The FCC recently launched a set of voluntary experiments aimed at testing the consumer impact of transitioning from legacy TDM-based networks designed primarily for voice services to next generation IP-based networks.  The FCC will offer funding from the Connect America Fund (CAF) for experiments in rural areas.

The opportunity to participate in the experiments is open to all types of entities, including cable operators, telephone companies, municipalities, and utilities.  If you’re interested in participating in the rural experiments, you can submit a non-binding expression of interest to the FCC by March 7^th. 

Background 

            In 2012, AT&T petitioned the FCC to conduct trials testing the transition to next-generation networks, including replacing TDM facilities and services with IP-based alternatives.  Recognizing that technology transitions to IP are already underway, the FCC acted on that petition last week, starting the process “for a diverse set of experiments and data collection initiatives” that will allow the FCC and the public to “evaluate how customers are affected by the historic technology transitions.”

            In one set of experiments—the Rural Broadband Experiments—the FCC will solicit proposals to bring advanced services to rural areas with CAF support. 

Rural Broadband Experiments

            Overview.  The Rural Broadband Experiments are two separate, but similar, experiments. The “Phase II” experiment is geared towards areas where the incumbent telephone company is a price cap carrier (e.g., large companies like AT&T, Verizon, Windstream, and CenturyLink).  Under CAF Phase II, if price cap carriers decline support, the FCC will use competitive bidding to award support to competitive providers in the price cap areas.  The Phase II experiment is designed to test an application-based competitive bidding mechanism that may be used in CAF Phase II.  The second experiment is geared toward areas served by rate-of-return carriers—the “RoR experiment.”

            The FCC laid the groundwork for the Rural Broadband Experiments and has asked for comments on many of the details.

How it works.  The FCC will accept proposals to build “robust last-mile broadband” to serve a wide range of customers in rural areas.  “Robust” is the FCC’s shorthand for “very high speed.”  CAF support will be available in 2014, though the amount of available support is an open issue.  The FCC will consider proposals that require one-time support and those that require support for terms of up to 10 years.

            Eligible entities.  The FCC encourages applications from a wide range of entities, including cable operators, telephone companies, municipalities, and utilities.  The FCC will also consider applications from groups of entities applying together.

            To receive funding, providers must offer voice and broadband services as part of the experiment and must obtain an ETC designation before funds will be disbursed.  The FCC won’t require applicants to have an ETC designation at the time of applying for an experiment.  Instead, applicants may wait to obtain an ETC designation after being selected for an award, but funds will not be disbursed until they confirm ETC status.  The FCC won’t require a video offering as part of the experiments, but including video could improve the chances of a project being selected for funding.

            Eligible areas.  The Rural Broadband Experiments are targeted at rural areas that lack access to broadband services with speeds of 3 Mbps/768 kbps.

            Phase II experiments.  In areas where the incumbent telephone company is a price cap carrier, the smallest area eligible for an experiment is a census tract.  CAF support will be available only for eligible census blocks within that tract.  In other words, any experiment must be conducted at the census tract level, but CAF support will be available only for eligible blocks within a tract.

            A census block is eligible for support if: (1) it lacks broadband with speeds of 3 Mbps/768 kbps and (2) the average cost per location to serve that block is equal to or greater than the likely funding threshold (for now, proposed at $50 per location) in the FCC’s Connect America Cost Model (CAM).  The FCC has also released a list of blocks that would be eligible under the threshold and will soon release a map showing those blocks. (Check back here for the map.)

            To ensure that support is not available in areas where other providers are offering voice and broadband with speeds of 3 Mbps/768 kbps, the FCC will conduct a challenge process after a project has been tentatively selected for an experiment.  If a challenge is granted, funding for the project will be adjusted. 

            RoR experiments.  The FCC did not decide which areas are eligible for support where the incumbent telephone company is a rate-of-return carrier, instead leaving this open for additional comment.  For now, the FCC encourages entities interested in proposing RoR experiments to focus on census blocks that lack broadband with speeds of 3 Mbps/768 kbps and are in high-cost areas similar to those eligible for support under the current CAM version. See the link above for the list of eligible areas.

            Similar to Phase II experiments, a challenge process will likely apply to RoR experiments.

How to apply.  The application process is broken into two phases: (1) non-binding expressions of interest (EOI) and (2) formal proposals.  

EOIs.  Entities are not required to submit an EOI in order to submit a formal proposal. But the FCC strongly encourages interested parties to submit EOIs.  The FCC will use the information to help determine the amount of CAF support available for the experiments and to gauge long-term interest in CAF programs for rural areas. For that reason, even entities that may not be able to participate in the Rural Broadband Experiments this year should consider submitting an EOI.

EOIs must be filed electronically in WC Docket No. 10-90 using the Electronic Comment Filing System and should include basic information about the entity and proposed project:

• The nature of entity or entities applying (e.g., cable operator, municipality, ILEC)
• A description of the proposed area, including census block number and the number of locations to be served, including schools, libraries, other anchor institutions
• Broadband technologies to be deployed
• Planned service offerings (description of voice service, broadband speed tiers, nature of video service, if any) and pricing
• Expected state, local, or tribal government participation or support (e.g., expedited permitting, right-of-way access, matching funds)
• Whether the project would require one-time support, continuing funding, or both, and a high-level estimate of the amount of funding requested

The FCC asked for EOIs to be filed by March 7, but will consider EOIs filed after that date on a rolling basis.  The FCC will not provide feedback on EOIs or the likelihood of a project receiving funding.  Rather, the information will help the FCC determine how to structure the Rural Broadband Experiments, how much support to allocate, and even gauge interest in future funding opportunities.

Formal proposals.  Sometime mid-summer, the FCC will solicit formal proposals to participate in the Rural Broadband Experiments.  Details on information to be included in formal proposals will be announced later.  At a minimum, formal proposals will be expected to show the applicant’s technical and financial capabilities and should be capable of quick implementation.

Further Notice of Proposed Rulemaking.  The FCC left a number of issues open for further comment.  Among others, the FCC asked for comment on the budget, requirements for formal proposals, and the selection criteria for Rural Broadband Experiments.

Budget.  The FCC proposes to use funds from the CAF’s broadband reserve account, but asked for comment on how much should be allocated to Rural Broadband Experiments.

Proposal requirements.  The FCC asked for comment on the types of information to be included in formal proposals.

Selection criteria.  The FCC asked for comment on how to evaluate proposals to select projects for funding.  For now, the FCC proposed to consider the project’s cost-effectiveness, ability to offer “robust” speeds, and scalability, as well as the extent to which the project will use “innovative strategies” to leverage support from state, local, or tribal funding, and the extent to which the project will make advanced services available on tribal lands. 

Process for RoR experiments.  The FCC proposes to follow the same process and application procedures for RoR experiments as for Phase II experiments and asked for comment on this approach.

If you have questions about the Rural Broadband Experiments or filing comments on open issues, please contact Jake Baldwin at (312) 372-3930 jbaldwin@cinnamonmueller.com or Bruce Beard at (314) 394-1535 or bbeard@cinnamonmueller.com.