CAF II Auction Text Details Framework, Proposal for Weighted Broadband Tiers
The FCC released the Connect America Fund Phase II auction item Thursday that it adopted Wednesday on a 4-1 vote, with Commissioner Mike O'Rielly partially dissenting (see 1605250046). The 164-page text spells out complex details of its order setting a framework for the subsidy auction and a Further NPRM on certain specifics to be decided later, including the "weights" to be assigned different broadband service tiers that could be offered by bidders. "All things considered, we value higher speeds over lower speeds, higher usage allowances over lower usage allowances, and lower latency over higher latency," the commission said.
Sign up for a free preview to unlock the rest of this article
Timely, relevant coverage of court proceedings and agency rulings involving tariffs, classification, valuation, origin and antidumping and countervailing duties. Each day, Trade Law Daily subscribers receive a daily headline email, in-depth PDF edition and access to all relevant documents via our trade law source document library and website.
The CAF II reverse auction will allow providers to bid for up to $215 million in annual funding support to provide both broadband and voice service in high-cost and extremely high-cost rural areas where large (price-cap) telcos didn't accept support or weren't even offered support. Low bids generally will be favored over high bids, but different providers can offer different levels of broadband service, complicating the equation. Adding further complexity is the potential participation of various technologies -- wireline, wireless and satellite -- offering advantages and disadvantages in performance, coverage and cost.
The commission will require broadband speeds of at least 10/1 Mbps (down/up), but it also wants to encourage providers to offer rural consumers higher levels of broadband service where feasible. "We want to maximize the number of consumers served with our finite budget," it said. "At the same time, we see the value to consumers in rural markets of having access to service during the 10-year term of support that exceeds our baseline requirements." So the order set performance standards based on broadband speeds and usage allowances, along with latency.
The FCC said all bids would be considered simultaneously, so bidders proposing to meet one set of performance standards will be competing directly against bidders committing to other performance standards. "We will use weights to account for the different characteristics of service offerings that bidders propose to offer when ranking bids," it said. "We express our preference for a multi-round auction format and for setting the minimum biddable unit as a census block group containing any eligible census blocks. We conclude that reserve prices will not exceed support amounts determined by the Connect America Cost Model (CAM).”
The order created four broadband tiers: (1) a "minimum" tier requires bidders to commit to data speeds of at least 10/1 Mbps and at least 150 GB of monthly usage; (2) a "baseline" tier requires at least 25/3 Mbps and monthly usage of 150 GB or the average usage of fixed broadband customers nationwide, whichever is higher; (3) an "above-baseline" tier requires at least 100/20 Mbps and unlimited monthly usage; and (4) a "Gigabit" tier requires at least 1 Gbps/500 Mbps and unlimited monthly usage. For each tier, "bidders will designate one of two latency performance levels: (1) Low latency bidders will be required to meet 95 percent or more of all peak period measurements of network round trip latency at or below 100 milliseconds (ms), or (2) High latency bidders will be required to meet 95 percent or more of all peak period measurements of network round trip latency at or below 750 ms and, with respect to voice performance, demonstrate a score of four or higher using the Mean Opinion Score," the commission said.
The FCC didn't assign weights to the tiers but instead sought comment in the FNPRM on what they should be. "We proposed procedures to assign a weight to each service tier as well as the high and low latency designations that would alter the initial cost-effectiveness score of each bid," the FCC said. "We thus propose to establish weights for specific types of bids that represent the relative benefits of service that provides higher speeds, higher usage allowances, and/or lower latency over service that meets lower requirements for participation in the Phase II auction. Under such a scheme, a bid closer to the reserve price but for higher performance levels could be selected based on its ‘weighted score’ -- its score that will be compared to other bids once weights are applied to its ‘cost-effective score’ -- even if another bidder seeks less actual support to provide the minimum level of service.”
The commission offered an example of how the system would work: "For instance, if the reserve price for a particular geography was $100 per location, and a bidder chose to bid $80 per location, the initial cost-effectiveness score would be 80. If the bidder proposed to offer a particular service that had a weight of '50', the adjusted score for the bid would then become 30 (80-50=30). If that bidder is competing against another bidder that bids $60 for the same geography, with a service that has a weight of 25, the second bidder would have a score of 35 (60-25=35). In this example, the first bidder would win even though it bid a higher amount per location, because its bid would be weighted downward according to the proposed service offering.”
USTelecom welcomed the CAF auction action as "progress" toward distributing broadband funding to costly rural areas. But the telco group said it remained "very concerned" the FCC hadn't approved voice-only support in unsubsidized extremely high-cost areas where price-cap carriers are still required to offer phone service -- "a mandate that the commission recognizes cannot be met" solely with revenues from providing service. "We are hopeful that the commission will act soon to provide support to keep voice service available in these areas," said Senior Vice President Jon Banks in a release Wednesday.