GOVERNMENT GRANTS	3 Months Ended
Mar. 31, 2021
GOVERNMENT GRANTS
GOVERNMENT GRANTS	9. GOVERNMENT GRANTS Universal Service Fund The Federal Universal Service Fund (“USF”) is a subsidy program managed by the Federal Communications Commission (“FCC”). USF funds are disbursed to telecommunication providers through four programs: the High Cost Program; Low Income Program (“Lifeline Program”); Schools and Libraries Program (“E-Rate Program”); and Rural Health Care Support Program. The Company participates in the High Cost Program, Lifeline Program, E-Rate Program, and Rural Health Care Support Program as further described below. All of these funding programs are subject to certain operational and reporting compliance requirements. The Company believes it is in compliance with all applicable requirements. During each of the three month periods ended March 31, 2021 and 2020, the Company recorded $4.1 million of revenue from the High Cost Program in its International Telecom segment for its US Virgin Islands operations under the “Viya” name. In 2018, the FCC initiated a proceeding to reform the High Cost Program in the US Virgin Islands and Puerto Rico in which it proposed to allocate USF funding of up to $18.7 million per year (inclusive of the $16.4 million per year currently allocated to Viya) for 10 years to supplant the $16.4 million that Viya currently receives per year. While Viya applied for Connect USVI Fund support allocated for the US Virgin Islands, on November 16, 2020, the FCC announced that Viya was not the recipient of the provisional award and that the FCC had provisionally accepted a bid of approximately $8.5 million per year for a term of 10 years. Viya has challenged this decision and its challenge remains pending before the FCC. If Viya’s challenge is not granted, pursuant to the terms of the program, Viya’s USF support will be reduced, to two-thirds of the legacy total amount, or $10.9 million, during the first year following the finalization of the award and to one-third of the legacy total amount, or $5.5 million, during the second year. Thereafter, Viya will not receive High Cost Program support. Also, during each of the three month periods ended March 31, 2021 and 2020, the Company recorded $0.3 million of High Cost Program revenue in its US Telecom segment. The Company is subject to certain operational, reporting and construction requirements as a result of this funding, and the Company believes that it is in compliance with all of these requirements. In August 2018, the Company was awarded $79.9 million over 10 years under the Connect America Fund Phase II Auction. Under this program, the Company is required to provide fixed broadband and voice services to certain eligible areas in the United States and is subject to operational and reporting requirements. The Company determined the award is a revenue grant, and as a result the Company will record the funding as revenue upon receipt. The Company recorded $1.9 million in each of the three-month periods ended March 31, 2021 and 2020 from the Connect America Fund Phase II program. The Company also receives construction grants to build network connectivity for eligible communities. The funding is used to reimburse construction costs and is distributed upon completion of a project. As of December 31, 2020, the Company has been awarded approximately $16.8 million of such grants. The Company was awarded $6.5 million of additional grants in the three months ended March 31, 2021. The Company has completed its construction obligations on $10.2 million of these projects and $13.1 million of such construction obligations remain with completion deadlines beginning in June 2021. Once these projects are constructed, the Company is obligated to provide service to the participants. The Company receives funds upon construction completion. The Company received $1.3 million during the three months ended March 31, 2021. The Company expects to meet all requirements associated with these grants. The Company also receives funding to provide discounted telecommunication services to eligible customers under the E-Rate Program, Lifeline Program, and Rural Health Care Support Program. During the three months ended March 31, 2021 and 2020, the Company recorded revenue of $2.1 million and $2.2 million, respectively, in the aggregate from these programs. The Company is subject to certain operational and reporting requirements under the above mentioned programs and it believes that it is in compliance with all of these requirements. CARES Act As of December 31, 2020, the Company had received $16.3 million of funding under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). During the three months ended March 31, 2021, the Company received an additional $2.4 million of funding. In total the Company received $18.7 of funding under this program. The funding was utilized to construct network infrastructure in the Company’s US Telecom segment. The construction was completed as of March 31, 2021 and $18.4 million of the funding was recorded as a reduction to property, plant and equipment and subsequent reduction to depreciation expense. The remaining $0.3 million was recorded as a reduction to operating expense in the three months ended March 31, 2021. Tribal Bidding Credit As part of the broadcast television spectrum incentive auction, the FCC implemented a tribal lands bidding credit to encourage deployment of wireless services utilizing 600 MHz spectrum on the lands of federally recognized tribes. The Company received a bidding credit of $7.4 million under this program in 2018. A portion of these funds will be used to offset network capital costs and a portion will be used to offset the costs of supporting the networks. The Company’s current estimate is that it will use $6.1 million to offset capital costs, consequently reducing future depreciation expense and $1.3 million to offset the cost of supporting the network which will reduce future operating expense. Through March 31, 2021, the Company has spent $6.1 million on capital expenditures and has recorded $0.3 million in offsets to the cost of supporting the network. The credits are subject to certain requirements, including deploying service by January 2021 and meeting minimum coverage metrics. If the requirements are not met the funds may be subject to claw back provisions. The Company believes it is in compliance with all applicable requirements related to these funds. CBRS Auction During the third quarter of 2020, the Company participated in the FCC’s Citizens Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis and are awarded for a 10-year renewable term. The Company was a winning bidder for PALs located strategically throughout the United States at a total cost of approximately $20.4 million. In connection with the awarded licenses, the Company will have to achieve certain CBRS spectrum build out obligations. The Company currently expects to comply with all applicable requirements related to these licenses. RDOF In the 2020 Rural Digital Opportunity Fund Phase I Auction (“RDOF”), pending the FCC’s conclusion of the award process, we expect to receive approximately $20.1 million over 10 years to provide broadband coverage to over 10,000 households. Once confirmed, we will be obligated to provide broadband and voice services to certain eligible areas in the United States.

GOVERNMENT GRANTS

3 Months Ended

Mar. 31, 2021

9. GOVERNMENT GRANTS

Universal Service Fund

The Federal Universal Service Fund (“USF”) is a subsidy program managed by the Federal Communications Commission (“FCC”). USF funds are disbursed to telecommunication providers through four programs: the High Cost Program; Low Income Program (“Lifeline Program”); Schools and Libraries Program (“E-Rate Program”); and Rural Health Care Support Program. The Company participates in the High Cost Program, Lifeline Program, E-Rate Program, and Rural Health Care Support Program as further described below. All of these funding programs are subject to certain operational and reporting compliance requirements. The Company believes it is in compliance with all applicable requirements.

During each of the three month periods ended March 31, 2021 and 2020, the Company recorded $4.1 million of revenue from the High Cost Program in its International Telecom segment for its US Virgin Islands operations under the “Viya” name. In 2018, the FCC initiated a proceeding to reform the High Cost Program in the US Virgin Islands and Puerto Rico in which it proposed to allocate USF funding of up to $18.7 million per year (inclusive of the $16.4 million per year currently allocated to Viya) for 10 years to supplant the $16.4 million that Viya currently receives per year. While Viya applied for Connect USVI Fund support allocated for the US Virgin Islands, on November 16, 2020, the FCC announced that Viya was not the recipient of the provisional award and that the FCC had provisionally accepted a bid of approximately $8.5 million per year for a term of 10 years. Viya has challenged this decision and its challenge remains pending before the FCC. If Viya’s challenge is not granted, pursuant to the terms of the program, Viya’s USF support will be reduced, to two-thirds of the legacy total amount, or $10.9 million, during the first year following the finalization of the award and to one-third of the legacy total amount, or $5.5 million, during the second year. Thereafter, Viya will not receive High Cost Program support.

Also, during each of the three month periods ended March 31, 2021 and 2020, the Company recorded $0.3 million of High Cost Program revenue in its US Telecom segment. The Company is subject to certain operational, reporting and construction requirements as a result of this funding, and the Company believes that it is in compliance with all of these requirements.

In August 2018, the Company was awarded $79.9 million over 10 years under the Connect America Fund Phase II Auction. Under this program, the Company is required to provide fixed broadband and voice services to certain eligible areas in the United States and is subject to operational and reporting requirements. The Company determined the award is a revenue grant, and as a result the Company will record the funding as revenue upon receipt. The Company recorded $1.9 million in each of the three-month periods ended March 31, 2021 and 2020 from the Connect America Fund Phase II program.

The Company also receives construction grants to build network connectivity for eligible communities. The funding is used to reimburse construction costs and is distributed upon completion of a project. As of December 31, 2020, the Company has been awarded approximately $16.8 million of such grants. The Company was awarded $6.5 million of additional grants in the three months ended March 31, 2021. The Company has completed its construction obligations on $10.2 million of these projects and $13.1 million of such construction obligations remain with completion deadlines beginning in June 2021. Once these projects are constructed, the Company is obligated to provide service to the participants. The Company receives funds upon construction completion. The Company received $1.3 million during the three months ended March 31, 2021. The Company expects to meet all requirements associated with these grants.

The Company also receives funding to provide discounted telecommunication services to eligible customers under the E-Rate Program, Lifeline Program, and Rural Health Care Support Program. During the three months ended March 31, 2021 and 2020, the Company recorded revenue of $2.1 million and $2.2 million, respectively, in the aggregate from these programs. The Company is subject to certain operational and reporting requirements under the above mentioned programs and it believes that it is in compliance with all of these requirements.

CARES Act

As of December 31, 2020, the Company had received $16.3 million of funding under the Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”). During the three months ended March 31, 2021, the Company received an additional $2.4 million of funding. In total the Company received $18.7 of funding under this program. The funding was utilized to construct network infrastructure in the Company’s US Telecom segment. The construction was completed as of March 31, 2021 and $18.4 million of the funding was recorded as a reduction to property, plant and equipment and subsequent reduction to depreciation expense. The remaining $0.3 million was recorded as a reduction to operating expense in the three months ended March 31, 2021.

Tribal Bidding Credit

As part of the broadcast television spectrum incentive auction, the FCC implemented a tribal lands bidding credit to encourage deployment of wireless services utilizing 600 MHz spectrum on the lands of federally recognized tribes. The Company received a bidding credit of $7.4 million under this program in 2018. A portion of these funds will be used to offset network capital costs and a portion will be used to offset the costs of supporting the networks. The Company’s current estimate is that it will use $6.1 million to offset capital costs, consequently reducing future depreciation expense and $1.3 million to offset the cost of supporting the network which will reduce future operating expense. Through March 31, 2021, the Company has spent $6.1 million on capital expenditures and has recorded $0.3 million in offsets to the cost of supporting the network. The credits are subject to certain requirements, including deploying service by January 2021 and meeting minimum coverage metrics. If the requirements are not met the funds may be subject to claw back provisions. The Company believes it is in compliance with all applicable requirements related to these funds.

CBRS Auction

During the third quarter of 2020, the Company participated in the FCC’s Citizens Broadband Radio Service (CBRS) auction for Priority Access Licenses (PALs) in the 3.5 GHz spectrum band. These PALs are licensed on a county-by-county basis and are awarded for a 10-year renewable term. The Company was a winning bidder for PALs located strategically throughout the United States at a total cost of approximately $20.4 million. In connection with the

awarded licenses, the Company will have to achieve certain CBRS spectrum build out obligations. The Company currently expects to comply with all applicable requirements related to these licenses.

RDOF

In the 2020 Rural Digital Opportunity Fund Phase I Auction (“RDOF”), pending the FCC’s conclusion of the award process, we expect to receive approximately $20.1 million over 10 years to provide broadband coverage to over 10,000 households. Once confirmed, we will be obligated to provide broadband and voice services to certain eligible areas in the United States.