§ 54.315   Application process for Connect America Fund phase II support
distributed through competitive bidding.

   (a) Application to participate in competitive bidding for Phase II
   support. In addition to providing information specified in § 1.21001(b)
   of this chapter and any other information required by the Commission,
   an applicant to participate in competitive bidding for Phase II auction
   support shall:

   (1) Provide ownership information as set forth in § 1.2112(a) of this
   chapter;

   (2) Certify that the applicant is financially and technically qualified
   to meet the public interest obligations of § 54.309 for each relevant
   tier and in each area for which it seeks support;

   (3) Disclose its status as an eligible telecommunications carrier to
   the extent applicable and certify that it acknowledges that it must be
   designated as an eligible telecommunications carrier for the area in
   which it will receive support prior to being authorized to receive
   support;

   (4) Indicate the tier of bids that the applicant plans to make and
   describe the technology or technologies that will be used to provide
   service for each tier of bid;

   (5) Submit any information required to establish eligibility for any
   bidding weights adopted by the Commission in an order or public notice;

   (6) To the extent that an applicant plans to use spectrum to offer its
   voice and broadband services, demonstrate it has the proper
   authorizations, if applicable, and access to operate on the spectrum it
   intends to use, and that the spectrum resources will be sufficient to
   cover peak network usage and deliver the minimum performance
   requirements to serve all of the fixed locations in eligible areas, and
   certify that it will retain its access to the spectrum for at least 10
   years from the date of the funding authorization; and

   (7) Submit specified operational and financial information.

   (i) Submit a certification that the applicant has provided a voice,
   broadband, and/or electric transmission or distribution service for at
   least two years or that it is a wholly-owned subsidiary of such an
   entity, and specifying the number of years the applicant or its parent
   company has been operating, and submit the financial statements from
   the prior fiscal year that are audited by a certified public
   accountant. If the applicant is not audited in the ordinary course of
   business, in lieu of submitting audited financial statements it must
   certify that it will provide financial statements from the prior fiscal
   year that are audited by a certified independent public accountant by a
   specified deadline during the long-form application review process.

   (A) If the applicant has provided a voice and/or broadband service it
   must certify that it has filed FCC Form 477s as required during this
   time period.

   (B) If the applicant has operated only an electric transmission or
   distribution service, it must submit qualified operating or financial
   reports that it has filed with the relevant financial institution for
   the relevant time period along with a certification that the submission
   is a true and accurate copy of the reports that were provided to the
   relevant financial institution.

   (ii) If an applicant cannot meet the requirements in paragraph
   (a)(7)(i) of this section, in the alternative it must submit the
   audited financial statements from the three most recent fiscal years
   and a letter of interest from a bank meeting the qualifications set
   forth in paragraph (c)(2) of this section, that the bank would provide
   a letter of credit as described in paragraph (c) of this section to the
   bidder if the bidder were selected for bids of a certain dollar
   magnitude.

   (b) Application by winning bidders for Phase II auction support—(1)
   Deadline. As provided by public notice, winning bidders for Phase II
   auction support shall file an application for Phase II auction support
   no later than the number of business days specified after the public
   notice identifying them as winning bidders.

   (2) Application contents. An application for Phase II auction support
   must contain:

   (i) Identification of the party seeking the support, including
   ownership information as set forth in § 1.2112(a) of this chapter;

   (ii) Certification that the applicant is financially and technically
   qualified to meet the public interest obligations of § 54.309 for each
   tier in which it is a winning bidder and in each area for which it
   seeks support;

   (iii) Certification that the applicant will meet the relevant public
   interest obligations for each relevant tier, including the requirement
   that it will offer service at rates that are equal or lower to the
   Commission's reasonable comparability benchmarks for fixed wireline
   services offered in urban areas;

   (iv) A description of the technology and system design the applicant
   intends to use to deliver voice and broadband service, including a
   network diagram which must be certified by a professional engineer. The
   professional engineer must certify that the network is capable of
   delivering, to at least 95 percent of the required number of locations
   in each relevant state, voice and broadband service that meets the
   requisite performance requirements in § 54.309;

   (v) Certification that the applicant will have available funds for all
   project costs that exceed the amount of support to be received from the
   Phase II auction for the first two years of its support term and that
   the applicant will comply with all program requirements, including
   service milestones;

   (vi) A description of how the required construction will be funded,
   including financial projections that demonstrate the applicant can
   cover the necessary debt service payments over the life of the loan, if
   any;

   (vii) Certification that the party submitting the application is
   authorized to do so on behalf of the applicant; and

   (viii) Such additional information as the Commission may require.

   (3) No later than the number of days provided by public notice, the
   applicant shall submit a letter from a bank meeting the eligibility
   requirements outlined in paragraph (c) of this section committing to
   issue an irrevocable stand-by letter of credit, in the required form,
   to the winning bidder. The letter shall at a minimum provide the dollar
   amount of the letter of credit and the issuing bank's agreement to
   follow the terms and conditions of the Commission's model letter of
   credit.

   (4) No later than 180 days after the public notice identifying them as
   a winning bidder, bidders that did not submit audited financial
   statements in their short-form application pursuant to paragraph
   (a)(7)(i) of this section must submit the financial statements from the
   prior fiscal year that are audited by a certified independent public
   accountant.

   (5) No later than 180 days after the public notice identifying it as a
   winning bidder, the applicant shall certify that it is an eligible
   telecommunications carrier in any area for which it seeks support and
   submit the relevant documentation supporting that certification.

   (6) Application processing. (i) No application will be considered
   unless it has been submitted in an acceptable form during the period
   specified by public notice. No applications submitted or demonstrations
   made at any other time shall be accepted or considered.

   (ii) Any application that, as of the submission deadline, either does
   not identify the applicant seeking support as specified in the public
   notice announcing application procedures or does not include required
   certifications shall be denied.

   (iii) An applicant may be afforded an opportunity to make minor
   modifications to amend its application or correct defects noted by the
   applicant, the Commission, the Administrator, or other parties. Minor
   modifications include correcting typographical errors in the
   application and supplying non-material information that was
   inadvertently omitted or was not available at the time the application
   was submitted.

   (iv) Applications to which major modifications are made after the
   deadline for submitting applications shall be denied. Major
   modifications include, but are not limited to, any changes in the
   ownership of the applicant that constitute an assignment or change of
   control, or the identity of the applicant, or the certifications
   required in the application.

   (v) After receipt and review of the applications, a public notice shall
   identify each winning bidder that may be authorized to receive Phase II
   auction support after the winning bidder submits a letter of credit and
   an accompanying opinion letter as described in paragraph (c) of this
   section, in a form acceptable to the Commission. Each such winning
   bidder shall submit a letter of credit and accompanying opinion letter
   as required by paragraph (c) of this section, in a form acceptable to
   the Commission no later than the number of business days provided by
   public notice.

   (vi) After receipt of all necessary information, a public notice will
   identify each winning bidder that is authorized to receive Phase II
   auction support.

   (c) Letter of credit. Before being authorized to receive Phase II
   auction support, a winning bidder shall obtain an irrevocable standby
   letter of credit which shall be acceptable in all respects to the
   Commission.

   (1) Value. Each recipient authorized to receive Phase II support shall
   maintain the standby letter of credit or multiple standby letters of
   credit in an amount equal to at a minimum the amount of Phase II
   auction support that has been disbursed and that will be disbursed in
   the coming year, until the Universal Service Administrative Company has
   verified that the recipient met the final service milestone as
   described in § 54.310(c).

   (i) Once the recipient has met its 60 percent service milestone, it may
   obtain a new letter of credit or renew its existing letter of credit so
   that it is valued at a minimum at 90 percent of the total support
   amount already disbursed plus the amount that will be disbursed in the
   coming year.

   (ii) Once the recipient has met its 80 percent service milestone, it
   may obtain a new letter of credit or renew its existing letter of
   credit so that it is valued at a minimum at 60 percent of the total
   support that has been disbursed plus the amount that will be disbursed
   in the coming year.

   (2) The bank issuing the letter of credit shall be acceptable to the
   Commission. A bank that is acceptable to the Commission is:

   (i) Any United States bank

   (A) That is insured by the Federal Deposit Insurance Corporation, and

   (B) That has a bank safety rating issued by Weiss of B- or better; or

   (ii) CoBank, so long as it maintains assets that place it among the 100
   largest United States Banks, determined on basis of total assets as of
   the calendar year immediately preceding the issuance of the letter of
   credit and it has a long-term unsecured credit rating issued by
   Standard & Poor's of BBB- or better (or an equivalent rating from
   another nationally recognized credit rating agency); or

   (iii) The National Rural Utilities Cooperative Finance Corporation, so
   long as it maintains assets that place it among the 100 largest United
   States Banks, determined on basis of total assets as of the calendar
   year immediately preceding the issuance of the letter of credit and it
   has a long-term unsecured credit rating issued by Standard & Poor's of
   BBB- or better (or an equivalent rating from another nationally
   recognized credit rating agency); or

   (iv) Any non-United States bank

   (A) That is among the 100 largest non-U.S. banks in the world,
   determined on the basis of total assets as of the end of the calendar
   year immediately preceding the issuance of the letter of credit
   (determined on a U.S. dollar equivalent basis as of such date);

   (B) Has a branch office in the District of Columbia or such other
   branch office agreed to by the Commission;

   (C) Has a long-term unsecured credit rating issued by a
   widely-recognized credit rating agency that is equivalent to a BBB- or
   better rating by Standard & Poor's; and

   (D) Issues the letter of credit payable in United States dollars

   (3) A winning bidder for Phase II auction support shall provide with
   its letter of credit an opinion letter from its legal counsel clearly
   stating, subject only to customary assumptions, limitations, and
   qualifications, that in a proceeding under Title 11 of the United
   States Code, 11 U.S.C. 101 et seq. (the “Bankruptcy Code”), the
   bankruptcy court would not treat the letter of credit or proceeds of
   the letter of credit as property of the winning bidder's bankruptcy
   estate under section 541 of the Bankruptcy Code.

   (4) Authorization to receive Phase II auction support is conditioned
   upon full and timely performance of all of the requirements set forth
   in this section, and any additional terms and conditions upon which the
   support was granted.

   (i) Failure by a Phase II auction support recipient to meet its service
   milestones as required by § 54.310 will trigger reporting obligations
   and the withholding of support as described in § 54.320(c). Failure to
   come into full compliance within 12 months will trigger a recovery
   action by the Universal Service Administrative Company. If the Phase II
   recipient does not repay the requisite amount of support within six
   months, the Universal Service Administrative Company will be entitled
   to draw the entire amount of the letter of credit and may disqualify
   the Phase II auction support recipient from the receipt of Phase II
   auction support or additional universal service support.

   (ii) The default will be evidenced by a letter issued by the Chief of
   the Wireline Competition Bureau or the Wireless Telecommunications
   Bureau, or their respective designees, which letter, attached to a
   standby letter of credit draw certificate, shall be sufficient for a
   draw on the standby letter of credit for the entire amount of the
   standby letter of credit.

   [ 81 FR 44449 , July 7, 2016, as amended at  83 FR 15994 , Apr. 13, 2018;
    83 FR 18454 , Apr. 27, 2018]

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