Length of CAF Funding Remains in Dispute
The question of whether and how much to increase the length of Connect America Fund support in return for recipients providing faster broadband remains under discussion at the FCC, with the commission scheduled to take up the issue Thursday (see 1411260040), industry representatives involved in the debate said. One issue that has emerged is a sentiment within the agency that CAF recipients continue to get funding for five years, as they do now, the representatives said.
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Providers and their representatives, including CenturyLink, ITTA and USTelecom, have pushed for the duration of funding to be doubled to 10 years to allow telcos to recoup more of what they say would be the higher cost of providing 10 Mbps download. The draft order to be taken up Thursday calls for increasing the minimum speed from 4 Mbps to 10 Mbps, commission officials have told us, and industry sources expect the commission to approve the increase.
The draft order, in response to industry concerns, also called for increasing the length of funding to six years, with an option by the provider for a seventh. But some within the agency believe the agency should leave the length of funding at five years, in order to bring about a competitive bidding process, ILEC representatives told us.
The FCC plans under the CAF process to make offers to price cap carriers to serve all high-cost areas in their market. Carriers said in interviews this week that if the duration of funding isn’t long enough, carriers will be more likely to decline offers to serve areas. Under the process, the right to serve those unserved areas would be put up for bid. The FCC declined to comment on the merits of continuing to offer funding for five years.
A scenario in which providers bid to serve areas would be more efficient than having providers accept the statewide offers, said Ross Lieberman, American Cable Association (ACA) senior vice president-government affairs. ACA has advocated a bidding system. Under the current system, CAF funding is determined by a model based on the average cost of serving areas, Lieberman said. ACA believes a bidding process would drive down the cost of serving an area and reflect more accurately the actual cost, Lieberman said. The ACA, in a news release Tuesday on the provisional selection of rural broadband experiment recipients, repeated its support for a bidding system, saying “because support is used more efficiently, it enables broadband service to be brought to more locations.” The 2011 USF/ICC reforms called for switching to competitive bids after the upcoming transitional five-year period where support is based on the cost model, so leaving CAF support at five years would mean not delaying the new system, Lieberman said.
However, carriers have said even seven years of funding wouldn't allow them to make up what they say are the higher costs of providing faster broadband, and would lead them not to accept serving as many areas as they would if they were to receive ten years of funding. Putting areas up for bid would lead bidders to “cherry pick” cheaper areas to serve, instead of all areas in their market in a state, they said. That would leave more high-cost areas unserved, they said. CenturyLink pointed to the rural broadband experiments as evidence not all areas would receive interest from providers, saying that the agency received bids in only 10 percent of eligible census tracts.
ACA, however, argued the broadband experiments showed CAF would draw bids, noting in the news release the agency received 600 bids. “These results dispel the notion that competitive providers wouldn’t be interested in participating in competitive bidding for universal service support,” said ACA, which disputes providing faster broadband costs more and justifies additional years of support for their rival price cap carriers.
The FCC said in April’s USF reform order that areas that don't attract bids could be handled through a separate Remote Areas Fund(see 1404240034).