The FCC’s first reverse auction for USF monies...

the FCC can run an effective reverse auction and demonstrated that allocating subsidies based on cost-effectiveness measures has the potential to dramatically increase the bang for the buck we get from universal service expenditures,” said Wallsten, a former FCC economist. Under the auction, the FCC ordered bids from lowest to highest based on dollars per road-mile covered and then granted awards until it reached its budget constraint of $300 million. “The results demonstrate how much more of a ‘bang for the buck’ it is possible to get when subsidies are ordered by cost-effectiveness rather than simply provided in all possible eligible areas,” the paper said (http://bit.ly/Z6Et5S). “By ordering subsidies in terms of cost-effectiveness, $300 million covered 83,500 road miles. Based on bids received in areas that were ultimately not awarded funding, covering the next 1,924 miles would have required an additional $144 million in subsidies.” It’s still unclear the extent to which the auction will mean service is ultimately rolled out to unserved areas, Wallsten wrote. “While this exercise demonstrated that the FCC can run an effective reverse auction, it also yields certain lessons,” the paper said. “Most notably, the auction highlighted the potential difficulty in generating participation. The FCC handled this problem well, but must continue to think hard about how to encourage participation in upcoming reverse auctions, most notably on the broadcaster side of the Incentive Auctions."