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FCC Establishes $9 Billion Fund to Support 5G Services in Rural America

As the Federal Communications Commission (“FCC”) continues to take steps to facilitate the deployment of next-generation 5G services nationwide, it is also working to ensure that rural America is not left behind.  On October 27, 2020, the FCC adopted an Order establishing the 5G Fund for Rural America (“5G Fund”), which will make available up to $9 billion in federal subsidies over 10 years to bring voice and 5G broadband services to unserved rural areas.  It also requires mobile carriers receiving legacy support to use an increasing percentage of their $368 million in funding for 5G services.  The funds are expected to support the deployment of 5G networks that will not only provide rural areas with critical access to telehealth, telework, remote learning opportunities, and precision agriculture, but will also drive job creation and economic growth.  

Below is an overview of the eligibility requirements to obtain 5G Fund support, obligations on support recipients, and the funding and transition issues related to carriers receiving legacy support. 

5G Fund Framework.  The 5G Fund will make support available in two phases.  Phase I will make available up to $8 billion nationwide to all eligible rural areas that lack unsubsidized 4G LTE and 5G broadband service.  Of this amount, $680 million will be reserved for service to Tribal lands.  Phase II will make available at least $1 billion (plus any funds left over from Phase I) to specifically target the deployment of technologically innovative 5G networks that facilitate precision agriculture.  The term of support for each phase will be 10 years, with support disbursed monthly, and support for both phases will be auctioned using a multi-round, descending clock auction, where the amount of support offered will decrease in each round.  

Eligible Areas.  Recognizing that it will likely result in an 18-24 month delay of an auction for 5G Fund support (or until 2023 as FCC Chairman Pai has suggested), the FCC will nevertheless award Phase I support to eligible areas based on the new mobile coverage data it collects through its Digital Opportunity Data Collection proceeding.  Areas eligible for support will include those that lack 4G LTE and 5G broadband service by at least one service provider that is not receiving subsidies to provide those services.  Areas ineligible for support will include those where unsubsidized 4G LTE and 5G networks have been deployed as well as portions of Alaska, Puerto Rico, and the U.S. Virgin Islands, where high-cost support has already been provided.  To prevent overbuilding, an entity with enforceable commitments outside of the 5G Fund context to deploy 5G will not be allowed to use any eligible areas for which it might win support to fulfill those commitments.  

Minimum Geographic Area.  The minimum geographic area for bidding—i.e., the geographic area by which areas eligible for support will be grouped for bidding—will be determined later, but will be no larger than a census tract and no smaller than a census block group.  The FCC will also incorporate an adjustment factor—for both the auction and the disaggregation of legacy support (discussed below)—that will assign a weight to each geographic area.  It will take into consideration the relative cost of serving areas with difficult terrain and the potential business case for each area, with less profitable areas receiving greater weight and therefore greater support.

Eligibility for 5G Fund Support.  All qualified applicants will be eligible to participate; the FCC will not categorically exclude applicants such as satellite providers or others.  A support recipient, however, must be capable of providing mobile, terrestrial voice and broadband services that meet the public interest obligations and performance requirements discussed below.  In addition, while not required prior to participation in an auction for 5G Fund support, a support recipient must be designated as an eligible telecommunications carrier (“ETC”) before it is authorized to receive support.  An applicant must also have exclusive access to licensed spectrum capable of supporting 5G service for at least 10 years in order to participate—i.e., access to unlicensed spectrum or spectrum licensed-by-rule alone is insufficient.  

Application to Participate.  A party interested in participating in the 5G Fund auction will be required to submit a short-form application.  In that application, the party must provide information on, among other things, its ownership structure, agreements related to the auction, ETC status, and the spectrum it intends to use.  Depending on whether the applicant has provided mobile wireless and/or mobile wireless broadband service for at least three years, it may also be required to certify to, or provide, certain operational, technical, and financial information.  Applicants that have provided service for fewer than three years (or not at all) will be required to submit a preliminary project description, a letter of interest from a qualified bank, and a statement from the bank that it would be willing to issue a letter of credit to the applicant.

Application to Receive Support.  If a bidder wins support, it will be required to submit a more in-depth long-form application after the auction with, among other things, a more detailed project description and information about its ETC designation (if not provided with the short-form application).  Prior to being authorized to receive support, a winning bidder will also be required to provide an irrevocable standby letter of credit and opinion letter.  The letter of credit may be reduced as a support recipient meets certain service milestones or, conversely, drawn upon if a support recipient fails to fulfill its obligations.  

Defaults.  A winning bidder that defaults on its winning bids prior to being authorized to receive support (e.g., the bidder fails to file or prosecute its long-form application or its long-form application is dismissed or denied) will be subject to a $3,000 base forfeiture for each separate violation of the FCC’s rules.  The FCC will limit the total base forfeiture to 15% of the support at the opening price for an area for the entire 10-year support term for each separate violation.  

5G Fund Support Recipient Requirements.

Public Interest Obligations—5G Fund support recipients will be required to satisfy the following public interest obligations:

  • Provide mobile, terrestrial voice and data services that comply, at a minimum, with 5G-NR (New Radio) technology as defined by 3GPP
  • Satisfy interim milestones by offering service to at least:  (i) 40% of the total square kilometers associated with the eligible areas by three years; (ii) 60% of the total square kilometers associated with the eligible areas by four years; and (iii) 80% of the total square kilometers associated with the eligible areas by five years
  • Satisfy a final milestone by offering service to at least 85% of the total square kilometers associated with the eligible areas by six years and providing service to least 75% of the total square kilometers within each of its individual biddable areas (e.g., census block group or census tract)
  • Offer service at rates that are reasonably comparable to rates they offer in urban areas
  • Allow collocation and voice and data roaming 

Performance Requirements—5G Fund support recipients will be required to meet the following minimum baseline performance requirements:  (i) data speeds of at least 35/3 Mbps with minimum cell edge speeds of 7/1 Mbps; (ii) latency of 100 milliseconds or less per round trip; and (iii) data allowances, offering at least one service plan that includes a minimum monthly data allowance equivalent to the average U.S. subscriber data usage.

Reporting and Non-Compliance—5G Fund support recipients will be required to submit annual reports as well as interim and final milestone reports, in which they will be required to provide infrastructure information on the cell sites that they use to provide mobile service.  Additionally, support recipients will be required to conduct on-the-ground measurement tests to substantiate their 5G broadband coverage data.  Non-compliance with the milestones may result in additional reporting requirements and/or the withholding of recovery of support. 

Legacy High-Cost Support Recipient Requirements. 

Public Interest Obligations—Competitive ETCs receiving legacy high-cost support will be required to satisfy the following public interest obligations:

  • Use an increasing percentage of their support toward 5G service—specifically, with certain exceptions, at least one-third of the legacy support they receive in 2021 and at least two-thirds of the legacy support they receive in 2022 must be used for 5G deployment, with the full amount applied in 2023 and each subsequent year
  • Provide mobile, terrestrial voice and data services that comply, at a minimum, with 5G-NR (New Radio) technology as defined by 3GPP
  • Meet specified coverage requirements and service deployment milestones (to be determined later) until such legacy support begins to phase down or otherwise ceases
  • Offer service at rates that are reasonably comparable to rates they offer in urban areas
  • Allow collocation and voice and data roaming 

Performance Requirements—Legacy high-cost support recipients will be required to meet the same performance requirements as 5G Fund support recipients.

Reporting and Non-Compliance—Competitive ETCs receiving legacy high-cost support for mobile wireless service will be required to file an initial report of their current service offerings as well as annual reports regarding their efforts to provide 5G services throughout their subsidized service areas, both of which must also include infrastructure data.  In addition, they will be required to submit service milestone reports (once coverage requirements are established) and substantiate deployment coverage data with on-the-ground measurement tests.  Support will be terminated to (and potentially recovered from) mobile competitive ETCs receiving legacy high-cost support that fail to comply with their public interest obligations and performance requirements.

Use, Freeze, and Limitations on Legacy High-Cost Support—The FCC addresses several other issues related to high-cost support recipients.  First, it clarifies that competitive ETCs receiving legacy high-cost support will be allowed to use support for the provision, maintenance, and upgrading of facilities and services.  Second, the FCC will freeze the mobile high-cost support of Standing Rock, the sole competitive ETC that continues to receive non-frozen support.  Third, the FCC clarifies that only terrestrial mobile wireless carriers may receive mobile high-cost support and that such support may only be used for terrestrial facilities and services.

Transition Schedule—Finally, the FCC adopts a framework for transitioning frozen legacy high-cost support to 5G Fund support, under which legacy high-cost support will be maintained for no more than five years to preserve service or potentially subject to phase down over two years. 

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Author

Angela Y. Kung

Of Counsel

Angela Y. Kung, Of Counsel at Mintz, draws on significant knowledge of the wireless regulatory landscape and experience at the FCC to advise clients on FCC rules and procedures. With particular expertise on spectrum use policies and auction procedures, she has shepherded Mintz's clients through several FCC auctions related to next-generation 5G wireless technologies and routinely advocates on behalf of clients to help ensure that the agency’s rules align with their interests.