FCC Seeks Comment on New Mobility Fund

By Danielle Frappier, Theresa Cavanaugh, and Adam Shoemaker

Yesterday, the Federal Communications Commission (FCC) unanimously adopted a Notice of Proposed Rulemaking (NPRM) proposing to create a new Mobility Fund that would provide a one-time injection of $100 million to $300 million in funding to support the build-out of 3G mobile wireless infrastructure in unserved areas.

As contemplated in the National Broadband Plan, and clarified in the recent Corr Wireless order, the funding would come from a portion of universal service fund (USF) High Cost support reclaimed from Verizon Wireless and Sprint Nextel as part of previously approved merger proceeding conditions.

The proposed fund would be designed to provide targeted funding to areas lacking 3G coverage, although the one-time investment contemplated would be modest compared to the overall size of the USF, which was approximately $9 billion in 2009. The NPRM notes that “mobility gaps remain a problem for residents, public safety first responders, businesses, public institutions, and travelers, particularly in rural areas” and that such gaps “impose significant disadvantages on those who live, work, and travel in such areas.”

Moreover, other types of USF funding for competitive providers, such as wireless carriers, have been capped since 2008, which has limited the amount of USF funding available for making network upgrades in areas that are uneconomical to serve.

The FCC has asked for comment on how precisely to identify the areas unserved by 3G services and whether funding should be limited to a specific set of unserved areas, what minimum performance and coverage requirements will be imposed on carriers awarded funding, and other qualifications to be required. Among the FCC’s proposals and questions on which it seeks comment are the following:

  • Whether funding should be available to any unserved area, limited to areas where the percentage of the population having access to 3G services is at least 3 percent below the nationwide average (98.5% – 3% = 95.5%), or whether another targeted approach should be used.
  • Whether to fund at most one provider in any given unserved area, as the FCC proposes.
  • Whether to award the funding, as proposed, through a single round, reverse auction process in which the carrier seeking the lowest amount of subsidy would be chosen (assuming the carrier meets the other requirements). The FCC also proposed to evaluate the bids on a “per-unit” basis, based on population but also potentially other criteria such as road miles. It also proposed a two-stage application process similar to the FCC’s spectrum auction application process, with a pre-auction “short form” application followed by long-form applications to be filed by winning bidders for further FCC review.
  • Whether the FCC should require, as proposed, that data rates be “comparable to those provided by networks using the basic functionality of HSPA or EV-DO.”
  • Whether a 95 to 100 percent coverage range is appropriate.
  • Whether to impose specific service quality and deployment schedules.

Under the NPRM, carrier applicants would be required to meet several eligibility criteria in order to participate in the auction. Specifically, a carrier will likely be required to show that it:

  • Has applied to be or has been designated an Eligible Telecommunications Carrier (ETC) in the relevant unserved area. Since the Mobility Fund would be created from High Cost USF reserves, and Section 254(e) of the Communications Act requires that recipients of these funds be ETCs, this requirement seems virtually certain to be adopted. Depending on the state to be served, wireless carrier applicants that do not already have ETC status in the relevant area may need to seek ETC designation directly from the FCC rather than the state public utility commission.
  • Has access to spectrum capable of 3G or better service in the geographic area it proposes to serve, although the FCC has sought comment on whether carriers would be permitted to use leased spectrum.
  • Can certify that it is financially and technically capable of providing service within the specified timeframe.

Comments will be due 45 days after publication in the Federal Register. We will post an update when these dates are fixed. The text of the NPRM is available here.

Please contact DWT if you are interested in knowing more about this proceeding or filing comments.

About Joe Wallin

Joe Wallin focuses on emerging, high growth, and startup companies. Joe frequently represents companies in angel and venture financings, mergers and acquisitions, and other significant business transactions. Joe also represents investors in U.S. businesses, and provides general counsel services for companies from startup to post-public.
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