As part of the Connect America Fund (CAF), the FCC created the Mobility Fund – a universal service support mechanism dedicated exclusively to mobile services – and in 2012 held the first Mobility Fund (MFI) auction. Since that time, the FCC has gained substantial experience with other CAF programs, including CAF I and II. So, as the FCC considers a draft order on the Mobility Fund II (MFII) framework, the FCC has a substantial CAF history on which to assess any MFII framework, and consider whether methods and procedures that have been effective elsewhere should apply consistently to all CAF programs.
Unfortunately, with the MFII proposals now pending for a vote, it would appear that many of the important CAF learnings have been lost. This is all the more regrettable as MFI continues to face significant implementation challenges, with substantial funds still undisbursed and compliance challenges mounting.
There are three areas in which the Commission could act to make the MFII program stronger, more sustainable and more attractive to participants.
First, the MFII proposal parts ways with the sensible build-out milestones adopted in CAF II. With CAF II funding, the deployment milestones progress evenly over six years. This approach better reflects how networks are planned and deployed and thus reduces obstacles to carriers accepting funding obligations. All CAF II recipients must deploy in even increments over six years with the first enforceable milestone of 40% in year three (to allow initial time for planning and procurement) and 20% increments in the following years to full deployment.
The MFII proposal instead requires recipients to complete deployment to 75% of road miles by the end of year three of a five-year term. This compressed time frame does not accurately reflect the time needed to plan the network, acquire sites, or get permits and/or rights of way, not to mention the obstacles faced when deploying service in remote and potentially challenging rural areas. In addition, a three-year deadline for the bulk of the build freezes technology options to those available in year three even though funding continues to flow for additional years. And the ultimate 90%/rural roads coverage requirement is unrealistic in any scenario.
Second, and speaking of rural roads, the proposed MFII draft continues to define service obligations and assess compliance based on road mile coverage as opposed to population (POPs) coverage. POPs coverage is business as usual for wireless network builds and good data on POPs is readily available. Indeed, build requirements for wireless licenses are all based on POPs or total geography covered. Road mile coverage is harder to analyze and data problems persist. And the current proposal appears to contemplate counting service and 4WD dirt roads, which are extremely hard to both measure and cover. Thus, at a minimum, any road miles approach should be limited to Primary, Secondary, and Local roads only.
Third, and most troubling, the draft order proposes adoption of the same compliance framework that, as we understand it, is currently proving extremely challenging for MFI recipients. The MFI Order contained little guidance regarding compliance and recipients are currently struggling to meet compliance “interpretations” now being imposed by the Universal Service Administrative Co. (USAC). As a result, carriers have deployed networks but are not receiving funding as differences on compliance are hashed out.
With CAF II, the FCC adopted an effective and self-effectuating compliance framework that allows carriers to understand the impact of missing deployment milestones before accepting any funding. The framework gives USAC clear rules to follow when a milestone is missed and ensures quick and consistent action is taken without involving the FCC in case-by-case adjudications. Most importantly, the framework is focused on encouraging recipients to complete their network builds rather than on imposing penalties for missed deadlines.
These changes, if adopted for MFII – which is, after all, a CAF program – would make the Mobility Fund program more attractive to potential participants and allow funds to be disbursed more effectively in a way that supports more efficient network builds. And, at the end of the day, that’s what the program is all about. If needed, the FCC could move forward with a framework that includes transitioning existing support and put the issues around build-out, milestones and compliance out for additional comment
Finally, a word on the proposal to transition existing support to nationwide carriers as a flash cut. The FCC has never reduced USF support on such short notice much less as a flash cut. Probably because doing so is unlawful. The law requires the FCC to establish predictable and sufficient USF support mechanisms and prohibits the FCC from adopting rules that advantage or disadvantage one provider over another. Nationwide carriers have relied on this support to develop their 2017 capital budgets and the high-cost areas we serve are just as high-cost as the areas served by non-nationwide carriers. There is no lawful justification for targeting nationwide carriers for a flash cut and the proposed order should, at a minimum, be modified to give those carriers time to plan and budget for the lost support.