MOBILITY FUND OVERVIEW

MOBILITY FUND OVERVIEW

18th Annual Oregon Connections Telecommunications ConferenceHood River, Oregon

Mark P. TrincheroDavis Wright Tremaine [email protected]

October 25, 2013

Universal Service Transformation and the Mobility Fund?

Background of Universal Service Funding– Historically, “implicit” support hidden in Inter-

Carrier Compensation rates– Telecom Act of 1996 Created an Explicit fund– Supported multiple carriers: Identical Support Rule

Concerns about size of USF– Supporting multiple carriers in the same area– FCC eliminated Identical Support Rule and Capped

Mobile Support at 2008 Levels– Competitive carrier support ≤ ILEC in the area

Universal Service Transformation and the Mobility Fund?

FCC’s “Transformation Order” Set Budget for USF Program For First Time– Wireline carriers: Connect America Fund ($4B)– Wireless carriers: Mobility Fund (two phases)– New funds for Remote Areas and Tribal Lands– Rural Health Care Fund becomes Healthcare

Connect Fund– Schools and Libraries Fund remains– Low-Income (Lifeline) Fund remains, with

substantial reforms

Mobility Fund Structure

• Phase I– $300M (plus separate $50M for Tribal lands)– Awarded by reverse auction (first ever)– One-time; no continuing support

• Phase II– $500M annually– Continuing support each year– Awarded for a period of years (period TBD)

Mobility Fund – Phase I

• What areas were eligible?– Unserved by either 3G or 4G wireless service

• 3G = at least 50 kbps uplink, 200 kbps downlink• 4G = at least 200 kbps uplink, 768 kbps downlink

– Determined at the census block level (is the “centroid” of the census block unserved?)

• Who could bid in an area?– Designated as an “Eligible Telecommunications

Carrier” (ETC) in the area– Access to spectrum in the area– Certify to financial and technical qualifications

Mobility Fund – Phase I (cont.)

• Winning Bidder Obligations – For at least 75% of the road miles in the bidding

area, deploy either• 3G service within 2 years, or• 4G service within 3 years

– Service must include voice, which must be available on a stand-alone basis

– Reasonably comparable rates– Offer co-location on new towers in the area, on

reasonable terms– Comply with FCC data roaming obligations– Drive testing, reporting, record retention, etc.

Mobility Fund – Phase I: Auction 901

• Auction 901 Procedures– Identified > 460,000 census blocks that lacked 3G

or better mobile service, and also contained road miles (out of ≈ 8,200,000 census blocks in US)

– Determined number of road miles in each census block (total of 650,000 road miles)

– For bidding purposes (except for Alaska and some tribal lands), aggregated these census blocks by census tracts

– 6,100 biddable census tracts– Bids were submitted based on dollars/road mile– Reverse auction: lowest bidder wins

Mobility Fund – Phase I: Auction 901

• Auction 901 Procedures (cont.)– $300 million cap for overall Phase I support

• Bids ordered from lowest to highest per road mile• “Work up the list” until the $300M is gone• Tribal bidders received 25% advantage when bidding

on their own tribal areas (but no reduction in support)– Process means there are “two ways to lose”

your bid:• Not the lowest bid in the census tract, or• Lowest bid, but bid too high in comparison to other

bids nationally (i.e., the $300M was already allocated to lower bids)

Mobility Fund – Phase I: Auction 901

• Auction 901 Procedures (cont.)– Designed to fund “the least costly of the most

costly” areas– Must cover at least 75% of road miles, but

support prorated for road coverage between 75% and 100%

– Competing with other bidders in the same area, and with all bidders in all other areas

Mobility Fund – Phase I: Auction 901

• Auction 901 Results (announced 10/3/2012)– 52 qualified bidders; 33 submitted at least one

winning bid– 894 bids submitted; 795 winning bids (about

13% of biddable cnsus tracts)– 31 states and 1 territory had winning bids – Winning bids covered c. 83,000 road miles (out

of a 650,000 eligible)– Winning bids ranged from $130/road mile to

$45,000/road mile– Average winning bid: $3,593/road mile

Mobility Fund – Phase I: Auction 901

• Auction 901 Results: Top State WinnersTotal Support Road Miles $/Road Mile

ID $32,840,434 2,697 $ 12,177 CO $32,649,205 3,985 $ 8,193 NC $26,108,602 972 $ 26,861 TX $24,916,904 14,364 $ 1,735 WY $22,831,980 13,577 $ 1,682 NV $21,060,478 2,776 $ 7,587 NM $17,895,266 17,920 $ 999 VA $12,414,554 753 $ 16,487 WV $10,611,162 344 $ 30,846 OK $10,376,072 1,339 $ 7,749

Mobility Fund Phase I: Eligible Areas Example

Mobility Fund Phase I: Winning Bids Example

Winning Bids in Oregon and Washington

Oregon had one winning bidder on two census tracts in Baker County– Total Awarded Amount = $123,081.40– Covering 946.78 road miles– @$130.00/road mile

Washington had two winning bidders on seven census tracts spread across Cowlitz, Grant, Lewis, Lincoln and Skamania Counties– Total Awarded Amount = $10,139,520.56– Covering 2963.70– @$1,244.00/road mile to $24,753.00/road mile

Tribal Mobility Fund Phase I: Auction 902

Scheduled for December 19, 2013– Short Form Applications Originally Due By COB

October 9th

– Federal Government Shutdown Resulted in Suspension

– Awaiting New Deadlines– Will the December 19th date slip?

Tribal Mobility Fund Phase I: Auction 902 (cont.)

$50M Set Aside for Tribal Lands– Most procedures similar to MF I Auction 901 with

some important exceptions– Tribally-owned entities are favored with:

• 25% Bidding Credit• Do Not Need to Have ETC Designation Prior (just

pending application)– Remains Difficult for Many Tribal Entities

• Trouble Obtaining Letters of Credit

Mobility Fund – Phase II

• Further Notice of Proposed Rulemaking (FNPRM) in MF Phase II issued as part of Transformation Order

• Additional Public Notice (PN) refining issues: DA 12-1853 in WT Docket No. 10-208 (12/21/2012)

• The resolution of many important issues remains uncertain

Mobility Fund – Phase II

• Overall Structure (as set forth in FNPRM)– $500M annually (up to $100M of this will be

reserved for Tribal Areas, including AK)– Distribution by reverse auction– Purpose: “ensure 4G wireless services in areas

where such service would not otherwise be available”

– Eligibility criteria to be same as MF I– Service must include voice service, and voice

service must be offered on a stand-alone basis– Public interest obligations similar to MF I

Mobility Fund – Phase II

• Refining the Issues: The 12/21/2012 PN– Eligible Areas – Prioritization of Eligible Areas– Term of Support - 10 years?– Support from multiple mechanisms (MF II,

CAF)?– Tribal Priorities - Interaction with 25% tribal

bidding credit?

Mobility Fund: Final Observations

• $300M in Phase I covered just under 13% of unserved road miles

• It will take a lot of money to cover all unserved road miles (CTIA has estimated $7.8B to $21B)

• Amounts in Phase II ($500M annually) plus Phase I ($300M one-time) are dwarfed by annual wireless industry capital expenditures ($20B+)

Mobility Fund: Were You Moved?

Thank You! Questions?

Email: [email protected]