Industry Insights

Rules Finalized for CAF Phase II Auction

April 2017
Authors:  Jamie Becker

Jamie Becker

Senior Managing Consultant

Consulting

1120 S. 101st Street, Suite 410
Omaha, NE 68124-1088

Omaha
402.392.1040

 & Burnie Snoddy

Burnie Snoddy

Senior Managing Consultant

Consulting

1401 50th Street, Suite 350
West Des Moines, IA 50266-5935

Des Moines
515.223.0159

At the February 2017 Open Meeting, the Federal Communications Commission (FCC) approved an order finalizing the upcoming Connect America Fund (CAF) Phase II auction’s bidding rules. Companies may compete for up to $1.98 billion nationwide in financial support in areas where the incumbent provider declined cost-model funding. This sets the next stage of the Universal Service Fund’s (USF) high-cost program to encourage the extension of voice and broadband communications services to rural and high-cost areas of the country.

Funding will be provided through combining a forward-looking cost model of constructing modern, multipurpose networks and the competitive bidding process. The competitive auction process serves as a mechanism to determine support in geographic areas where price cap carriers declined the support determined by the cost model. Reserve prices may not exceed support amounts determined by the Connect America Cost Model (CAM).

The recent FCC order establishes the bid weights for the CAF Phase II auction. The goal of the weighting process is to give credit to bids that offer more robust service. The order does this by adding specified values to a bid, depending on the performance tier and latency—a lower bid is more competitive, so those assigned a positive weight are at a disadvantage. All bids in the reverse auction will be simultaneously considered across performance tiers such that bidders proposing to meet one performance tier will be directly competing against bidders proposing to meet other standards. The weighted values are:

  • Minimum – Speeds of at least 10 Mbps downstream and 1 Mbps upstream with 150 GB of monthly usage are 65
  • Baseline – Speeds of at least 25 Mbps downstream and 3 Mbps upstream with 150 GB or U.S. median are 45
  • Above-baseline – Speeds of at least 100 Mbps downstream and 20 Mbps upstream with 2 TB are 15
  • Gigabit – Speeds of at least 1 Gbps downstream and 500 Mbps upstream with 2 TB are 0
  • High latency Defined as ≤750 ms and MOS of  ≥4 are 25
  • Low latency – Defined as ≤100 ms are 0

The FCC has yet to release more details on the auction dates and how to participate. The FCC has stated its preference is to use census block groups as the auction bidding parameters, but expressly reserved the right to select census tracts, if necessary, to limit the number of discrete biddable units.

The FCC has provided a map reflecting where funding is available. Unfortunately, that map doesn’t provide a clear picture of what census blocks have eligible funding. BKD used FCC and U.S. Census data to develop a mapping process to help companies view which census block groups have funding as well as the amount of funding and number of locations within those census block groups. In addition, BKD developed maps at census block levels to better define eligible locations within census block groups.

BKD can help narrow the census block groups with funding as well as map areas you may be interested in evaluating to determine if funding would be available to provide service in neighboring or nearby exchanges.

If you are interested in determining if the CAF Phase II Auction may have funding of interest to your company please contact the authors or your BKD advisor.

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