FCC Rural Broadband Proposal Being Circulated
A draft order being circulated by FCC Chairman Tom Wheeler for the July 11 meeting lays out a process for the agency’s rural broadband experiment that’s seen as a test of the competitive bidding envisioned under Phase II of the Connect America Fund (CAF), said agency and industry officials in interviews last week. Wheeler is proposing to spend $100 million over the next 10 years for the experiment, at the upper end of the $50 million to $100 million range outlined in an NPRM, said an agency official. It’s unknown whether the commission will back that figure, the official said.
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The order includes a requirement that bidders secure FCC payments with a letter of credit from a financial institution, despite concerns from Native American tribes and some rural providers that the requirement will make it harder for them to win bids, said a commission official. The Navajo Nation Telecommunications Regulatory Commission in comments in docket 10-90 noted the requirement meant “no Tribally-owned entities win (and very few were even eligible to bid)” for Auction 902 Tribal Mobility Fund Phase I funds (http://bit.ly/1qLo2O6). The Rural Utilities Service, which makes loans to small rural carriers, doesn’t always provide letters of credit, said Shannon Heim, who represents the Alaska Rural Coalition, and met with an aide to Commissioner Ajit Pai June 12, according to an ex parte filing (http://bit.ly/1pHvs1j). “I understand the FCC’s need to have some security, but that policy perspective ignores the reality of rural America,” she told us. The agency acknowledges the concerns and said tribes can apply for waivers to the requirement, said an agency official. Heim said the waiver process is expensive.
The experiment is seen as a test of a key portion of CAF Phase II, in which providers will be offered funds to serve underserved areas within their service area within in a state, said agency and industry officials. In areas where the provider declines to serve with the CAF funds, the agency would enter a competitive bidding process to find a provider to serve the area, they said. The experiment would test such questions as whether providers would apply, whether underserved areas are included in process, or whether requirements like the line of credit prove to be a deterrent for providers making bids, they said. “It’s a test run,” said an industry official.
Industry officials await more details. “We're eager to see precisely what the item says, and we anticipate that our members will continue to demonstrate a strong interest in providing meaningful rural broadband solutions,” NTCA Senior Vice President of Policy Michael Romano told us in a statement. “It will be important, however, that whatever programs are adopted recognize that true success comes not just in getting broadband out to rural areas initially, but also in keeping broadband there, keeping it affordable for all rural consumers, and allowing it to be upgraded over time to keep up with consumer demand."
Wheeler addressed the experiments in a blog post June 20 (http://fcc.us/1ytHmBX), saying the “simple fact of the matter is that the free market has failed to provide basic broadband connectivity to more than 15 million Americans. While we have already taken steps to close the gap, there’s more work to be done. ... We expect to move forward with CAF Phase II with all dispatch, and the lessons learned in these experiments will help us achieve our goal of delivering world-class voice and broadband networks to rural America.”