Feb. 11-13, 2013 1

ETC DESIGNATION & TRIBAL MOBILITY FUND

Feb. 11-13, 2013 2

ETC DESIGNATION

Feb. 11-13, 2013 3

ETC Designation

What is an Eligible Telecommunications Carrier (ETC)? Carrier designated by the PUC or FCC that:

Offers the supported services using it’s own facilities or a combination of it’s own facilities and resale

Advertises the availability of supported services Only ETCs are eligible to receive federal USF All ILECs have been designated as ETCs

Competitive providers (CETCs) must receive designation from the PUC or FCC

Feb. 11-13, 2013 4

ETC Designation

What are the requirements of an ETC? Voice grade access to the PSTN Local minutes of use at no additional charge Access to 911 or E911 Toll limitations for eligible low income

customers FCC’s Transformation Order added broadband

4 Mbps/1 Mbps broadband speeds Latency sufficient for real time applications Usage limits comparable to urban areas

Feb. 11-13, 2013 5

ETC Designation

How does a carrier get designated as an ETC? All ILECs were initially designated as ETCs without

having to apply New ILECs have been granted ETC status with their

study area waiver Competitive providers must file an application

with the state PUC or the FCC Rural Areas – “may” designate more than one ETC Other Areas – “shall” designate more than one ETC Public Interest determination

Feb. 11-13, 2013 6

ETC Designation

Impacts of FCC Reform on ETC Designation Elimination of Identical Support Rule

Phased out over 5 years One wireline ETC

Rural Areas – ILEC continues as ETC Non-Rural Areas – ILEC has right of first

refusal One wireless ETC

Replaces multiple wireless ETCs in many areas

Feb. 11-13, 2013 7

ETC Designation

Designation as an ETC by the FCC Comply with service requirements 5-Year Service Quality Improvement Plan Ability to remain functional in emergencies Satisfy consumer protection and service

quality standards Lifeline Only CETCs

Demonstrate financial and technical capability

Submit terms, conditions and pricing of services

Feb. 11-13, 2013 8

ETC Designation

How does a carrier receive annual certification as an ETC? Annual submission to FCC, PUC & Tribal Authority

Progress report on 5-year Service Quality Improvement Plan

Report on service outages affecting 10% of end users or a 911 special facility

Number of unfulfilled service requests Number of complaints Compliance with service quality standards and

consumer protection rules Ability to function in emergency situations

Feb. 11-13, 2013 9

ETC Designation

How does a carrier receive annual certification as an ETC? Annual submission to FCC, PUC & Tribal

Authority Price offerings Names of holding company, operating company,

affiliates and branding (“dba”) Evidence of Tribal engagement Pricing no more than 2 standard deviations above

national average Network performance test results

Feb. 11-13, 2013 10

ETC Designation

What is Tribal Engagement? Discussions with Tribal government that includes:

Needs assessment and deployment planning focused on Tribal community institutions

Feasibility and sustainability planning Marketing services in a culturally sensitive manner Rights of way, land use permitting, facilities siting,

environmental and cultural preservation review processes

Compliance with Tribal business and licensing requirements

Feb. 11-13, 2013 11

BECOMING A TELECOM CARRIER

Feb. 11-13, 2013 12

Becoming a Telecom Carrier

How is the process of becoming a telecom carrier relevant to ETC designation? Process of becoming a telecom carrier

Network design Financial forecasting Lender approval FCC waivers & approval Commence operations Financial & regulatory reporting

We’ll focus on lender and FCC approval

Feb. 11-13, 2013 13

Becoming a Telecom Carrier

How does the loan process work? Each lender will be different, but most Tribal

carriers are financed through RUS Application involved a variety of information

Company description Network design Customer survey Service pricing 5-Year financial forecast

Full set of financial statements Settlements & USF Impacts of FCC Reform Explanation of assumptions

Feb. 11-13, 2013 14

Becoming a Telecom Carrier

How does the loan process work? Application will include a variety of

assumptions, including approval of FCC waivers Traditional FCC waivers

Study Area Waiver Entry to NECA Pools Expedited USF Support Etc.

FCC Transformation Order Revenue Baseline Switched Access transition to Bill & Keep USF Limitations

Feb. 11-13, 2013 15

Becoming a Telecom Carrier

How does the loan process work? Loan review and FCC waiver process will run

concurrently Somewhat of a chicken or the egg scenario

Will the loan be granted without the FCC waivers? Will the FCC waivers be granted without the loan?

May result in a request for conditional approval of the loan and/or waivers to keep them moving

Feb. 11-13, 2013 16

Thank You

Chad Duval, PrincipalMoss Adams LLP

chad.duval@mossadams.com209-955-6124

Feb. 11-13, 2013 17

Becoming a Telecom Carrier

Wireline ETC Petitions Application will include a variety of FCC

waiver requests Traditional FCC waivers

Study Area Waiver Entry to NECA Pools Expedited USF Support

FCC Transformation Order Transition to Bill & Keep USF Limitations

Feb. 11-13, 2013 18

Becoming a Telecom Carrier Traditional Waiver - Study Area Waiver

Study Area: the geographic area in which a carrier provides service

State PUCs and the FCC share jurisdiction over study areas

If you seek ETC designation for only a portion of a study area, you will need: FCC approval to revise the study area boundaries

Public interest demonstration Ruling by the state PUC that it does not object to the

revised study area Tip: Try to submit the study area waiver jointly with

the affected ILEC

Feb. 11-13, 2013 19

Becoming a Telecom Carrier Traditional Waiver - Entry to NECA Pools

National Exchange Carrier Association (“NECA”) is an association of ILECs which administers interstate tariffs for carriers that participate in NECA’s pools

Rationale for participation: Cost efficiency Barrier to participation: FCC’s rules limit

participation in NECA’s pools to those ILECs in existence as of 1996

Solution: Request a waiver of 47 C.F.R. § 69.2(hh) to allow the new carrier to participate in NECA’s pools

Feb. 11-13, 2013 20

Becoming a Telecom Carrier Traditional Waiver - Expedited USF

Many of FCC’s USF support rules are based on a carrier’s historical costs

Problem: New carriers don’t have historical costs

Solution: Request a waiver of 47 C.F.R. §§ 36.611, 36.612, and 54.903(a)(3) to recover costs based on projected costs

Feb. 11-13, 2013 21

Becoming a Telecom Carrier FCC Transformation Order Waiver – Transition to Bill-

and-Keep Old intercarrier compensation rule: Carriers pay one

another to connect calls based on the cost of connecting the call

New bill-and-keep rule: Carrier on whose network a call originates bills its customer and keeps the entire proceeds

Problem #1: Tribal carriers were net winners under the old rule, so bill-and-keep will reduce overall revenues

Problem #2: New bill-and-keep rules provide many carriers with additional federal support based on historical intercarrier compensation revenues

Feb. 11-13, 2013 22

Becoming a Telecom Carrier FCC Transformation Order Waiver –

Transition to Bill-and-Keep (cont.) Solution: Request a short term waiver of the

transition to bill-and-keep (47 C.F.R. § 51.909) Benefits:

Increase revenues during initial years of operations

Provides historical intercarrier compensation revenues to allow new carriers to qualify for additional federal support when the short term waiver expires

Feb. 11-13, 2013 23

Becoming a Telecom Carrier FCC Transformation Order Waiver – USF Limitations

Old USF rules: Carriers with the highest costs were reimbursed generally with full USF support

New USF rules: New rules limit USF support $250 per line per month limit on High Cost Loop Support (“HCLS”) Limit reimbursable capital and operating expenses for HCLS

(“CapEx and OpEx Limits”) based on expenses of similarly situated carriers

Reduced limits on corporate operations expenses (i.e., management salaries, legal and engineering fees, etc.)

Problem: Tribal carriers have high expenses in initial years of operations, and new USF rules subject new carriers to unpredictable USF support levels

Solution: Request a short term waiver of the new USF rules to increase level and predictability of USF revenues during initial years of operations

Feb. 11-13, 2013 24

Thank You

Sean Conway, AssociateAkin Gump Strauss Hauer & Feld LLP

sconway@akingump.com202-887-4463

Feb. 11-13, 2013 25

TRIBAL MOBILITY FUND

Feb. 11-13, 2013 26

Introduction: Mobility Fund and Tribal Mobility Fund

Purpose: Provide funding to deploy and maintain

mobile broadband infrastructure in unserved and underserved areas of the country

Mobility Fund: Phases 1 and 2 Support for unserved and underserved

areas, including Tribal lands Tribal Mobility Fund: Phases 1 and 2

Support dedicated exclusively for unserved and underserved Tribal lands

Feb. 11-13, 2013 27

Mobility Fund – 2 Phases Mobility Fund: Phase 1

$300 million of one-time support to deploy mobile broadband infrastructure to unserved areas

Funding awarded through a “reverse auction” that occurred in 2012

Standing Rock was one of the auction winners Mobility Fund: Phase 2

$500 million of ongoing annual support for mobile broadband networks in high-cost areas

FCC currently considering rules for awarding support through competitive bidding

Feb. 11-13, 2013 28

Tribal Mobility Fund – 2 Phases Tribal Mobility Fund: Phase 1

$50 million of one-time support to deploy mobile broadband infrastructure on unserved Tribal lands

Tribal Mobility Fund: Phase 2 Up to $100 million annually to expand and

sustain mobile broadband networks on Tribal lands in which service would be unavailable absent federal support

FCC currently considering rules for awarding support through competitive bidding

Feb. 11-13, 2013 29

Tribal Mobility Fund Phase 1 When?

Sometime in 2013; FCC has not announced date How?

Reverse Auction Funding awarded to bidders that will serve the most

unserved locations (i.e., households and places of business) on Tribal lands at the lowest cost

Tribal Bidding Credit Eligibility: Tribally-owned or controlled carriers

seeking support to serve their associated Tribal lands Mechanics: Reduces the bid amount by 25% for the

purpose of comparing it to other bids

Feb. 11-13, 2013 30

Tribal Mobility Fund Phase 1 (cont.) Wh0?

ETC Designated Carrier Caveat: Tribally-owned or controlled entities that

have pending ETC applications may participate in the auction; however, such entities cannot receive support until it becomes ETC designated

Access to Spectrum Hold a wireless license for the service area Lease of spectrum for at least 5 years

Financially and Technically Qualified Certification Requirement

Feb. 11-13, 2013 31

Tribal Mobility Fund Phase 1 (cont.) Where?

Unserved Tribal lands Additional Auction Application Requirements

Detailed Project Description Description of network Identification of technology Demonstration of technical feasibility Detailed budget

Certification of Tribal Engagement Requirements

Feb. 11-13, 2013 32

Tribal Mobility Fund Phase 1 (cont.) Post-Auction Requirements

Winning Bidders will be subject to post-auction public interest requirements, including: Construction Deadlines Annual Service Reports

Stay Tuned The FCC will be releasing more

information on the Tribal Mobility Fund in 2013

Feb. 11-13, 2013 33

Thank You

Tom Davidson, PartnerAkin Gump Strauss Hauer & Feld LLP

tdavidson@akingump.com202-887-4011