FCC sets rules for $2B CAF-II broadband funding auction

FCC headquarters
During the upcoming Connect America Fund Phase II auction, service providers will compete for support to expand broadband to unserved areas, along with voice service.

The FCC set new rules for a “reverse auction” aimed at providing nearly $2 billion for rural broadband deployment over the next 10 years.

During the upcoming Connect America Fund Phase II auction, service providers will compete for support to expand broadband to unserved areas, along with voice service.

According to the FCC, the auction rules established are designed to maximize the value the American people will receive for the Connect America Fund dollars spent by balancing deployment of higher-quality services with cost efficiencies.

All three commissioners approved the measure, but Commissioner Michael O’Rielly said he dissented on parts of the order.

This auction focuses on census blocks deemed unserved by broadband in 20 states where the nation’s largest service provider declined last year’s Connect America Fund offer of support. Additionally, the auction will address locations across the country with extremely high deployment costs. 

“Thanks to today’s action we take another step forward in this agency’s effort to close the broadband deployment gap by auctioning off almost $2 billion in universal service support to bring broadband to unserved and underserved communities,” said FCC Commissioner Mignon Clyburn. “This order carefully calibrates how we craft our auction’s decisions to enable robust competition and obtain the best bang for our universal service buck.”

The new order establishes “weights” that credit bids by companies offering more robust service. These weights take into account the value of higher speeds, higher usage allowances, and low latency. However, the FCC said that the formula used to rank bidders balances these performance goals with the need to reach as many consumers as possible within the FCC’s budget for rural universal service support.

AT&T praised the FCC’s actions on Mobility Fund II and the CAF II auction plans, saying they will put more broadband into underserved rural areas.  

“The FCC’s actions today move both the Mobility Fund II and CAF II Auctions closer to reality and are a big win for rural Americans,” said Joan Marsh, SVP of federal regulatory for AT&T, in a blog post. “By making these items a top priority for 2017, Chairman Pai is delivering on his commitment to Universal Service and his pledge to bring the benefits of the digital age to all Americans.”

Closing the affordability gap

While the auction will expand broadband into new areas, the remaining issue is ensuring that the services can be affordable. Commissioner Clyburn said that building out network infrastructure only solves one part of the rural broadband gap. Even after service providers roll out broadband infrastructure, not every consumer is going to purchase service.

“What can ill afford to ignore is that half of the homes passed in the poorest parts of this nation will more likely not sign up for service not because they do not want it, but they will more likely not sign up because they can’t afford it,” Clyburn said. “When our own data pegs the cost of basic broadband at over $75 a month it is easy to understand why families forgo service, particularly if they make less than $20,000 a year.”

Clyburn added that the affordability gap becomes a major issue in less affluent areas of the country.

“We will never close the digital divide by supporting a single provider in an area and hoping that if you build it they will come,” Clyburn said. “In wealthy areas deployment with little ease makes broadband available for the people that live there, but in less prosperous areas mere deployment is but a technology bridge to nowhere.”

More technologies needed?

While the FCC’s action hopes to extend broadband to more areas, not everyone is happy with the FCC’s CAF II auction item. Commissioner O’Rielly said that his chief concern is that because the order is too narrowly focused on higher speed technology, it could prevent other areas from getting the service they need.

“It did seem that proposals with a narrower range were more likely to garner bidders from all tiers promoting a robust auction and maximizing coverage,” O’Rielly said. “Unfortunately, this order adopts a broader range than what was even proposed and circulated and now appears to favor the highest speed tiers at the expense of more people getting broadband.”

O’Rielly’s concerns were echoed by the Wireless Internet Service Providers Association (WISPA). The industry trade group said in a statement that the action will favor what they claim is the most expensive technology (fiber) versus the most cost-effective (wireless). By taking this approach, WISPA argues that it will cost the Universal Service Fund more money to serve fewer homes and businesses. 

“Rather than using the auction to drive competition and spur innovation, the FCC’s plan will disproportionately subsidize a particular access technology that large corporations have tried and abandoned in hard-to-reach areas due to excessive cost, slow deployment, and lack of demand,” said Alex Phillips, president of WISPA, in a statement. “This plan is digital favoritism, not digital empowerment.”

Phillips added that “too many rural Americans will remain on the wrong side of the digital divide, and those who do get access will have to wait much longer to be connected to ‘Lamborghini’ service.”