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Etc designation & tribal mobility fund
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  1. Etc designation & tribal mobility fund

  2. ETC DESIGNATION

  3. ETC Designation • What is an Eligible Telecommunications Carrier (ETC)? • Carrier designated by the PUC or FCC that: • Offers the supported services using it’s own facilities or a combination of it’s own facilities and resale • Advertises the availability of supported services • Only ETCs are eligible to receive federal USF • All ILECs have been designated as ETCs • Competitive providers (CETCs) must receive designation from the PUC or FCC

  4. ETC Designation • What are the requirements of an ETC? • Voice grade access to the PSTN • Local minutes of use at no additional charge • Access to 911 or E911 • Toll limitations for eligible low income customers • FCC’s Transformation Order added broadband • 4 Mbps/1 Mbps broadband speeds • Latency sufficient for real time applications • Usage limits comparable to urban areas

  5. ETC Designation • How does a carrier get designated as an ETC? • All ILECs were initially designated as ETCs without having to apply • New ILECs have been granted ETC status with their study area waiver • Competitive providers must file an application with the state PUC or the FCC • Rural Areas – “may” designate more than one ETC • Other Areas – “shall” designate more than one ETC • Public Interest determination

  6. ETC Designation • Impacts of FCC Reform on ETC Designation • Elimination of Identical Support Rule • Phased out over 5 years • One wirelineETC • Rural Areas – ILEC continues as ETC • Non-Rural Areas – ILEC has right of first refusal • One wireless ETC • Replaces multiple wireless ETCs in many areas

  7. ETC Designation • Designation as an ETC by the FCC • Comply with service requirements • 5-Year Service Quality Improvement Plan • Ability to remain functional in emergencies • Satisfy consumer protection and service quality standards • Lifeline Only CETCs • Demonstrate financial and technical capability • Submit terms, conditions and pricing of services

  8. ETC Designation • How does a carrier receive annual certification as an ETC? • Annual submission to FCC, PUC & Tribal Authority • Progress report on 5-year Service Quality Improvement Plan • Report on service outages affecting 10% of end users or a 911 special facility • Number of unfulfilled service requests • Number of complaints • Compliance with service quality standards and consumer protection rules • Ability to function in emergency situations

  9. ETC Designation • How does a carrier receive annual certification as an ETC? • Annual submission to FCC, PUC & Tribal Authority • Price offerings • Names of holding company, operating company, affiliates and branding (“dba”) • Evidence of Tribal engagement • Pricing no more than 2 standard deviations above national average • Network performance test results

  10. ETC Designation • What is Tribal Engagement? • Discussions with Tribal government that includes: • Needs assessment and deployment planning focused on Tribal community institutions • Feasibility and sustainability planning • Marketing services in a culturally sensitive manner • Rights of way, land use permitting, facilities siting, environmental and cultural preservation review processes • Compliance with Tribal business and licensing requirements

  11. BECOMING A TELECOM CARRIER

  12. Becoming a Telecom Carrier • How is the process of becoming a telecom carrier relevant to ETC designation? • Process of becoming a telecom carrier • Network design • Financial forecasting • Lender approval • FCC waivers & approval • Commence operations • Financial & regulatory reporting • We’ll focus on lender and FCC approval

  13. Becoming a Telecom Carrier • How does the loan process work? • Each lender will be different, but most Tribal carriers are financed through RUS • Application involved a variety of information • Company description • Network design • Customer survey • Service pricing • 5-Year financial forecast • Full set of financial statements • Settlements & USF • Impacts of FCC Reform • Explanation of assumptions

  14. Becoming a Telecom Carrier • How does the loan process work? • Application will include a variety of assumptions, including approval of FCC waivers • Traditional FCC waivers • Study Area Waiver • Entry to NECA Pools • Expedited USF Support • Etc. • FCC Transformation Order • Revenue Baseline • Switched Access transition to Bill & Keep • USF Limitations

  15. Becoming a Telecom Carrier • How does the loan process work? • Loan review and FCC waiver process will run concurrently • Somewhat of a chicken or the egg scenario • Will the loan be granted without the FCC waivers? • Will the FCC waivers be granted without the loan? • May result in a request for conditional approval of the loan and/or waivers to keep them moving

  16. Thank You Chad Duval, Principal Moss Adams LLP chad.duval@mossadams.com 209-955-6124

  17. Becoming a Telecom Carrier • Wireline ETC Petitions • Application will include a variety of FCC waiver requests • Traditional FCC waivers • Study Area Waiver • Entry to NECA Pools • Expedited USF Support • FCC Transformation Order • Transition to Bill & Keep • USF Limitations

  18. Becoming a Telecom Carrier • Traditional Waiver - Study Area Waiver • Study Area: the geographic area in which a carrier provides service • State PUCs and the FCC share jurisdiction over study areas • If you seek ETC designation for only a portion of a study area, you will need: • FCC approval to revise the study area boundaries • Public interest demonstration • Ruling by the state PUC that it does not object to the revised study area • Tip: Try to submit the study area waiver jointly with the affected ILEC

  19. Becoming a Telecom Carrier • Traditional Waiver - Entry to NECA Pools • National Exchange Carrier Association (“NECA”) is an association of ILECs which administers interstate tariffs for carriers that participate in NECA’s pools • Rationale for participation: Cost efficiency • Barrier to participation: FCC’s rules limit participation in NECA’s pools to those ILECs in existence as of 1996 • Solution: Request a waiver of 47 C.F.R. § 69.2(hh) to allow the new carrier to participate in NECA’s pools

  20. Becoming a Telecom Carrier • Traditional Waiver - Expedited USF • Many of FCC’s USF support rules are based on a carrier’s historical costs • Problem: New carriers don’t have historical costs • Solution: Request a waiver of 47 C.F.R. §§ 36.611, 36.612, and 54.903(a)(3) to recover costs based on projected costs

  21. Becoming a Telecom Carrier • FCC Transformation Order Waiver – Transition to Bill-and-Keep • Old intercarrier compensation rule: Carriers pay one another to connect calls based on the cost of connecting the call • New bill-and-keep rule: Carrier on whose network a call originates bills its customer and keeps the entire proceeds • Problem #1: Tribal carriers were net winners under the old rule, so bill-and-keep will reduce overall revenues • Problem #2: New bill-and-keep rules provide many carriers with additional federal support based on historical intercarrier compensation revenues

  22. Becoming a Telecom Carrier • FCC Transformation Order Waiver – Transition to Bill-and-Keep (cont.) • Solution: Request a short term waiver of the transition to bill-and-keep (47 C.F.R. § 51.909) • Benefits: • Increase revenues during initial years of operations • Provides historical intercarrier compensation revenues to allow new carriers to qualify for additional federal support when the short term waiver expires

  23. Becoming a Telecom Carrier • FCC Transformation Order Waiver – USF Limitations • Old USF rules: Carriers with the highest costs were reimbursed generally with full USF support • New USF rules: New rules limit USF support • $250 per line per month limit on High Cost Loop Support (“HCLS”) • Limit reimbursable capital and operating expenses for HCLS (“CapEx and OpEx Limits”) based on expenses of similarly situated carriers • Reduced limits on corporate operations expenses (i.e., management salaries, legal and engineering fees, etc.) • Problem: Tribal carriers have high expenses in initial years of operations, and new USF rules subject new carriers to unpredictable USF support levels • Solution: Request a short term waiver of the new USF rules to increase level and predictability of USF revenues during initial years of operations

  24. Thank You Sean Conway, Associate Akin Gump Strauss Hauer & Feld LLP sconway@akingump.com 202-887-4463

  25. TRIBAL MOBILITY FUND

  26. Introduction: Mobility Fund and Tribal Mobility Fund • Purpose: • Provide funding to deploy and maintain mobile broadband infrastructure in unserved and underserved areas of the country • Mobility Fund: Phases 1 and 2 • Support for unserved and underserved areas, including Tribal lands • Tribal Mobility Fund: Phases 1 and 2 • Support dedicated exclusively for unserved and underserved Tribal lands

  27. Mobility Fund – 2 Phases • Mobility Fund: Phase 1 • $300 million of one-time support to deploy mobile broadband infrastructure to unserved areas • Funding awarded through a “reverse auction” that occurred in 2012 • Standing Rock was one of the auction winners • Mobility Fund: Phase 2 • $500 million of ongoing annual support for mobile broadband networks in high-cost areas • FCC currently considering rules for awarding support through competitive bidding

  28. Tribal Mobility Fund – 2 Phases • Tribal Mobility Fund: Phase 1 • $50 million of one-time support to deploy mobile broadband infrastructure on unserved Tribal lands • Tribal Mobility Fund: Phase 2 • Up to $100 million annually to expand and sustain mobile broadband networks on Tribal lands in which service would be unavailable absent federal support • FCC currently considering rules for awarding support through competitive bidding

  29. Tribal Mobility Fund Phase 1 • When? • Sometime in 2013; FCC has not announced date • How? • Reverse Auction • Funding awarded to bidders that will serve the most unserved locations (i.e., households and places of business) on Tribal lands at the lowest cost • Tribal Bidding Credit • Eligibility: Tribally-owned or controlled carriers seeking support to serve their associated Tribal lands • Mechanics: Reduces the bid amount by 25% for the purpose of comparing it to other bids

  30. Tribal Mobility Fund Phase 1 (cont.) • Wh0? • ETC Designated Carrier • Caveat: Tribally-owned or controlled entities that have pending ETC applications may participate in the auction; however, such entities cannot receive support until it becomes ETC designated • Access to Spectrum • Hold a wireless license for the service area • Lease of spectrum for at least 5 years • Financially and Technically Qualified • Certification Requirement

  31. Tribal Mobility Fund Phase 1 (cont.) • Where? • Unserved Tribal lands • Additional Auction Application Requirements • Detailed Project Description • Description of network • Identification of technology • Demonstration of technical feasibility • Detailed budget • Certification of Tribal Engagement Requirements

  32. Tribal Mobility Fund Phase 1 (cont.) • Post-Auction Requirements • Winning Bidders will be subject to post-auction public interest requirements, including: • Construction Deadlines • Annual Service Reports • Stay Tuned • The FCC will be releasing more information on the Tribal Mobility Fund in 2013

  33. Thank You Tom Davidson, Partner Akin Gump Strauss Hauer & Feld LLP tdavidson@akingump.com 202-887-4011