Joint Board Seeks Comment on ‘Reverse Auctions’ for USF Support
Resurrecting an idea first aired several years ago, the Federal-State Joint Board asked for comments on using “reverse auctions” to distribute universal service funds in rural and other high-cost areas. The idea gained currency earlier this year when FCC Chmn. Martin voiced interest in letting phone companies bid to provide universal service in rural areas (CD March 30 p6). The term “reverse auction” sometimes is used to indicate that low bidders, not high bidders, get contracts.
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The joint board Fri. invited responses to a long list of questions on USF auctions and issued a “discussion proposal” that, among other things, would protect rural telecom companies by proposing 2 auction winners in each area. Both would have to offer basic voice service but in addition one would have to provide broadband Internet access, with the other responsible for wireless mobility. Comments are due 45 days after the joint board notice appears in the Federal Register -- which may take a week or longer.
The proposal envisions 10-year service terms with more criteria than low price. Service would be based on county boundaries, though rural incumbents could bid for current service areas even if they don’t cover entire counties. States would handle auctions and oversee subsequent service, all subject to FCC approval. A phase-in would let incumbents opt to be treated as the winning broadband network bidder in their existing service areas for the first 10 years.
Rural phone companies have criticized the auction idea, saying low bids could discourage maintenance of infrastructure in high-cost areas. “The idea of an auction doesn’t naturally encourage network development,” Stuart Polikoff, dir.-govt. relations at OPASTCO, said: “In the past, OPASTCO has had generic concerns about auctions because winners might be motivated to do the bare minimum.” Polikoff didn’t comment on the latest proposal.
Among questions the board posed: (1) Whether auctions are an “appropriate” way to set universal service support, for example “whether there are general lessons that can be learned from academic literature or elsewhere” on the value of using auctions for such aims. (2) How auctions fit Communications Act requirements, including “rate comparability and affordability.” (3) Roles the FCC, state commissions and the Universal Service Administrative Co. (USAC) should play. (4) What geographic areas to target for bidding. (5) The “optimal” term for bidders, whether there should be a phase-in between winners of the last auction and those winning the next one and what happens if a winner doesn’t provide good service. (6) Should there be multiple winners for the same area. (7) Handling of incumbent rural LECs.
“The Joint Board emphasizes that no decision, tentative or otherwise, has been reached to recommend the adoption of competitive bidding for universal service support,” the public notice said, declaring the board’s interest in “building a record addressing this potential mechanism.” The board is made up of 3 FCC commissioners -- Martin, Tate and Copps -- and 3 state regulators -- Ore. PUC Comr. Ray Baum, Fla. PSC Chmn. Lisa Edgar and Ind. Utility Regulatory Comr. Larry Landis. It also includes W. Va. Consumer Advocate Billy Jack Gregg.