Without Fixes, Auction Will Not Bring Broadband To Unserved Consumers Most Efficiently
PITTSBURGH, October 20, 2017 – In a new set of comments filed Wednesday, the American Cable Association urged the Federal Communications Commission to adopt bidding rules for the upcoming Connect America Fund (CAF) Phase II reverse auction that will maximize bidder participation and award support most efficiently.
With the Phase II program, the FCC is planning to allocate up to $200 million over the next decade to service providers that commit to offer fixed voice and broadband services to residences and businesses in price cap carrier areas that are unserved by broadband.
“This auction is the FCC’s first effort to use competitive bidding to award fixed line universal service support in unserved areas. That alone should make the agency proceed carefully to ensure it adopts bidding procedures and program requirements that will maximize participation, thereby increasing the chances the auction will produce efficient outcomes,” ACA President and CEO Matthew M. Polka said.
ACA is concerned that the CAF auction will fall short of expectations because of the inordinate complexity of the proposed auction design and the undue burdens of the proposed procedures, deterring providers from participating. As a result, the auction would not produce efficient results, wasting scare federal support.
ACA’s reply comments (attached) were crafted in collaboration with Peter Cramton, Professor of Economics at the University of Maryland and a recognized auction expert. In the new comments, ACA proposed that the FCC:
Prohibit package bidding: To begin with, package bidding is far less likely to be of value in the auction – or at least any value is outweighed by the added design complexity which will deter participation – because in the auction, the lots are far less likely to be substitutable or complementary for most bidders.
Prohibit tier shifting between rounds: Permitting a bidder to shift tiers between rounds makes bidding more opaque and especially difficult for smaller providers to evaluate, whereas larger providers will have the resources to contend with these issues.
Maintain the limited ability of bidders to switch areas between rounds: Permitting limited switching will encourage bidders to signal early in the auction their sincere interest in an area, limiting gaming and an extended auction process.
Reject the proposed “five-point” financial screen: While ACA did not reject the “five-point” scale out of hand in its initial comments, it now urges the FCC to do so – at least for experienced applicants – for many reasons, including that for experienced applicants that have been providing service for at least two years, the screen is unnecessary; and
Enable bidders to share auction experts without violating the FCC’s anti-collusion requirements: Harsh anti-collusion requirements preventing bidders from sharing auction experts will deter provider participation in the auction, leading to an “arms race” where the most knowledgeable experts will likely be retained by the largest would-be bidders who can promise the greatest levels of activity and remuneration for those expert firms.
ACA believes its recommendations will contribute to a successful auction because they are geared toward maximizing bidder participation. The FCC was already challenged, prior to dealing with the auction design and procedures, in maximizing participation in the auction.
Consequently, the FCC should not adopt an auction design and procedures that are complex and would further discourage participation, especially by smaller providers. The FCC, thus, should revise its proposals to prohibit package bidding and tier shifting between rounds, adopt its proposal to limit “switching” of areas between rounds, reject the “five-point” financial screen, and enable bidders to share auction experts.
About the American Cable Association: Based in Pittsburgh, the American Cable Association is a trade organization representing nearly 750 smaller and medium-sized, independent cable companies who provide broadband services for nearly 7 million cable subscribers primarily located in rural and smaller suburban markets across America. Through active participation in the regulatory and legislative process in Washington, D.C., ACA’s members work together to advance the interests of their customers and ensure the future competitiveness and viability of their business. For more information, visit http://www.americancable.org/