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Federal Register / Vol. 86, No. 35 / Wednesday, February 24, 2021 / Rules and Regulations
6. Adjustment Factor Values. In the 5G Fund Adjustment Factor Public Notice, we proposed values for an adjustment factor that operates along two dimensions: Terrain elevation variation and demand, using median household income as a proxy. These two dimensions were included to account for differences in network deployment costs and business case considerations that stem from the geographic and economic variations in the United States. We proposed that areas be sorted into terrain elevation variation and demand factor groups according to their characteristics. The terrain elevation variation dimension is intended to address, in part, network cost differences across areas, while the demand factor is intended to address differences in expected revenues across areas. Under the approach proposed in the 5G Fund Adjustment Factor Public
Notice, an areas terrain classification is determined by its average standard deviation of elevation. Areas are separated into one of three categories:
1 Flat standard deviation of 40 meters or less; 2 hilly standard deviation between 40 and 115 meters; and 3
mountainous standard deviation greater than 115 meters. Similarly, areas demand classification is determined by the areas median household income.
We note that the category thresholds for the mediumand high-income categories represent 2017 median household incomes that are 150% and 200% of the poverty line for a family of three, respectively. Consistent with the adjustment factor values we adopt herein, we will use the latest available data on terrain and median household income appropriate for such purposes to classify areas into the adjustment factor categories concurrent with the
Commissions release of the map of final areas eligible for 5G Fund Phase I
support.
7. We adopt the adjustment factor values in Fig. 1, as proposed in the 5G
Fund Adjustment Factor Public Notice.
We find that these adjustment factor values, informed by the three economic analyses laid out in the 5G Fund Adjustment Factor Public Notice, appropriately reflect the relative cost of serving areas with differing terrain characteristics, as well as the potential business case for each area, with less profitable areas receiving greater weight and therefore more support. Using these values to help distribute 5G Fund support to, and disaggregate legacy support in, a range of areas across the country that are geographically and economically diverse serves the public interest.

FIG. 1ADJUSTMENT FACTOR VALUES
Terrain elevation variation Demand factors Flat
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Low
Medium
High

8. Use of An Adjustment Factor in Bidding. Commenters generally support the use of an adjustment factor to increase support in higher-cost, lessprofitable areas, and no commenter suggests alternative adjustment factor values to those proposed in the 5G Fund Adjustment Factor Public Notice.
Although no commenter objects to the use of terrain elevation variation and median household income in the determination of the adjustment factor, several commenters suggest that the adjustment factor should consider other variables, such as differences in the cost of labor and transportation to both deploy and operate 5G service, differences in the cost of utility and other operating costs, and the existing infrastructure in an area.
9. We are not persuaded by these arguments and decline to increase the number of components or categories that make up the adjustment factor. We acknowledge that terrain elevation variation and median household income do not exhaust the list of potentially relevant variables. Likewise, we acknowledge that when we separate areas into categories, the areas near the midpoint of the category will have their relative costs and business cases more accurately represented by the adjustment factor values than areas at
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the margins. Nevertheless, as noted in the 5G Fund Report and Order, the adjustment factor adopted by the Commission is not intended to fully offset the differences inherent in providing service to different types of areas. Rather, it is intended to make the most difficult areas to serve more attractive at auction in order to encourage more bidding for these areas. Moreover, we selected terrain elevation variation and median household income as the two dimensions for the adjustment factor characteristics because they are important factors in characterizing deployment costs and business case considerations, respectively, and because there is more readily available and verifiable data with which to apply these two factors. As we discussed in the 5G Fund Adjustment Factor Public Notice, terrain elevation variation captures differences in network costs because wireless network engineering principles indicate that greater variability of terrain in a given geographic area reduces the signal strength received by a mobile user, which requires wireless carriers to build more sites to provide the same quality of service. As a result, areas with higher terrain elevation variation generally have higher capital
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expenditures, operating expenditures, and leasing costs. Similarly, we also discussed in the 5G Fund Adjustment Factor Public Notice the importance of demand factors and the role that expected revenues play in carriers deployment decisions. The Entry Model Adjustment Factor study found that, all else equal, areas with higher median household incomes are more likely to be covered, a finding consistent with the basic assumption that higher income areas are more profitable.
10. Economic Analyses. To inform the proposed adjustment factor values, the Office and Bureau included three economic analyses. The first analysis the Entry Model used coverage data to estimate the effect that an areas physical and demographic characteristics have on carriers network deployment decisions. The second analysis the Cell Site Density Model examined how cell site spacing changes as terrain roughness increases. The third analysis the Auction Bidding Model used Mobility Fund Phase I Auction 901 bidding data to estimate how terrain roughness and other factors affected carriers bids.
11. Discussion of the economic analyses in the record is limited, and no party submitted an alternative economic analysis. Some commenters argue that
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