On May 25, 2016, the FCC commissioners voted to set in motion the Connect America Fund (CAF) Phase II competitive bidding process, almost five years after it was adopted as part of the complete overhaul of the Universal Service Fund (USF) in the 2011 USF/ICC Transformation Order. The CAF Auctions Order was released the following day. The CAF Phase II auctions will distribute around $215 million annually ($2 billion over 10 years) to any type of broadband provider in the areas where price cap carriers did not elect CAF Phase II support. Cable, fiber, broadband over powerline, DSL, satellite, and wireless are all in play for the CAF Phase II auctions. The auctions will build on the processes and lessons from the Rural Broadband Experiments and the FCC’s many wireless auctions. Leftover areas where broadband providers do not bid will eventually be part of the long-awaited Remote Areas Fund auction.

The CAF Phase II auctions will be open to any broadband providers that can meet the technology standards of one of four tiers of service: 10/1 Mbps, 25/3 Mbps, 100/20 Mbps, or 1 Gbps/500 Mbps. The application process will include a pre-auction short form and a post-auction long form. The FCC will establish the bidding process mechanics, including how to weigh bids and determine the appropriate amount of support for the 20 states where the price cap carriers rejected CAF Phase II support, after a comment cycle. The bidding process will not begin until after the comment cycle and further rules are adopted. With this time frame, the auctions may not take place until late this year or early next year, with funding disbursements coming at least six months after the auctions are completed.

In applying some of what was learned during the Rural Broadband Experiments, the CAF Phase II auctions will allow the inclusion of smaller, community banks to underwrite letters of credit, and the ability to submit audited financial statements after the auction. Unfortunately, these modifications from the Rural Broadband Experiment rules were significantly less than the changes sought by JSI and the clients that we assisted in advocacy efforts.

The next step in the CAF Phase II auctions will be for the Wireline Bureau to release a Public Notice that includes the eligible census blocks. The CAF Auctions Order notes that the final eligible areas may be quite different than anticipated, because the FCC is utilizing the most current Form 477 data instead of the old State Broadband Initiative (SBI) data that was used for the initial round of CAF funding and the Rural Broadband Experiments. Like the A-CAM, any census block where a provider has reported 10/1 Mbps service will be ineligible for the auctions. Accordingly, until the Public Notice is released, potential auction participants have no way of identifying specific areas that might be eligible for the auctions.

JSI strongly encourages clients to get involved with the CAF Phase II auctions with any type of technology that makes sense for the eligible areas. JSI will assist clients in determining if there are eligible areas that make sense to pursue, and can assist with all stages of the auctions once they commence. Contact Cassandra Heyne in the Maryland office at 301-459-7590 for assistance with mapping the eligible areas (once released) and developing a strategy to participate in the auctions.

Source: JSI e-Lert