Federal Communications Commission DA 19-773 Before the FEDERAL COMMUNICATIONS COMMISSION WASHINGTON, D.C. 20554 In the Matter of Telecommunications Carriers Eligible for Universal Service Support Connect America Fund ) ) ) ) ) ) ) WC Docket No. 09-197 WC Docket No. 10-90 ORDER Adopted: August 13, 2019 Released: August 13, 2019 By the Chief, Wireline Competition Bureau: I. INTRODUCTION 1. In this Order, the Wireline Competition Bureau (Bureau) designates Sunset Digital Communications, LLC (SDC LLC) as an eligible telecommunications carrier (ETC) in eligible high-cost areas within the states of Tennessee and Virginia. See Attachment; see also Petition for Eligible Telecommunications Designation, WC Docket No. 09-197 (filed Nov. 15, 2018) (SDC LLC Petition), as supplemented, Supplement to Petition for Eligible Telecommunications Designation, WC Docket No. 09-197 (filed Aug. 8, 2019) (SDC LLC Petition Supplement). On August 6, 2019, the Bureau granted Sunset Digital Communications, Inc.’s request to allow modification of its CAF Phase II auction long-form application to reflect its acquisition by SDC LLC. Connect America Fund, Petition of Sunset Digital Communications, Inc. Waiver of Section 54.315(b)(6)(iv) of the Commission’s Rules, WC Docket No. 10-90, AU Docket No. 17-182, Order, DA 19-745 (WCB rel. Aug. 6, 2019); see also Notice of Domestic Section 214 Authorization Granted, Public Notice, 33 FCC Rcd 5203 (2018). Sunset Digital Communications, Inc. (SDC, Inc.) and SDC LLC also amended the pending ETC petition associated with SDC, Inc.’s Auction 903 award to indicate that SDC LLC, as SDC Inc.’s successor, would be bound to and by all representations, certifications, and commitments made in the ETC petition and requested that the Commission designate SDC LLC in lieu of SDC, Inc. See SDC LLC Petition Supplement. Designation is conditioned upon and limited to SDC LLC’s authorization to receive Connect America support awarded through the Connect America Fund Phase II auction (Auction 903) and effective only upon such authorization. See Connect America Fund Phase II Auction (Auction 903) Closes; Winning Bidders Announced; FCC Form 683 Due October 15, 2018, AU Docket No. 17-182, WC Docket No. 10-90, Public Notice, 33 FCC Rcd 8257 (2018) (Auction 903 Closing Public Notice); see also Connect America Fund et al., Report and Order and Further Notice of Proposed Rulemaking, 31 FCC Rcd 5949 (2016) (Phase II Auction Order). In making this designation, the Bureau finds that SDC LLC meets the eligibility requirements to receive universal service support, as set forth in section 214(e)(6) of the Communications Act of 1934, as amended (Act), and related Commission rules. 47 U.S.C. § 214(e)(6); 47 CFR § 54.202. The Bureau also waives, on its own motion, the requirement that SDC LLC submit proof of its ETC designation on or before February 25, 2019. The Bureau will release separate public notices regarding Auction 903 funding authorizations. II. BACKGROUND A. Connect America Fund Phase II Auction 903 Support 2. Auction 903 is one part of a multi-step process to comprehensively reform and modernize the high-cost component of the Universal Service Fund (USF). Connect America Fund et al., WC Docket Nos. 10-90 et al., Report and Order and Further Notice of Proposed Rulemaking, 26 FCC Rcd 17663, 17725, para. 156 (2011), aff’d sub nom., In re: FCC 11-161, 753 F.3d 1015 (10th Cir. 2014). At the conclusion of this auction, 103 bidders won $1.49 billion in support over 10 years to provide fixed broadband and voice services to over 700,000 locations in high-cost areas in 45 states. See Auction 903 Closing Public Notice, 33 FCC Rcd at 8257. In order to become authorized to receive support, winning bidders must complete a post-auction application (long-form application) designed to ensure that winning bidders are technically and financially qualified to offer supported services and have met all regulatory prerequisites and conditions for receiving USF support. 47 CFR § 1.21004; Phase II Auction Order, 31 FCC Rcd at 6000, para. 144. As part of this application, Auction 903 winning bidders must certify that their ETC designation covers all relevant census blocks and submit supporting documentation, including an ETC designation order. 47 CFR § 54.315(b)(5) (requiring winning bidders to submit within 180 days of the announcement of winning bids, a certification of ETC designation in all relevant areas and supporting documentation for that certification); Connect America Fund Phase II Auction Scheduled for July 24, 2018; Notice and Filing Requirements and Other Procedures for Auction 903, AU Docket No. 17-182, WC Docket No. 10-90, Public Notice, 33 FCC Rcd 1428, 1519, para. 310 (2018) (Auction 903 Procedures Public Notice); see also Phase II Auction Order, 31 FCC Rcd at 5999, 6002-05, paras. 141, 149-56. B. Requirements for FCC ETC Designation 3. Section 254(e) of the Act provides that “only an eligible telecommunications carrier designated under section 214(e) shall be eligible to receive specific federal universal service support.” 47 U.S.C. § 254(e). Congress gives primary authority for ETC designations to state commissions. Id. § 214(e)(2). The FCC has authority only when “a common carrier [is] providing telephone exchange service and exchange access that is not subject to the jurisdiction of a State commission.” Id. § 214(e)(6). The petitioning carrier must demonstrate that the FCC has jurisdiction and may do so by submitting an “affirmative statement from the state commission or a court of competent jurisdiction that the carrier is not subject to the state commission’s jurisdiction.” See Federal-State Joint Board on Universal Service et al., CC Docket No. 96-45, Twelfth Report and Order, Memorandum Opinion and Order, and Further Notice of Proposed Rulemaking, 15 FCC Rcd 12208, 12267, para. 120 (2000) (2000 Tribal Order); 47 U.S.C. § 214(e)(6). The Commission has delegated authority to the Bureau to consider appropriate ETC designation requests. See Procedures for FCC Designation of Eligible Telecommunications Carriers Pursuant to Section 214(e)(6) of the Communications Act, CC Docket No. 96-45, Public Notice, 12 FCC Rcd 22947, 22948 (1997). 4. A petition for ETC designation by the FCC must include: (1) a certification that the petitioner offers or intends to offer all services designated for support by the Commission pursuant to section 254(c) of the Act; (2) a certification that the petitioner offers or intends to offer the supported services either using its own facilities or a combination of its own facilities and resale of another carrier’s services; 47 U.S.C. § 214(e)(1); 47 CFR § 54.201(d)(1). (3) a description of how the petitioner advertises the availability of the supported services and the charges therefor using media of general distribution; 47 U.S.C. § 214(e)(1); 47 CFR § 54.201(d)(2). (4) a detailed description of the geographic service area for which the petitioner requests to be designated as an ETC; An ETC’s “service area” is set by the designating authority and is the geographic area within which an ETC has universal service obligations and may receive universal service support. 47 U.S.C. § 214(e)(5); 47 CFR § 54.207(a). Although section 214(e)(5) of the Act, 47 U.S.C. § 214(e)(5), requires conformance of a competitive ETC’s service area and an incumbent rural telephone company’s service area, the Commission has separately forborne from imposing such requirements on Auction 903 support recipients. See Phase II Auction Order, 31 FCC Rcd at 6006-6009, paras. 159-168. and (5) a certification that neither the petitioner, nor any party to the application, is subject to a denial of federal benefits pursuant to the Anti-Drug Abuse Act of 1988. 21 U.S.C. § 862; 47 CFR § 1.2002(a)–(b). 5. In addition, petitioners must demonstrate their ability to meet certain service standards. A petitioner seeking an ETC designation for purposes of becoming eligible to receive high-cost support must: (1) certify that it will comply with the service requirements applicable to the support that it receives; (2) submit a five-year service plan (applicable only to high cost areas); (3) demonstrate its ability to remain functional in emergency situations; and (4) demonstrate its ability to satisfy applicable consumer protection and service quality standards. See 47 CFR § 54.202(a). 6. For petitioners seeking ETC designation for the purpose of becoming authorized to receive Auction 903 support, the Bureau waived the requirements that the petitioners submit a five-year service plan and proof of compliance with consumer protection and service quality standards, finding that the need for such requirements is obviated by specific service quality standards applicable to Auction 903 support recipients and specific reporting obligations relating to such standards. WCB Reminds Connect America Fund Phase II Auction Applicants of the Process for Obtaining a Federal Designation as an Eligible Telecommunications Carrier, WC Docket Nos. 09-197 and 10-90, Public Notice, 33 FCC Rcd 6696, 6699-6700 (WCB 2019). 7. In addition, prior to designating a carrier as an ETC pursuant to section 214(e)(6) of the Act, the Commission must determine whether such designation is in the public interest. 47 U.S.C. § 214(e)(6); 47 CFR § 54.202(b). When making a public interest determination, the Commission historically has considered the benefits of increased consumer choice and the unique advantages and disadvantages of the applicant’s service offering. See, e.g., Virgin Mobile ETC Designation Order in the States of Alabama, Connecticut, Delaware, New Hampshire and the District of Columbia, WC Docket 09-197, Order, 25 FCC Rcd 17797, 17799, para. 6 (WCB 2010). In the Auction 903 ETC Public Notice, the Bureau found that recipients of Phase II Auction support demonstrated their ability to offer service efficiently through the competitive bidding process and their ability to meet public interest obligations through their short- and long-form applications and thus, need not submit additional support in their petitions. Auction 903 ETC Public Notice, 33 FCC Rcd at 6700-6701. C. Petition for ETC Designation 8. SDC LLC seeks an ETC designation to become eligible to receive Auction 903 support in all CAF-eligible census blocks covered by its awards. SDC Petition at Attach. A, as supplemented, SDC LLC Petition Supplement; see also Connect America Fund Phase II: Assignments - Assigned Census Blocks, https://auctiondata.fcc.gov/public/projects/auction903/reports/ all_assigned_census_blocks. In the Attachment to this Order, the Bureau has summarized these awards, including the specific deployment obligations over the support term and the number of CAF-eligible census blocks included in the award. The Bureau has released a public notice soliciting comments on SDC LLC’s petition. Wireline Competition Bureau Seeks Comment on Sunset Digital Communications, Inc. Petition for Designation as an Eligible Telecommunications Carrier for the Purposes of Becoming Eligible to Receive Connect America Fund Phase II Auction Support, Docket No. 09-197, Public Notice, 33 FCC Rcd 11690 (WCB 2018). No comments addressing SDC LLC’s petition were filed. III. DISCUSSION 9. We find that SDC LLC satisfies the Commission’s requirements for ETC designation and therefore, designate SDC LLC as an ETC in the specified states, conditioned upon and limited to the high-cost areas where they are authorized to receive Auction 903 support and effective only upon such authorization. In these areas, SDC LLC must meet Connect America Phase II requirements, Lifeline requirements, and other service obligations attendant to its high-cost designation, as specified in the Act and the Commission’s rules. 47 CFR § 54.202(a)(1)(i); id. § 54.101(d); Lifeline and Link Up Reform and Modernization et al., WC Docket No. 11-42 et al., Third Report and Order, Further Report and Order, and Order on Reconsideration, 31 FCC Rcd 3962, 3974, 4074-75, paras. 35, 311-12 (2016) (requiring all high-cost recipients to meet Lifeline obligations in all areas where they deploy a network pursuant to a broadband service obligation and are commercially offering qualifying service). A. Commission Authority 10. SDC LLC demonstrates that the Commission has the requisite authority to designate it as an ETC pursuant to section 214(e)(6) of the Act. SDC LLC cites the relevant state regulations specifically excluding from state regulatory authority, the broadband and voice services offered by the SDC LLC. SDC LLC Petition at 3 (citing Tenn. Code Ann. $ 65-5-203; VA Code Ann. § 56-1.3). On this basis and consistent with our past decisions, we find that SDC LLC has demonstrated FCC authority to decide its petition. See Auction 903 ETC Public Notice, 33 FCC Rcd at 6697 (“If a state law expressly articulates that it does not have jurisdiction over a relevant type of technology, Commission staff would consider such a statute relevant in its determination of Commission jurisdiction.”); Telecommunications Eligible for Universal Service Support, WC Docket Nos. 09-197, 10-90, Order, DA 19-226, para. 12 (rel. Mar. 28, 2019) (finding, on an independent basis, that certain CAF Phase II Auction bidders (including those winning support in Tennessee or Virginia) demonstrated FCC jurisdiction to decide their ETC petitions by citing the relevant state statutes). B. Eligibility Requirements 11. Offering the Services Supported by the Universal Service Support Mechanisms. We find that SDC LLC establishes through the required certifications and related filings that it will offer the services supported by the federal universal service support mechanisms. SDC LLC Petition at 4-5; 47 U.S.C. § 214(e)(1)(A); 47 CFR § 54.201(d)(1). 12. Compliance with the Service Requirements Applicable Auction 903 Support. We find that SDC LLC establishes its ability to comply with service requirements applicable to the support that it receives. Id. at 5; 47 CFR §§ 54.101(d), 54.202(a)(1)(i). This determination takes into account that, prior to being authorized to receive Auction 903 support, SDC LLC must certify and demonstrate, as part of its short- and long-form applications, the technical and financial ability to provide voice and broadband services meeting or exceeding CAF Phase II standards, 47 CFR §§ 54.310(e)(1); 54.315(b)(2)(ii), (b)(2)(iv). certify its commitment to meeting relevant public interest obligations, Id. § 54.315(b)(2)(iii). and certify its compliance with all statutory and regulatory requirements for receiving the universal service support. Id. § 54.315(b)(2)(v). Moreover, once authorized, SDC LLC must satisfy certain reporting obligations to ensure that the support received is being used efficiently and appropriately and that service requirements are being met. Id. § 54.313 (requiring annual report); id. § 54.310(c) (requiring build-out milestone reporting); Phase II Auction Order, 31 FCC Rcd at 5964, para. 40 (describing reporting obligations of Auction 903 support recipients). 13. Compliance with Service Requirements Applicable to Lifeline Services. SDC LLC commits to offering Lifeline discounts to qualifying low-income consumers, consistent with the Commission’s rules, in all high-cost areas where it is authorized to receive support. SDC LLC Petition at 5. 14. Offering the Supported Services Using a Carrier’s Own Facilities. SDC LLC certifies that it is a facilities-based provider of broadband and voice services. Id. at 6; 47 U.S.C. § 214(e)(1)(A); 47 CFR § 54.201(d)(1). 15. Advertising Supported Services. SDC LLC commits to advertising the availability of the supported services and related charges using media of general distribution. Id.; 47 U.S.C. § 214(e)(1)(B); 47 CFR § 54.201(d)(2). We emphasize that, as part of this commitment, SDC LLC must advertise the availability of its services and charges in a manner reasonably designed to reach Lifeline-eligible consumers. 47 CFR § 54.405. 16. Ability to Remain Functional in Emergency Situations. SDC LLC states that it can remain functional in emergency situations. SDC LLC states that it has sufficient back-up power to ensure functionality in the designated service area without an external power source, can re-route traffic around damaged facilities, and can manage traffic spikes resulting from emergency situations. SDC LLC Petition at 5; 47 CFR § 54.202(a)(2). 17. Anti-Drug Abuse Act Certification. SDC LLC submits a certification that satisfies the requirements of the Anti-Drug Abuse Act of 1988, as codified in sections 1.2001-1.2003 of the Commission’s rules. Id. at 6; 47 CFR § 1.2002. C. Public Interest Analysis 18. We conclude that SDC LLC’s participation in universal service programs would be in the public interest and would provide numerous benefits to consumers. As noted above, ETC designations in areas where a petitioner is authorized to receive CAF Phase II Auction support serves the public interest. Through participation in the auction bidding and application processes, SDC LLC demonstrates that it can offer voice and broadband services in high-cost areas efficiently and at a price and quality comparable to the service offerings in more competitive areas. Moreover, granting SDC LLC’s petition will serve the interests of low-income consumers by ensuring the availability of new, facilities-based Lifeline services at competitive prices in areas eligible for Auction 903 support. 19. Accordingly, based on the information, representations, and certifications in its petition, we find that SDC LLC has met all applicable conditions and prerequisites for ETC designation and that conditionally grant its petition. D. Regulatory Oversight 20. Under section 254(e) of the Act, SDC LLC must use universal service support “only for the provision, maintenance, and upgrading of facilities and services for which the support is intended.” 47 U.S.C. § 254(e). Under section 214(e) of the Act, SDC LLC must provide supported services throughout its service area. Id. § 214(e). When authorized to receive high-cost support, SDC LLC must file an annual certification that all federal high-cost support received was used in the preceding calendar year and will be used in the coming calendar year only for the provision, maintenance, and upgrading of facilities and services for which the support is intended. 47 CFR § 54.314(b). The Commission conditions future support awarded through the high-cost program on the filing of such certification. Id. 21. An ETC receiving Lifeline support uses that support as intended when it reduces the price of its telecommunications services by the amount of the support for the eligible consumer. See Petition of TracFone Wireless, Inc. for Forbearance from 47 U.S.C. § 214(e)(1)(A) and 47 C.F.R. § 54.201(i), CC Docket No. 96-45, Order, 20 FCC Rcd 15095, 15105-06, para. 26 (2005). In addition, the ETC must file annual reports that include, among other things, a certification of compliance with applicable minimum service standards, service quality standards, and consumer protection rules. 47 CFR § 54.422(b)(3); see also id. §§ 54.416, 54.422 (requiring an officer of the company to certify that the ETC has policies and procedures in place to ensure that its Lifeline subscribers are eligible to receive Lifeline services and that will comply with all federal Lifeline certification procedures). 22. We find that reliance on SDC LLC’s commitments to meet these and other regulatory requirements, as well as representations and commitments made in its petition, is reasonable and consistent with the public interest and the Act. We conclude that fulfillment of these additional reporting requirements will further the Commission's goal of ensuring that SDC LLC satisfies its obligation under section 214(e) of the Act to provide supported services throughout its respective designated service areas. 23. The Commission may initiate an inquiry on its own motion to examine any ETC’s records and documentation to ensure that the universal service support the ETC receives is being used “only for the provision, maintenance, and upgrading of facilities and services” in the areas in which it is designated as an ETC. 47 U.S.C. §§ 220, 403. SDC LLC must provide such records and documentation to the Commission and USAC upon request. 47 CFR § 54.417. If SDC LLC fails to fulfill the requirements of the Act, the Commission’s rules, and the terms of this Order after it begins receiving universal service support, the Commission has authority to revoke SDC LLC’s ETC designation. Id. § 54.320(c); Federal-State Joint Board on Universal Service; Western Wireless Corp. Petition for Preemption of an Order of the South Dakota Public Utilities Commission, CC Docket No. 96-45, Declaratory Ruling, 15 FCC Rcd 15168, 15174, para. 15 (2000). The Commission also may assess forfeitures for violations of Commission rules and orders. See 47 U.S.C. § 503(b). E. Waiver of Deadline for Submitting Proof of ETC Designation 24. Auction 903 winning bidders were required to certify that they are ETCs in all bid areas and to submit appropriate documentation supporting such certification on or before February 25, 2019 (Auction 903 ETC deadline). 47 CFR § 54.315(b)(5) (requiring winning bidders to submit within 180 days of the announcement of winning bids, a certification of ETC designation in all relevant areas and supporting documentation for that certification); Auction 903 Procedures Public Notice, 33 FCC Rcd at 1519, para. 310; see also Phase II Auction Order, 31 FCC Rcd at 5999, 6002-05, paras. 141, 149-56. The Bureau finds, on its own motion, good cause to waive this deadline for SDC LLC. The Commission has delegated to the Bureau the authority to grant waivers of the filing deadline. See Phase II Auction Order, 31 FCC Rcd at 603, n.315; see also 47 C.F.R. §§ 0.91(p) (functions of the Wireline Competition Bureau), 0.291 (delegation of authority to the Wireline Competition Bureau). The Commission has found that waiver of this deadline is appropriate when an ETC designation proceeding is not yet complete by the deadline despite the good faith efforts of the long-form applicant. See Auction 903 Closing Public Notice, 33 FCC Rcd at 8268, para. 35 (citing Phase II Auction Order, 31 FCC Rcd at 6002-03, paras. 152-53). The Commission may waive its policies or rules upon a showing of good cause and may take into account, on an individual basis, considerations of hardship, equity, or more effective implementation of overall policy. See WAIT Radio v. FCC, 418 F.2d 1153, 1159 (D.C. Cir. 1969); see also NE Cellular Tel. Co. v. FCC, 897 F.2d 1164, 1166 (D.C. Cir. 1990). Waiver of the Commission’s policies or rules is appropriate only if both: (i) special circumstances warrant a deviation from the general rule; and (ii) such deviation will serve the public interest. See Network IP, LLC v. FCC, 548 F.3d 116, 127 (D.C. Cir. 2008). Deadlines can only be waived under “unusual or compelling circumstances.” Id. at 126 (citation omitted). The Commission has explained that it would presume such good faith efforts when the petitioner submitted its petition to the relevant authority within 30 days of the release of the Auction 903 Closing Public Notice. See Auction 903 Closing Public Notice, 33 FCC Rcd at 8268-69, para. 35. SDC LLC filed its petition within this 30-day time frame, thus demonstrating due diligence in meeting its filing deadline. IV. ORDERING CLAUSES 25. Accordingly, IT IS ORDERED, pursuant to the authority contained in section 214(e)(6) of the Communications Act of 1934, as amended, 47 U.S.C. § 214(e)(6), and the authority delegated in sections 0.91 and 0.291 of the Commission’s rules, 47 CFR §§ 0.91, 0.291, that SDC LLC IS CONDITIONALLY DESIGNATED AN ELIGIBLE TELECOMMUNICATIONS CARRIER IN ALL CENSUS BLOCKS IN THE SPECIFIED STATES FOR WHICH IT IS ELIGIBLE TO RECEIVE SUPPORT AWARDED THROUGH THE CONNECT AMERICA PHASE II AUCTION. These designations (in the states of Tennessee and Virginia) are contingent upon SDC LLC becoming authorized to receive such support, is limited to those areas where support is authorized and is effective only upon authorization. 26. IT IS FURTHER ORDERED that pursuant to section 1.3 of the Commission’s rules, 47 CFR § 1.3, and pursuant to the authority delegated under sections 0.91, and 0.291 of the Commission’s rules, 47 CFR §§ 0.91, 0.291, the deadline specified in section 54.315(b)(5) of the Commission’s rules, 47 CFR § 54.315(b)(5), IS WAIVED to the extent described above. 27. IT IS FURTHER ORDERED that a copy of this Order SHALL BE TRANSMITTED to the relevant state commissions and to the Universal Service Administrative Company. 28. IT IS FURTHER ORDERED that, pursuant to section 1.102(b)(1) of the Commission’s rules, 47 CFR § 1.102(b)(1), this order SHALL BE effective upon release. FEDERAL COMMUNICATIONS COMMISSION Kris Anne Monteith Chief Wireline Competition Bureau ATTACHMENT Winning Bidder Date Petition Filed State(s) Number of Census Blocks Consistent with the requirements specified for completion of the long-form application and as described above in this Order, we define the designate service area for the bid area based on the published list of CAF-eligible census blocks associated with Sunset Digital Communications, Inc.’s winning bids, thus superseding any discrepancies in the petition’s descriptions of such areas. See Connect America Fund Phase II: Assignments - Assigned Census Blocks, https://auctiondata.fcc.gov/public/projects/auction903/reports/all_assigned_census_blocks. Number of Supported Locations Sunset Digital Communications, Inc. 11/15/2019 TN 276 2,095 Sunset Digital Communications, Inc. 11/15/2019 VA 1,316 6,998 9