will be due 30 days after publication of the proposed rulemaking in the Federal Register, with reply comments due 45 days after the proposed rulemaking’s publication.