Challenge Process Provides Opportunity for Competitive Providers to Ensure No Subsidies to Areas Served by the Competitor

On March 30, the FCC released an Order and Notice of Proposed Rulemaking announcing $2 billion in new financial support to rural incumbent telecommunications carriers (so-called rate of return carriers) willing to deploy broadband services in unserved areas. The Commission’s proposal effectively extends the existing Connect America Fund (CAF) program to the smaller, independent rate of return incumbent providers located in many rural areas.

As with prior CAF initiatives, the FCC has included a challenge process that will permit unsubsidized competitors (such as cable operators, CLECs and fixed wireless Internet service providers) to oppose subsidies in areas they already serve. To prevail in such a challenge the unsubsidized competitor must show that they offer voice and broadband service in census blocks that the Commission believes to be unserved, and eligible for support.

The challenge process will be similar to that used in the CAF Phase II proceeding which concluded last year. It will begin when the FCC releases an updated version of its A-CAM model, which uses FCC Form 477 data, as reported in December 2014, to create a baseline assumption of census blocks that are served by broadband. A successful challenger must demonstrate that it offers fixed voice service at reasonable rates and fixed terrestrial broadband service with speeds of at least 10 Mbps downstream and 1 Mbps upstream with latency suitable for real-time applications such as VoIP.

In addition, the challenger must be able to port telephone numbers in the challenged census block and must offer service to 85 percent of the locations within the block. A challenger must certify that it meets the service metrics and provide additional evidence that it serves the area in question. Although the permissible evidence will vary, the FCC noted that it would accept evidence such as include a list of neighborhoods served, street addresses, or a map showing boundaries of the cable franchise areas.

As with prior challenge processes, the incumbent RLEC or other parties may contest the challenger’s assertions. The challenger will not receive an opportunity to reply. Challenges will be due 21 days following the release of the revised model. The Order notes that the FCC expects the challenge process to be completed in 2017.