FCC Adopts CAF II Auction Order for Fixed Services With Wide Bid Weight Range

The FCC approved an order setting a broad range of bid weights for a planned Connect America Fund Phase II reverse auction of almost $2 billion in subsidy support for fixed broadband/voice services over 10 years. The CAF II bid weights are designed to value "high speeds, higher usage allowances and low latency," balanced with "cost efficiencies" to deploy broadband widely, said a release Thursday. Chairman Ajit Pai and Commissioner Mignon Clyburn voted for the order; Commissioner Mike O'Rielly partially dissented.

“It’s time to close the digital divide," said Pai, who called the urban-rural split "stark," with 39 percent of rural Americans lacking "adequate access" to high-speed internet service. Clyburn hailed Pai's broadband leadership while urging more focus on affordability. O'Rielly suggested the bid weights would skew support toward costly high-end services and reduce the scope of broadband deployment. "We should buy fewer Lamborghinis and more Chevys," he said.

The Wireless Internet Service Provider Association said it was "very disappointed" with an order promoting fiber and "digital favoritism, not digital empowerment." The American Cable Association called it a "positive step to bring robust broadband service to unserved areas," and a rural electric/telco coalition said it was encouraged. AT&T and USTelecom issued positive statements.

The order's bid weights favor higher-speed, low-latency performance tiers in a reverse auction that awards support to low bids (less weight lowers a bid): the "minimum" tier (10/1 Mbps) is weighted at 65, "baseline" (25/3 Mbps) at 45, "above baseline" (100/20 Mbps) at 15, and "gigabit" (1 Gbps/500 Mbps) at zero; high-latency service is weighted at 25 and low-latency service at zero. Stakeholders said a draft had proposed "placeholder" weights of 60, 40, 20 and zero for the speed tiers (see 1702170048).

“We adopt auction weights designed to give every bidder -- no matter what technology they use -- a meaningful opportunity to compete for federal funds, while ensuring the best value for the American taxpayer," said Pai. "We also take steps to ensure that the citizens of every state that was promised new, better, faster broadband service by the FCC back in 2015 will see that funding come through to their state, either in this auction -- which I hope takes place as soon as possible -- or in the Remote Areas Fund that will follow on its heels.”

O'Rielly said a narrower weight range seemed more likely to attract bidders, promote a robust auction and maximize coverage. "Unfortunately, this order adopts a broader range ... and now appears designed to favor the highest speed tiers at the expense of more people getting broadband," he said. "I am concerned that the tiers ... will have the effect of spending a disproportionate amount of funding on services that far exceed what we can afford, and concentrating that funding in relatively low-cost areas." He said the latency penalty was too high and said the bid weights were decided at the last moment with little data support, calling himself "very open" to reconsideration.

Clyburn lauded Pai for pushing through "significant broadband infrastructure items," but said deployment is only part of the challenge. "No network is truly available, nor will any effort shrink the chronic digital canyons that exist, until broadband service is both affordable and accessible," she said. "I am hopeful that in our continued work to comprehensively address the digital divide, we will bring as much firepower to the affordability and accessibility gaps as we have brought to tackling longstanding deployment challenges.”

The FCC declined to provide any additional bid weighting and will study the outcome of the auction to determine how best to target funding in the subsequent remote areas fund auction for areas that remain unserved, including on tribal lands, said Alex Minard, a Wireline Bureau deputy division chief. He said the order declined to adopt alternative interim milestones for nonterrestrial service providers or others that had deployed infrastructure. He said the order denied a petition for reconsideration of a decision to score bids relative to applicable reserve prices; granted a petition to reconsider a decision to re-auction areas served by high-latency providers that fail to meet subscriber thresholds; and granted a petition to change the monthly minimum usage allowance requirements for the above-baseline and gigabit tiers from unlimited to 2 TB of data. The commission said it would seek comment on auction mechanics, and then vote on final details.

Clyburn lamented that the FCC didn't include a bidding credit for tribal communities, calling it a "missed opportunity." House lawmakers had pressed the agency to include a tribal bidding credit. "This credit is critically needed to encourage broadband deployment in Indian Country,” said a letter to Pai from the 18 lawmakers, led by Rep. Raul Ruiz, D-Calif., a new member of the Communications Subcommittee. Without the credit, Indian country “will continue to fall behind,” said the signers, who were mostly Democrats, including Commerce Committee ranking member Frank Pallone, D-N.J., and Rep. Keith Ellison, D-Minn. Rep. Tom Cole, R-Okla., and Stevan Pearce, R-N.M., also signed.

WISPA said the order "will tend to favor the costliest technologies (fiber) over the most cost-effective (wireless)" and will "cost the Universal Service Fund more money to serve fewer homes." It's "a squandered opportunity for the American taxpayer and rural Americans," said President Alex Phillips.

The ACA said it alone submitted "detailed analysis about how to construct" a bid weighting methodology that would maximize participation by providers using any technology and result in the most cost-effective distribution of support for the best broadband possible. "The FCC appears to have taken ACA's analysis to heart," said CEO Matthew Polka.

The rural electric/telco coalition praised the action. “Universal service should ensure, as the statute makes clear, both that services are available and that they are ‘reasonably comparable’ in price and quality to those available in urban areas," said NTCA CEO Shirley Bloomfield, who credited the FCC with "recognizing this balance." The order "is an important step" toward expanding rural broadband, said USTelecom CEO Jonathan Spalter. AT&T Senior Vice President Joan Marsh said the CAF II fixed and mobile orders were both "a big win for rural Americans.”