# Connect America Fund Phase II Auction; Notice and Filing Requirements and Other Procedures for Auction 903

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URL: https://www.frixlaw.com/law-library/documents/fr%3A2018-05142

## Record

- **Collection:** Federal Register
- **Document type:** Rule
- **Published:** March 29, 2018
- **Citation:** 83 FR 13590

## Text

FEDERAL COMMUNICATIONS COMMISSION
47 CFR Part 54
[AU Docket No. 17-182; WC Docket No. 10-90; FCC 18-6]
Connect America Fund Phase II Auction; Notice and Filing Requirements and Other Procedures for Auction 903

AGENCY:

Federal Communications Commission.

ACTION:

Final action; requirements and procedures.

SUMMARY:

In the document, the Federal Communications Commission (Commission) establishes the procedures for the Connect America Fund Phase II auction (Phase II auction, auction, or Auction 903). The auction will award up to $1.98 billion over 10 years to providers that commit to offer voice and broadband services to fixed locations in unserved high-cost areas. The auction is scheduled to begin on July 24, 2018.

DATES:

Auction 903 short-form applications must be filed prior to 6 p.m. Eastern Time (ET) on March 30, 2018. Bidding in Auction 903 is scheduled to begin on July 24, 2018.

FOR FURTHER INFORMATION CONTACT:

Heidi Lankau or Katie King, Telecommunications Access Policy Division, Wireline Competition Bureau, (202) 418-7400 or TTY (202) 418-0484; Mark Montano or Angela Kung, Auctions and Spectrum Access Division, Wireless Telecommunications Bureau, (202) 418-0660.

SUPPLEMENTARY INFORMATION:

This is a synopsis of the Commission's document in AU Docket No. 17-182; WC Docket No. 10-90; FCC 18-6, released on February 1, 2018 (
CAF II Auction Procedures Public Notice
). 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://transition.fcc.gov/Daily_Releases/Daily_Business/2018/db0201/FCC-18-6A1.pdf.

I. Introduction

1. The Commission establishes procedures for the Connect America Fund Phase II auction (Phase II auction, auction, or Auction 903), thus furthering its progress toward closing the digital divide for all Americans, including those in rural areas of the country. The Phase II auction will award up to $198 million annually for 10 years to service providers that commit to offer voice and broadband services to fixed locations in unserved high-cost areas. The auction is scheduled to begin on July 24, 2018.

2. Auction 903 will be the first auction to award ongoing high-cost universal service support using a multiple-round, reverse auction. Through this auction, the Commission intends to maximize the value the American people receive for the universal service dollars it spends, balancing higher-quality services with cost efficiencies. Therefore, the auction is designed to select bids from providers that would deploy high-speed broadband and voice services in unserved communities for lower relative levels of support. The bidding procedures will be implemented through the Auction 903 bidding system, which will enable a bidder to express in a simple and orderly way the amount of support it needs to provide a specified level of service to a specified set of eligible areas.

II. Auction Specifics

3.
Auction Title and Start Date.
The auction is referred to as “Auction 903—Connect America Fund Phase II.” Bidding in Auction 903 will begin on July 24, 2018. The initial schedule for bidding rounds will be announced by public notice approximately one week before the start of the auction.

4.
Auction 903 Dates and Deadlines.
The Auction Application Tutorial will be available via the internet by March 13, 2018. The Short-Form Application (FCC Form 183) filing window opens March 19, 2018 at 12:00 noon ET. The Short-Form Application (FCC Form 183) filing window deadline is March 30, 2018 at 6:00 p.m. ET. The Auction Bidding Tutorial will be available via the internet by June 28, 2018. The mock auction begins during the week of July 16, 2018. The auction begins on July 24, 2018.

5.
Requirements for Participation.
Those wishing to participate in this auction must submit a short-form application (FCC Form 183) electronically prior to 6:00 p.m. ET, March 30, 2018, following the electronic filing procedures that will be provided in a public notice to be released in advance of the opening of the short-form application filing window and comply with all provisions outlined in the document and applicable Commission rules.

III. Public Interest Obligations

6. Each winning bidder that is authorized to receive Phase II support after the close of the auction will be required to offer voice and broadband services meeting the relevant performance requirements to fixed locations. It must make these services available to the required number of locations associated with the eligible census blocks for which it is the winning bidder. The number of locations that a support recipient is required to serve in the eligible census blocks is aggregated to the census block group (CBG) level, which is the geographic area that will be used for bidding in the auction. In the auction, the Commission will accept bids for service at one of four performance tiers, each with its own minimum download and upload speed and usage allowance, and for either high or low latency service, as shown in the tables below. Winning bidders that become authorized to receive Phase II support must deploy broadband service that meets the performance tier and latency requirements associated with their winning bids. Each Connect America Fund support recipient must offer voice as a standalone service, but may separately bundle its broadband offerings with a voice service.

Performance tier
Speed
Monthly usage allowance
Weight

Minimum
≥10/1 Mbps
≥150 gigabytes (GB)
65

Baseline
≥25/3 Mbps
≥150 GB or U.S. median, whichever is higher
45

Above Baseline
≥100/20 Mbps
≥2 terabytes (TB)
15

Gigabit
≥1 Gbps/500 Mbps
≥2 TB
0

Latency
Requirement
Weight

Low Latency
≤100 ms
0

High Latency
≤750 ms & MOS ≥4
25

7. Phase II support recipients are permitted to offer a variety of broadband service offerings as long as they offer at least one standalone voice plan and one service plan that provides broadband at the relevant performance tier and latency requirements, and these plans must be offered at rates that are reasonably comparable to rates offered in urban areas. For voice service, a support recipient will be required to certify that the pricing of its service is no more than the applicable reasonably comparable rate benchmark that the Commission's Wireline Competition Bureau (WCB) releases each year. For broadband services, a support recipient will be required to certify that the pricing of a service that meets the required performance tier and latency performance requirements is no more than the applicable reasonably comparable rate benchmark, or that it is no more than the non-promotional price charged for a comparable fixed wireline broadband service in the state or U.S. territory where the eligible telecommunication carrier (ETC) receives support.

8. The Commission has adopted specific service milestones that require each winning bidder authorized to receive Phase II support to offer service to a portion of the number of locations associated with the eligible census blocks included in its authorized winning bids in a state. Specifically, each support recipient must complete construction and begin commercially offering service to 40 percent of the requisite number of locations in a state by the end of the third year of funding and to an additional 20 percent in each subsequent year, with 100 percent by the end of the sixth year. A support recipient is deemed to be commercially offering voice and/or broadband service to a location if it provides service to the location or could provide it within 10 business days upon request.

9. Compliance will be determined at the state-level. The Commission will verify that the support recipient offers the required service to the total number of locations across all the eligible census blocks included in all of the support recipient's authorized bid areas (
i.e.,
CBGs) in a state. If a support recipient is authorized to receive support in a state for different performance tier and latency combinations, it will be required to demonstrate that it is offering service meeting the relevant performance requirements to the required number of locations for each performance tier and latency combination within that state.

10. The required number of locations for each performance tier and latency combination will be determined by adding up the locations in all the eligible census blocks in the state covered by authorized winning bids specifying the particular performance tier and latency combination.

11. The Commission also decided that a support recipient that faces unforeseen challenges may take advantage of the flexibility to serve, at a minimum, 95 percent of the required number of locations in a state. Support recipients that offer service to at least 95 percent of locations but fewer than 100 percent of locations must refund support based on the number of locations left unserved in the state.

12. In the event a support recipient cannot identify enough locations in the eligible census blocks in its winning bids to meet its statewide obligation, it will have one year after release of the Phase II auction closing public notice to file evidence of the total number of locations in those blocks, including geolocation data of all the locations it was able to identify. The support recipient's filing will be subject to review and comment by relevant stakeholders and an audit. If the support recipient demonstrates that the number of actual, on-the-ground locations is lower than the number estimated by the CAM, its state location total will be adjusted, and its support will be reduced on a pro rata basis. If a support recipient finds that the number of actual locations has increased, its location total and support will not be increased.

13. To monitor each support recipient's compliance with the Phase II auction public interest obligations, the Commission has adopted reporting requirements described in detail in the
Phase II Auction Order,
81 FR 44413, July 7, 2016. These include reporting a list of geocoded locations each year to which the support recipient is offering the required voice and broadband services, making a certification when the support recipient has met service milestones, and submitting the annual FCC Form 481 report. A support recipient that fails to offer service to the required number of locations by a service milestone will be subject to non-compliance measures. A support recipient will also be subject to any non-compliance measures that are adopted in conjunction with a methodology for high-cost support recipients to measure and report network performance.

IV. Eligible Areas

14. The Commission will use CBGs containing one or more eligible census blocks as the minimum geographic area for bidding in the auction. WCB released a list of the eligible census blocks for Auction 903 in December 2017 based on December 31, 2016 FCC Form 477 data. The list contains two tables. The first table identifies the CBGs eligible for bidding in the Phase II auction and lists the CBG identification number (the 12-digit Census code), the relevant state abbreviation, the county name, the number of locations that are eligible for Phase II support, and the reserve price (on an annual basis) rounded to the nearest dollar. The second table identifies the eligible census blocks within the CBGs that are eligible for bidding in the Phase II auction. This table lists the census block identification number (the 15-digit Census code), the relevant state abbreviation, the county name, and the CBG identification number. All the eligible census blocks within a CBG will be aggregated for bidding purposes. The table includes approximately 214,000 census blocks that are within approximately 30,300 CBGs, located in 50 states and territories. The Commission directs WCB to release a revised map and list of eligible areas that removes census block groups with a $0 reserve price and census blocks that overlap certain rate-of-return carrier study area boundaries.

V. Applying To Participate in Auction 903

15.
General Information Regarding Short-Form Applications.
An application to participate in Auction 903, referred to as a short-form application or FCC Form 183, provides information used to determine whether the applicant has the legal, technical, and financial qualifications to participate in a Commission auction for universal service support. The short-form application is the first part of the Commission's two-phased auction application process. In the first phase, an entity seeking to participate in the auction must file a short-form application in which it certifies, under penalty of perjury, its qualifications. Eligibility to participate in the Phase II auction is based on an applicant's short-form application and certifications. A potential applicant must take seriously its duties and responsibilities and carefully determine before filing a short-form application that it is able to meet the public interest obligations associated with Phase II support if it ultimately becomes a winning bidder in the auction. The Commission's determination that an applicant is qualified to participate in Auction 903 does not guarantee that the applicant will also be deemed qualified to receive Phase II support if it becomes a winning bidder. In the second phase of the

process, each winning bidder must file a more comprehensive long-form application (FCC Form 683), which the Commission will review to determine if a winning bidder should be authorized to receive support for its winning bids.

16. An entity seeking to participate in Auction 903 must file a short-form application electronically via the FCC's Auction Application System prior to 6:00 p.m. ET on March 30, 2018. Among other things, an applicant must submit operational and financial information demonstrating that it can meet the service requirements associated with the performance tier and latency combination(s) for which it intends to bid. Below the Commission describes more fully the information disclosures and certifications required in the short-form application. An applicant that files a short-form application is subject to the Commission's rule prohibiting certain communications. An applicant is subject to the prohibition beginning at the deadline for filing short-form applications.

17. An applicant bears full responsibility for submitting an accurate, complete, and timely short-form application. An applicant should consult the Commission's rules to ensure that, in addition to the materials described below, all required information is included in its short-form application. To the extent the information in the document does not address a potential applicant's specific operating structure, or if the applicant needs additional information or guidance concerning the following disclosure requirements, the applicant should review the educational materials for Auction 903 and/or use the contact information provided in the document to consult with Commission staff to better understand the information it must submit in its short-form application.

18. The same entity may not bid based on more than one auction application,
i.e.,
as more than one applicant. Therefore, an entity may not submit more than one short-form application for Auction 903. If an entity submits multiple short-form applications, only one application may be the basis for that entity to become qualified to bid.

19. An applicant should note that submitting a short-form application (and any amendments thereto) constitutes a representation by the certifying official that he or she is an authorized representative of the applicant, that he or she has read the form's instructions and certifications, and that the contents of the application, its certifications, and any attachments are true and correct. As more fully explained below, an applicant is not permitted to make major modifications to its application after the short-form application filing deadline. Submitting a false certification to the Commission may result in penalties, including monetary forfeitures, the forfeiture of universal service support, license forfeitures, ineligibility to participate in future auctions, and/or criminal prosecution.

20. After the initial short-form application filing deadline, Commission staff will review all timely submitted applications to determine whether each application complies with the application requirements and has provided all required information concerning the applicant's qualifications for bidding. After this review is completed, a public notice will be released announcing the status of applications and identifying the applications that are complete and those that are incomplete because of minor defects that may be corrected. This public notice also will establish an application resubmission filing window, during which an applicant may make permissible minor modifications to its application to address identified deficiencies. The public notice will include the deadline for resubmitting modified applications. After the review of resubmitted applications is complete, a public notice will be released identifying the applicants that are qualified to bid.

21.
Disclosure of Agreements and Bidding Arrangements.
An applicant must identify in its short-form application all real parties in interest to any agreements relating to the participation of the applicant in the competitive bidding for Phase II support. This disclosure requirement applies to any arrangements with parties that are applying to participate in Auction 903 as well as parties that are not. An applicant that discloses any such agreement(s) must provide in its short-form application a brief description of each agreement.

22. An applicant must certify under penalty of perjury in its short-form application that it has disclosed all real parties in interest to any agreements involving the applicant's participation in the competitive bidding for Phase II support. An applicant must also certify under penalty of perjury that it has not entered into any explicit or implicit agreements, arrangements, or understandings of any kind related to the support to be sought through the Phase II auction, other than those disclosed in its application. For purposes of making the required agreement disclosures, if parties agree in principle on all material terms prior to the application filing deadline, each applicant should provide a brief description of, and identify the other party or parties to, the agreement on its respective FCC Form 183, even if the agreement has not been reduced to writing. If an applicant has had discussions, but has not reached an agreement by the close of the initial filing window, it should not include the names of parties to the discussions on its application and may not continue such discussions with any applicants after the close of the initial filing window until after the auction closes.

23.
Ownership Disclosure Requirements.
Each applicant must comply with the ownership disclosure requirements in §§ 1.2112(a) and 54.315(a)(1) of the Commission's rules. Specifically, in completing the short-form application, an applicant must fully disclose information regarding the real party- or parties-in-interest in the applicant or application and the ownership structure of the applicant, including both direct and indirect ownership interests of 10 percent or more, as prescribed in § 1.2112(a) of the Commission's rules. Each applicant is responsible for ensuring that information submitted in its short-form application is complete and accurate.

24. In certain circumstances, an applicant may have previously filed an FCC Form 602 ownership disclosure information report or filed an auction application for a previous auction in which ownership information was disclosed. The most current ownership information contained in any FCC Form 602 or previous auction application on file with the Commission that used the same FRN the applicant is using to submit its FCC Form 183 will automatically be pre-filled into certain ownership sections on the applicant's FCC Form 183, if such information is in an electronic format compatible with FCC Form 183. Each applicant must carefully review any ownership information automatically entered into its FCC Form 183, including any ownership attachments, to confirm that all information supplied on FCC Form 183 is complete and accurate as of the application filing deadline for Auction 903. Any information that needs to be corrected or updated must be changed directly in FCC Form 183.

25.
Specific Universal Service Certifications.
An applicant must certify that it is in compliance with all statutory and regulatory requirements for receiving the universal service support it seeks. Alternatively, if expressly allowed by the rules specific to a high-cost support mechanism, an applicant may certify that it

acknowledges that it must be in compliance with such requirements before being authorized to receive Phase II support.

26. In addition, an applicant must certify that it will make any default payment that may be required pursuant to § 1.21004, and that it is aware that if its application is shown to be defective, the application may be dismissed without further consideration and penalties may apply.

27.
Specific Phase II Eligibility Requirements and Certifications. State Selections and Impermissible State Overlaps.
An applicant must select the specific state(s) in which it wishes to bid when submitting its short-form application. For purposes of the short-form application, the term “state” shall also include the District of Columbia and U.S. territories to the extent they contain eligible areas. An applicant will be able to place bids for eligible areas only in the state(s) identified in its short-form application and for which it is deemed eligible to bid. An applicant should take appropriate steps to ensure that the state(s) it selects fully reflect its bidding intentions because an applicant may not select any additional states in which to bid after the initial short-form application filing window closes. However, an applicant will be permitted to remove any state(s) it selected on its short-form application during the application resubmission filing window.

28. In addition, to discourage coordinated bidding that may disadvantage other bidders, separate applicants that are commonly controlled or are parties to a joint bidding arrangement are prohibited from bidding in any of the same states. Knowing the specific state(s) for which an applicant intends to bid, as well as its ownership and bidding arrangement information, all of which is collected on the short-form application, will help the Commission ensure that applicants comply with this prohibition.

29. Commonly controlled applicants are those in which the same individual or entity either directly or indirectly holds a controlling interest. To identify commonly controlled applicants, the Commission defines a “controlling interest” for purposes of the Phase II auction as an individual or entity with positive or negative
de jure
or
de facto
control of the applicant. In addition, the Commission defines “joint bidding arrangements” as those that (i) relate to any eligible area in the Phase II auction and (ii) address or communicate bids or bidding strategies, including arrangements regarding Phase II support levels (
i.e.,
bidding percentages) and specific areas on which to bid, as well as any arrangements relating to the post-auction market structure in an eligible area.

30. Entities that are commonly controlled or are parties to a joint bidding arrangement have two options for submitting short-form applications to avoid the restriction on state overlaps. It is important that such entities carefully consider these options prior to the short-form application filing deadline. At the deadline, the prohibition of certain communications begins, and after that time, only minor amendments or modifications to applications will be permitted.

31. First, such entities may submit a single short-form application and qualify to bid as one applicant in a state. To facilitate the identification of such applications, an applicant will indicate whether it is submitting the application on behalf of itself and one or more existing operating companies, and if so, to identify such companies. Similarly, parties to a joint bidding arrangement may form a consortium or a joint venture and submit a single short-form application that identifies each party to the consortium or joint venture. At least one related entity, affiliate, or member of the holding or parent company, consortium, or joint venture identified in the short-form application must demonstrate that it meets the operational and financial requirements of § 54.315(a)(7).

32. If a holding/parent company or a consortium/joint venture is announced as a winning bidder in Auction 903, the entity may designate at least one operating company controlled by the holding/parent company or by a member of (or an entity controlled by a member of) the consortium/joint venture that will be authorized to receive Phase II support for the winning bids in a state. While more than one operating company may be designated in a state, an operating company must be identified for each winning bid, whether the bid covers one CBG or a package of CBGs. Thus, a winning bidder cannot apportion either eligible census blocks within a winning bid for a CBG or separate CBGs within a winning package bid among multiple operating companies. The operating company that seeks authorization for Phase II support must file the long-form application in its own name. Because the operating company is the entity that will be required to meet the associated Phase II public interest obligations, the operating company should be the entity that will make the required certifications in the long-form application about its technical and financial qualifications and that will meet the public interest obligations. A holding/parent company or a consortium/joint venture short-form applicant that intends to form a new operating company if it is named as a winning bidder is expected to take whatever steps are necessary to form the operating company in advance of the long-form application filing deadline. The identified operating company must also be the entity that is designated as the ETC by the relevant state(s) in the areas covered by the winning bid(s) and is named in the letter of credit applicable to the specific winning bids for which it becomes authorized for support.

33. The second way commonly controlled entities or parties to a joint bidding arrangement can participate is by submitting short-form applications and qualifying to bid independently, though not in the same state. Such applicants must exercise due diligence to confirm prior to submitting their respective short-form applications that no other commonly controlled entity or party to a joint bidding arrangement, or an entity that controls any party to such an arrangement, has indicated its intent to bid in any of the same state(s) that each of the applicants has selected. To that end, an applicant must certify in its short-form application that it acknowledges that it cannot place any bids in the same state as (i) another commonly controlled entity, (ii) another party to a joint bidding arrangement related to Phase II support that it is a party to, or (iii) any entity that controls a party to such an arrangement. And, as noted above, to help identify any impermissible state overlaps, an applicant must provide in its short-form application a brief description of any bidding arrangements that are required to be disclosed.

34. If, during short-form application review, applicants that are commonly controlled and/or parties to a joint bidding arrangement are found to have selected the same state(s) in their respective applications, all such applications will be deemed to be incomplete on initial review. The WCB and the Wireless Telecommunications Bureau (WTB) (collectively, the Bureaus) will inform each affected applicant of the identity of each of the other applicant(s) with which it has an impermissible state overlap and the specific overlapping state(s). To the extent that an affected applicant has disclosed a joint bidding arrangement with one or more of the other affected applicants, these applicants must decide amongst themselves which applicant (if any) will bid in each overlapping state. Then, the applicants must revise their

short-form applications during the application resubmission window, as appropriate, so that only one of the applications includes the overlapping state and thus only one of the applicants can be deemed eligible to bid on that particular state. However, if the overlapping state(s) remain listed in more than one of the affected applicants' applications after the close of the resubmission filing window, none of the affected applicants will be eligible to bid in the overlapping state(s). Any affected applicant that has not entered into a joint bidding arrangement with the other affected applicant(s) (including commonly controlled entities) and disclosed that arrangement on its short-form application will be barred by the Commission's prohibited communications rule from discussing the overlap with any of the other affected applicant(s). As a result, such applicants will be prohibited from bidding in any state(s) where there is an overlap after the close of the resubmission filing window. After the Auction 903 qualified bidders are announced, each applicant will be able to view its final eligibility determination for each state in the Auction Application System. The bidding system will be configured to permit a qualified bidder to bid only in the state(s) for which that qualified bidder has been deemed eligible to bid.

35.
Operational History and Submission of Financial Statements.
The Commission has established two pathways for an applicant to demonstrate its operational experience and financial qualifications to participate in the Phase II auction. These pathways vary depending on whether the applicant has at least two years of operational experience. In addition, all applicants are required to provide financial and operational information, regardless of whether they have two years of operational experience.

36. With the first pathway, an applicant can certify, if applicable, on its FCC Form 183 that it has provided voice, broadband, and/or electric distribution or transmission services for at least two years prior to the short-form application filing deadline (or that the applicant is the wholly owned subsidiary of an entity that has done so), specify the number of years it has been operating, and identify the services it has provided. An applicant will be deemed to have started providing a service on the date it began commercially offering that service to end users.

37. If an applicant certifies that it has been providing voice and/or broadband services for at least two years, it must certify that it (or its parent company, if it is a wholly owned subsidiary) has filed FCC Form 477s as required during that time period. It must also identify the FRNs it (or its parent company) used to file the FCC Form 477s for the relevant filing periods. The relevant FCC Form 477 filing periods include data as of June 30, 2016; December 31, 2016; and June 30, 2017. FCC Form 477 data for these periods that were on file as of February 5, 2018 will be used to validate an applicant's representation on the short-form application that it has been providing a voice and/or broadband service for at least two years. If the applicant certifies that it has been providing only electric distribution or transmission services for at least two years (
i.e.,
it has not also been providing voice or broadband service for at least two years), it must submit with its short-form application qualified operating or financial reports that it (or its parent company, if it is a wholly owned subsidiary) filed with the relevant financial institution in 2016 and 2017 that demonstrate that the applicant (or its parent company) has been operating for at least two years. The applicant also must submit a certification that the submission is a true and accurate copy of the forms that were submitted to the relevant financial institution. The Commission will accept the Rural Utilities Service (RUS) Form 7, Financial and Operating Report Electric Distribution; the RUS Form 12, Financial and Operating Report Electric Power Supply; the National Rural Utilities Cooperative Finance Corporation (CFC) Form 7, Financial and Statistical Report; the CFC Form 12, Operating Report; the CoBank Form 7; or the functional replacement of one of these reports.

38. If an applicant that meets the foregoing requirements and it (or its parent company) is audited in the ordinary course of business, the applicant must also submit its (or its parent company's) financial statements from the prior fiscal year, including balance sheets, net income, and cash flow, that were audited by an independent certified public accountant. If the applicant is a holding company, it must submit its own audited financial statements. If the applicant is a consortium or a joint venture, it must submit the audited financial statements of the entity that is the subject of the at least two-year operational certification. If the applicant is a wholly owned subsidiary and has certified that its parent company has provided service for at least two years, it must submit the audited financial statements of its parent company. Because the short-form application filing window opens in the first quarter of 2018, the Commission requires that an applicant submit its (or its parent company's) 2016 audited financial statements. However, an applicant may, and is encouraged to, instead submit its fiscal year-end 2017 audited financial statements if they are finalized before the short-form application deadline.

39. If an applicant (or its parent company) is not audited in the ordinary course of business and the applicant does not submit its audited financial statements with the short-form application, it must certify that the long-form applicant will submit its (or its parent company's) audited financial statements from the prior fiscal year within 180 days after being announced as a winning bidder. Such an applicant must also submit its (or its parent company's) fiscal year-end 2016 unaudited financial statements with its short-form application, including balance sheet, net income, and cash flow. If an applicant certifies in its short-form application that it will submit audited financial statements during the long-form application process, but such statements are ultimately not submitted, the winning bidder or long-form applicant will be deemed to be in default and subject to a forfeiture.

40. An applicant that does not have at least two years of operational experience must submit with its short-form application its (or its parent company's) financial statements that are audited by an independent certified public accountant from the three most recent fiscal years (
i.e.,
2014, 2015, and 2016), including balance sheets, net income, and cash flow. An applicant is encouraged to instead submit fiscal year-end 2015, 2016, and 2017 audited financial statements if the 2017 audited financial statements are finalized in time to submit them before the short-form application deadline. Such an applicant must also submit with its short-form application a letter of interest from a qualified bank stating that the bank would provide a letter of credit to the applicant if the applicant becomes a winning bidder and is selected for bids of a certain dollar magnitude. The letter should include the maximum dollar amount for which the bank would be willing to issue a letter of credit to the applicant and a statement that the bank would be willing to issue a letter of credit that is substantially in the same form as set forth in the model letter of credit provided in Appendix B of the

Phase II Auction Order,
81 FR 44413, July 7, 2016.

41.
Financial Qualifications.
All applicants must report on their short-form application certain metrics from their financial statements (audited or unaudited) from the prior fiscal year being submitted with the applications. These metrics are meant to demonstrate that an applicant has sufficient financial qualifications to participate in the Phase II auction to minimize the number of winning bidders that default because they are unable to meet the long-form application requirements. Winning bidders will be required to provide additional, more specific evidence of their financial qualifications at the long-form application stage to demonstrate that they have the financial qualifications to meet the Phase II public interest obligations.

42. These metrics must be reported in the short-form application and will be scored using a five-point scale described below. The five-point scale will be used to score one yes/no question and four other common financial metrics. These metrics are based on information already contained in the financial statements that must be submitted with the short-form application. The five-point scale provides a streamlined process for assessing, efficiently and objectively, whether an applicant has sufficient financial qualifications or requires further financial review. An applicant that scores at least three points will be deemed to have sufficient financial qualifications to participate in the auction if it has submitted the required financial information with its short-form application.

43. The objective financial metrics for this five-point scale will not necessarily provide a full picture of an applicant's financial qualifications. Therefore, a score of less than three points will warrant a review of the full set of financial statements submitted with the short-form application, as well as other information submitted with the application and/or information submitted to the Commission in other contexts (
e.g.,
financials filed with a FCC Form 481, revenues reported in FCC Form 499, etc.). To the extent this information does not sufficiently demonstrate that an applicant is financially qualified, the application will be deemed incomplete and the Commission may request further information from the applicant during the application resubmission period.

44. The first point on the five-point scale is based on a yes/no question. Specifically, an applicant that submits audited financial statements will be asked whether it received an unmodified, non-qualified opinion from the auditor; an applicant will receive one point for a “yes” answer. An applicant must also enter the following metrics from the most recent financial statements submitted with the short-form application: (1) Latest operating margins (
i.e.,
operating revenue less operating expenses excluding depreciation), where an operating margin greater than zero will receive one point; (2) Times Interest Earned Ratio (TIER), where a TIER ((net income plus interest expense) divided by interest expense) greater than or equal to 1.25 will receive one point; (3) current ratio (current assets divided by current liabilities), where a ratio greater than or equal to 2 will receive one point; and (4) equity ratio (total equity divided by total capital), where a result greater than or equal to 0.4 will receive one point. This scoring methodology is summarized in the table below:

Financial metric

Response or
threshold

Score

If the applicant has audited financial statements, did it receive an unmodified (non-qualified) opinion?
Yes
+1

Operating margin
>0
+1

Times Interest Earned Ratio (TIER)
≥1.25
+1

Current Ratio (Ratio current assets/current liabilities)
≥2
+1

Equity Ratio (Total equity/total capital (total equity plus total liabilities))
≥0.4
+1

45. The question regarding an applicant's audit opinion measures both the applicant's financial condition and operations. The metric for operating margin measures core profitability, and the metrics for current ratio and equity ratio measure the applicant's short- and long-term financial condition, respectively. TIER measures the ability to pay interest on outstanding debt.

46. The Commission will consider an applicant with a total score of three points or greater (
i.e.,
a score of one for at least three of the metrics) to have sufficient financial qualifications to participate in Auction 903, regardless of the applicant's score for any specific metric. Failure to score at least three does not indicate that an applicant lacks the financial qualifications to participate in the auction. Rather, it indicates that further review is required. During this further review, an applicant's operating cash flow and EBITDA will be considered, as these metrics may provide a useful context for assessing an applicant's financial status. If an applicant is unable to demonstrate that it has sufficient financial qualifications based on the information submitted with the short-form application and information submitted to the Commission in other contexts, Commission staff will be able to ask the applicant questions and request additional information during the resubmission filing window.

47.
Eligibility to Bid for Performance Tier and Latency Combinations.
The Commission requires an applicant to demonstrate its eligibility to bid for the performance tier and latency combination(s) it selects in its application in advance of the start of bidding in the auction. An applicant must submit high-level operational information in its short-form application to complete its operational showing. It is the Commission's objective to safeguard consumers from situations where bidders unable to meet the specified service requirements divert support from bidders that can meet the Phase II public interest obligations, and the short-form application can accomplish this purpose. However, a determination at the short-form stage that an applicant is eligible to bid for a given performance tier and latency combination and has sufficient access to spectrum, if applicable, does not preclude a determination at the long-form application stage that a long-form applicant lacks the requisite technical qualifications or access to spectrum, and thus should not be authorized to receive Phase II support for that eligible area.

48.
Selecting Performance Tier and Latency Combinations.
As required by the Commission's rules, each applicant must select in its short-form application the performance tier and latency combination(s) for which it intends to bid in each state where it seeks support. For each tier and latency combination, an applicant must indicate the technology or technologies it intends to use to meet the associated requirements. If an applicant intends to use spectrum, it must also indicate the spectrum band(s) and total amount of uplink and

downlink bandwidth (in megahertz) that it has access to for the last mile for each performance tier and latency combination it selected in each state.

49.
Operational Information.
An applicant must submit in its short-form application sufficient operational information regarding its experience providing voice, broadband, and/or electric distribution or transmission service and its plans for provisioning service if awarded support. Such information will demonstrate whether an applicant has the technical qualifications to bid for specific performance tier and latency combinations. Specifically, an applicant must submit high-level operational information to complete its operational showing and demonstrate that it can be expected to be reasonably capable of meeting the public interest obligations (
e.g.,
speed, usage, latency, and service milestones) for each performance tier and latency combination selected.

50. Eligibility to bid for specific tier and latency combinations will be determined on a state-by-state basis. Accordingly, for each selected performance tier and latency combination, an applicant will be required to demonstrate that it is reasonably capable of meeting the relevant public interest obligations for each state it selects and to explain how it intends to provision service if awarded support. Because compliance with the service obligations will be determined on a state-level basis and some applicants may propose to deploy hybrid networks, it will be useful to understand how an applicant selecting multiple performance tier and latency combinations within a state intends to meet the requirements for each combination in the state. To reduce the risk of defaults, the combination(s) selected by an applicant will be evaluated to determine its eligibility to bid for any such combination(s).

51. An applicant must answer the questions listed in Appendix A of the
CAF II Auction Procedures Public Notice
for each state it selects in its application. The questions are intended to elicit short, narrative responses from the applicant regarding its experience in providing voice, broadband, and/or electric distribution or transmission service, and the network(s) it intends to use to meet its Phase II public interest obligations. The questions are designed to confirm that the applicant has developed a preliminary design or business case for meeting the public interest obligations for its selected performance tier and latency combinations. They ask the applicant to identify the information it could make available to support the assertions in its application. The Commission does not anticipate that it will be unduly burdensome to respond to these questions because, at a minimum, each applicant will need to have started planning at a high-level how it intends to meet the relevant Phase II public interest obligations as part of its obligation to conduct due diligence prior to the auction. Because a short-form applicant will not know where it might be authorized to receive support and will have six years to build out or upgrade its network, the information submitted may be based on a preliminary network design, which may be modified once the winning bids are announced and as the network is built out.

52. The Commission expects concise descriptions from applicants. The Commission will implement its usual procedures for reviewing auction applications to help ensure that eligibility determinations are made consistently across all applications by, among other things, leveraging the expertise of engineers and/or other subject matter experts.

53. Until an applicant knows where it will be awarded support and how many locations it will be required to serve, it may not have made all its decisions regarding how it will meet its Phase II obligations. However, an applicant is required to certify that it has performed the necessary due diligence to participate in the Phase II auction. This includes making sure that the applicant will be able to build and operate facilities that will fully comply with all applicable requirements. Accordingly, it is reasonable to expect that an applicant will have developed a preliminary plan for how it will meet its Phase II obligations if awarded support. If an applicant has not demonstrated that it is reasonably capable of meeting the relevant public interest obligations based on the information submitted in the short-form application, the applicant will be asked to submit evidence during the resubmission filing window to demonstrate that it has developed a preliminary plan.

54.
Modifications to Proposed Operational Questions.
The Commission has made some modifications to the originally proposed operational questions to provide greater clarity on how an applicant should respond to them.

55. First, the Commission retains the question about the total number of subscribers an applicant has served with voice and broadband because the size of a service provider's current operations provides useful insight into how an applicant has scaled its network in the years it has been operating. However, an applicant can provide an estimate and should provide the current total number of subscribers (as of the short-form application filing deadline). If an applicant is no longer providing service in any state, the applicant must estimate the number of customers that were served at the beginning of the last full year that it did provide service.

56. Second, the Commission retains the question asking an applicant to identify the relevant industry standards for the last-mile technologies it intends to use to meet its Phase II obligations if it becomes a winning bidder and is authorized to receive support. This question will give an applicant the opportunity to demonstrate that it has started planning how it will meet the Phase II obligations and that it intends to use technologies that are generally accepted as having the capabilities to meet the relevant performance standards. However, an applicant is not precluded from proposing to use non-standards-based technology. So that an applicant intending to use such technology can demonstrate that the technology has suitable capabilities for meeting the applicable performance requirements, such an applicant must identify the vendors and the products it is considering using and provide links to the vendors' websites and to publicly available technical specifications of the products. If the technical specifications are not publicly available, the applicant may submit them with its application.

57. The Commission will treat the responses to the questions in Appendix A of the
CAF II Auction Procedures Public Notice
and any associated supporting documentation as confidential and will withhold them from routine public inspection. Accordingly, there is no need for an applicant to submit a § 0.459 confidentiality request to seek protection of this information from public disclosure.

58.
Operational Assumptions.
The Commission also adopts certain assumptions that an applicant will need to make about network usage and subscription rates when determining, for purposes of its short-form application, whether it can meet the public interest obligations for its selected performance tier and latency combination(s) if it becomes a winning bidder and is authorized to receive Phase II support.

59. First, an applicant must assume it will offer service to at least 95 percent of the required number of locations across its bids in each state by the end of the six-year build-out period. This

assumption is consistent with the requirement that each winning bidder submit with its long-form application a network diagram with a certification by a professional engineer that the network would deliver, to at least 95 percent of the required number of locations in each relevant state, voice and broadband service that meets the relevant performance requirements. While Phase II support recipients should plan to offer service to 100 percent of the required number of locations and take advantage of the flexibility to offer service to 95 percent of the required number of locations only in unforeseen circumstances, an assumption by an applicant that it will offer service to 95 percent of locations will provide reasonable assurance that the applicant will engineer its network so that it is reasonably capable of meeting the relevant public interest obligations for the required number of locations. While each winning bidder that is authorized to receive Phase II support will be required to offer service only in areas where it is authorized to receive support, after the close of a round, each bid represents an irrevocable offer to meet the terms of the bid if it becomes a winning bid. Accordingly, an applicant that becomes a qualified bidder should assume for each round of the auction that it could be required to offer service meeting the relevant requirements to the number of locations across all the bids that it places in each state.

60. Second, consistent with assumptions made in the CAM, an applicant must assume that it will have at least a 70 percent subscription rate for its voice and broadband services by the time it will meet the final service milestone if it becomes authorized to receive support. Because it may take time for an applicant that becomes a winning bidder and is authorized to receive Phase II support to obtain customers as it builds out its network, applicants may factor this into their engineering and make reasonable assumptions about how the subscription rate will scale during the build-out term. Regardless of the assumptions an applicant makes about its subscription rate when engineering its network, the applicant must keep in mind that its network must be capable of scaling to meet demand. That is, if a Phase II support recipient reports in the High Cost Universal Service Portal that a location is served, it must be capable of providing service meeting the relevant performance requirements to that location within 10 business days after receiving a request.

61. An applicant, if it becomes a winning bidder and is authorized to receive Phase II support, will not be required to demonstrate that it has achieved at least a 70 percent subscription rate once it has deployed to the required number of locations. Instead, an applicant must assume for purposes of its short-form application that it will achieve at least a 70 percent subscription rate when engineering its network. Some Phase II support recipients will achieve at least a 70 percent subscription rate in the areas where they are authorized to receive support and others will not. However, requiring an applicant to make a specific assumption will give the Commission reasonable assurance that an applicant is engineering a network that can be scaled to meet potential demand. Given that subscription rates are likely to vary from area to area and over the 10-year period, the most objective way to minimize defaults and verify that an applicant is making reasonable assumptions about its subscription rate is to require all applicants to make the same assumption about the minimum subscription rate at the end of the build-out period. By adopting a minimum 70 percent subscription rate, applicants are provided some additional clarity for how they can demonstrate that they are technically qualified to participate in the Phase II auction. These benefits would not be achieved by simply presuming that an applicant will have the incentive to make reasonable subscription assumptions because the applicant will ultimately be subject to network testing requirements and non-compliance measures if it becomes a winning bidder and is authorized to receive Phase II support.

62. By requiring an applicant to assume a minimum subscription rate of 70 percent, the Commission is balancing the reality that not all consumers in a given area may subscribe to the Phase II-funded service with the requirement that Phase II support recipients provide the required service to consumers living at a funded location within 10 business days of a request. In the Commission's predictive judgment, a 70 percent subscription rate is a reasonable assumption for engineering a network when taking into account (i) that existing subscription rates, which in some cases are lower than 70 percent, may not reflect actual demand over the 10-year support term, which would be expected to increase as data usage increases and higher speeds are made available, and (ii) in the high-cost areas where the Phase II support recipient will be deploying its network, it is more likely to be the only broadband provider, which may increase adoption rates. There is a risk that this requirement may result in an increase in costs and could potentially lead to an applicant engineering a network that is capable of serving more locations than actually request service. However, this potential harm is outweighed by the risk that a support recipient could engineer a network that is incapable of meeting demand and may leave consumers unserved if the Commission does not take proactive measures to ensure that a support recipient is making reasonable assumptions about its potential subscription rate.

63. Finally, each winning bidder must provide high-level information regarding its peak period data usage assumptions during the short-form application stage and detailed information regarding its peak period data usage assumptions during the long-form application stage once the bidders know the number of locations they will be required to serve. The Commission intends to review each winning bidder's response on a case-by-case basis to ensure that it is making reasonable assumptions given the required data usage allowances for the performance tiers for which it has been named a winning bidder.

64.
Specific Information Required from Applicants Proposing to Use Spectrum to Provide Service.
An applicant that intends to use radiofrequency spectrum to offer its voice and broadband services must submit information regarding whether the spectrum to which it has access will enable the applicant to meet the public interest obligations for each performance tier and latency combination that it selects in its application.

65. The Commission's Phase II auction rules require an applicant that plans to use spectrum to demonstrate that it has (i) the proper spectrum use authorizations, if applicable; (ii) access to operate on the spectrum it intends to use; and (iii) sufficient spectrum resources to cover peak network usage and meet the minimum performance requirements to serve the fixed locations in eligible areas. Consistent with the Commission's approach in the Mobility Fund Phase I auction, for the described spectrum access to be sufficient, the applicant must have obtained any necessary approvals from the Commission for the spectrum, if applicable, by the short-form application filing deadline, subject to the exceptions described below. The Phase II auction short-form application

rules also require an applicant to certify that it will retain such authorizations for at least 10 years.

66. An applicant that intends to use licensed or unlicensed spectrum must in its short-form application (i) identify the spectrum band(s) it will use for the last mile, backhaul, and any other parts of the network; (ii) describe the total amount of uplink and downlink bandwidth (in megahertz) that it has access to in each spectrum band for the last mile; (iii) describe the authorizations (including leases) it has obtained to operate in the spectrum, if applicable; and (iv) list the call signs and/or application file numbers associated with its spectrum authorizations, if applicable. Any applicant that intends to provide service using satellite technology must describe in its short-form application its expected timing for applying for earth station licenses if it has not already obtained these licenses. Moreover, because an applicant can apply to obtain a microwave license at any time, an applicant that intends to obtain microwave license(s) for backhaul to meet its Phase II public interest obligations may describe in its short-form application its expected timing for applying for such license(s), if it has not already obtained them.

67. This spectrum information, combined with the operational and financial information submitted in the short-form application, will allow an applicant to demonstrate that it has sufficient spectrum resources and is reasonably capable of meeting the public interest obligations required by its selected performance tier and latency combination(s). If a license, lease, or other authorization is set to expire prior to the end of the 10-year support term, the Commission will infer that the authorization will be able to be renewed when determining at the short-form application stage whether an applicant has sufficient access to spectrum. However, this inference will in no way influence or prejudge the Commission's resolution of any future renewal application, and if the authorization is not renewed during the support term and the Phase II support recipient is unable to meet its Phase II obligations, that support recipient will be in default and subject to any applicable non-compliance measures.

68. In Appendix B of the
CAF II Auction Procedures Public Notice,
the Commission identifies the spectrum bands that it anticipates could be used for the last mile to meet Phase II obligations and indicate whether the spectrum bands are licensed or unlicensed. The Commission would expect that a service provider operating in these bands could, at a minimum, offer service meeting the requirements for the Minimum performance tier provided that the service provider is using sufficient bandwidth in the spectrum band(s) and a technology that can operate on these spectrum bands consistent with applicable U.S. and international rules and regulations.

69. Appendix B of the
CAF II Auction Procedures Public Notice
is a non-exhaustive list of spectrum bands that an applicant could potentially use to meet its performance obligations. An applicant is not precluded from proposing to use a spectrum band that is not included in Appendix B, provided that the applicant can demonstrate that it is reasonably capable of meeting the performance requirements over the 10-year support term for the selected performance tier and latency combination(s) using that spectrum. An applicant that selects a spectrum band listed in Appendix B for a particular performance tier and latency combination may not necessarily be deemed eligible to bid for that combination. Such a showing depends on the technology the applicant intends to use and whether such use is consistent with applicable U.S. and international rules and regulations, the performance tier and latency combination(s) selected, the bandwidth to which the applicant has access in the band(s), and the authorizations the applicant has, if applicable, to access the spectrum. Because these factors will vary for each applicant, the Commission declines to designate specific spectrum bands as “safe harbors” based on whether providers have historically met the relevant requirements for certain performance tier and latency combinations using those spectrum bands.

70.
Collection of Identifiers Associated With Information Submitted to the Commission in Other Contexts.
In addition to information provided in a short-form application, any relevant information that an applicant has submitted to the Commission in other contexts may be considered during application review for purposes of determining whether the applicant is expected to be reasonably capable of meeting the public interest obligations for its selected performance tier and latency combination(s) if it becomes a winning bidder and is authorized to receive Phase II support. This other information would include the following: Data reported in FCC Form 477 Local Telephone Competition and Broadband Report (FCC Form 477), FCC Form 481 Carrier Annual Reporting Data Collection Form (FCC Form 481), and FCC Form 499-A Annual Telecommunications Reporting Worksheet (FCC Form 499-A), including non-public information. For example, whether an applicant already offers service that meets the public interest obligations associated with its selected performance tier and latency combination(s) and the number of subscribers to that service may be considered.

71. Specifically, applicants must submit in the short-form application any FCC Registration Numbers (FRNs) that an applicant or its parent company—and in the case of a holding company applicant, the operating companies identified in its application—has used to submit its FCC Form 477 data during the past two years. Because the short-form application deadline is March 30, 2018, the Commission will collect FCC Form 477 FRNs that were used for the filings for data as of June 30, 2017, data as of December 31, 2016, and data as of June 30, 2016. Requiring submission of the FRNs that an applicant has used for FCC Form 477, will allow reviewers to cross-reference FCC Form 477 data that an applicant (or a related entity) has filed during the past two years.

72. An applicant must also submit in the short-form application any study area codes (SACs) indicating that the applicant (or its parent company/subsidiaries) is an existing ETC. A holding-company applicant must submit the SACs of its operating companies identified in the application. An applicant is required by the Commission's Phase II short-form application rules to disclose its status as an ETC if applicable.

73. Finally, applicants must submit in the short-form application any FCC Form 499 filer identification numbers that the applicant or its parent company and, in the case of a holding company, its operating companies identified in the application have used to file an FCC Form 499-A in the past year, if applicable. Because the short-form application filing deadline is March 30, 2018, applicants must submit filer identification numbers that were used for the April 3, 2017 filing.

74.
Limiting Eligibility to Bid for Certain Performance Tier and Latency Combinations.
The Commission will preclude applicants planning to use certain technologies to meet their Phase II obligations from becoming eligible to bid for performance tier and latency combinations that are inconsistent with those technologies. Specifically, the Auction Application System will not allow an applicant that selects low

latency in combination with any of the performance tiers to also select geostationary satellites as the technology for those performance tier and latency combinations. The Auction Application System also will not allow an applicant that selects the Gigabit performance tier in combination with either high or low latency in its short-form application to also select geostationary satellites as the technology for those tier and latency combinations.

75. In addition, the Auction Application System will allow an applicant that selects the Gigabit and Above Baseline performance tiers to also select the fixed wireless and/or digital subscriber line (DSL) technologies for those performance tiers on the short-form application. However, the applicant's most recent publicly available FCC Form 477 deployment and subscription data, in addition to the applicant's operational information, will be used to determine the applicant's eligibility to bid in those tiers. If the FCC Form 477 data for that period do not show that the applicant offers residential Gigabit service using fixed wireless or DSL (whichever is selected by the applicant), the applicant will not be deemed eligible to bid in the Gigabit performance tier. If an applicant does not offer a fixed wireless or DSL service at or above 100/20 Mbps based on its FCC Form 477 data, the applicant may be deemed eligible to bid in the Above Baseline performance tier, but that determination will be informed by its FCC Form 477 data as well as its operational information.

76. Applicants that propose to use other technologies that lack historical deployment data are not precluded from bidding for any specific performance tier and latency combination if such applicants become qualified to bid. Without historical deployment data, the Commission is unable to decide categorically whether it can reasonably predict that a new technology would generally be able to meet the relevant public interest obligations by the required service milestones. The Commission will consider each application proposing to use such a new technology on a case-by-case basis, taking into account the applicant's experience, its responses to the short-form operational questions, its spectrum access (if applicable), and other information collected in the short-form application. The additional costs of having to review these technologies on a case-by-case basis are outweighed by the potential benefits to consumers if an applicant can use new technologies to bring advanced services to unserved areas.

77.
Standard for Evaluating Information on Performance Tier and Latency Combinations; Initial and Final Determinations of Eligibility to Bid on Selected Combinations.
The Bureaus will review the information submitted by an applicant in its short-form application as well as any other relevant and available information to determine whether the applicant has planned how it would provide service if awarded support and whether it is expected to be reasonably capable of meeting the public interest obligations for its selected performance tier and latency combination(s) in its selected state(s). If an applicant demonstrates that it is reasonably capable of meeting the public interest obligations for one or more selected tier and latency combinations in a state, the applicant will be deemed eligible to bid for those performance tier and latency combination(s) in that state.

78. If an applicant is unable to demonstrate that it is reasonably capable of meeting the relevant public interest obligations for its selected performance tier and latency combination(s) based on the information submitted in its short-form application and other available information, the Bureaus will deem the application incomplete. The applicant will then have another opportunity during the application resubmission period to submit additional information to demonstrate that it meets this standard. The Bureaus will notify the applicant that additional information is required to assess the applicant's eligibility to bid for one or more of the specific performance tier and latency combination(s) selected in its short-form application. During the application resubmission filing window, the applicant will be able to submit additional information to establish its eligibility to bid for the relevant performance tier and latency combination(s). An applicant will also have the option of selecting a lesser performance tier and latency combination for which it might be more likely to meet the relevant public interest obligations. The Commission considers these to be permissible minor modifications of the short-form application. After the Auction 903 qualified bidders are announced, each applicant will be able to view its final eligibility determination for each performance tier and latency combination in the selected state(s) for which it is eligible through the Auction Application System. An applicant must have at least one performance tier and latency combination deemed eligible in at least one state in order to become qualified to bid. The bidding system will be configured to permit a qualified bidder to bid only for the performance tier and latency combination(s) for which it has been deemed eligible to bid.

79.
Due Diligence Certification.
Each applicant has sole responsibility for investigating and evaluating all technical and marketplace factors that may have a bearing on the level of Phase II support for which it will seek to bid in Auction 903 if it becomes a qualified bidder. Each qualified bidder is responsible for assuring that, if it becomes a winning bidder and is ultimately authorized to receive Phase II support, it will be able to build and operate facilities in accordance with the Phase II obligations and the Commission's rules generally.

80. Applicants should be aware that Auction 903 represents an opportunity to apply for Phase II support, subject to certain conditions and regulations. Auction 903 does not constitute an endorsement by the Commission of any particular service, technology, or product, nor does the award of Phase II support constitute a guarantee of business success.

81. An applicant should perform its due diligence research and analysis before proceeding, as it would with any new business venture. In particular, the Commission strongly encourages each applicant to review all underlying Commission orders and to assess all pertinent economic factors relating to the deployment of service in a particular area.

82. Each applicant should perform technical analyses or refresh its previous analyses to assure itself that, should it become a winning bidder for Phase II support, it will be able to build and operate facilities that fully comply with all applicable technical and legal requirements and will advertise and provide the service to customers. Each applicant should verify that it can identify enough locations within the eligible census blocks that it intends to include in its bids to be able to offer service meeting the relevant requirements to the required number of locations if it becomes a winning bidder and is authorized to receive Phase II support. Each Phase II support recipient will be required to offer service meeting the relevant requirements to the total number of locations across all the winning bids in each state where it is authorized to receive support. The total number of locations where a Phase II support recipient is required to offer service in each state is determined by

adding up the number of locations the CAM estimated for each eligible census block included in the support recipient's winning bids in the state. The Commission has adopted a process by which support recipients that cannot identify enough locations to meet their state location totals can demonstrate that the number of actual, on-the-ground locations is lower than the number estimated by the CAM. Such a demonstration must be made within one year after the release of the Auction 903 closing public notice and will be subject to review by WCB following comment by relevant stakeholders and potentially an audit. Applicants' due diligence should be informed by the availability of and requirements for this process, in addition to other factors.

83. The Commission strongly encourages each applicant to conduct its own research prior to Auction 903 to determine the existence of pending administrative or judicial proceedings that might affect its decision on participation in the auction. The due diligence considerations mentioned in the document do not comprise an exhaustive list of steps that should be undertaken prior to participating in this auction. As always, the burden is on the applicant to determine how much research to undertake, depending upon specific facts and circumstances related to its interests.

84. Pending and future judicial proceedings, as well as certain pending and future proceedings before the Commission—including applications, applications for modification, notices of proposed rulemaking, notices of inquiry, petitions for rulemaking, requests for special temporary authority, waiver requests, petitions to deny, petitions for reconsideration, informal objections, and applications for review—may relate to or affect licensees or applicants for support in Auction 903. Each prospective applicant is responsible for assessing the likelihood of the various possible outcomes and for considering the potential impact on Phase II support available through this auction.

85. Each applicant is solely responsible for identifying associated risks and for investigating and evaluating the degree to which such matters may affect its ability to bid on or otherwise receive Phase II support. Each applicant is responsible for undertaking research to ensure that any support won in this auction will be suitable for its business plans and needs. Each applicant must undertake its own assessment of the relevance and importance of information gathered as part of its due diligence efforts.

86. The Commission makes no representations or guarantees regarding the accuracy or completeness of information in its databases or any third-party databases, including, for example, court docketing systems. To the extent the Commission's databases may not include all information deemed necessary or desirable by an applicant, an applicant must obtain or verify such information from independent sources or assume the risk of any incompleteness or inaccuracy in said databases. Furthermore, the Commission makes no representations or guarantees regarding the accuracy or completeness of information that has been provided by incumbent licensees and incorporated into the Commission's databases.

87. To confirm an applicant's understanding of its obligations, the applicant must certify under penalty of perjury in its short-form application that the applicant acknowledges that it has sole responsibility for investigating and evaluating all technical, marketplace, and regulatory factors that may have a bearing on the level of Connect America Fund Phase II support it submits as a bid, and that, if the applicant wins support, it will be able to build and operate facilities in accordance with the Connect America Fund obligations and the Commission's rules generally.

88. This certification will help ensure that an applicant acknowledges and accepts responsibility, if it becomes a qualified bidder, for its bids and any forfeitures imposed in the event of default, and that it will not attempt to place responsibility for the consequences of its bidding activity on either the Commission or any of its contractors.

89.
Eligible Telecommunications Carrier Certification.
An applicant must acknowledge in its short-form application that it must be designated as an ETC for the areas in which it will receive support prior to being authorized to receive support. Only ETCs designated pursuant to section 214(e) of the Communications Act of 1934, as amended (the Act), 47 U.S.C. 254 “shall be eligible to receive specific Federal universal service support.” Section 214(e)(2) states the primary responsibility for ETC designation. However, section 214(e)(6) provides that the Commission is responsible for processing requests for ETC designation when the service provider is not subject to the jurisdiction of any state commission. Support is disbursed only after the provider receives an ETC designation and satisfies the other long-form application requirements.

90. The Commission decided that an applicant need not be an ETC as of the initial short-form application filing deadline for Auction 903, but that it must obtain a high-cost ETC designation for the areas covered by its winning bids within 180 days after being announced as a winning bidder. Absent a waiver of the deadline, a long-form applicant that fails to obtain the necessary ETC designations by this deadline will be subject to an auction forfeiture as described below, and will not be authorized to receive Phase II support. In addition to all the requirements for participating in the Phase II auction, each applicant should be familiar with the requirements for a high-cost ETC. For example, all high-cost ETCs are required to offer Lifeline voice and broadband service to qualifying low-income consumers pursuant to the Lifeline program rules. Moreover, when the requirement has been fully implemented, each Phase II support recipient will be required to bid on category one telecommunications and internet access services in response to a posted FCC Form 470 seeking broadband service that meets the connectivity targets for the schools and libraries universal service support program (E-rate) for eligible schools and libraries located within any area in a census block where the ETC is receiving Phase II support. A high-cost ETC may also be subject to state-specific requirements imposed by the state that designates it as an ETC.

91.
Procedures for Limited Disclosure of Application Information.
Consistent with the Commission's practice in the Mobility Fund Phase I auction (Auction 901) and recent spectrum auctions, procedures limit the application information that will be disclosed to the public.

92. Specifically, to help ensure anonymous bidding and to protect applicants' competitively sensitive information, the Commission will withhold from the public, as well as other applicants, the following information submitted with an Auction 903 short-form application at least until after the auction closes and the results are announced:

• The state(s) selected by an applicant.

• The state(s) for which the applicant has been determined to be eligible to bid.

• The performance tier and latency combination(s) selected by an applicant and the associated weight for each combination.

• The spectrum access attachment submitted with the short-form application.

• The performance tier and latency combination(s) for which the applicant has been determined to be eligible to bid and the associated weight for each combination.

• An applicant's responses to the questions in Appendix A of the
CAF II Auction Procedures Public Notice
and any supporting documentation submitted in any attachment(s) that are intended to demonstrate an applicant's ability to meet the public interest obligations for each performance tier and latency combination that the applicant has selected in its application.

• Any financial information contained in an applicant's short-form application for which the applicant has requested confidential treatment under the abbreviated process in § 0.459(a)(4) of the Commission's rules.

93. All other application information that is not subject to a request for confidential treatment will be publicly available upon the release of the public notice announcing the status of submitted short-form applications after initial review.

94. Any applicant may use an abbreviated process under § 0.459(a)(4) to request confidential treatment of the financial information contained in its short-form application. The abbreviated process allows applicants to answer a simple yes/no question on FCC Form 183 as to whether they wish their information to be withheld from public inspection. Requests to withhold financial data that applicants elsewhere disclose to the public will not be granted and that information may be disclosed in the normal course.

95. Unlike the typical § 0.459 process, which requires that an applicant submit a statement of the reasons for withholding the information for which confidential treatment is sought from public inspection, an applicant that seeks confidential treatment of the financial information contained in its short-form application need not submit a statement that conforms with the requirements of § 0.459(b) unless and until its request for confidential treatment is challenged. Because the Commission has found in other contexts that financial information that is not otherwise publicly available could be competitively sensitive, applicants seeking confidential treatment of financial information may use this abbreviated process. The Commission will not, however, permit an applicant to seek confidential treatment of the total financial score that it receives for its financial metrics (using the five-point scale adopted above) pursuant to the § 0.459(a)(4) abbreviated process. Because an applicant's total financial score will not identify an applicant's specific financial information, it does not raise the same competitive sensitivity concerns.

96. The § 0.459(a)(4) abbreviated process for requesting confidential treatment may not be used by an applicant to request confidential treatment of any information in its short-form application other than its financial information. Thus, an applicant that wishes to seek confidential treatment of any other portion(s) of its short-form application must file a regular § 0.459 request for confidential treatment of any such information with its short-form application (other than responses to the questions in Appendix A of the
CAF II Auction Procedures Public Notice
and associated supporting documentation that the Commission presumes to be competitively sensitive). This request must include a statement of the reasons for withholding those portions of the application from public inspection. Additionally, in the event an applicant's abbreviated request for confidential treatment of the financial information contained in its short-form application is challenged, the applicant must submit a request for confidential treatment of its financial information that conforms with the requirements of § 0.459 within 10 business days after receiving notice of the challenge.

97. After the auction closes and the results are announced, the Commission no longer has a need to preserve anonymous bidding. Accordingly, the Commission will make publicly available all short-form application information that was withheld from the public prior to and/or during the auction, except for (1) responses to the questions in Appendix A of the
CAF II Auction Procedures Public Notice
and any supporting information submitted in any attachment(s) that are intended to demonstrate an applicant's ability to meet the public interest obligations for the performance tier and latency combination(s) that the applicant selected in its application, and (2) any financial information for which the § 0.459(a)(4) abbreviated confidential treatment process was requested and continues to be afforded. This approach is consistent with the Commission's interest in a transparent auction process and its practice in the Mobility Fund Phase I auction and typical spectrum auctions.

98.
Prohibited Communications and Compliance with Antitrust Laws.
To help protect competition in the auction, the Commission's rules prohibit an applicant from communicating certain auction-related information to another applicant from the auction application filing deadline until the post-auction deadline for winning bidders to file long-form applications for support. More specifically, § 1.21002 of the Commission's rules prohibits an applicant in Auction 903 from cooperating or collaborating with any other applicant with respect to its own, or one another's, or any other competing applicant's bids or bidding strategies, and from communicating with any other applicant in any manner the substance of its own, or one another's, or any other competing applicant's bids or bidding strategies during the prohibition period. The rule provides an exception for communications between applicants if those applicants identify each other on their respective applications as members of a joint bidding arrangement and certify that the application identifies all real parties in interest to agreements related to the applicant's participation in the auction. The targeted restrictions imposed by the rule are necessary to serve the important public interest in a fair and competitive auction.

99.
Entities Covered by § 1.21002.
Section 1.21002's prohibition of certain communications will apply to any applicant that submits a short-form application to participate in Auction 903. This prohibition applies to all applicants that submit short-form applications regardless of whether such applicants become qualified bidders or actually bid.

100. “Applicant” for purposes of this section includes the entity filing the application, each party capable of controlling the applicant, and each party that may be controlled by the applicant or by a party capable of controlling the applicant.

101. Subject to the joint bidding arrangement exception, the prohibition applies to communications of an applicant that are conveyed to another applicant. The prohibition of “communicating in any manner” includes public disclosures as well as private communications and indirect or implicit communications, as well as express statements of bids and bidding strategies. Consequently, an applicant must take care to determine whether its auction-related communications may reach another applicant, unless the exception applies.

102. Applicants subject to § 1.21002 should take special care in circumstances where their officers, directors, and employees may receive information directly or indirectly relating to any other applicant's bids or bidding strategies. Information received by a party related to the applicant may

be deemed to have been received by the applicant under certain circumstances. For example, Commission staff have found that, where an individual serves as an officer and director for two or more applicants, the bids and bidding strategies of one applicant are presumed conveyed to the other applicant, and, absent a disclosed agreement that makes the rule's exception applicable, the shared officer creates an apparent violation of the rule. Commission staff have not addressed a situation where non-officers or directors receive information regarding a competing applicant's bids or bidding strategies and whether that information should be presumed to be communicated to the applicant.

103.
Prohibition Applies Until Long-Form Application Deadline.
The § 1.21002 prohibition of certain communications begins at the short-form application filing deadline and ends at the long-form application deadline. Long-form applications will be due within 10 business days after release of the Auction 903 closing public notice, unless otherwise provided by public notice.

104.
Prohibited Communications.
Section 1.21002 prohibits an applicant from communicating with another applicant only with respect to “its own, or one another's, or any other competing applicant's bids or bidding strategies.” Thus, the prohibition does not apply to all communications between or among applicants; it applies to any communication conveying, in whole or part, directly or indirectly, the applicant's or a competing applicant's bids or bidding strategies.

105. All applicants applying to obtain support are “competing applicants” under the rule. Parties apply to participate in Auction 903 to obtain support from a fixed budget that is insufficient to provide support at the reserve price to all eligible areas. The bidding system determines which areas will receive support based on the bids placed for any areas. As in the reverse auction portion of the broadcast incentive auction, applicants are competing with one another regardless of whether each seeks to serve different geographic areas with Phase II support.

106. A communication must convey “bids or bidding strategies” to be covered by the prohibition. The prohibition applies to the same subject matter included in “joint bidding arrangements,” as defined for purposes of determining impermissible state overlaps among applicants. Those arrangements (i) relate to any eligible area in the Phase II auction and (ii) address or communicate bids or bidding strategies, including arrangements regarding Phase II support levels (
i.e.,
bidding percentages) and specific areas on which to bid, as well as any arrangements relating to the post-auction market structure in an eligible area. Thus, covered parties should be careful to avoid direct or indirect communications with another applicant that (i) relate to any Phase II auction eligible area(s) and (ii) address Phase II support levels, including potential arrangements regarding the post-auction market structure in eligible areas.

107. Business discussions and negotiations that are unrelated to bidding in Auction 903 and that do not convey information about Phase II bids or bidding strategies are not prohibited by the rule. Moreover, not all auction-related information is covered by the prohibition. For example, communicating merely whether a party has or has not applied to participate in Auction 903 will not violate the rule. In contrast, communicating how a party will participate, including specific states and/or tier and latency combinations selected, specific percentages bid, and/or whether or not the party is placing bids, would convey bids or bidding strategies and would be prohibited.

108. While § 1.21002 does not prohibit business discussions and negotiations among auction applicants that are not auction related, each applicant must remain vigilant not to communicate, directly or indirectly, information that affects, or could affect, bids or bidding strategy. Certain discussions might touch upon subject matters that could convey cost information and bidding strategies. Such subject areas include, but are not limited to, management, sales, local marketing agreements, and other transactional agreements.

109. Bids or bidding strategies may be communicated outside of situations that involve one party subject to the prohibition communicating privately and directly with another such party. For example, the Commission has warned that prohibited “communications concerning bids and bidding strategies may include communications regarding capital calls or requests for additional funds in support of bids or bidding strategies to the extent such communications convey information concerning the bids and bidding strategies directly or indirectly.” Moreover, the Commission found a violation of the rule against prohibited communications when an applicant used the Commission's bidding system to disclose “its bidding strategy in a manner that explicitly invited other auction participants to cooperate and collaborate . . . in specific markets,” and has placed auction participants on notice that the use of its bidding system “to disclose market information to competitors will not be tolerated and will subject bidders to sanctions.”

110. Likewise, when completing short-form applications, each applicant should avoid any statements or disclosures that may violate § 1.21002, particularly in light of the limited information procedures in effect for Auction 903. Specifically, an applicant should avoid including any information in its short-form application that might convey information regarding its state selection, such as referring to certain states or markets in describing bidding agreements, including any information in attachments that will be publicly available that may otherwise disclose the applicant's state selections, or, to the extent it has an alternative option, using applicant names that refer to states or locations within a state.

111. Applicants also should use caution in their dealings with other parties, such as members of the press, financial analysts, or others who might become conduits for the communication of prohibited bidding information. For example, even though communicating that it has applied to participate in the auction will not violate the rule, an applicant's statement to the press that it intends to stop bidding in the auction could give rise to a finding of a § 1.21002 violation. Similarly, an applicant's public statement of intent not to place bids during Auction 903 bidding could also violate the rule.

112. Applicants should be mindful that communicating non-public application or bidding information publicly or privately to another applicant may violate § 1.21002 even though that information subsequently may be made public during later periods of the application or bidding processes.

113.
Communicating with Third Parties.
Section 1.21002 does not prohibit an applicant from communicating bids or bidding strategies to a third-party, such as a consultant or consulting firm, counsel, or lender, provided that the applicant takes appropriate steps to ensure that any third party it employs for advice pertaining to its bids or bidding strategies does not become a conduit for prohibited communications to other applicants, unless both applicants are parties to a joint bidding arrangement disclosed on their respective applications. For example, an applicant might require a third party, such as a lender, to sign a non-disclosure

agreement before the applicant communicates any information regarding bids or bidding strategy to the third party. Within third-party firms, separate individual employees, such as attorneys or auction consultants, may advise individual applicants on bids or bidding strategies, as long as such firms implement firewalls and other compliance procedures that prevent such individuals from communicating the bids or bidding strategies of one applicant to other individuals representing separate applicants. Although firewalls and/or other procedures should be used, their existence is not an absolute defense to liability, if a violation of the rule has occurred.

114. As Commission staff have explained in the context of the broadcast incentive auction, in the case of an individual, the objective precautionary measure of a firewall is not available. As a result, an individual that is privy to bids or bidding information of more than one applicant presents a greater risk of engaging in a prohibited communication. The Commission will take the same approach to interpreting the prohibited communications rule in Auction 903. Whether a prohibited communication has taken place in a given case will depend on all the facts pertaining to the case, including who possessed what information, what information was conveyed to whom, and the course of bidding in the auction.

115. Separate Auction 903 applicants should not specify the same individual on their short-form applications to serve as an authorized bidder. A violation of § 1.21002 could occur if an individual acted as the authorized bidder for two or more applicants because a single individual may, even unwittingly, be influenced by the knowledge of the bids or bidding strategies of multiple applicants, in his or her actions on behalf of such applicants. Also, if the authorized bidders are different individuals employed by the same organization (
e.g.,
a law firm, engineering firm, or consulting firm), a violation similarly could occur. In the latter case, at a minimum, applicants should certify on their applications that precautionary steps have been taken to prevent communication between authorized bidders, and that the applicant and its bidders will comply with § 1.21002.

116. Whether a communication is prohibited is fact dependent and determined on a case-by-case basis. Therefore, the Commission cannot categorically announce more “flexible” or lenient enforcement intentions or speculate on whether hypothetical, broadly described conduct would constitute a violation of the rule. Nonetheless, Commission precedent makes clear that an individual consultant hired by multiple applicants to offer bidding advice during the auction presents a greater risk of violating § 1.21002 than an individual consultant who estimates the costs of individual projects for multiple applicants without weighing in on bidding strategies during the bidding.

117. Potential applicants may discuss the short-form application or bids for specific CBGs with the counsel, consultant, or expert of their choice before the short-form application deadline. Furthermore, the same third-party individual could continue to give advice after the short-form deadline regarding the application, provided that no information pertaining to bids or bidding strategies, including state(s) selected on the short-form application, is conveyed to that individual. With respect to bidding, the same third-party individual could, before the short-form application deadline, assist more than one potential applicant with calculating how much support the specific applicant would require to provide service in each CBG for which it is interested in bidding. If such work can be completed in advance of the short-form application deadline, it would eliminate the need for third-party bidding advice during the auction. Finally, to the extent potential applicants can develop bidding instructions prior to the short-form deadline that a third party could implement without changes during bidding, the third party could follow such instructions for multiple applicants provided that those applicants do not communicate with the third party during the prohibition period.

118.
Section 1.21001(b)(4) Certification.
By electronically submitting a short-form application, each applicant in Auction 903 certifies its compliance with §§ 1.21001(b)(4) and 1.21002. In particular, an applicant must certify under penalty of perjury that the application discloses all real parties in interest to any agreements involving the applicant's participation in the competitive bidding for Phase II support. Also, the applicant must certify that it and all applicable parties have complied with and will continue to comply with 47 CFR 1.21002.

119. Merely filing a certifying statement as part of an application will not outweigh specific evidence that a prohibited communication has occurred, nor will it preclude the initiation of an investigation when warranted. The Commission has stated that it “intend[s] to scrutinize carefully any instances in which bidding patterns suggest that collusion may be occurring.” Any applicant found to have violated § 1.21002(b) may be subject to sanctions.

120.
Duty to Report Prohibited Communications.
Section 1.21002(c) provides that any applicant that makes or receives a communication that appears to violate § 1.21002 must report such communication in writing to the Commission immediately, and in no case later than five business days after the communication occurs. An applicant's obligation to make such a report continues until the report has been made.

121. In addition, § 1.65 of the Commission's rules requires an applicant to maintain the accuracy and completeness of information furnished in its pending application and to notify the Commission of any substantial change that may be of decisional significance to that application. Thus, § 1.65 requires an Auction 903 applicant to notify the Commission of any substantial change to the information or certifications included in its pending short-form application. An applicant is therefore required by § 1.65 to report to the Commission any communication the applicant has made to or received from another applicant after the short-form application filing deadline that affects or has the potential to affect bids or bidding strategy, unless such communication is made to or received from an applicant that is a member of a joint bidding arrangement identified on the application pursuant to § 1.21001(b)(4).

122. Sections 1.65(a) and 1.21002 of the Commission's rules require each applicant in competitive bidding proceedings to furnish additional or corrected information within five days of a significant occurrence, or to amend its short-form application no more than five days after the applicant becomes aware of the need for amendment. These rules are intended to facilitate the auction process by making information that should be publicly available promptly accessible to all participants and to enable the Bureaus to act expeditiously on those changes when such action is necessary.

123.
Procedure for Reporting Prohibited Communications.
A party reporting any prohibited communication pursuant to § 1.65, § 1.21001(b), or § 1.21002(c) must take care to ensure that any report of the prohibited communication does not itself give rise to a violation of

§ 1.21002. For example, a party's report of a prohibited communication could violate the rule by communicating prohibited information to other applicants through the use of Commission filing procedures that allow such materials to be made available for public inspection.

124. Parties must file only a single report concerning a prohibited communication and must file that report with the Commission personnel expressly charged with administering the Commission's auctions. The Commission's rule is designed to minimize the risk of inadvertent dissemination of information in such reports. Any reports required by § 1.21002(c) must be filed consistent with the instructions set forth in the document. For Auction 903, such reports must be filed with Margaret W. Wiener, the Chief of the Auctions and Spectrum Access Division, Wireless Telecommunications Bureau, by the most expeditious means available. Any such report should be submitted by email to Ms. Wiener at the following email address:
auction903@fcc.gov.
If you choose instead to submit a report in hard copy, any such report must be delivered only to: Margaret W. Wiener, Chief, Auctions and Spectrum Access Division, Wireless Telecommunications Bureau, Federal Communications Commission, 445 12th Street SW, Room 6-C217, Washington, DC 20554.

125. A party seeking to report such a prohibited communication should consider submitting its report with a request that the report or portions of the submission be withheld from public inspection by following the procedures specified in § 0.459 of the Commission's rules. Such parties are encouraged to coordinate with the Auctions and Spectrum Access Division staff about the procedures for submitting such reports.

126.
Winning Bidders Must Disclose Terms of Agreements.
Each applicant that is a winning bidder may be required to disclose in its long-form application the specific terms, conditions, and parties involved in any agreement into which it has entered. This may apply to any bidding consortia, joint venture, partnership, or agreement, understanding, or other arrangement entered into relating to the competitive bidding process, including any agreement relating to the post-auction market structure. Failure to comply with the Commission's rules can result in enforcement action.

127.
Additional Information Concerning Prohibition of Certain Communications in Commission Auctions.
Section 1.21002 is consistent with similar rules the Commission has applied in other Commission auctions. Applicants may gain insight into the public policies underlying § 1.21002 by reviewing information about the application of these other rules. Decisions applying these rules by courts and by the Commission and its bureaus in other Commission auctions can be found at
http://wireless.fcc.gov/auctions/prohibited_communications.
Applicants utilizing these precedents should keep in mind the specific language of the rule applied in past decisions, as well as any differences in the context of the applicable auctions.

128.
Antitrust Laws.
Regardless of compliance with the Commission's rules, applicants remain subject to the antitrust laws, which are designed to prevent anticompetitive behavior in the marketplace. Compliance with the disclosure requirements of § 1.21002 will not insulate a party from enforcement of the antitrust laws. For instance, a violation of the antitrust laws could arise out of actions taking place well before any party submits a short-form application. The Commission has cited a number of examples of potentially anticompetitive actions that would be prohibited under antitrust laws: For example, actual or potential competitors may not agree to divide territories in order to minimize competition, regardless of whether they split a market in which they both do business, or whether they merely reserve one market for one and another market for the other. Similarly, Commission staff have previously reminded potential applicants and others that “[e]ven where the applicant discloses parties with whom it has reached an agreement on the short-form application, thereby permitting discussions with those parties, the applicant is nevertheless subject to existing antitrust laws.”

129. To the extent the Commission becomes aware of specific allegations that suggest that violations of the federal antitrust laws may have occurred, the Commission may refer such allegations to the United States Department of Justice for investigation. If an applicant is found to have violated the antitrust laws or the Commission's rules in connection with its participation in the competitive bidding process, it may be subject to a forfeiture and may be prohibited from participating further in Auction 903 and in future auctions, among other sanctions.

130.
Red Light Rule.
The Commission adopted rules, including a provision referred to as the “red light rule,” that implement the Commission's obligation under the Debt Collection Improvement Act of 1996, which governs the collection of debts owed to the United States, including debts owed to the Commission. Under the red light rule, applications and other requests for benefits filed by parties that have outstanding debts owed to the Commission will not be processed. Applicants seeking to participate in Auction 903 are subject to the Commission's red light rule. Pursuant to the red light rule, unless otherwise expressly provided for, the Commission will withhold action on an application by any entity found to be delinquent in its debt to the Commission.

131. Because robust participation is critical to the success of the Phase II auction, the Commission finds good cause to provide a limited waiver of the red light rule for any applicant seeking to participate in Auction 903 that is red-lighted for debt owed to the Commission at the time it timely files a short-form application. Specifically, a red-lighted applicant seeking to participate in Auction 903 will have until the close of the application resubmission filing window to pay any debt(s) associated with the red light. No further opportunity to cure will be allowed. If an applicant has not resolved its red light issue(s) by the close of the initial filing window, its application will be deemed incomplete. If the applicant has not resolved its red light issue(s) by the close of the application resubmission window, Commission staff will immediately cease all processing of the applicant's short-form application, and the applicant will be deemed not qualified to bid in the auction. As noted above, this waiver is limited. It does not waive or otherwise affect the Commission's right or obligation to collect any debt owed to the Commission by an Auction 903 applicant by any means available to the Commission, including set off, referral of debt to the United States Treasury for collection, and/or by red lighting other applications or requests filed by an Auction 903 applicant.

132. Potential applicants for Auction 903 should review their own records, as well as the Commission's Red Light Display System (RLD), to determine whether they owe non-tax debt to the Commission and should try to resolve and pay any outstanding debt(s) prior to submitting a short-form application. The RLD enables a party to check the status of its account by individual FCC Registration Numbers (FRNs) and links other FRNs sharing the same Tax Identification Number (TIN) when determining whether there are outstanding delinquent debts. The RLD is available at

http://www.fcc.gov/

redlight/.

Additional information is available at
https://www.fcc.gov/debt_collection/.

133. Additionally, an Auction 903 applicant may incur debt to the Commission after it files its short-form application and may fail to pay that debt when due. An applicant should note that the Commission will conduct additional red light checks prior to authorizing Phase II auction support. Qualified bidders are encouraged to continue to review their own records as well as the RLD periodically during the auction and to resolve and pay all outstanding debts to the Commission as soon as possible. The Commission will not authorize any winning bidder to receive Phase II auction support until its red light issues have been resolved.

134.
USF Debarment.
The Commission's rules provide for the debarment of those convicted of or found civilly liable for defrauding the high-cost support program. Auction 903 applicants are reminded that those rules apply with equal force to the Phase II auction.

135.
Modifications to FCC Form 183. Only Minor Modifications Allowed.
After the initial FCC Form 183 filing deadline, an Auction 903 applicant will be permitted to make only minor changes to its application consistent with the Commission's rules. Examples of minor changes include the deletion or addition of authorized bidders (to a maximum of three) and the revision of addresses and telephone numbers of the applicant, its responsible party, and its contact person. Major modification to an FCC Form 183 (
e.g.,
adding a state in which the applicant intends to bid, certain changes in ownership that would constitute an assignment or transfer of control of the applicant, change of certifying official, change in applicant's legal classification that results in a change in control) will not be permitted after the initial FCC Form 183 filing deadline. If an amendment reporting changes is a “major amendment,” as described in § 1.21001(d)(4), the major amendment will not be accepted and may result in the dismissal of the application.

136.
Duty to Maintain Accuracy and Completeness of FCC Form 183.
Pursuant to § 1.65 of the Commission's rules, each applicant has a continuing obligation to maintain the accuracy and completeness of information furnished in a pending application, including a pending application to participate in the Phase II auction. Consistent with the requirements for the Commission's spectrum auctions, an applicant for Auction 903 must furnish additional or corrected information to the Commission within five business days after a significant occurrence, or amend its FCC Form 183 no more than five business days after the applicant becomes aware of the need for the amendment. An applicant is obligated to amend its pending application even if a reported change may result in the dismissal of the application because it is subsequently determined to be a major modification.

137.
Modifying an FCC Form 183.
As noted above, an entity seeking to participate in Auction 903 must file an FCC Form 183 electronically via the FCC's Auction Application System. During the initial filing window, an applicant will be able to make any necessary modifications to its FCC Form 183 in the Auction Application System. An applicant that has certified and submitted its FCC Form 183 before the close of the initial filing window may continue to make modifications as often as necessary until the close of that window; however, the applicant must re-certify and resubmit its FCC Form 183 before the close of the initial filing window to confirm and effect its latest application changes. After each submission, a confirmation page will be displayed stating the submission time and submission date.

138. An applicant will also be allowed to modify its FCC Form 183 in the Auction Application System, except for certain fields, during the resubmission filing window and after the release of the public notice announcing the Auction 903 qualified bidders. During these times, if an applicant needs to make permissible minor changes to its FCC Form 183, or must make changes in order to maintain the accuracy and completeness of its application pursuant to § 1.65, it must make the change(s) in the Auction Application System and then re-certify and re-submit its application to confirm and effect the change(s).

139. An applicant's ability to modify its FCC Form 183 in the Auction Application System will be limited between the closing of the initial filing window and the opening of the application resubmission filing window and between the closing of the resubmission filing window and the release of the public notice announcing the Auction 903 qualified bidders. During these periods, an applicant will be able to view its submitted application, but will be permitted to modify only the applicant's address, responsible party address, and contact information (
e.g.,
name, address, telephone number, etc.) in the Auction Application System. An applicant will not be able to modify any other pages of FCC Form 183 in the Auction Application System during these periods. If, during these periods, an applicant needs to make other permissible minor changes to its FCC Form 183, or changes to maintain the accuracy and completeness of its application pursuant to § 1.65, the applicant must submit a letter briefly summarizing the changes to its FCC Form 183 via email to
auction903@fcc.gov.
The email summarizing the changes must include a subject line referring to Auction 903 and the name of the applicant, for example, “Re: Changes to Auction 903 Auction Application of XYZ Corp.” Any attachments to the email must be formatted as Adobe® Acrobat® (PDF) or Microsoft® Word documents. An applicant that submits its changes in this manner must subsequently modify, certify, and submit its FCC Form 183 application electronically in the Auction Application System once it is again open and available to applicants.

140. Applicants should also note that even at times when the Auction Application System is open and available to applicants, the system will not allow an applicant to make certain other permissible changes itself (
e.g.,
correcting a misstatement of the applicant's legal classification). This is the case because certain fields on the FCC Form 183 will no longer be available to/changeable by the applicant after the initial filing window closes. If an applicant needs to make a permissible minor change of this nature, it must submit a written request by email to
auction903@fcc.gov,
requesting that the Commission manually make the change on the applicant's behalf. Once Commission staff has informed the applicant that the change has been made in the Auction Application System, the applicant must then recertify and resubmit its FCC Form 183 in the Auction Application System to confirm and effect the change(s).

141. As with filing FCC Form 183, any amendment(s) to the application and related statements of fact must be certified by an authorized representative of the applicant with authority to bind the applicant. Applicants should note that submission of any such amendment or related statement of fact constitutes a representation by the person certifying that he or she is an authorized representative with such authority and that the contents of the amendment or statement of fact are true and correct.

142. Applicants must not submit application-specific material through the Commission's Electronic Comment Filing System. Further, as discussed above, parties submitting information

related to their applications should use caution to ensure that their submissions do not contain confidential information or communicate information that would violate § 1.21002 or the limited information procedures adopted for Auction 903. An applicant seeking to submit, outside of the Auction Application System, information that might reflect non-public information, such as an applicant's state and/or performance tier and latency selection(s) or specific information about bid(s), should consider including in its email a request that the filing or portions of the filing be withheld from public inspection until the end of the prohibition of certain communications pursuant to § 1.21002.

143. Questions about FCC Form 183 amendments should be directed to the Auctions and Spectrum Access Division at (202) 418-0660.

VI. Preparing for Bidding in Auction 903

144.
Bidder Education.
Prior to the deadline for applications to participate in Auction 903, detailed educational information will be provided in various formats to would-be participants.

145. The Commission will provide various materials on the pre-auction process in advance of the opening of the short-form application window, beginning with the release of step-by-step instructions for completing Form 183. In addition, the Commission will provide an online application procedures tutorial covering information on pre-auction preparation, completing short-form applications, the application review process, and Phase II rules. Moreover, the Commission will conduct a workshop or webinar on the pre-auction application process, with an opportunity for participants to ask questions.

146. The Commission will provide separate educational materials on the bidding process in advance of the start of the mock auction, beginning with release of a user guide for the bidding system, followed by

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/fr%3A2018-05142. Public record. Not legal advice.