CAF Phase II Reverse Auction Bidding Weights Defined

Auctions Still Far Away

On March 2, 2017, the FCC released an Order which tied up some loose ends with the Connect America Fund Phase II reverse auctions, such as defining the bidding weights for the different speed and latency tiers and resolving several Petitions for Reconsideration. However, the CAF Phase II reverse auctions will not be starting any time soon. The FCC noted that the next step will be to release a Public Notice that seeks comment on specific mechanisms of the auction. Once issues such as the auction format and reserve prices are settled, then the FCC will release the final list of eligible blocks, and three months later, the bidding will commence.

The FCC adopted bidding weights to make the CAF Phase II reverse auctions favor high-speed, low-latency broadband; and it declined to adopt weights for any other metric that would make the auction process more complex, increase entry barriers, or appear to play favoritism to states or Tribes. In fact, there will be no preferential treatment for Tribal areas or special accommodations made to ensure that all states get some level of funding in the CAF Phase II auction. The FCC also hopes to quickly move on to the Remote Areas Fund reverse auction within a year from the CAF Phase II auction, as the CAF Phase II auction will in part serve as a learning experience and help the FCC develop policies for the Remote Areas Fund. The FCC will ensure that states who are left out of the CAF Phase II auction will have some support reserved in the Remote Areas Fund, except for New York, which was granted a waiver to receive up to the amount of Verizon’s declined offer in a complimentary reverse auction operated by the state.

The bidding weights for speed and latency are as follows:

The bidding weights will be added to the ratio that is calculated in the bidding process based on the amount of the bid per unit and number of locations served. With this bidding weight structure, it will likely be more difficult for satellite and lower-speed fixed or mobile wireless technologies to win despite being lower cost technologies. Participants who intend to deploy above baseline or gigabit-capable technologies will need to ensure that their costs are as low so they can bid as low as possible and take advantage of the low or no bidding weights for those tiers and low latency.

The FCC made other minor adjustments to the CAF Phase II auction process and decided several items on reconsideration, but overall there is still much more to be determined before the auctions formally begin, such as if the bidding unit size will be census block group or census tract. JSI has developed a primer for clients that provides an overview of the CAF Phase II reverse auction process and where things stand as of now in terms of the rules, procedures and timeline. We will continue to monitor the developments in the CAF Phase II reverse auction, and encourages clients to continue looking for attractive eligible areas in your region. For questions about the FCC’s new Order on bidding weights or if you would like a copy of our auction primer, please contact one of our experts by clicking the button below.

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