Connect America Fund, Connect America Fund Phase II Auction, The Uniendo a Puerto Rico Fund and the Connect USVI Fund, Rural Digital Opportunity Fund, Rural Digital Opportunity Fund Auction, Establishing a 5G Fund for Rural America, Letters of Credit for Recipients of High-Cost Competitive Bidding Support

FEDERAL COMMUNICATIONS COMMISSION <CFR>47 CFR Part 54</CFR> <DEPDOC>[WC Docket Nos. 10-90, 18-143, 19-126, 24-144; AU Docket Nos. 17-182, 20-34; GN Docket No. 20-32; FCC 24-64; FR ID 226925]</DEPDOC> <SUBJECT>Connect America Fund, Connect America Fund Phase II Auction, The Uniendo a Puerto Rico Fund and the Connect USVI Fund, Rural Digital Opportunity Fund, Rural Digital Opportunity Fund Auction, Establishing a 5G Fund for Rural America, Letters of Credit for Recipients of High-Cost Competitive Bidding Support</SUBJECT> <HD SOURCE="HED">AGENCY:</HD> Federal Communications Commission. <HD SOURCE="HED">ACTION:</HD> Proposed rule. <SUM> <HD SOURCE="HED">SUMMARY:</HD> In this document, the Federal Communications Commission (Commission) seeks comment on changes to its rules regarding letters of credit for recipients of high-cost support awarded through competitive bidding. Specifically, the Commission seeks comment on changing the rules governing which United States banks are eligible to issue such letters. It also seeks comment on modifying the letter of credit rules for Connect America Fund Phase II (CAF II) support recipients that have met all of their deployment and reporting obligations, along with allowing certain Rural Digital Opportunity Fund (RDOF) support recipients to lower the value of their letters of credit. </SUM> <EFFDATE> <HD SOURCE="HED">DATES:</HD> Comments are due on or before August 5, 2024 and reply comments are due on or before August 19, 2024. 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 below as soon as possible. </EFFDATE> <HD SOURCE="HED">ADDRESSES:</HD> Pursuant to §§ 1.415 and 1.419 of the Commission's rules, 47 CFR 1.415, 1.419, interested parties may file comments and reply comments on or before the dates indicated on the first page of this document. Comments may be filed using the Commission's Electronic Comment Filing System (ECFS). You may submit comments, identified by WC Docket Nos. 10-90, 18-143, 19-126, 24-144; AU Docket Nos. 17-182, 20-34; GN Docket No. 20-32, by any of the following methods: • <E T="03">Electronic Filers:</E> Comments may be filed electronically using the internet by accessing the ECFS: <E T="03">https://www.fcc.gov/ecfs/.</E> • <E T="03">Paper Filers:</E> Parties who choose to file by paper must file an original and one copy of each filing. • Filings can be sent by hand or messenger delivery, by commercial courier, or by the U.S. Postal Service. <E T="03">All filings must be addressed to the Secretary, Federal Communications Commission.</E> • Hand-delivered or messenger-delivered paper filings for the Commission's Secretary are accepted between 8 a.m. and 4 p.m. by the FCC's mailing contractor at 9050 Junction Drive, Annapolis Junction, MD 20701. All hand deliveries must be held together with rubber bands or fasteners. Any envelopes and boxes must be disposed of before entering the building. • Commercial courier deliveries (any deliveries not by the U.S. Postal Service) must be sent to 9050 Junction Drive, Annapolis Junction, MD 20701. Filings sent by U.S. Postal Service First-Class Mail, Priority Mail, and Priority Mail Express must be sent to 45 L Street NE, Washington, DC 20554. • <E T="03">People with Disabilities:</E> To request materials in accessible formats for people with disabilities (braille, large print, electronic files, audio format), send an email to <E T="03">fcc504@fcc.gov</E> or call the Consumer & Governmental Affairs Bureau at 202-418-0530. <FURINF> <HD SOURCE="HED">FOR FURTHER INFORMATION CONTACT:</HD> Nathan Eagan at <E T="03">nathan.eagan@fcc.gov,</E> Wireline Competition Bureau, 202-418-7400. </FURINF> <SUPLINF> <HD SOURCE="HED">SUPPLEMENTARY INFORMATION:</HD> This is a summary of the Commission's notice of proposed rulemaking (NPRM) in WC Docket Nos. 10-90, 18-143, 19-126, 24-144; AU Docket Nos. 17-182, 20-34; GN Docket No. 20-32; FCC 24-64, adopted June 6, 2024 and released June 7, 2024. The full text of this document is available for public inspection during regular business hours at Commission's headquarters 45 L Street NE, Washington, DC 20554 or at the following internet address: <E T="03">https://docs.fcc.gov/public/attachments/FCC-24-64A1.pdf.</E> <HD SOURCE="HD1">Synopsis</HD> <HD SOURCE="HD1">I. Introduction</HD> 1. In the NPRM, the Commission seeks comment on modifying Letter of Credit (LOC) rules for Universal Service Fund High-Cost support authorized through a competitive process. The Commission also seeks comment on modifying the required value of a letter of credit for recipients of the RDOF support. Finally, it seeks comments on making the waiver of certain aspects of the LOC rules permanent for recipients of CAF II support to align with the RDOF LOC requirements. The Commission is seeking comment in these areas to explore potential ways to facilitate providers' compliance with program requirements while facilitating broadband deployment in unserved and underserved areas, and helping providers to meet their deployment milestones. 2. Currently, the Commission's rules require that entities authorized to receive High-Cost support authorized through a competitive process have an LOC from a United States bank with a Weiss bank safety rating of B− or better. When the Commission first adopted this rule, approximately 3,600 banks qualified to issue letters of credit. In the last 2 years, however, nearly half of those banks have lost their eligibility to issue LOCs as they have seen their Weiss rating fall below a B−. Therefore, many carriers authorized to receive CAFF II Auction or RDOF support face the possibility of having their support withheld until they obtain a new LOC from a qualifying bank, and these carriers must incur increased costs and administrative burdens associated with obtaining a new LOC from a qualifying bank. Accordingly, the Commission seeks comment on whether the Commission should modify the current requirement of a B− or better Weiss safety rating. 3. In addition, RDOF support recipients are required to maintain LOCs that increase in value on an annual basis. Banks issuing LOCs generally require RDOF support recipients to maintain sufficient cash reserves to support the LOC, which impacts the financial resources available for the provider's operations, including deployment. As part of RDOF's rules, support recipients that meet their optional or required deployment milestone are allowed to reduce the value of their required LOCs to one year of their total support once Universal Service Administrative Company (USAC) has verified deployment. This flexibility was intended to balance our responsibility to protect program funds while simultaneously reducing the financial burdens on RDOF support recipients to participate in the program as they met their deployment milestones. In the NPRM, the Commission seeks comment on providing additional flexibility by allowing an RDOF support recipient to lower the value of its LOC to one year of support if it has deployed service to 10 percent of its locations by the end of its second year of support, instead of 20 percent, and the Commission seeks comment on whether such a waiver would apply to recipients whose two-year optional milestone has already occurred. 4. Finally, the Commission seeks comment on making our waiver of certain aspects of the CAF II LOC rules permanent, and thereby continuing to allow CAF II support recipients that have met their deployment and reporting obligations to follow the RDOF's LOC rules, and maintain LOCs at lower values. <HD SOURCE="HD1">II. Discussion</HD> 5. <E T="03">Weiss Bank Safety Rating.</E> In the NPRM, the Commission seeks targeted comment on whether and how to change the sections of the letter of credit rules requiring a minimum safety rating for issuing financial institutions. Currently, Auction 903 and 904 support recipients are required to obtain a letter of credit from United States banks maintaining a Weiss bank safety rating of B− or better. In light of the developments in the banking industry, the Commission seeks comment on this requirement. The Commission also seeks comment on whether to change the rule requiring United States banks to maintain a Weiss bank safety rating of B− or better for future recipients of support from the 5G Fund. If the Commission decides to alter those rules, the Commission seeks comment on what requirements to adopt for banks issuing letters of credit to support recipients, to further the dual goals of securing the financial commitments made through Auctions 903 and 904, and any auction of 5G Fund support, while maintaining a sufficiently expansive pool of issuing banks to enable broad participation in the programs by providers, and especially small providers. The Commission seeks comment on whether there are alternative, reliable ratings to use for assessing a bank's suitability for issuing an LOC to support recipients; or whether the Commission should continue to utilize only Weiss ratings, but accept a lower grade for bank eligibility. In making any changes to the issuing bank eligibility rules, how can the Commission minimize any potential public interest harms and continue to responsibly steward the funds disbursed through CAF II Auction and RDOF programs as well as the 5G Fund? The Commission anticipates that any changes to the bank eligibility rules could also apply to other FCC programs that currently have the same Weiss bank safety rating requirement. The Commission seeks comment on this. 6. When the Commission adopted its requirement that banks maintain a Weiss bank safety rating of B− or better, it reasoned that Weiss offered “an independent and objective perspective of the safety of the banks it rates based on capitalization, asset ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━ Preview showing 10k of 38k characters. Full document text is stored and available for version comparison. ━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━━