auctionRural areas that currently lack broadband could gain broadband at speeds above 1 Gbps as the result of action taken by the FCC at its monthly meeting today. Speeds of 1 Gbps downstream and 500 Mbps upstream are one of four speed levels established by the FCC as part of Connect America Fund auction plans.

That auction will award funding to broadband service providers to cover some of the costs of bringing broadband to rural areas where broadband is not available today, or is available only at low speeds. Winners will be bidders that offer to provide service at the lowest level of support. The budget for funding awarded through the Connect America Fund auction is $215 million annually for 10 years.

Areas that will be included in the Connect America Fund auction are in portions of price cap carrier territories where the incumbent carrier did not accept funding. This includes portions of at least 19 states.

Connect America Fund Auction Plans
The FCC said it will consider plans for the four speed tiers in awarding the funding, but has not yet determined how those plans will be weighted in making those decisions. Instead the commission will seek further comment on how that process should work. Each of the four speed tiers also can include higher-latency and lower-latency versions. That provision could be a nod to satellite service providers, which deliver higher-latency services.

The four speed tiers defined by the FCC for the Connect America Fund auction are as follows:

  • A minimum performance tier of 10 Mbps downstream and 1 Mbps upstream with at least 150 gigabytes (GB) of monthly usage.
  • A baseline tier of 25 Mbps/ 3 Mbps with a minimum usage allowance of 150 GB per month or that “reflects the average usage of a majority of fixed broadband customers nationwide, using Measuring Broadband America data or a similar data source, whichever is higher.”
  • An above-baseline tier of 100 Mbps/ 20 Mbps with unlimited monthly usage.
  • A gigabit performance tier of 1 Gbps/ 500 Mbps and unlimited monthly usage.

The Connect America Fund auction will be open to a wide range of network operators, including rural carriers that might want to expand beyond their traditional local service territory and others. Additionally, the price cap carriers will have the opportunity to bid to offer service in parts of their territory within states in which they previously rejected funding. Initially the price cap carriers had to accept or decline funding on a statewide basis.

Letters of Credit Requirements
FCC Commissioner Ajit Pai had some good news at today’s meeting for small rural carriers and electric companies that might want to bid in the CAF auction. Today’s action, which took the form of a report and order, will make it “easier for smaller banks including community banks to provide letters of credit” for winning bidders, Pai said.

This is something that rural carriers and power companies have asked for, after some of them had difficulty collecting funding awarded to them in the FCC’s Rural Broadband Experiments (RBE) program because they could not meet a requirement of the program to obtain a letter of credit (LOC) from one of the nation’s top 100 banks. The RBE program awarded $100 million to network operators to bring broadband to unserved areas using a competitive bidding process and was designed to help the FCC in establishing parameters for the CAF auction.

Some entities that were awarded RBE funding are still in limbo because of the LOC requirement. Pai did not say whether the less severe LOC requirements for CAF auction winners would also apply to the RBE program. But it would seem to be a logical step for the FCC to modify the LOC requirements for the RBE program to match those of the CAF auction.

Open Issues
The Connect America Fund auction is the latest of several steps the FCC has taken to bring broadband to unserved rural areas. Previously price cap carriers accepted more than $1.5 billion in funding annually for six years to bring broadband to the majority of unserved areas of their local service territories – and a similar program is in the works that will give similar options to small rural carriers that serve areas not served by the price cap companies.

Other issues that still must be resolved include:

  • What if any measures should be put in place to ensure that funding is distributed equitably among the various states that will be included in the auction.
  • How funding for the Remote Areas Fund would be awarded. The Remote Areas Fund would cover unserved areas that do not receive winning bids in the Connect America Fund auction.
  • Parameters of a broadband program for tribal lands.
  • Parameters of a Mobility Fund for wireless services. Although previous proposals called for eliminating this program, FCC Chairman Wheeler said today that a mobility program is one of the commission’s goals for this year.