Yesterday the FCC approved an order that moves the nearly two billion dollar Connect America Fund (CAF) Phase II Auction competitive bidding process forward.   As we have previously reported, the Phase II auction will provide support (subsidies) to broadband providers willing to deploy broadband and voice services to unserved Americans.  The FCC will use four technology neutral service performance tiers and two latency tiers, to evaluate bids submitted by competing providers.  Specifically, the FCC will evaluate auction bids for services offered at one of four performance tiers (download speed/upload speed): 10/1 Mbps, 25/3 Mbps, 100/20 Mbps, and 1 Gbps/500 Mbps.  In addition, the agency will also evaluate the latency tiers (set at 100 milliseconds or below and 750 milliseconds or below (with a voice performance score of four or higher using the Mean Opinion Score (MOS)) for services bid in this auction.

The order adopted yesterday finalizes the standards for the $1.98 billion auction (over ten years), including a specific weighting criteria for  bids that propose broadband service at one of the four performance tiers described above, as well as weighting criteria for services offering high and low latency.  The FCC also granted two petitions for reconsideration, one to make eligible for the auction those areas with high-latency, low-subscriber broadband service, and another to set a minimum monthly usage limit of 2 terabytes.  It denied a third petition asking the Commission to reconsider its decision to score bids relative to an applicable reserve price.

This auction is still many months away, but with this order potential participants can now finalize plans and strategy for participating.  This auction will likely serve as a model for the FCC’s anticipated Remote Areas Fund auction, and possibly for the Commission to disburse other dedicated support in the future.

Notably, Commissioner O’Rielly suggested that this order may be subject to a risk of reconsideration because the weighted bidding criteria was, according to the commissioner, decided without the benefit of public comment. Commissioner O’Rielly also warned against further direct support to states (such as the recent set-aside for California), which could limit the remaining support available for the upcoming Remote Areas Fund.

We will provide in-depth analysis of the order as well as the next steps for providers seeking to participate in the CAF Phase II auction as soon as the text of the order is published.