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August 30, 2017 by Tom Cohen

Seeking Comments: What You Need to Know about the Upcoming CAF II Auctions

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A few weeks ago, the FCC released a Public Notice seeking comment on bidding procedures for the Connect America Fund Phase II auction, which will be the first auction to award high-cost universal service support in unserved, high-cost areas through competitive bidding in a multiple-round, reverse auction. The auction should be held later in 2018. Comments are due over the next two months, and it will be important to follow them, not only to see how stakeholders want the auction to be structured but to gauge the interest of the many stakeholders in participating, from price cap incumbents to adjacent rural carriers to new entrants, including electric co-ops, cable operators, and fixed wireless and satellite providers.

The FCC has a long history of conducting auctions, and it has honed its extensive requirements over that time. Participants need to understand that the process is rigorous and requires both expenditures of resources to determine whether and how to participate and then to engage in the process. The CAF auction will require similar due diligence to develop winning strategies, especially as, for each round, bidders can shift both price and location. 

As part of the Public Notice, the FCC is seeking comment on how applicants can become qualified to participate in the auction and how bids will be processed to determine winners and assign support amounts. The FCC also is looking for feedback on a number of proposed procedures, including –

  • Using census block groups containing eligible census blocks as the minimum area for bidding;
  • Requiring an applicant to identify in the short-form application the state(s) where it intends to bid and restricting bids to the identified state(s);
  • Requiring an applicant to submit evidence that it can meet the performance tier and latency combinations for which it intends to bid and that it is reasonably capable of building out the required network and providing the required services
  • Setting the reserve price for bids based on the support per-location in the FCC’s cost model.

The FCC also asks for comment on the structure for its “descending clock auction” and on using a “second-price” rule to determine the amount of support.

As you can tell, how the FCC resolves all of the questions raised in the Public Notice will be crucial to whether potential stakeholders decide to participate and whether the auction itself will succeed in bringing broadband to unserved areas. Since the 2017 Calix ConneXions conference will be held just after comments are filed, a dedicated breakout session will be held to discuss all these issues more fully at the event. We’ll see you there!