Verizon: CAF-II auction rules should focus on locations where funding was declined by provider

Verizon (NYSE: VZ) did not accept funding from the second phase of the FCC's Connect America Fund (CAF-II) program, but the service provider wants the regulator to recognize the need for faster broadband nationwide by ranking bids higher for territories where funding was declined.

The telco said it is concerned that the FCC's decisions in the Competitive Bidding Order could increase the probability that locations in the declined states will be left unserved after the auction is completed.

In a filing with the FCC, Verizon said some states like New York cited "the need for an efficient and equitable allocation of Phase II funds, particularly for those states in which a substantial amount of the offer of Phase II support was declined."

To remedy these issues, Verizon suggested the FCC could rank bids for the declined territories ahead of other bids. Once the FCC has awarded support to a certain percentage of locations where CAF-II funding was turned down, it could then award lower-ranked bids.

Verizon said that the FCC could rank bids "until it has either awarded support to 95 percent of the eligible locations in that territory or has awarded support in the amount of the CAF II offer to that territory."

By using this method, Verizon said that the "CAF II auction support awarded in this manner would complement state initiatives in declined states that have such programs, such as New York, and would also support the deployment of broadband in other states."

As part of this process, Verizon also suggested that the FCC should establish bidding weights to maximize the number of locations that obtain broadband service at the baseline or above-baseline performance tiers.

Under the FCC's current CAF II auction process, the regulator established four performance tiers: "minimum" (10 Mbps downstream/1 Mbps upstream); "baseline" (25/3 Mbps); "above baseline" (100/20 Mbps); and "gigabit" (1 Gbps/ 500 Mbps).

Although the FCC has not released the preliminary list of eligible locations, Verizon said many as 750,000 locations could be eligible for CAF-II funding based on data that the Commission published for the CAF Phase II offer.

"In light of these previous decisions by the Commission, it now should set the weights with care so as to maximize the number of homes and businesses that obtain at least the baseline level of broadband from the auction," Verizon said. "In particular, the Commission should not set a large weight for any performance tier, including the gigabit tier. A large weight would permit a substantially higher bid to win over a lower bid, and thus deplete the available budget more rapidly."

For more:
- see the FCC filing (PDF)

Related articles:
Verizon passes on $144M in CAF II funding as wireline asset sale rumors swirl
AT&T takes $427M in CAF II funding, sets plan to bring wireline, wireless broadband to 18 states
Frontier acquires Verizon wireline assets in 3 states for $10.5B

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