FCC Draft Eyes $2 Billion CAF II Auction; Public Notices Could Follow Order
The FCC would put over $2 billion in broadband-oriented rural subsidies up for grabs over the next decade in a reverse auction of Connect America Fund (CAF) support, FCC Chairman Tom Wheeler said Wednesday. "We hope the power of competitive bidding will spark robust broadband deployment and service offerings across rural America in the most cost-efficient way possible," he said in a blog post on a draft CAF Phase II auction order and other items on the tentative agenda for the commission's May 25 meeting (see 1605040066).
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The draft order would set a general framework for parties to bid for $215 million in annual funding, an FCC official said Thursday. That support would target high-cost areas currently served by large and midsize price-cap telcos, but where those carriers didn't accept $1.5 billion in annual CAF Phase II broadband/voice support on a state-by-state basis (see 1508270068). Extremely high-cost areas would be included, but to the extent they don't get funded in the auction, the order anticipates targeting them in a remote area fund, said the official. The draft would set performance standards for auction winners, which would have to provide certain levels of broadband speed and service quality, and also would be subject to deployment milestones and requirements for consumer monthly usage allowances, said the official, who didn't provide further specifics.
Wheeler said his proposal "would set robust yet flexible standards for broadband deployment, recognizing the diverse challenges inherent in deploying broadband in rural America." Additionally he said, "It would also target support where it’s most needed on the local level, ensure accountability, and safeguard against waste, fraud, and abuse."
The FCC could back off a previous leaning toward fiber deployment, which was a "sticking point," said a cable attorney. "I don't think they're going to be definitive on that," said the attorney. "They're not resolving all the issues."
The draft order would require CAF II recipients to be eligible telecom carriers but would rely on the traditional state-run designation process, not set up a new national ETC process, as the FCC did for Lifeline USF broadband support, said the FCC official, saying waivers would be possible for non-ETCs that need more time to obtain state approval. If the order is approved, the commission would issue a public notice seeking further comment and then another PN setting auction procedures, followed by applications and the auction, said the official.
NCTA welcomed the auction but said it's late in the USF reform process. “Competitive bidding for universal service high-cost support is a policy the FCC should have embraced years ago," it emailed. "Unfortunately, the current item is a drop in the bucket that does nothing to mitigate the long-term harm that will result from Chairman Wheeler’s earlier decisions to favor one type of company -- incumbent phone companies -- with exclusive access to almost $30 billion in subsidies, while excluding providers of more efficient and robust technologies, such as cable operators.”
Wheeler has struggled to win FCC backing for a draft auction order he circulated in September (see 1509250057). The votes weren't there, industry representatives said Thursday. An FCC spokesman and aides to commissioners didn't comment. Commissioner Mike O'Rielly and CTIA said in November they were concerned the draft contained a bias toward fiber (see 1511170063). O'Rielly in December warned against picking winners and losers and listed five principles for the auction to follow: "maximize coverage," "no categories," "open to all technologies," "multi-round auction" and "no overbuilding" (see 1512100065). Satellite interests also voiced concerns about a fiber-centric approach (see 1512290025).
The single biggest concern was a proposed "tiering mechanism" that would have directed funding to fiber deployment in the first instance, said an industry attorney. "So basically, it was a heavy preference for fiber in how the money would have flowed," the attorney said. The problem is the auction targets the "hardest-to-serve areas" that the "telcos didn’t want" and that a broadband cost model suggests would cost $1 billion per year to serve, the attorney said. Providing $200-something million a year to subsidize fiber in areas that larger telcos wouldn't serve with DSL would be "weird," the attorney said.
Electric utilities have continued to push the FCC to "set the bar high" on service requirements so the funding helps create "future-proof" broadband networks. But ViaSat has called for a "competitively neutral, market-based mechanism that distributes CAF support to the lowest cost bidder."