On February 23, 2017, during the second open meeting under Chairman Ajit Pai, the Federal Communications Commission (FCC or the Commission) unanimously approved an order launching the long-awaited second phase of the Mobility Fund. The Mobility Fund offers financial support to service providers to preserve and extend mobile broadband and voice services in unserved and underserved areas. The FCC’s order will provide up to $4.53 billion over the next decade to expand 4G LTE coverage to areas currently lacking that level of service, with $340 million reserved for Tribal areas. This order is one component of Chairman Pai’s focus on bridging the digital divide. The full text of the FCC’s order and further notice of proposed rulemaking has not been released.

The FCC created the Mobility Fund in a 2011 order with two phases. The first phase included a one-time spend of $300 million to support the buildout of mobile voice and broadband service in unserved areas. The Commission initially expected the second phase of funding to conclude in 2013. Former Chairman Tom Wheeler circulated a Phase II order last fall, but withdrew the item following calls by then-Commissioner Pai, Commissioner Michael O’Rielly, and Republican members of Congress to avoid acting on major or controversial items until after the new administration took office.

Under the order, any portion of a census block not fully covered by unsubsidized 4G LTE coverage with a minimum download speed of 5 Mbps will be eligible for funding. The FCC will identify the areas eligible for funding based on carrier-submitted coverage data provided in their Form 477 submissions. Because the Commission recognizes the Form 477 data are far from perfect, there will be a challenge process by which carriers can provide evidence that areas should or should not be eligible for Phase II funding. The order does not establish parameters for the challenge process, instead seeking further public input through the further notice of proposed rulemaking. The Chairman and both commissioners stressed the importance of the challenge process in ensuring support funds reach the neediest areas. AT&T Services, Atlantic Tele-Network, Inc. and its subsidiaries, and Buffalo-Lake Erie Wireless Systems Co. have already proposed an outline for the mechanics of the challenge process.

Funding will be distributed via a reverse auction and guaranteed for 10 years. The Commission aims to complete the auction within one year. Winning service providers will need to provide service with a median data speed of 10/1 Mbps, latency of less than 100 milliseconds, and rates that are reasonably comparable to urban rates. Bidding and performance will be assessed on a “per-square mile” basis, rather than based on road miles as the 2011 order had proposed. The Order also imposes buildout requirements, such that by year six, 85 percent of the winner’s area must be covered by LTE service. In his statement, Chairman Pai also mentioned that the Mobility Fund Phase II framework aligns “whenever possible” with the Connect America Fund Phase II rules adopted last year.

Carriers currently receiving support for areas that receive a winning bid under Phase II will see a rapid phase down of support over the following two years. Eligible areas without a winning bid and currently receiving support will continue to receive support for the next five years for the lowest-cost provider. Based on ex parte filings by the Competitive Carriers Association and Rural Wireless Association, these phasedowns will likely see significant pushback from smaller and rural providers.

The next phase in the Mobility Fund Phase II process will be hammering out the specifics of the challenge process to determine eligible areas. Based on typical comment periods, the FCC likely will not finalize the challenge process until mid-summer 2017 at the earliest.