Reverse USF Auction Seen Perilous for Rural Carriers
Rural carriers are raising red flags about what could happen to some of the smallest carriers if the FCC institutes reverse auctions to make USF distribution more efficient. Comments varied widely on this and other proposals to restructure the distribution side of USF.
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NTCA submitted a study by economist Dale Lehman claiming to show risks with reverse auctions. “The implementation of reverse auctions for determining the distribution of universal service in those areas with preexisting infrastructure and ubiquitous service would be a serious mistake,” NTCA said, calling the potential downside “too great, the risk of an unfavorable outcome too large, and the stakes too high for reverse auctions to be considered a feasible alternative.”
OPASTCO urged the FCC to proceed with caution, saying the Commission first should test how auctions would work. “Before applying reverse auctions to rural ILECs, they should first be tried for a significant period of time with non-ILEC (competitive) carriers,” the group said: “It would be unwise to immediately apply this untested approach to rural ILECs, who are the carriers of last resort in their service areas.”
The Rural Cellular Assn. said small carriers are the most at risk from reverse auctions or similarly aggressive revisions. “It would not be competitively neutral to force carriers with immature networks to compete against incumbents that have the natural advantage of being fully built out,” RCA said.
But other groups and companies said reverse auctions are worthy of further study. AT&T said implementing auctions at least would end the long debate on how to calculate the cost of providing support. “AT&T supports the Joint Board’s efforts to consider innovative approaches to break the log- jam, and believes that a competitive bidding process, appropriately structured, could be an economically efficient and effective way to achieve the universal service objectives enunciated in… the 1996 Act,” the Bell said.
CTIA also expressed potential support. “If implemented in a technologically- and competitively-neutral manner and coupled with other reforms CTIA supports, reverse auctions can serve as a market-oriented means to reduce the size of the universal service fund while advancing the important goals of universal service,” CTIA said. - Howard Buskirk