2018-12625. The Uniendo a Puerto Rico Fund and the Connect USVI Fund, Connect America Fund, ETC Annual Reports and Certifications

AGENCY:

Federal Communications Commission.

ACTION:

Proposed rule.

SUMMARY:

In this document, the Federal Communications Commission (Commission) seeks comment on how best to structure the second stage of the Uniendo a Puerto Rico and Connect USVI Funds to speed longer-term efforts to rebuild fixed and mobile voice and broadband networks in the territories and harden them against future natural disasters. The Commission intends to target high-cost support over the next several years in a tailored and cost-effective manner, using competitive processes where appropriate.

DATES:

Comments are due on or before July 5, 2018 and reply comments are due on or before July 18, 2018. If you anticipate that you will be submitting comments, but find it difficult to do so within the period of time allowed by this document, you should advise the contact listed in the following as soon as possible.

ADDRESSES:

You may submit comments, identified by WC Docket Nos. 18-143, 10-90 and 14-58, by any of the following methods:

• Federal eRulemaking Portal: http://www.regulations.gov. Follow the instructions for submitting comments.
• Federal Communications Commission's website: http://fjallfoss.fcc.gov/​ecfs2/​. Follow the instructions for submitting comments.
• People with Disabilities: Contact the FCC to request reasonable accommodations (accessible format documents, sign language interpreters, CART, etc.) by email: [e-mail] or phone: [phone] or TTY: [phone].

For detailed instructions for submitting comments and additional information on the rulemaking process, see the SUPPLEMENTARY INFORMATION section of this document.

FOR FURTHER INFORMATION CONTACT:

Alexander Minard, Wireline Competition Bureau, [phone] or TTY: [phone].

SUPPLEMENTARY INFORMATION:

This is a synopsis of the Commission's Notice of Proposed Rulemaking (Notice) in WC Docket Nos. 18-143, 10-90, 14-58; FCC 18-57, adopted on May 8, 2018 and released on May 29, 2018. The full text of this document is available for public inspection during regular business hours in the FCC Reference Center, Room CY-A257, 445 12th St. SW, Washington, DC 20554 or at the following internet address: https://docs.fcc.gov/​public/​attachments/​FCC-18-57A1.pdf. The Order that was adopted concurrently with the Notice is published elsewhere in the Federal Register.

I. Introduction

1. Through the Uniendo a Puerto Rico Fund, the Commission will make available up to $750 million of funding to carriers in Puerto Rico, including an immediate infusion of $51.2 million for restoration efforts in 2018. Of the remainder, the Commission proposes that about $444.5 million would be made available over a 10-year term for fixed voice and broadband (an $84 million increase over current funding levels) and that about $254 million would be made available over a 3-year term for 4G Long-Term Evolution (LTE) mobile voice and broadband (a $16.8 million increase).

2. Through the Connect USVI Fund, the Commission will make available up to $204 million of funding to carriers in the U.S. Virgin Islands, including an immediate infusion of $13 million for restoration efforts in 2018. Of the remainder, the Commission proposes that about $186.5 million would be made available over a 10-year term for fixed broadband (a $21 million increase) and that about $4.4 million would be made available over a 3-year term for 4G LTE mobile voice and broadband (a $4.2 million increase).

3. As a result of these Funds, as well as the Commission's decision not to offset more than $65 million in advance payments it made to carriers last year, it will make available up to $256 million in additional high-cost support for rebuilding, improving, and expanding broadband-capable networks in Puerto Rico and the Virgin Islands. The Commission seeks comment on how best to structure the second stage of these Funds to speed longer-term efforts to rebuild fixed and mobile voice and broadband networks in the territories and harden them against future natural disasters. The Commission intends to target high-cost support over the next several years in a tailored and cost-effective manner, using competitive processes where appropriate.

II. Notice: Stage 2 Funding for Long-Term Rebuilding

4. The Commission recognizes that a longer-term solution is needed to rebuild, improve, and expand service in Puerto Rico and the U.S. Virgin Islands given the widespread devastation to communications networks caused by the hurricanes. In this Notice, the Commission proposes to establish second stages for the Uniendo a Puerto Rico Fund and the Connect USVI Fund—one that would make available about $699 million through the Uniendo a Puerto Rico Fund and about $191 million through the Connect USVI Fund.

5. As background, the USF currently directs approximately $36 million each year to fixed services in Puerto Rico and $16 million each year to fixed services in the U.S. Virgin Islands, along with $79.2 million each year to mobile services in Puerto Rico and only $67,000 each year to mobile services in the U.S. Virgin Islands. However, none of this funding is tied to specific, accountable build-out targets. The Commission now seeks comment on revisiting that spending to ensure there is sufficient support for the long-term rebuilding of the territories and that such support is distributed in a cost-efficient manner.

6. Based on the Commission's analysis, it proposes to spend up to an additional $126 million through the second stages of the Uniendo a Puerto Rico Fund and the Connect USVI Fund. Specifically, the Commission would increase funding for fixed services by $10.5 million per year over ten years and for mobile services by $7 million per year over three years to ensure that carriers have sufficient funds to rebuild and improve the voice and broadband-capable networks, both where the hurricanes destroyed existing infrastructure and in rural areas that have not yet been served. As result, the Uniendo a Puerto Rico Fund would make available about $444.5 million over a decade for fixed broadband (an $84 million increase over current funding levels) and about $254 million over 3 years for 4G LTE mobile broadband (a $16.8 million increase). And the Connect USVI Fund would make available about $186.5 million over a decade for fixed broadband (a $21 million increase) and about $4.4 million over a 3-year term for 4G LTE mobile broadband (a $4.2 million increase).

7. The Commission expects that this support will provide meaningful relief to carriers in the storm-ravaged territories in a targeted and cost-effective manner. The Commission seeks comment on whether this budget is appropriate and whether additional support beyond current levels of high-cost support is necessary to rebuild, improve, and expand service in these areas. Does the Commission's proposed allocation of additional high-cost support between fixed and mobile providers accurately reflect the costs that each will face in restoring, improving and expanding service? The Commission also seeks comment on whether and how to incorporate any unclaimed restoration funding into its long-term plan. Commenters are requested to provide specific information to substantiate their views.

8. The proposal for different terms of support for fixed and mobile providers reflects the Commission's distinct goals of providing longer-term support for fixed services and restoring a competitive environment for mobile providers. And because the Commission's proposed long-term plan treats fixed and mobile services in different ways, it seeks more detailed comment in the following on the particulars of the plan for each type of service.

9. More generally, the Commission seeks comment on how to ensure that service is rebuilt quickly and efficiently, while improving networks where feasible and protecting critical communications networks against future natural disasters. Recognizing that access to reliable communications services is essential, particularly in times of emergency, the Commission also explores options to expand service to areas that were unserved prior to the hurricanes. The Commission invites comment on how to balance its competing objectives of rebuilding and improving service, ensuring network resiliency, and expanding coverage. At the same time, the Commission is mindful of its responsibility as stewards of the USF to ensure that support is spent efficiently and seek comment on appropriate safeguards to ensure accountability. Similar to Stage 1 funding, the Commission reminds Puerto Rico and the U.S. Virgin Islands that the Act prohibits the territories from adopting regulations related to Stage 2 funding that are “inconsistent with the Commission's rules to preserve and advance universal service.”

10. The long-term rebuilding, improvement, and hardening of fixed voice and broadband service is critical in helping Puerto Rico and the U.S. Virgin Islands recover from the devastation caused by the hurricanes. The Commission believes that authorizing up to $105 million in additional funds for rebuilding while distributing all high-cost funding for fixed networks through an incentive-based mechanism will best ensure that networks are rebuilt, improved, and expanded across the territories in an efficient manner.

11. The Commission first notes that present circumstances require them to revisit the Commission's past treatment of high-cost support for fixed networks in Puerto Rico and the U.S. Virgin Islands. In the December 2014 Connect America Fund Order, 80 FR 4446, January 27, 2015, the Commission decided to allow price-cap carriers in insular areas to elect to continue receiving frozen high-cost support amounts in exchange for accepting tailored service obligations to be adopted at a later date. Although PRTC (in Puerto Rico) and Viya (in the U.S. Virgin Islands) elected to receive frozen support, the Commission has yet to establish specific service obligations for either carrier. Moreover, the hurricanes and their aftermath wrought havoc upon these existing networks—so much so that each of these carriers has claimed that multiples of their current annual support amounts are necessary for restoration and rebuilding. The Commission seeks comment on the view that changed circumstances require them to revisit funding for fixed networks in these territories. How does the fact that the Commission has not adopted specific CAF Phase II obligations for PRTC and Viya impact the reliance interests, if any, these carriers could reasonably have had in the status quo continuing through 2020? How should the need for extensive rebuilding factor into the Commission's decision? How should the fact that the Commission is considering the addition of $10.5 million in high-cost funding per year for rebuilding fixed networks in these territories affect its decision? And how should the Commission weigh the efficiency of more competitive approaches that could extend improved service more widely to consumers in Puerto Rico and the U.S. Virgin Islands against any reliance interests in continuing to administer frozen support as before?

12. Given the changed circumstances, the Commission proposes to reconsider the existing frozen high-cost support mechanisms and replace them with a competitive mechanism that would allocate an additional $105 million to fixed networks in the territories over a decade. The Commission proposes to allocate these support amounts so that approximately 80 percent goes to the Uniendo a Puerto Rico Fund and approximately 20 percent to the Connect USVI Fund. As a result, fixed network operators in Puerto Rico would have an opportunity to compete for $444.5 million over the next decade and fixed network operators in the U.S. Virgin Islands would have an opportunity to compete for $186.5 million over the next decade.

13. The Commission seeks comment on this proposal. In the concurrently adopted Order, the Commission used the same 80-20 ratio to balance the difference in population between Puerto Rico and the U.S. Virgin Islands, the significant financial challenges faced by carriers in both areas, the current level of high-cost support available to providers, and other relevant factors. Should the Commission maintain that ratio for the purpose of allocating additional support? Are the total funding amounts appropriate for each territory given the rebuilding required and the improvements need to harden networks against future natural disasters and the expansion needed in rural areas? Is a ten-year term of support, which the Commission has repeatedly used in other high-cost programs to ensure those building out had sufficient time to amortize and recover their costs, appropriate here? How should the Commission address differences in the geographic or competitive landscape in evaluating its long-term plans? For example, Viya is currently the only fixed provider in the U.S. Virgin Islands. Does that argue for requiring inter-area competition as the Commission does in the Connect America Fund Phase II reverse auction? Or is a quasi-competitive process on the U.S. Virgin Islands nonetheless feasible? Or should the Commission pursue some alternative option?

14. The Commission also invites comment on how to best promote its aim of providing support quickly and efficiently to speed the rebuilding, improvement, and expansion of service. How can the Commission ensure that people living in the territories have access to reasonably comparable, affordable fixed voice services and broadband-capable networks? And as stewards of the USF, the Commission seeks comment on how best to fulfill its commitment to fiscal responsibility to ensure that funds are targeted efficiently.

15. As detailed in the following, the Commission proposes to award high-cost support using a competitive proposal process, similar to a request for proposal process. The Commission also seeks comment on conducting an auction, negotiating directly with ETCs, and establishing build-out obligations while continuing to provide frozen high-cost support at current levels.

16. The Commission proposes to award fixed support through the Uniendo a Puerto Rico Fund and the Connect USVI Fund by evaluating competitive proposals submitted by carriers. This approach could be completed quickly and efficiently, thereby avoiding lengthy delays in getting critical funding to carriers. A competitive proposal process is a more streamlined approach than the typical Commission auction, yet still requires carriers to compete for support. Moreover, this option may better enable the Commission to determine how best to award support for network-hardening purposes than the auction approach.

17. The Commission proposes that accepted proposals will receive support for 10 years, beginning in January 2019 and running through December 2028. The Commission seeks comment on whether to transition support, through a phase-down process, in any geographic area where the incumbent carrier, i.e., PRTC or Viya, did not win support based on its proposal. The Commission provides additional details and seek comment on them in the following.

18. Eligible Providers.—The Commission proposes that only a provider that, according to June 2017 FCC Form 477 data, had an existing fixed network and provided broadband service in Puerto Rico or the U.S. Virgin Islands prior to the hurricanes would be eligible to apply to participate. The Commission seeks comment on whether participation should be limited to fixed providers who served at least some residential locations or whether providers that served only business locations should also be permitted to participate. The Commission proposes to limit participation to providers who had provided services before the hurricane because it believes they would be better equipped to rebuild and expand service as quickly as possible. Relatedly, the Commission also believes that existing providers with established track records present a smaller risk of defaulting on their service obligations. However, the Commission seeks comment on whether new entrants should also be eligible. If so, what particular qualifications if any should the Commission impose on them?

19. The Commission further proposes to evaluate the financial and technical capabilities of the applicants through a single-stage application process. Doing so would minimize the amount of time it takes to complete the competitive proposal process and begin awarding support. The Commission seeks comment on whether to use instead the two-phase application process of the competitive bidding rules for universal service in Part 1, Subpart AA of the Commission's rules, as it has done for the CAF Phase II auction.

20. Consistent with the Communications Act of 1934, as amended, and the Commission's rules, a provider must be designated as an ETC before receiving support. To the extent necessary, the Commission proposes to allow providers to obtain ETC designations after winning support rather than before participating in the competitive proposal process, similar to the approach it followed for the CAF Phase II auction. The Commission seeks comment on this approach. What methods would be appropriate for selecting another carrier if the winner fails to timely obtain an ETC designation?

21. Eligible Areas.—Given the unique circumstances presented by the widespread destruction of critical infrastructure, the Commission proposes to make eligible all of Puerto Rico. By making the entire territory eligible, the Commission would eliminate the need to establish a challenge process and thus enable a more expeditious completion of the process. Doing so would also encourage applicants to expand service to areas that were previously unserved, in addition to restoring service to areas that had service before the hurricanes. Further, the Commission anticipates that making all of Puerto Rico eligible for support will increase competition, driving down the support amounts proposed in lower-cost areas. The Commission seeks comment on this approach. Similarly, the Commission proposes to make eligible all of the U.S. Virgin Islands and seek comment on that approach.

22. Alternatively, the Commission seeks comment on whether certain areas should be excluded. For example, are there areas where service has already been rebuilt (or will be rebuilt by the end of 2018)? Are there areas where providing high-cost support to one carrier would distort the competitive market and reduce potential competitors' incentives to rebuild service? How can the Commission ensure consistency with its policy against providing funding in areas where there is an unsubsidized competitor? Would the ability of other carriers to bid for such support reduce the funding in such areas to only what's needed to rebuild otherwise unserved areas? Are there areas where support levels would be so low as to be unnecessary to rebuild and improve service, such as census blocks in Puerto Rico identified by the model as having particularly low average monthly costs? How can the Commission best achieve its goal of maximizing the expansion of service to unserved areas in addition to restoring and improving service to areas that had it before the hurricanes?

23. Minimum Geographic Area.—The Commission proposes to accept proposals for support to satisfy specific service obligations within each of Puerto Rico's 78 municipios. Using municipios as the basic geographic area for support may allow providers to achieve economies of scale that would not be available if the Commission used smaller areas, such as Puerto Rico's over 900 barrios. On the other hand, there may be some risk that municipios are too large to target funding in a competitively neutral manner—incumbent providers with large existing service territories are likely more amenable to providing service over a wider area. The Commission seeks comment on whether using municipios makes sense or whether it should instead provide support on a more granular basis, such as by barrios, census block groups, or some other geographic unit.

24. The Commission seeks comment on the appropriate minimum geographic area for support in the U.S. Virgin Islands. Should the Commission treat the entire territory as one geographic area to carry out this initiative? Or should the Commission treat each island in the U.S. Virgin Islands separately for this purpose? Or would using some other census-defined geography such as census tract, census block group, or census block be more appropriate?

25. Number of Locations in Each Geographic Area.—The Commission proposes to identify the number of locations in each geographic area by using the Connect America Cost Model (the CAM). The Commission seeks comment on how it can best account for the fact that people may have migrated from Puerto Rico and the U.S. Virgin Islands since the storms. The Commission seeks comment on what other sources of data would more accurately model the number of locations in each area. The Commission also seeks comment on whether to provide support based on only certain locations within each geographic area, such as those that are more costly to serve, and whether to exclude certain other locations from bidding, such as those that are less costly and therefore may not require high-cost support. The Commission proposes, as a condition of receiving support for funded locations, that a winning bidder serve all locations within a geographic area, not just those funded (if the Commission decides to fund just a subset of locations). This proposal comports with the Commission's decision to focus on rebuilding all networks and make all of Puerto Rico eligible for bidding, rather than only discrete areas. Alternatively, the Commission seeks comment on limiting the obligation only to funded locations or locations in census blocks identified by the model as being above a certain funding benchmark?

26. Given possible changes in the number of locations post-hurricane and the difficulties in obtaining more recent, accurate data, the Commission also seeks comment on whether to instead evaluate proposals to serve all the locations in a municipio without determining exactly how many locations that represents. In other words, applicants would commit to serve all locations in a municipio rather than to serve a specific number. The Commission also seeks comment on whether differences in municipio characteristics, such as quantity of high cost locations or remoteness, should lead the Commission's to attach different obligations to funding so as to better ensure all parts of the territories are provided with service.

27. Furthermore, if the data the Commission eventually adopts overestimates the number of locations in an area, it seeks comment on what flexibility to offer winning applicants. Should the Commission, for example, reduce support on a pro rata basis if it lowers the number of locations a provider must serve, and if so, what requirements and limitations should the Commission establish for such reductions? Should the Commission consider giving providers more flexibility here than it has in other contexts given the facilities lost and the recent emigration from the territories?

28. Reserve Prices.—The Commission proposes to use a three-step process to set reserve prices. First, the Commission would employ the cost model used to establish support for price cap carriers (the CAM) to calculate the average cost per location of all locations in a census block. Second, the Commission would set separate high-cost and extremely high-cost thresholds for Puerto Rico and the U.S. Virgin Islands to ensure the full amount of funding available to each territory over the ten-year period is available for obligation. Third, the Commission would establish a reserve price for each minimum geographic area based on the sum of the support amounts calculated for each eligible census block in that municipio. Under the proposal, WCB would release the reserve price and number of locations for all eligible areas by public notice no later than 30 calendar days before the application deadline to submit competitive proposals.

29. The Commission seeks comment on this proposal, and particularly on the key second step. The Commission notes that the extremely high-cost threshold here would be used to establish a per-location funding cap, similar to how the Commission offered rate-of-return carriers model-based support. How should the Commission establish the appropriate thresholds? The CAM established a high-cost threshold of $52.50 based on assumed take rates and potential average revenues per subscriber. Do those assumptions still hold in the context of Puerto Rico and the U.S. Virgin Islands after the hurricanes? If not, should the Commission lower the high-cost threshold and if so, by how much? By 25 percent? By more? The CAM established a high-cost threshold of $198.60. Is that appropriate here? The Puerto Rico Telecommunications Regulatory Board has stated that more support needs to be directed to the rural parts of the island. Would that suggest setting a higher extremely high-cost threshold? The Commission also seeks comment on how to allocate funds between bringing service to locations that had never been served versus restoring service (potentially at a lower cost) to locations where service had been disrupted by the hurricanes. For example, the Commission has previously assigned zero support to locations below the high-cost threshold on the assumption that a business case nonetheless existed to serve such locations. Does the context of rebuilding networks on these islands suggest revisiting that assumption and assigning some funding—say 10 percent of cost—to cover the costs below the high-cost threshold? The Commission also seeks comment on how the CAM should be adjusted, if at all, to take into account the need for network hardening. For example, should the Commission assume the cost of above-ground plant will increase 10 percent (or more) to account for such hardening before it determines the costs per location?

30. Selection Process.—The Commission seeks comment on the appropriate time frame and format for submitting proposals. The Commission proposes to allow confidential proposals. Should the Commission unseal proposals after finishing the evaluations process for transparency reasons? The Commission seeks comment on whether to make public the submitted proposals after the evaluation process has been completed and winning applicants have been determined. The Commission seeks comment on prohibiting multiple carriers from submitting a proposal jointly.

31. The Commission proposes to select winning proposals based primarily on price per-location served while adjusting the bids to consider factors including network resiliency, network deployment timing, and network performance. The Commission seeks comment on these factors and what other factors it should consider when evaluating proposals. Considering price as the primary factor responsibly manages the Fund, but the Commission recognizes the increased costs of deploying a storm-hardened network in Puerto Rico and the USVI. For instance, how should the Commission factor storm hardening proposals into the Commission's evaluation? Should the Commission require or increase the weight of bids that comply with resiliency standards like TIA-222-H, the most up-to-date standard for antenna supporting structures, with best practices promulgated by the FCC's Communications Security, Reliability and Interoperability Council, or with another industry used standard for network resiliency? Should the Commission establish weights to account for the speed of deployment? What weight would be appropriate to balance costs against encouraging prompt deployment to the territories? Should the Commission establish weights to account for proposals offering “higher speeds over lower speeds, higher usage allowances over lower usage allowances, and lower latency over higher latency”? If so, what weighting scheme would be appropriate for that purpose? Instead of using specific weights could the Commission define preferences for various characteristics in the proposals? If the Commission does not require proposals to identify a specific number of locations to serve, what factors should it consider in comparing proposals?

32. How should the Commission address package bidding? For example, should the Commission allow package bidding? If so, what limits if any should the Commission put on packages (e.g., should the Commission require all packages to be contiguous or limit the number of minimum geographic areas included in the package)? If selecting two package bids would be the most efficient outcome even if they overlapped in a particular geographic area, should the Commission accept both (perhaps requiring the less efficient bidder to redirect support from the overlapped area to other unserved areas) or reject the less efficient package (perhaps leaving no bidder for some areas)?

33. How should the Commission evaluate bids? Should the Commission direct USAC or WCB to evaluate bids? The Commission proposes directing the reviewer to evaluate the bids in accordance with the selection criteria, methodology and bidding process outlined above. Once that initial evaluation is complete, should the Commission make selections or offer feedback to applicants and allow them to return with best-and-final offers? Or would that introduce undue discretion into the process or create additional administrative burdens or delays? If a dissatisfied applicant wants to challenge its non-selection, would existing appeals processes be sufficient?

34. How should the Commission address areas without bids? One approach would be to invite a second round of competitive proposals, with the difference between bids and reserve prices in the first round being transferred to raise the reserve price of remaining areas (pro rata) in the second round. In other words, if the reserve price for areas won in the first round were $10 million and only $8 million was bid, then $2 million would be available to raise the reserve prices in areas remaining in the second round. The Commission seeks comment on this approach, including whether it would be vulnerable to potential gamesmanship by bidders.

35. In addition, as a backstop, the Commission proposes to require the incumbent carrier to continue to provide service to any unawarded areas using frozen high-cost support—with corresponding service obligations to be determined by the Commission after the competitive proposal process is complete. The Commission notes that for this and other purposes (such as any transitional payments) it would allocate an incumbent carrier's existing frozen support across their service territory in proportion to the reserve prices the Commission initially set for the competitive proposal process. The Commission believes this backstop would place incumbent carriers in no worse a position then they are in today, with frozen support and accompanying service obligations to be determined by the Commission.

36. Service Obligations.—In addition to voice service, the Commission proposes to require support recipients to offer broadband service meeting the following metrics: Download/upload speeds of at least 10/1 megabits per second (Mbps), roundtrip latency of no greater than 100 milliseconds (ms), and a minimum usage allowance of the higher of 170 GB per month or one that reflects the average usage of a majority of consumers, using Measuring Broadband America data or a similar data source.

37. The Commission seeks comment on whether these obligations are appropriate. Should the Commission, for instance, require some portion of the areas served to receive 25/3 Mbps service? And, if so, what fraction would be appropriate? Should the Commission impose different requirements for areas based on the amount of support allocated?

38. Further, the Commission proposes requiring each support recipient to offer broadband service in its supported area at rates that are reasonably comparable to rates offered for comparable services in urban areas. Rates will be considered reasonably comparable if they are “at or below the applicable benchmark to be announced annually by public notice issued by the Wireline Competition Bureau.” Based on the results of the Urban Rate Survey, the Commission sees no reason to adopt a different benchmark specific to Puerto Rico or the U.S. Virgin Islands. The Commission seeks comment on this approach.

39. Deployment Milestones.—As with the CAF Phase II Auction, the Commission proposes that winning bidders must deploy to at least 40 percent of locations after the third year of support, at least 60 percent after the fourth, at least 80 percent after the fifth, and 100 percent after the sixth year of support. The Commission seeks comment on whether this schedule is appropriate. The Commission also seeks comment on how it should track milestones if a particular number of locations, as already discussed, is not defined. Are there other ways to track progress without having to rely on location counts given the possible difficulty of establishing a number of locations?

40. Oversight and Accountability Measures.—The Commission has an obligation to ensure that carriers receive support “only for the provision, maintenance, and upgrading of facilities and service for which the support is intended” as required by section 254(e) of the Act. The Commission has exercised its oversight obligations in a variety of way since inception of the fund. In the following, the Commission proposes various oversight and accountability measures that, taken together, serve the public interest by enhancing the Commission's ability to monitor the use of USF and ensure its use for intended purposes.

41. First, the Commission proposes that support recipients must satisfy all reporting and certification obligations of providers receiving CAF Phase II auction support, including as described in sections 54.313 and 54.316 of the Commission's rules. The Commission seeks comment on this proposal. The Commission seeks comment on whether providers who win support must track their restoration expenditures. Should providers retain documentation on how much support was used for capital expenditures and operating expenditures? What are the associated burdens with retaining expenditure documentation? Would retention of this documentation be duplicative of records needed for deployment milestones?

42. Second, the Commission proposes aligning the annual reporting obligations with the obligations of other rate-of-return carriers in the 2016 Rate-of-Return Order, 81 FR 24282, April 25, 2016, by requiring geocoded location reporting into the HUBB. This reporting obligation would require providers to submit information demonstrating locations the provider is reporting as broadband-enabled where the company is prepared to offer voice and broadband service meeting the requisite performance standards. Do carriers currently retain geolocation data for served locations? If not, what period of time is needed to enable collection of geolocation data? Should the Commission require this data be reported for only newly deployed locations or all reported locations? Would annual reporting or a longer period more appropriately balance the reporting burden against the accuracy of the data? Additionally, the Commission proposes requiring awarded carriers to submit performance measurements in accordance with the requirements to be defined by the Commission. To the extent that awarded carriers have not participated in that proceeding, the Commission proposes requiring the same testing method options and parameters as price cap carriers.

43. Third, the Commission proposes to carefully monitor and reassess the deployment obligations of the awarded support before the end of the fifth year. Understanding the deployment and operational realities of providing service in both Puerto Rico and the U.S. Virgin Islands, the Commission believes this reassessment would be prudent to address any changed circumstances within the territories, whether that be changes in subscribership expectations due to population changes or future disruptive natural disasters. As the current situation demonstrates, the long-term planning involved in any telecommunications deployment decision requires a number of assumptions that may change dramatically over time. Would providing an opportunity for the Commission to reassess deployment obligations be beneficial to providers or cause unneeded uncertainty? Should the reassessment be tied to deployment milestones? For example, the reassessment would not be triggered if a provider is 60 percent deployed after four years, but would occur if a provider failed to meet the deployment obligation. Would it be appropriate to alter the obligations by increasing or decreasing the number of locations or modifying the service obligations?

44. Fourth, the Commission proposes to subject awarded carriers to the same compliance standards as any other carrier with defined obligations by defining specific obligations for the support. This may result in a carrier that failed to meet its milestones having support reduced until the carrier can meet its obligations or face recovery actions. The Commission seeks comment on this approach.

45. The Commission also seeks comment on whether successful applicants must obtain a letter of credit by way of security, as must winning bidders in the CAF Phase II auction. If so, how should the letter of credit be structured? Should it be for the full amount awarded, or some lesser amount that will nevertheless protect the USF? Should an alternative to a letter of credit be considered, such as a performance or payment bond?

46. Fifth, the Commission proposes to subject all awarded carriers in the territories to ongoing oversight by the Commission and USAC to ensure program integrity and prevent waste, fraud, and abuse. The Commission has a longstanding audit program that is continually updated to respond to the Commission's needs inclusive of changes in program requirements, new guidance from GAO and OMB, and changes in law. Accordingly, the Commission proposes that all awarded carriers would be subject to random compliance audits and other investigations to ensure compliance with program rules and orders. The Commission seeks comment on what sorts of audit procedures the Commission should undertake to confirm that support has been spent on allowed restoration costs. The Commission also seeks comment on whether there are specific circumstances facing carriers in the territories that require modifying the current audit practices.

47. As an alternative to the competitive proposal process, the Commission seeks comment on using an auction for the second stages of the Uniendo a Puerto Rico Fund and the Connect USVI Fund. The Commission notes that it cannot simply apply the same rules of the CAF Phase II Auction here because it seeks to achieve different goals. Among other differences, here the Commission wishes to rebuild networks, including in areas where a business case existed pre-hurricane for providing service, whereas in the CAF Phase II context, the Commission aims to maintain and expand service where there is no such business case.

48. Instead, the Commission seeks comment on using a single-round sealed bid auction to award support. Such an approach generally would award support on a per-location basis, based on the lowest price. Bidders would identify a per-location support price at which they are willing to meet Commission requirements to cover the locations in each eligible area they specify. Bids would then be ranked, lowest to highest, and support would be assigned to those areas with the lowest bid amounts submitted (and within each assigned area, to the lowest bidder), until no further bids can be accommodated under the budget. The terms of such an auction would otherwise largely track the terms for the competitive proposal process described above.

49. The Commission seeks comment on whether the competitive environment in Puerto Rico is sufficiently robust to ensure an auction that distributes funds in a cost-effective way. The Commission seeks comment on whether to use an auction process to distribute funds in Puerto Rico, but not in the U.S. Virgin Islands, given that FCC Form 477 data shows that Viya is currently the only fixed provider there.

50. Are there any specific auction rules or procedures the Commission should consider so that an auction would not be overly complicated for the Commission to administer and would not overly burden potential bidders? Is there an auction design the Commission could use that would achieve its objective of maximizing consumer benefits? Would this approach afford the same flexibility as a competitive proposal process?

51. The Commission seeks comment on whether to structure the second stages based on carrier-submitted proposals to rebuild, improve, and expand service in the territories. Such proposals would not be evaluated on a competitive basis, but would be the result of negotiation between the Commission and carriers. Given similarly unique circumstances, the Commission adopted a framework based on carrier commitments to maintain and expand the availability of service in Alaska.

52. Like the competitive proposal option, through this process the Commission seeks to maximize the number of locations where fixed voice and broadband services would be available in a targeted and cost-effective manner. As with any method of awarding of support, the Commission expects to hold providers accountable to use support for its intended purposes and to meet the deployment commitments it set.

53. To the extent the Commission adopts this approach, it seeks comment on the process by which it would seek proposals, review them, and award support. The Commission anticipates establishing the specific criteria by which it would award support and measure compliance by Public Notice, along with a time frame for submitting proposals. The Commission invites comment on this approach.

54. In the Universal Service Transformation Order, 76 FR 73830, November 29, 2011, the Commission allowed price cap carriers serving specific non-contiguous areas of the United States—including Puerto Rico and the U.S. Virgin Islands—to maintain frozen support levels for those carriers if, in the Bureau's determination, certain conditions were met. Recognizing that these carriers faced different operating conditions and challenges compared to carriers in the contiguous 48 states, the Bureau invoked its discretion. Both PRTC and Viya elected to continue receiving frozen support, with the Commission responsible for adopting specific service obligations tailored to the individual circumstances of each carrier.

55. As the Commission has not yet adopted CAF II obligations for the frozen support that PRTC and Viya continue to receive, it seeks comment on whether to forego reconsidering the Commission's prior decisions and instead simply adopt specific service obligations to reflect the frozen-support amounts PRTC and Viya currently receive. If the Commission pursues this alternative, what obligations would be appropriate and feasible? Should the Commission establish particular expectations regarding expanding service to new areas or implementing more resilient networks?

56. In the aftermath of the hurricanes, the rapid restoration of mobile service was critical in facilitating communications with public safety and civic officials and connecting families to loved ones. Building upon the significant restoration efforts that have taken place to date, the Commission seeks comment on how best to target high-cost support to rebuild, improve, harden, and expand mobile services in Puerto Rico and the U.S. Virgin Islands. The Commission proposes to make $259 million in support available to eligible facilities-based mobile providers over the next three years through the Uniendo a Puerto Rico Fund and the Connect USVI Fund. The Commission's goal is to facilitate timely recovery of mobile services within these territories in a cost-effective manner.

57. The Commission notes that it has previously targeted Puerto Rico and the U.S. Virgin Islands as potential areas eligible for the upcoming MF-II auction. However, the Commission recognized in December that conditions in the territories after the hurricanes made establishing reliable coverage of mobile networks infeasible in the near term. As such, the Commission waived the filing deadline for mobile providers to submit 4G LTE coverage information for a period of 180 days or until the Commission took action addressing the appropriate approach, given the circumstances, for providing ongoing, high-cost support for mobile services in Puerto Rico and the U.S. Virgin Islands, whichever occurred earlier.

58. The Commission now proposes to extend that waiver, exempt these mobile providers from filing this coverage information, and carve Puerto Rico and the U.S. Virgin Islands out from the MF-II auction. Instead, the Commission proposes to supplement existing support over a three-year period by giving providers an additional $21 million to rebuild their networks after the destruction wrought by Hurricanes Irma and Maria and their aftermath. The Commission seeks comment on allocating these support amounts so that approximately 80 percent goes to the Uniendo a Puerto Rico Fund and approximately 20 percent to the Connect USVI Fund. As a result, over the next three years, the Uniendo a Puerto Rico Fund would make available $254.4 million to mobile network operators and the Connect USVI Fund would make available $4.4 million to mobile network operators. These territories currently face serious and continuing challenges in restoring their mobile communications capacity, and the Commission tentatively concludes that this additional funding will allow providers in these territories to repair the damage caused by the hurricanes to their wireless networks as well as make their networks more resilient to future natural disasters.

59. The Commission seeks comment on this proposal. In the concurrently adopted Order, the Commission used the same 80-20 ratio to balance the difference in population between Puerto Rico and the U.S. Virgin Islands, the significant financial challenges faced by carriers in both areas, the current level of high-cost support available to providers, and other relevant factors. Should the Commission maintain that ratio for the purpose of allocating additional support? Are the total funding amounts appropriate for each territory given the rebuilding required and the improvements need to harden networks against future natural disasters and the expansion needed in rural areas? Is a three-year term of support appropriate here? How should the Commission address differences in historic universal service funding in evaluating its long-term plans? For example, mobile carriers in the U.S. Virgin Islands receive almost no funding today. Does that argue for allocating most of the new funding there? Or should the Commission redistribute all funding across both territories setting aside historic allocations?

60. The Commission proposes that only providers that provided facilities-based mobile services in Puerto Rico and the U.S. Virgin Islands prior to the hurricane impacts, according to the June 2017 Form 477 data, would be eligible to elect this new funding. The Commission proposes to allocate the new funding based on the number of subscribers (voice or broadband internet access service) each provider served as of June 30, 2017—similar to how the Commission calculates support in stage one. As an alternative, the Commission seeks comment on allocating all funding available for mobile network operators in the second stages of the Uniendo a Puerto Rico Fund and the Connect USVI Fund based on pre-hurricane subscribership. Such an approach would avoid any inefficiencies in the historic allocation of support among the islands and avoid the need for a decision ahead of time regarding how much in particular should go to Puerto Rico versus the U.S. Virgin Islands. If the Commission pursues this alternative approach, should the Commission set transitional funding amounts for existing recipients of high-cost support? In particular, should the Commission ensure that existing recipients receive at least two-thirds of their current mobile support in 2019 and at least one third in 2020?

61. The Commission proposes that, in exchange for accepting additional support, each mobile provider must commit to, at minimum, a full restoration of its pre-hurricane coverage area, at a level of service that meets or exceeds the minimum standard required of recipients of MF-II support. Such a requirement aligns with the goal of MF-II to “target universal service funding to support the deployment of the highest level of mobile service available today—4G LTE.” The Commission tentatively concludes that, given the extent of damage in Puerto Rico and the U.S. Virgin Islands, most providers will already be engaging in substantial rebuilding of towers and infrastructure, and will find it most economical to deploy 4G LTE during such restoration versus alternative technologies. The Commission seeks comment on whether this requirement is appropriate. Should the Commission instead require providers to rebuild their networks at a different standard? For example, should the Commission instead require deployment at the speed benchmark used to identify areas eligible for MF-II? Is there an alternative standard appropriate to ensure that residents of Puerto Rico and the U.S. Virgin Islands have comparable service to other areas of the United States? Should the Commission restrict funding to support operation, deployment, and enhancement only of 4G LTE?

62. The Commission also seeks comment on whether the Uniendo a Puerto Rico Fund and the Connect USVI Fund should include requirements to expand service. Are there areas, for instance, that lacked coverage before the hurricanes and that the Commission should nonetheless require providers to serve? How should such areas be identified and how should the Commission determine what carriers should be required to serve them? The Commission seeks comment on how quickly rebuilding could be accomplished and what milestones might be appropriate to complete build out. Is three years of funding for rebuilding appropriate? Why or why not?

63. The Commission also seeks comment on the appropriate reporting requirements for support recipients. The Commission proposes to have any mobile providers receiving second-stage support via the Uniendo a Puerto Rico Fund and the Connect USVI Fund report twice per year on their coverage. Specifically, the Commission proposes that providers supply coverage maps using the buildout parameters the Commission will adopt for the MF-II auction. If the Commission adopts a different service requirement for funding recipients than the minimum standard required of recipients of MF-II support, it proposes to make appropriate adjustments to the reporting requirements. The Commission seeks comment on these proposals. The Commission also seeks comment on how this data should best be submitted to the Commission, such as through the regular Form 477 filings or some other process?

64. As noted above, the Commission has an obligation to ensure that carriers receive support “only for the provision, maintenance, and upgrading of facilities and service for which the support is intended” as required by section 254(e) of the Act. The Commission seeks comment on appropriate oversight and accountability measures for carriers that receive additional high-cost support as proposed in this Notice. The Commission proposes that recipients of such funds conform to the annual reporting requirements the Commission adopted for MF-II. The Commission also proposes that all support recipients be subject generally to the same audit requirements as recipients of CAF-II support and all other high-cost support. The Commission seeks comment on whether any other oversight or accountability measures are appropriate. Should the Commission require carriers to submit one or more Milestone Reports to demonstrate progress on service restoration? Would it be beneficial for the Commission or USAC to make use of independent testing to determine service speed, quality, and reliability in these areas?

65. The Commission proposes to use an auction to allocate funding following this three-year period, with any funding commitments resulting from such an auction to commence on the day following the end of the three-year period. The Commission seeks comment on whether the competitive environment in Puerto Rico and the U.S. Virgin Islands is sufficiently robust to ensure an auction that distributes funds in a cost-effective way and whether it makes sense from the perspective of administrative efficiency to hold such an auction. Can the Commission use the same general auction rules and same auction design for this auction as it will use for the MF-II auction? Are there any specific auction rules or procedures the Commission should consider so that an auction would not be overly complicated for the Commission to administer and would not overly burden potential bidders?

66. If the Commission were to use an auction to allocate funding, how should it determine which areas would be eligible to win support in the auction? Should the Commission consider an area eligible if it does not meet the speed and technical parameters used to identify areas eligible for MF-II? Should the Commission adopt additional or alternative specifications for eligibility that would be more suitable for Puerto Rico and the U.S. Virgin Islands? For example, should an area be eligible if, despite meeting a certain download speed requirement, it does not meet certain network resiliency requirements, e.g. hardening to hurricane impacts? If so, what resiliency requirements would be appropriate? In this document, the Commission proposes that providers supply coverage maps using the technical parameters buildout parameters the Commission will adopt for the MF-II auction. Would that coverage information suffice for determining areas eligible for an auction, or is additional data required, such as a one-time data collection using the MF-II Challenge process technical parameters? If so, when should the Commission collect that data to ensure that funding commitments can begin on schedule?

67. Several parties have proposed that rebuilt networks be “storm hardened.” The Commission seeks comment on whether the Uniendo a Puerto Rico Fund and the Connect USVI Fund should require second-stage participants to improve the ability of their facilities and equipment to resist hurricanes and other natural disasters. If so, should the Commission require compliance with resiliency standards like TIA-222-H, the most up-to-date standard for antenna supporting structures or with best practices promulgated by the FCC's Communications Security, Reliability and Interoperability Council? Are there other industry standards that would help improve resistance to flooding, wind damage, and water damage? How should any such requirements be enforced? What are the expected costs of deploying a “storm hardened” network, and how should the Commission evaluate the costs and benefits of any such network? Should the Commission consider requiring hardening of certain key network assets, but not the entire network? If so, how should key assets be identified? Would requiring hardening only of assets sufficient to provide voice and basic data service be appropriate? What level of data service would be appropriate? Are costs associated with back-up power endurance, backhaul resiliency, physical infrastructure resiliency, recovery plans, and/or redundant or alternate network implementations appropriate in this context? Should the Commission instead allow carriers to include in their proposals how and to what degree they would harden their networks, and factor that information into the evaluation of proposals?

68. The Commission also proposes to require second-stage participants to provide more detailed information to support tracking of recovery efforts. Although mobile carriers already provide information on coverage (but not signal strength, antenna alignment, and throughput) on a biannual basis through FCC Form 477, that information does not reveal the real-time status of communications systems in the aftermath of a disaster. Carriers currently have the option to provide information about the status of their infrastructure via the Commission's voluntary Disaster Information Reporting System (DIRS), and it proposes to require carriers who accept USF funding through the Uniendo a Puerto Rico Fund and the Connect USVI Fund to participate in DIRS. The Commission seeks comment on this proposal and on the data that DIRS should seek. Would it be appropriate to require mobile carriers to provide coverage maps, signal strength, antenna alignment, and throughput on a periodic basis in DIRS? How often should these reports be provided? Would it be appropriate to require coverage maps at a more granular boundary value, for example -98 dBm to reflect indoor coverage for both voice and data? Would it be appropriate to require carriers to include information about disruptions to backhaul? Should the DIRS data contain more information about the customers' experience with their mobile service, for example by including more information about the condition of backhaul? If so, at what intervals? What are the costs and benefits of requiring additional reporting? When might it be appropriate to relieve carriers of any enhanced reporting requirements?

69. The Commission anticipates that any second-stage mobile participants in the Uniendo a Puerto Rico Fund and the Connect USVI Fund would continue to adhere to the current post-disaster resiliency framework for some time and seek comment on when that framework should and should not apply. First, are there common metrics used across providers to determine whether and when to open roaming capabilities? Should the Commission no longer expect adherence to the framework when coverage has been rebuilt to pre-hurricane levels? If so, should there be a minimum level of service associated with such coverage? Alternatively, would a set time period for continued adherence, such as one year, be more appropriate and reduce administrative burden? If so, what time period would be appropriate? Finally, should a similar framework be adopted for fixed providers?

70. The Commission also anticipates that any second-stage participants in the Uniendo a Puerto Rico Fund and the Connect USVI Fund would coordinate any construction and access issues with other carriers and state and federal agencies to minimize duplicative facilities, hardening, construction, digging, and other activity. The Commission believes that such coordination could help rebuild service in these areas more quickly and efficiently. The Commission seeks comment on whether voluntary coordination is sufficient or if it should adopt specific requirements. Commenters should identify specific carrier obligations and a framework for coordination. If the Commission adopted requirements, are there any reporting obligations that would be appropriate to ensure cooperation?

71. Finally, the Commission understands that much of Puerto Rico still lacks electrical power. Communications networks require reliable power to operate. The Commission seeks comment on what obligations providers should bear to ensure that their networks can function even when the electrical power grid is down. For instance, the Commission seeks comment on whether carriers could run their networks using energy sources readily available in Puerto Rico and the U.S. Virgin Islands that do not need to be shipped from elsewhere. The Commission seeks comment on the applicable costs of sustainable back-up power. What are the costs of maintaining generators on-site versus using portable generators? What are the costs and additional considerations of obtaining renewable back-up power versus traditional power methods?

72. Finally, the Commission seeks comment on other alternatives.

73. The Commission seeks comment on a petition filed by PRTC on January 19, 2018, asking the Commission to “create a $200 million emergency Universal Service Fund designated to facilitate restoration of service in insular areas by [ETCs] in Puerto Rico.” PRTC's request encompasses support for both fixed and mobile providers in Puerto Rico. It suggests the Commission distribute funds “based on a percentage of the consumer service disruption credits provided by facilities-based ETCs to end user customers” or “in proportion to the total number of lines each facilities-based ETC restores during the next twelve months.” The Commission seeks specific comment on whether additional short-term funding is necessary for Puerto Rico given the actions it takes in the concurrently adopted Order. If the Commission were to pursue such relief, how could it ensure that any funds are well spent? Do carriers regularly offer “service disruption credits,” or do different carriers offer different options to their consumers? And would such an emergency fund create a perverse incentive of rewarding those carriers that had greater service disruptions vis-à-vis those that recovered more quickly from the hurricanes?

74. The Commission also seeks comment on the petition filed by Viya proposing a one-time infusion of $45 million in support to help it rebuild its fixed network in the U.S. Virgin Islands, the petition filed by Viya on October 5, 2017, that sought “a supplemental, one-time infusion of up to $50 million for carriers to rebuild wireless networks using hurricane-hardened facilities” in the U.S. Virgin Islands, and the petition filed by Open Mobile seeking additional high-cost support and an advance on its support payments. The Commission seeks specific comment on whether additional short-term funding is necessary for the U.S. Virgin Islands given the actions it takes in the concurrently adopted Order. If the Commission were to pursue such relief, how could it ensure that any funds are well spent?

III. Procedural Matters

A. Initial Paperwork Reduction Act

75. This document contains proposed information collection requirements. The Commission, as part of its continuing effort to reduce paperwork burdens, invites the general public and the Office of Management and Budget (OMB) to comment on the information collection requirements contained in this document, as required by the Paperwork Reduction Act of 1995, Public Law 104-13. In addition, pursuant to the Small Business Paperwork Relief Act of 2002, Public Law 107-198, see 44 U.S.C. 3506(c)(4), the Commission seeks specific comment on how it might further reduce the information collection burden for small business concerns with fewer than 25 employees.

76. Initial Regulatory Flexibility Certification. The Regulatory Flexibility Act of 1980 as amended (RFA) requires that a regulatory flexibility analysis be prepared for rulemaking proceedings, unless the agency certifies that “the rule will not have a significant economic impact on a substantial number of small entities.” The RFA generally defines “small entity” as having the same meaning as the terms “small business,” “small organization,” and “small governmental jurisdiction.” In addition, the term “small business” has the same meaning as the term “small business concern” under the Small Business Act. A small business concern is one which: (1) Is independently owned and operated; (2) is not dominant in its field of operation; and (3) satisfies any additional criteria established by the Small Business Administration (SBA).

77. This Notice proposes annual support to rebuild, improve, and expand fixed and mobile services in Puerto Rico and the U.S. Virgin Islands. The Notice proposes making support available to any fixed or mobile provider who obtains an ETC designation, using a competitive and subscriber-based process, respectively. Ten fixed and mobile carriers in Puerto Rico and the U.S. Virgin Islands currently receive high-cost support. Even assuming other carriers will obtain an ETC designation to receive part of the additional support proposed by the Notice, the Commission does not anticipate the proposed rule to affect more than 15 providers out of the 737 providers currently receiving high-cost support. Accordingly, the Commission anticipates that this Notice will not affect a substantial number of carriers, and so it does not anticipate that it will affect a substantial number of small entities. Therefore, the Commission certifies that this Notice will not have a significant economic impact on a substantial number of small entities. See 5 U.S.C. 605(b).

78. Comments. All comments to this Notice should be filed in WC Docket No. 18-143, The Uniendo a Puerto Rico Fund and the Connect USVI Fund.

IV. Ordering Clauses

79. Accordingly, it is ordered, pursuant to the authority contained in sections 4(i), 214, 254, 303(r), and 403 of the Communications Act of 1934, as amended, 47 U.S.C. 154(i), 214, 254, 303(r), and 403, and sections 1.1, 1.3, and 1.412 of the Commission's rules, 47 CFR 1.1, 1.3, and 1.412, Notice of Proposed Rulemaking is adopted. The Notice is effective thirty (30) days after publication of the text or summary thereof in the Federal Register.

80. It is further ordered that pursuant to applicable procedures set forth in sections 1.415 and 1.419 of the Commission's Rules, 47 CFR 1.415, 1.419, interested parties may file comments on the Notice on or before July 5, 2018, and reply comments on or before July 18, 2018.

Federal Communications Commission.

Marlene Dortch,

Secretary.