JSI Opposes Reverse Auction in 100% Overlap Rule

Urges FCC to Decide Prior to A-CAM II Window Closing

Earlier this week, JSI submitted reply comments opposing the use of reverse auctions in rate-of-return areas where one or more unsubsidized competitors overlap a Legacy rate-of-return study area entirely (100%) or almost entirely. If a Legacy carrier is subjected to a reverse auction in these cases, it would be left with little to no universal service support for its existing customers. We argued that if the FCC ultimately decides to implement such a mechanism, carriers should know all of the details prior to the deadline for accepting the upcoming A-CAM II offer.

Our reply comments were in response to a December 2018 Report and Order and Further Notice of Proposed Rulemaking (FNPRM) in which the FCC sought input on how to implement a reverse auction mechanism in cases where Form 477 data showed 100% overlap by an unsubsidized competitor (see our December 12, 2018, e-Lert for more).

Although the FCC has yet to release the A-CAM II offers, JSI has been generating A-CAM II support estimates for clients and helping them compare those estimates with projected Legacy support for the 10-year period. In discussing these analyses with clients, it became apparent for some, especially those whose Legacy support is projected to be higher than A-CAM support (so-called “glide path” carriers), that knowing details of how a reverse auction would work is critical to deciding whether to elect A-CAM II or to remain on Legacy support.

With these clients’ concerns in mind, JSI filed the reply comments supporting the multiple commenters who oppose the use of a reverse auction methodology in existing rate-of-return study areas. JSI believes that even if a rate-of-return carrier is overlapped significantly by an unsubsidized competitor, a reverse auction mechanism is not appropriate in areas where the rate-of-return broadband provider already has existing customers, services, networks and investment obligations. The reverse auction mechanism, if implemented as proposed, would adversely affect those rate-of-return carriers because it:

• relies on inaccurate and incomplete FCC Form 477 data;
• lacks a transition plan for existing carriers that may lose support; and
• does not occur concurrently with the rate-of-return carrier’s decision to remain on Legacy support or elect the second offer of A-CAM support.

Therefore, JSI urged the FCC to exercise caution when considering the possibility of removing support from carriers that have made prior investments with the expectation of future support. We also suggested that, if the FCC does decide to phase out existing support, the decision should only apply to any future investments and not to existing investments that are in the process of being recovered.

JSI also argued that if the FCC fails to disclose the proposed changes to Legacy support before the A-CAM II election window closes, Legacy carriers will be unable to determine what is best for their investment decisions, deployment decisions, and what is in the best interest of their end-user customers. In some cases, the changes to Legacy universal service support proposed in the FNPRM can be the deciding factor for whether to remain on Legacy support or elect A-CAM II.

If you have any questions about the FNPRM or the 100% overlap reverse auction mechanism or if you would like JSI to conduct an analysis for your company in preparation for the A-CAM II offers, please contact one of our experts by clicking the button below.

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