FCC Establishes Transition to Connect America Fund Auction Winners

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FCC commissioners voted Thursday to set a path for the transition between legacy Connect America Fund support in certain price cap areas, and new, auction-based support for voice and broadband.   

The Connect America Fund (CAF) Phase II Auction, which closed in August of 2018, allocated nearly $1.5 billion in support for broadband in rural areas.  The funds are targeted to areas where the incumbent provider—large carriers known as price cap carriers—declined a 2015 offer of CAF Phase II model-based support.

FCC Chairman Ajit Pai likened what the agency voted on to a relay race during the Olympics. “This is about the transfer of the baton,” and it “provides for a smooth handoff from yesterday’s subsidies to a new, more efficient system that will help build tomorrow’s rural broadband networks.” He said the new system minimizes potential loss of service and is a “key step” in the process of distributing CAF II auction funds to winning bidders.  

Commissioner Michael O’Rielly said: “This item takes a logical and appropriate step to end legacy frozen support in areas that were subject to winning auction bids. As a strong supporter of a market-oriented, multi-round reverse auction approach to stretch scarce Universal Service dollars, the rules we adopt today will provide needed certainty and clarity in implementing the phasedown of support funding.”

Commissioner Jessica Rosenworcel supported the item but also pushed for the agency to do more to fix the “woefully inadequate” maps that are relied on to direct broadband subsidies. “We cannot just hand out billions of dollars. We need to audit where these dollars go, what [buildout] commitments are made,” and if those buildouts actually occur, she said. “Hopefully, with tools like this, we can address these broadband desserts.”

The order provides clarity and certainty to providers during this transition, while ensuring that existing voice service is maintained throughout the process for customers.  To ensure a seamless transition and protect program resources, the order does the following:

  • Where the price cap carrier bid in the auction and won, legacy support is converted to auction-based support when Phase II support is authorized in that area.
  • In areas where a carrier other than the incumbent price cap carrier won in the auction, legacy support to the price cap carrier ceases when Phase II support for that winning bidder is authorized in that area.
  • In auction-eligible areas with no winning bidder, interim legacy support for existing price cap carriers will continue until further Commission action.
  • In areas that were ineligible for the auction, legacy support ceases when the first Phase II Auction support is authorized nationwide.
  • In areas where a competitive provider is receiving legacy support, it will be phased down over two years.

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By Leslie Stimson, Inside Towers Washington Bureau Chief

February 15, 2019 

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