$2 Billion CAF II Auction Plans Set, Pai Pleads for Participation from Providers of All Types

The Connect America Fund auction to award funding to bring broadband to unserved areas of 20 states is officially scheduled for July 24. The FCC at today’s monthly commission meeting voted to approve plans for the competitive bidding process, known as the CAF II Auction or Auction 903. Funding will be awarded for areas where an incumbent price cap carrier declined to deploy service at the level of funding offered by the FCC. Funding will be awarded to network operators who offer to deliver service at the lowest level of CAF support.

“We need and want everyone to participate – rural telcos, electric cooperatives, cable operators, price cap carriers, satellite companies and fixed wireless providers,” said FCC Chairman Ajit Pai at today’s meeting. “The most cost-effective technology for a particular area will vary so regardless or how you deliver connectivity, please take a hard look at participating in the CAF II auction.”

CAF II Auction
As expected, the FCC upheld plans to weight bids so that carriers offering to deliver the highest speeds and the lowest latency will be favored over another bidder who offers to deploy service at the same price but with lower speed or higher latency – an approach originally outlined in September.

Bids will be made by census block groups.

Another important aspect of the auction plans is that network operators will be able to use letters of credit from smaller banks to meet participation requirements. When the FCC tested the reverse auction concept by conducting a relatively small-scale reverse auction several years ago to award funding for rural broadband experiments, some conditionally winning bidders were unable to accept funding because they could not obtain a letter of credit from a large bank and that was a requirement of the program. Today’s decision allows auction winners to obtain letters of credit from smaller banks.

While commissioners generally expressed support for the auction plans, both Democrats and Republicans criticized certain aspects of the plans.

Democratic Commissioner Mignon Clyburn said she would have liked auction areas to be smaller than census block groups because that would have made it easier for smaller network operators to participate. “More bidders more often means a bigger and better bang for our Universal Service buck,” said Clyburn.

Republican Commissioner Michael O’Rielly expressed concerns about the weights assigned to service tiers, arguing that the system could award funding for gigabit build-outs in some communities while leaving other communities without any high-speed broadband.

FCC plans for the CAF II auction include educational programs aimed at encouraging more network operators to participate in the auction.

This post has been updated to state that the minimum bidding unit is a census block group, rather than a census block.