FCC Seen Approving CAF II Auction Public Notice; Industry Rivals Prepare for Last Battles

It would be surprising if there's major controversy among the commissioners Thursday, said Brett Kilbourne, general counsel of the Utilities Technology Council, a member of the Rural Coalition of power companies and telcos. "I would expect 3-0," said an industry representative, who noted the PN asks many questions: "I think the fight will come at the order stage." Another industry official doubted any dissent, and said the auction could occur as early as Q1. The current item appears to be ahead of schedule -- Chairman Ajit Pai in March said he hoped for a PN by fall (see 1703270047). None of the three FCC commissioner offices commented Friday. Commissioner Michael O'Rielly partially dissented in February from an order setting bid weights in the reverse auction, generally favoring lower support and higher service levels (see 1702230019).

The PN proposed to use census block groups as the minimum geographic area for bidding in a "multi-round, descending clock auction." It made proposals for short- and long-form applications, bidding procedures and reserve prices to be calculated using a cost model. "Support will be assigned to no more than one bidder per area. The auction will end after the aggregate support amount of all bids is less than or equal to the total budget and when there is no longer competition for support to any area," it proposed. The auction budgets $1.98 billion cumulatively over 10 years.

Complexity is a major concern for potential participants, given the lack of fixed-provider auction experience, the interest of smaller players and the differing landline, fixed-wireless and satellite technologies. “I think we’re going to be looking at ways to make sure the auction is competitive but also simple enough so that smaller entities without lots of resources for experts can participate and feel like they have a chance to win," said Ross Lieberman, American Cable Association senior vice president. The Rural Coalition also said complexity could discourage smaller providers. "I don't think anybody has any idea whether the auction rules favor anybody," an industry official said.

Parties continue to press their concerns. A Rural Coalition filing Wednesday in docket 10-90 proposed various modifications, some of which targeted satellite providers, which a Hughes Network Systems official criticized as favoring fiber deployment (see 1707270041).

Hughes pressed its own proposal "to incorporate time to deploy" as a factor in the auction process, in meetings with aides to Pai (here), Commissioners Mignon Clyburn and Michael O'Rielly (here), and others (here). The PN's subscriber "take rate" proposal makes general sense, but "it is crucial" the auction "adequately captures the variation in time to deployment among service providers," said the satellite provider, suggesting it could take fiber providers longer to serve customers in unserved areas.

ViaSat sought changes before the PN, drawing Rural Coalition objections (see 1707070042). "The limited CAF II budget will not likely allow broadband to be extended to all areas the FCC deems unserved. Satellite broadband can and should play an important role in the Commission’s overall plan to solve the digital divide. ... We intend to work with the Commission on ways to solve that problem," it emailed us Friday.

Others spoke of their hopes for the PN. “We are pleased the process is moving forward and our members are working to participate in the auction next year," said Stephen Coran, Wireless ISP Association outside counsel. "We have some ideas about improving on what the Commission has proposed.”

NTCA, a Rural Coalition member, believes the draft PN "asks many good questions and that prompt action on auction design is important to keep things moving toward distribution of funds needed to make the business case to reach unserved areas," said Senior Vice President Mike Romano. The key will be to ensure that funding recipients are "capable of delivering reasonably comparable service to consumers throughout a given area -- in other words, that 'universal service' really will translate to universal availability" of "robust, reliable, and sustainable broadband service."

Frontier Communications "is excited that the FCC is taking this next step, and we are waiting on the final rules and eligible areas to determine whether we will participate," it said.

CAF II Notebook

NARUC cited its "general support" for a Pennsylvania petition to reconsider a rule in order to help the state retain CAF II funding declined by Verizon (see 1706010061). Without the change, Pennsylvania will be harmed "by the competitive bidding process in a way that will frustrate the deployment of broadband in high-cost support-eligible areas," said a filing posted Thursday (the date is incorrect). "This concern is not limited to Pennsylvania." Hughes in April asked the FCC to reconsider the bid weights, which "will effectively preclude" satellite providers from participating (see 1704210016). O'Rielly said he's sympathetic to bid weight reconsideration. There haven't been any signs yet of FCC recon movement.