News Update - September 1 -15, 2021: USF Contributions, Epic Games v. Apple, FCC, Broadband
FCC Commissioner Carr Supports Economic Study That Proposes Funding USF Through A Service Fee On Digital Advertising
September 15, 2021 – FCC Commissioner Brendan Carr has released a statement praising a new economic study that examines two proposals for changing the funding mechanism used for the universal service fund (USF). Currently, the USF is made up of revenue from traditional phone services, which have decreased dramatically over the last decade, causing the USF contribution factor, which is ultimately paid by consumers, to increase to record levels. In Subsidizing Universal Broadband Through a Digital Advertising Services Fee: An Alignment of Incentives, economists Hal J. Singer and Ted Tatos discuss funding the USF by: (1) levying a new service fee on digital advertising, or (2) shifting the funding base to landline Internet service providers (ISPs). They conclude that assessing a service fee on digital advertising constitutes the best policy for reforming USF contributions. Their conclusion is based on the following economic criteria: (a) the size and expected growth of these funding bases; (b) the ability of each funding source to evade the imposition of any subsidy requirements by, inter alia, shifting revenue sources to avoid paying the fees; and (c) the extent to which the burden remains on the provider side and is not passed through to the user. The two economists estimate that “if the current USF funding levels were increased to $17.5 billion annually, by 2029 the contribution factor on digital advertising would only reach 7.3 percent, compared to a 14.6 percent contribution factor if the fees were levied on wireline ISPs.”
In May 2021, Commissioner Carr wrote an op-ed for Newsweek which calls for “Big Tech” to start contributing to the USF to help support broadband networks. He issued the following statement supporting the findings of Singer’s and Tatos’ paper:
“For too long, Big Tech has been enjoying a free ride on our Internet infrastructure. The current funding mechanism for the Universal Service Fund – a regressive charge placed on consumers’ monthly bills for traditional telephone service – is unfair and unsustainable. As this new economic study shows, requiring Big Tech to start paying a fair share could eliminate entirely this 30 percent charge from consumers’ bills. Rather than artificially raising the cost of Internet service for Americans, assessing Big Tech would sharply reduce consumers’ monthly costs. The study also shows that requiring large technology companies to pay a fee would align incentives given both the bandwidth consumed by digital advertising services and the benefits large technology companies would realize from even greater connectivity.”
USForward Report Recommends Way To Reform The Universal Service Fund – Adding Broadband Revenue Will Cause USF Contribution Factor To Fall Under 4%
September 14, 2021 – Broadband advocacy organizations NTCA–The Rural Broadband Association, INCOMPAS, and the Schools, Health & Libraries Broadband (SHLB) Coalition have sponsored the release of a report that recommends “a smart, sustainable approach” to reforming the universal service fund (USF) contribution system. The report – USForward – was written by Carol Mattey, a former long-time FCC official in the agency’s Wireline Competition Bureau.
Today, the USF is made up of revenue from interstate telecommunications services – wireline, mobile, and VoIP. The amount of money telecommunications carriers remit to the USF is based on a calculation of their end-user revenues from these services and the quarterly USF contribution factor. For the past 10 years, telecommunications revenue has consistently declined, causing the USF contribution factor to sharply increase to unprecedented levels. Many communications industry stakeholders believe the current USF system is beyond repair and fundamental reform is needed.
In light of this situation, the USForward report analyzes several options for reforming USF contributions: (1) modifying the current revenues-based contribution methodology to assess broadband internet access service revenues, (2) assessing connections, or (3) assessing telephone numbers. Ultimately, the report makes the case for adding broadband internet access service revenues to the USF in order to stabilize the program for the future. Notably, the report concludes that assessing broadband revenue will drop the USF contribution factor to under four percent:
“Reforming the current revenues-based system to include broadband internet access service revenues is the preferred approach, both as a matter of policy and ease of implementation. Doing so would reduce the contribution factor to less than 4%.”
Epic Games v. Apple: Court Says Apple Must Allow iOS Apps To Direct Users To Alternative Payment Options
September 10, 2021 – The United States District Court for the Northern District Of California has issued an opinion ruling on Epic Games, Inc.’s lawsuit against Apple, Inc. In its complaint against Apple, Epic alleged that certain Apple App Store business practices violate federal and state antitrust laws and California unfair competition law. Generally, Epic challenged Apple’s requirement that all iOS apps must use Apple’s iOS in-app payment processing. This payment structure enables Apple to take 30 percent of every sale of every app in its Apple App Store, as well as a 30 percent cut of all revenue from in-app purchases. Apple counterclaimed, alleging Epic “breached its developer agreements and App Store guidelines by introducing a direct pay option on iOS devices in Epic Games’ videogame Fortnite.”
In its decision, the Court first found “that the relevant market here is digital mobile gaming transactions, not gaming generally and not Apple’s own internal operating systems related to the App Store.” Next, the Court said it “cannot ultimately conclude that Apple is a monopolist under either federal or state antitrust laws.” Ultimately, however, the Court concluded that “the trial did show that Apple is engaging in anticompetitive conduct under California’s competition laws.” Accordingly, the Court issued a permanent injunction requiring Apple to allow iOS apps to direct their users to alternative payment options outside of, and in addition to, in-app payments. In other words, an iOS app can have a link or a message that directs users away from the Apple in-app purchasing ecosystem to the app’s own site where users can make payments. The injunction will take effect in 90 days.
Fourth Quarter 2021 USF Contribution Factor: 29.1 Percent
September 10, 2021 – The Federal Communications Commission’s Office of Managing Director has announced that the proposed universal service fund (USF) contribution factor for the fourth quarter of 2021 will be 29.1 percent. This is a slight decrease from the 31.8 percent factor that was used in the third quarter of 2021.
For the fourth quarter of 2021, the Universal Service Administrative Company (USAC) projects $9.517295 billion in total interstate and international end-user telecommunications revenues will be collected. USAC estimates that $2.123870 billion is needed to cover the total demand and expenses for all Federal universal service support mechanisms in the fourth quarter of 2021. Total demand includes projected program support, administrative expenses, and true-ups and adjustments, and breaks out as follows:
E-Rate Schools & Libraries: $594.14 million
Rural Health Care: $153.12 million
High-Cost: $1.13713 billion
Lifeline: $230.93 million
Connected Care: $8.55 million
If the FCC takes no action on the proposed USF contribution factor within 14 days, it will be declared approved. Historical information on quarterly universal service fund contribution factors is available online from the FCC.
FCC Updating The Record In Drone Access To Spectrum Proceeding – Comments Due October 12th
September 10, 2021 – The FCC’s Wireless Telecommunications Bureau is seeking comment to refresh the record in RM-11798, its proceeding to address the growing need of the unmanned aircraft systems (UAS or “drone”) industry for access to licensed spectrum. Comments are due on or before October 12, 2021. Reply comments are due October 25, 2021. In February 2018, the Aerospace Industries Association (AIA) filed a petition asking the FCC “to adopt licensing and service rules for Control and Non-Payload Communications (CNPC) links in the 5030-5091 MHz band to support UAS operations in the United States.” The FCC initially sought comment on the AIA petition in April 2018. The Wireless Bureau now wants to “update the record to reflect operational, technical, and regulatory developments that have occurred over the last three years in the rapidly growing and evolving area of UAS operations and that are relevant to this proceeding,” The Bureau also is seeking “to explore certain aspects of the AIA proposal in greater detail than is reflected in the current record.”
FCC Announces Tentative Agenda For September 30th Open Meeting
September 9, 2021 – Federal Communications Commission Acting Chair Jessica Rosenworcel has announced the tentative agenda for the FCC’s next open meeting scheduled for September 30, 2021:
Promoting More Resilient Networks – The Commission will consider a Notice of Proposed Rulemaking to examine the Wireless Network Resiliency Cooperative Framework, the FCC’s network outage reporting rules, and strategies to address the effect of power outages on communications networks. (PS Docket Nos. 21-346, 15-80; ET Docket No. 04-35)
Reassessing 4.9 GHz Band for Public Safety – The Commission will consider an Order on Reconsideration that would vacate the 2020 Sixth Report and Order, which adopted a state-by-state leasing framework for the 4.9 GHz (4940-4900 MHz) band. The Commission also will consider an Eighth Further Notice of Proposed Rulemaking that would seek comment on a nationwide framework for the 4.9 GHz band, ways to foster greater public safety use, and ways to facilitate compatible non-public safety access to the band. (WP Docket No. 07-100)
Authorizing 6 GHz Band Automated Frequency Coordination Systems – The Commission will consider a Public Notice beginning the process for authorizing Automated Frequency Coordination Systems to govern the operation of standard-power devices in the 6 GHz band (5.925-7.125 GHz). (ET Docket No. 21-352)
Spectrum Requirements for the Internet of Things – The Commission will consider a Notice of Inquiry seeking comment on current and future spectrum needs to enable better connectivity relating to the Internet of Things (IoT). (ET Docket No. 21-353)
Shielding 911 Call Centers from Robocalls – The Commission will consider a Further Notice of Proposed Rulemaking to update the Commission's rules regarding the implementation of the Public Safety Answering Point (PSAP) Do-Not-Call registry in order to protect PSAPs from unwanted robocalls. (CG Docket No. 12-129; PS Docket No. 21-343)
Stopping Illegal Robocalls From Entering American Phone Networks – The Commission will consider a Further Notice of Proposed Rulemaking that proposes to impose obligations on gateway providers to help stop illegal robocalls originating abroad from reaching U.S. consumers and businesses. (CG Docket No. 17-59; WC Docket No. 17-97)
Supporting Broadband for Tribal Libraries Through E-Rate – The Commission will consider a Notice of Proposed Rulemaking that proposes to update sections 54.500 and 54.501(b)(1) of the Commission’s rules to amend the definition of library and to clarify Tribal libraries are eligible for support through the E-Rate Program. (CC Docket No. 02-6)
Strengthening Security Review of Companies with Foreign Ownership – The Commission will consider a Second Report and Order that would adopt Standard Questions – a baseline set of national security and law enforcement questions – that certain applicants with reportable foreign ownership must provide to the Executive Branch prior to or at the same time they file their applications with the Commission, thus expediting the Executive Branch’s review for national security and law enforcement concerns. (IB Docket No. 16-155)
LightBox Releases New Nationwide Internet Connectivity Map
September 9, 2021 – LightBox has released a Nationwide Internet Connectivity Map, which it claims shows precise internet connectivity data for all structures across the U.S. It used data from two billion wi-fi access points to create the map. LightBox distinguishes its map from other broadband maps by identifying actual internet connectivity – locations that have an active internet connection – instead identifying “locations that could be served by a service provider upon request.” LightBox estimates that 60 million Americans currently do not have an active internet connection.
In July 2020, LightBox submitted a bid to create a digital Broadband Serviceable Location Fabric for the FCC. The Fabric is a common dataset of all locations in the U.S. where fixed broadband internet access service can be installed, and is a key component of the Digital Opportunity Data Collection, the FCC’s new broadband mapping effort.
NTIA Receives More Than 280 Applications For Tribal Broadband Connectivity Program Funding
September 8, 2021 – The U.S. Department of Commerce’s National Telecommunications and Information Administration (NTIA) has announced it has received more than 280 applications for its Tribal Broadband Connectivity Program. The applications request more than $5 billion in total funding. NTIA is reviewing the applications using a three-step process: initial administrative and eligibility review of applications, merit review, and programmatic review.
In June 2021, NTIA announced the availability of $1 billion in Tribal Broadband Connectivity Program grants to expand broadband access and adoption on Tribal lands. The program will distribute grants to eligible Native American, Alaska Native, and Native Hawaiian entities to support broadband infrastructure deployment, and to facilitate digital inclusion, workforce development, telehealth, and distance learning. Applications were due September 1, 2021. Further information about the Tribal Broadband Connectivity Program, its requirements, and award criteria are available via the program’s Notice Of Funding Opportunity.
FCC Reviewing Competitive Access To Broadband In Apartment And Office Buildings
September 7, 2021 – The FCC’s Wireline Competition Bureau is requesting public comments to update the record on issues raised in the FCC’s 2019 Improving Competitive Broadband Access to Multiple Tenant Environments (MTEs) Notice of Proposed Rulemaking. Comment is generally requested on three primary issues related to broadband deployment and access in MTE buildings: (1) revenue sharing agreements; (2) exclusive wiring arrangements, including sale-and-leaseback arrangements; and (3) exclusive marketing arrangements. These main issues are generally summarized as follows:
Revenue Sharing Agreements Between MTE Owners & Service Providers – whether such arrangements inhibit entry by competitive providers or affect the price and quality of service options for consumers.
Exclusive Wiring Arrangements – whether and how such arrangements effect competition and deployment of broadband facilities in MTEs, and how they specifically preclude access to new entrants and inhibit choice for tenants.
Exclusive Marketing Arrangements – whether specific circumstances might lead to such arrangements, and how they create confusion and fewer choices for MTE tenants.
By refreshing the record with new comments, the FCC hopes to better understand how it can promote increased broadband competition, consumer choice, and lower prices for Americans living and working in MTE buildings. Comments are due 30 days from the date the Public Notice is published in the Federal Register. Reply comments are due 45 days from publication.
State Broadband Funding: Ohio Accepting Applications For Residential Broadband Expansion Grant Program
September 6, 2021 – Ohio Governor Mike DeWine has announced that the Ohio Residential Broadband Expansion Grant program is now accepting applications. A total of $250 million in grants is available under the program. Grants will be provided to internet service providers to fund broadband projects “that improve high-speed internet access in unserved and underserved areas of Ohio.” Funded projects must provide broadband service with speeds of at least 25/3 Mbps to residents in areas that do not have access to broadband at those speeds. The application window is open from September 6, 2021, until 5:00 p.m. on November 8, 2021. Additional information on the grant program and filing an application online is available on the Broadband.Ohio.Gov.
Vermont Supreme Court Reverses PUC Decision Requiring Free Lifeline Handsets
September 3, 2021 – The Vermont Supreme Court has reversed a decision by the Vermont Public Utility Commission requiring an applicant seeking designation as an eligible telecommunications carrier (ETC) to offer free handsets. In May 2020, TruConnect Communications, Inc. applied for ETC designation from the Vermont Public Utility Commission to provide affordable service under the Federal Lifeline program. TruConnect primarily offers affordable prepaid voice calling plans. After reviewing the ETC petition, the Vermont Public Utility Commission’s hearing officer issued a proposed decision that found TruConnect’s prepaid Lifeline customers will receive a free handset. Moreover, the proposed decision approving the ETC request included a condition requiring TruConnect to “provide all its Vermont Lifeline customers with an E-911 compliant handset at no charge.” In response, TruConnect asked the PUC to remove the free-handset condition, explaining its Lifeline offering does not include free handsets, but rather a free SIM card. The Vermont PUC ultimately issued an amended final order approving TruConnect’s petition for ETC designation, subject to the free-handset condition. TruConnect appealed, seeking removal of the condition. The Vermont Supreme Court agreed with TruConnect’s arguments, finding that the free handset condition was imposed on clearly erroneous grounds:
“The Commission imposed the free-handset condition because: (1) it found that TruConnect offered to provide free handsets to Lifeline customers in Vermont and (2) it concluded that Lifeline requires ETCs to offer free handsets. As to the first ground, we conclude the finding lacked support in the record. As to the second ground, we agree with the parties that the Lifeline program does not require ETCs to provide free handsets. Consequently, we conclude that the Commission erred by imposing the free-handset condition.”
FCC Announces Extended Form 477 Data Submission Deadlines
September 3, 2021 – The FCC’s Office of Economics and Analytics has extended the September 1, 2021 filing deadline for the submission of FCC Form 477 data as of June 30, 2021. Two new deadlines have been announced:
October 1, 2021 – Filers Affected By Hurricane Ida – The FCC extends the filing deadline to October 1, 2021 for the submission of Form 477 data as of June 30, 2021 for affected filers in Louisiana and Mississippi. In this context, “affected” filers are those entities required to file Form 477 that operate facilities, or, in a significant manner essential to the business operation, rely on personnel, records, or financial institutions located in the parishes of Louisiana or the counties of Mississippi that the Federal Emergency Management Agency (FEMA) has designated as eligible for Individual or Public Assistance for the purposes of federal disaster relief as of the date of release of this Public Notice, which includes all parishes and counties in those states, to provide services or to conduct substantial business activities with the Commission.
September 15, 2021 – All Other Form 477 Filers – For all other filers, the FCC establishes the deadline of September 15, 2021 for their data submissions.
Perdue For Senate Petitions FCC For TCPA Declaratory Ruling On Ringless Voicemail Messages
September 3, 2021 – The Federal Communications Commission’s (FCC) Consumer And Governmental Affairs Bureau is seeking comment on a petition for declaratory ruling filed by Perdue for Senate, Inc. related to the Telephone Consumer Protection Act (TCPA). Specifically, in its petition, Perdue for Senate requests that the FCC “clarify that delivery of a voice message directly to a voicemail box through ringless voicemail (RVM) technology does not constitute a ‘call’ subject to prohibitions on the use of an automatic telephone dialing system (ATDS) or an artificial or prerecorded voice under Section 227(b)(1)(A)(iii) of the TCPA or Section 64.1200(a)(1)(iii) of the [FCC’s] rules.” Comments on the petition are due on or before October 4, 2021. Reply comments are due October 19, 2021.
NECA Proposes Modifications To Average Schedule USF Formula
September 2, 2021 – The FCC’s Wireline Competition Bureau is seeking comment on the National Exchange Carrier Association, Inc.’s (NECA) proposed modification of the average schedule universal service high cost loop support formula. Comments on the proposed changes are due on or before October 4, 2021. Reply comments are due October 19, 2021. In an August 27, 2021, filing, NECA proposed modifications to the formula used to calculate universal service fund (USF) high cost loop (HCL) expense adjustments for average schedule companies. NECA’s filing shows that annual payments to average schedule companies under the proposed formula will total approximately $6.034 million payable to 72 average schedule study areas in 2022. That amount is prior to application, where applicable, of any Universal Service Administrative Company (USAC) adjustments for the per line per month support cap and the overall budget control mechanism for rate-of-return high-cost USF support. It is an increase of $2.159 million (~55.7%), compared to current payments. The proposed formula and associated cost per loop values, if approved, will govern HCL payments to average schedule companies eligible for HCL support from January 1, 2022, through December 31, 2022.
USAC Files Fourth Quarter 2021 USF Contribution Base Data: $9.517 Billion
September 1, 2021 – The Universal Service Administrative Company (USAC) has filed projected universal service fund (USF) contribution base data which will be used to determine the USF contribution factor for the fourth quarter of calendar year 2021. USAC has determined that the total projected interstate and international end-user revenue base for the fourth quarter of 2021 is $9,517,295,012. To provide a comparison, the total USF contribution base amounts for the past seven quarters were as follows:
Third Quarter 2021: $9,665,944,070
Second Quarter 2021: $9,905,669,690
First Quarter 2021: $10,068,712,553
Fourth Quarter 2020: $10,428,377,862
Third Quarter 2020: $10,219,123,520
Second Quarter 2020: $10,865,131,593
First Quarter 2020: $11,129,976,956
USAC’s estimated revenue base for the fourth quarter of 2021 was derived from projected collected revenue for October to December 2021 reported by telecommunications service providers using FCC Form 499-Q submitted in August 2021 – 4,681 reporting providers, of which 3,194 are USF contributors and 1,487 are non-contributing de minimis service providers. As of August 19, 2021, USAC has yet to receive information from 155 non-de minimis telecommunications service providers that had previously submitted Form 499-Q revenue information to USAC.
After the Federal Communications Commission (FCC) approves the total USF contribution base, the quarterly funding requirements for USF support mechanisms, and projected USF administrative costs, the FCC will establish a USF contribution factor for the fourth quarter of 2021. The new contribution factor will be announced by a Public Notice. USAC will then bill USF contributors on a monthly basis for their individual obligations based on the approved contribution factor.
Mergers & Acquisitions: Boost Mobile Acquiring Prepaid Mobile Service Provider Gen Mobile
September 1, 2021 – Low cost wireless provider Boost Mobile has announced it is acquiring prepaid mobile service provider Gen Mobile. Under the transaction, Boost will acquire the Gen Mobile brand, customer base, existing distribution network, technology, and wireless team. As explained in the press release, the deal is part of Boost’s overall business strategy:
Earlier this year, Boost Mobile announced its participation in the Emergency Broadband Benefit (EBB) program which helps make broadband access more affordable for Americans. Through increased distribution in underrepresented communities, Gen Mobile will be integral in Boost's efforts to close the digital divide. Gen Mobile will continue to sell its low-cost wireless plans starting at just $10 – with other cost-efficient plans to come – and will also accelerate its EBB and Lifeline growth.
The purchase price was not disclosed. Gen Mobile will remain headquartered in Los Angeles and the leadership will remain intact. The transaction is subject to customary closing conditions and regulatory approvals. Boost Mobile is a subsidiary of Dish Network, which purchased Boost in July 2020 as part of T-Mobile’s merger with Sprint.
Mergers & Acquisitions: Comporium Purchasing Chesnee Telephone From SkyLine Membership Corporation
September 1, 2021 – The FCC’s Wireline Competition Bureau is seeking comment on a Section 214 application to transfer control of Chesnee Telephone Company from Skyline Telephone Membership Corporation d/b/a SkyLine Membership Corporation to Comporium, Inc. Comments are due or before September 15, 2021, and reply comments are due September 22, 2021.
Chesnee Telephone is a South Carolina incumbent local exchange carrier (LEC) serving approximately 1,737 access lines in Spartanburg and Cherokee counties in northwestern South Carolina. Chesnee Cable, a wholly owned subsidiary of Chesnee Telephone, provides interexchange services to Chesnee Telephone customers, and also provides cable TV services and broadband services. Chesnee Telephone holds a domestic 214 authorization, and Chesnee Cable holds an International 214 authorization. SkyLine Membership Corporation is North Carolina corporation and telecommunications provider in Tennessee and North Carolina that owns 100% of Chesnee Telephone.
Comporium, a South Carolina corporation, and its affiliates, provides service as an
incumbent LEC to approximately 84,000 access lines in 32 exchanges in South Carolina and North Carolina. Pursuant to the terms of the proposed transaction, Comporium will purchase 100% of Chesnee Telephone from SkyLine, resulting in complete control of Chesnee Telephone and its wholly owned subsidiary, Chesnee Cable.
AT&T Tells FCC Its 3G Network Shutdown Should Not Be Delayed
September 1, 2021 – AT&T has filed an opposition to a petition that asks the Federal Communications Commission to delay AT&T’s plan to shutter its 3G network in February 2022. In May 2021, the Alarm Industry Communications Committee (AICC) filed a petition for emergency relief asking the FCC to delay AT&T Mobility’s planned February 2022 shut down of its 3G network until December 31, 2022. AICC claims the delay is needed to give alarm companies more time to replace 3G alarm signaling radios in customer premises, and blames the COVID-19 pandemic as the reason the alarm industry has not been able to finish replacing outdated 3G equipment. AICC asserts the FCC “has ample authority” under Titles I, II and III of the Communications Act to require AT&T to delay its 3G shutdown.
In its opposition, AT&T first argues that the FCC cannot use Title II statutory authority to grant AICC’s petition because the overwhelming majority of alarm-company connections and other enterprise IoT connections to AT&T’s network are offered as private carriage services, not common carrier services. AT&T further argues that Title II regulation of its IoT services is precluded “because they are not interconnected with the public switched network.” Also, AT&T says the FCC cannot rely on Title I ancillary authority because that power must be used to support specific delegated authority, and “there is no ‘specifically delegated power’ to which regulations protecting alarm-monitoring companies could be ‘ancillary.’”
Next, AT&T argues that AICC and its members were given sufficient time to plan for the 3G phase out. AT&T explains that when it entered into agreements with alarm companies in 2016, 2017, and 2018, AT&T declared its 3G network would “be made available at least until December 31, 2021.” AT&T formally notified business customers in February 2019 that its 3G network would be turned off in February 2022. In short, AT&T says forcing it “to delay its 3G sunset would undercut its carefully planned 5G transition, waste valuable spectrum assets, and degrade network performance to the detriment of millions of ordinary AT&T wireless customers.” With respect to AICC’s claims that the COVID-19 pandemic and chipset supply-chain issues have delayed equipment upgrades, AT&T says those arguments are not credible. AT&T cites statements of CEOs and investment presentations from leading alarm companies that show many alarm companies were not negatively impacted by the pandemic as many consumers invested in home security solutions.
