Insights: Broadband Legal Strategies Blog

The Wireline Competition Bureau (Bureau) announced today that there is sufficient funding available to fully meet the Universal Service Administrative Company's (USAC) estimated demand for category one and category two requests for E-rate supported services for funding year 2019.

The Commission released the Category 2 Notice of Proposed Rulemaking today.

The USF Cap Notice of Proposed Rulemaking has been published in the Federal Register.

On May 22, 2019, a coalition of Texas Carriers (Central Texas Telephone Cooperative, Inc., Peoples Telephone Cooperative, Inc., and Totelcom Communications, LLC) called on the FCC to act against what they called the “overbuilding” of USF-supported fiber networks.  The coalition’s primary concern is that E-rate funds are being used to overbuild or duplicate existing USF-supported networks.  The Texas Carriers petitioned the FCC to initiate a rulemaking to address this omission.

To address their concerns, the Texas Carriers propose amending the rules to prohibit the use of USF funds for the construction of fiber networks that overbuild existing fiber networks.  Under the Texas Carriers’ proposed rule, special construction applicants would be subject to a 60-day challenge period, during which time service providers would have the opportunity to demonstrate that existing networks could provide the required fiber connection.  Applicants would then be eligible for USF support if, after the challenge period, they could affirm that no existing fiber facilities existed for their proposed fiber network.  The proposed rule would also prohibit the use of USF funds to construct new fiber for any portion of the proposed network where it is demonstrated that fiber already exists.  The Texas Carriers believe the proposed rule will reduce wasteful and inefficient use of E-rate program funds and free up more funding for schools and libraries that need fiber broadband connections.

When a party submits a request for a rulemaking, as these carriers have done so here, Commission rules require it to seek comment on whether it should initiate a rulemaking.  Then the Commission would decide whether to grant the petition and seek comment on the adoption of the proposed rule or a revised version of the proposed rule. 

The Commission on Monday released an order granting relief for multi-year/upfront applicants that otherwise would have had their funding requests reduced by one-third.  The order only affects HCF applicants that applied for multi-year or upfront funding for FY 2018.

Until the Commission made this decision, however, USAC was holding most of the funding requests for FY 2018. Now that the order is released, all HCPs might see more FCLs.

Multi-year/upfront HCF funding requests (FRNs) are capped at $150 million a year.  Due to demand this year, funding commitments for those applications would have been reduced by a third.  That cap does not affect single-year HCF or telecom funding requests.  To avoid that result, the Commission suspended the multi-year commitment rule and allowed USAC to process all funding requests as if they were filed for a single year of funding.  Multi-year requests allow HCPs to receive commitments for multiple years in the first year of the application but the entire request is counted against the cap in the first year.

The Commission also told USAC to designate the underlying contracts as “evergreen;” long-term contracts designated by the administrator as “evergreen” are not required to conduct competitive rebidding during the life of the contract.  If USAC had issued funding commitments earlier in the year with the evergreen designation, those HCPs would have known they did not have to conduct another competitive bidding process.  The Commission also extended the FY 2019 filing window until June 30 but ONLY for those (1) multi-year/upfront applicants that (2) had not yet received funding commitments for FY 2018.