FCC Clears Way for July CAF II Subsidy Auction for Fixed Broadband and Voice Services

The final items appeared to largely track two draft orders and a PN (here and here) (see 1801090050), though the agency made a few modifications, including to ensure broadband deployment accuracy and to ease the qualification burdens on small providers. The items upheld bid weights for different broadband performance tiers, kept census block groups as the minimum geographic bidding unit, declined to adopt state-specific bidding rules, upheld eligibility and deployment requirements, and reaffirmed the FCC's commitment not to overbuild areas that already have a certain level of broadband. The PN set a March 30 deadline for applications, and detailed other procedures and "agency outreach and education plans for potential bidders, including online tutorials, workshops, webinars, and a mock auction," said a release.

Chairman Ajit Pai said the FCC has "done a lot to make sure the auction" is widely accessible. "We’ve simplified the bidding options and balanced the design to accommodate both those seeking to extend their networks and those planning larger projects," he said. "We’ve reviewed the financial-qualification and letter-of-credit requirements to enable bidding by smaller companies. We’ve created flexibility in our model so that bidders won’t have to identify every location they plan to serve before the auction even starts." He said staff is working to make bidding interfaces user-friendly. The FCC in 2019 "will move on to the Remote Areas Fund for those areas still without high-speed broadband," he added.

Many winning bidders will be allowed to "true-up" the number of broadband locations to be served a year after the auction closes, said Heidi Lankau, a Wireline Bureau attorney. Telcos said a broadband cost model overestimated the number of locations to be served, but industry officials were hopeful changes would be made (see 1801220047 and 1801290053). Noting he shared industry concerns, O'Rielly said, "We were able to work together to reach an appropriate solution. Support recipients will be able to provide evidence, subject to potential audit, of the actual number of locations. If the number is less than what had been estimated, there will be a proportional reduction in support."

Clyburn welcomed changes to lessen some burdens faced by small providers, "including challenging financial qualifications and the use of consultants." Lankau said the order provides relief by reducing the cost of maintaining a letter of credit.

Three commissioners cited concerns. O'Rielly said the FCC broadband tier bid weights could "tip the scale toward funding gigabit service in a few communities at enormous costs while leaving many more unserved Americans with no broadband options whatsoever for many years to come." The decision "to unduly penalize other technologies, especially satellite service, could" reduce participation, "not only in this auction but in the Rural Areas Fund auction as well," he said. Clyburn was disappointed the FCC kept census block groups as the minimum bidding unit and didn't do anything to target tribal lands. Commissioner Jessica Rosenworcel said she "would have preferred that we worked right now with our state partners -- like Pennsylvania -- who have stepped up and sought out new forms of federal-state collaboration when it comes to universal service."

The auction will help deploy broadband to "unserved, high-cost areas," said USTelecom CEO Jonathan Spalter: "Now we need to ensure that $2 billion flows quickly and efficiently.” Many unserved areas are adjacent to those served by NTCA rural telco members, who have heard repeated pleas from neighboring communities to deploy, said CEO Shirley Bloomfield: "We are hopeful that the measures they adopt will facilitate expansion of robust, affordable, and sustainable broadband into these areas that have been waiting for so long.”