The FCC’s query about using reverse auctions (CD Oct 12 p6) for u...

for rural ILECs, a result not contemplated” by the Federal-State Joint Board, where the proposal originated. Alltel said reverse auctions could be used to set the level of support, similar to “a forward-looking cost methodology,” but any carrier able to provide that price should be allowed to offer service. In other words, “auctions should not be used to select one or a limited number of eligible telecommunications carriers.” Verizon, joined by Verizon Wireless, said reverse auctions could be the solution to the over-extended Universal Service Fund (USF): “With the right design, a simple system of reverse auctions for high cost support could provide consumers, carriers and regulators with substantial benefits.” State regulators appeared to have mixed feelings about the reverse auction concept. The Ia. Utilities Board said it likes that auctions would reduce the number of USF-supported carriers but it’s concerned about the viability of incumbent rural carriers: “On the one hand, rural exchanges may represent the type of service territory where it makes the most economic sense to support only one network and an auction may incent carriers to seek operational efficiencies… On the other hand, existing incumbent networks have been constructed… in reliance upon continued receipt of universal service support. If that support were to suddenly be redirected to another network based on competitive bids, the existing universal service ‘investment’ in the incumbent network would be lost.”