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ACA Embraces FCC’s Competitive Bidding Proposals For USF

The American Cable Association announced broad but qualified support for an array of Federal Communications Commission policies and initiatives designed to promote broadband deployment in the most costly and geographically remote regions of the country that incumbent phone carriers elect not to serve with basic Internet access.

"The FCC has proposed a viable competitive bidding process to disburse Universal Service Fund support to ensure that the urban-rural digital divide quickly becomes a distant memory.  By adopting several ACA policy recommendations, the FCC will further ensure that funding flows in the most efficient fashion to the low-cost providers meeting minimum performance standards," ACA President and CEO Matthew M. Polka said.

The FCC has identified affordable and universal broadband access as a national priority, relying on the market in most cases but on USF support in others to allow providers to offer service in communities with some of the most challenging economics in terms of network deployment. Last October, the FCC voted to create the Connect America Fund (CAF), which will allocate USF support to the construction and maintenance of broadband networks for the first time in the country's history.

In comments filed on Jan. 19, ACA noted that the FCC decided that for an initial period, CAF money would automatically flow to so-called price cap phone carriers, giving them a right of first refusal on a state-by-state basis to serve their traditional study areas. To the extent these price cap carriers decline the funding in certain states, the FCC proposes a competitive auction process to allocate funding to other willing broadband providers.

In terms of funding rules, ACA strongly supports competitive bidding in the study areas of price-cap carriers, with funds awarded to the lowest bidder and contingent upon meeting a host of performance standards. This reverse auction process is clearly the most efficient mechanism to provide quality service to consumers in high-cost areas for the lowest cost to the American public, which funds the USF program through monthly fees added to landline, wireless, and VoIP phone bills. With adoption of the additional proposals submitted by ACA in its comments, the trade group is confident that the FCC can conduct successful auctions.

To that end, ACA urged the FCC that to maximize the chances of a successful CAF distribution scheme, the agency must have clear goals focused on bringing quality broadband service to high-cost areas for the lowest cost; on making it objective, with all public interest obligations well-defined and known in advance; and on ensuring competitive neutrality, especially so that the maximum number of providers may participate in the auction.

ACA stressed that in order to eliminate bureaucratic obstacles to ACA members' participation in the auctions, the FCC had to revise the Eligible Telecom Carrier (ETC) qualification process, which as currently implemented is both onerous for smaller providers and is not necessary under the CAF program. ACA believes the FCC has the authority to design the ETC designation process for broadband service and should assert exclusive jurisdiction. Such exclusive jurisdiction is appropriate to support the USF's new mission of focusing on broadband deployment and facilitating a successful competitive bidding process.

ACA added that the existing state ETC designation process is inherently burdensome because it potentially requires that carriers file multiple applications, the FCC does not control the timing of decisions, and states often impose burdensome requirements that could severely affect providers' bids in the reverse auction or performance afterward.

In its comments, ACA submitted the following recommendations for achieving an effective auction process:

  • Support should be provided to a single recipient that bids to receive the lowest amount of support to provide broadband service meeting the public interest obligations in the eligible service area;
  • Areas that are eligible to receive support should be based on census blocks;
  • Census blocks eligible for support are those with costs for broadband service as determined by the forward-looking broadband cost model that are sufficiently above the national average but are not "extremely" high cost and where an unsupported provider does not offer 4 Mbps/1 Mbps broadband service to at least a majority of locations;
  • The public must be given the opportunity prior to the auction to comment on and challenge the determination of whether a census block is served by an unsupported competitor;
  • An auction's reserve price for an area should be based on a forward-looking cost model in combination with evidence from prior auctions;
  • Auction participants should submit bids to provide service to all eligible high-cost census blocks in a census tract, and winners should be chosen on a census tract basis;
  • Support should be provided for a five-year term with no right to renewal, and the FCC should re-evaluate the need for support and method of support after that time;
  • The FCC should hold sequential regional auctions, and bidding in each region should occur over multiple rounds until a clear, lowest bid is provided;
  • Support should be awarded only if an auction is fully competitive, which can be determined by examining the degree by which the winning bid varies from winning bids in similarly situated areas; and
  • Recipients of support should provide broadband service meeting the public interest commitments designated by the FCC to at least 95 percent of locations in the service area (census tract) within two years.


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