CAFII Auction 903 Short-forms Due March 30, 2018

Connect America Fund Phase II Auction

Scheduled Start:  July 24, 2018

 

CAFII Short-Form Application

Filing Window Opens:  March 19, 2018

Deadline for Filing:  March 30, 2018

 

The Federal Communications Commission (“FCC” or “Commission”) will conduct a multiple round, reverse auction, Auction 903 (“Auction”) to provide up to $198 million annually for 10 years under the Connect America Fund Phase II (“CAFII”) program, providing support to service providers that deploy high-speed broadband and voice services to fixed locations.  The CAFII Auction is scheduled to begin on July 24, 2018.

Application and Eligibility Requirements

To participate in the CAFII Auction, entities must establish eligibility through a short-form application, which must be filed by March 30, 2018 at 6:00 p.m. ET.  Ownership information must be up to date for this filing.  Applicants must identify all states in which they intend to bid and the potential performance tiers and latency combinations that they expect to bid.  They also must demonstrate operational experience and financial wherewithal.  Prior to receiving support, winning bidders must submit a long-form application with additional information demonstrating ability to meet technical and financial requirements, letters of credit, and ETC designation documentation.

Eligible Areas

The minimum geographic area for bidding in the CAFII Auction will be census block groups (“CBGs”) containing one or more eligible census blocks.  Eligible census blocks lack broadband at 10/1 Mbps speeds largely in areas served by price cap carriers where the carrier declined Connect America Cost Model support (“CAM”), and in extremely high-cost census blocks.  The FCC has released the revised final list of eligible areas, which contains approximately 30,000 CBGs.  We encourage you to review the list and associated map to assess expansion opportunities in the eligible areas and interest in participating in the CAFII Auction.  The list of census blocks is available at  https://www.fcc.gov/files/caf2auctionpublishblockfeb2018csv; the list of census block groups is available at  https://www.fcc.gov/files/caf2auctionpublishcbgfeb2018csv.  The map depicting eligible areas is available at  https://www.fcc.gov/maps/caf2-auction-final-areas.

Performance Tiers and Weights

Applicants will bid to provide service based on performance tier (broadband speed and usage allowance) and latency combinations (“PTLCs”), which will be weighted according to tier and latency. The FCC has suggested that bids placed for lower speeds and usage allowances (and/or higher latency) “will have to be particularly cost-effective to compete with higher tier bids.” The four tiers and two latency options, and associated requirements are:

Performance Tiers
Speeds
Usage Allowance
Weight
Minimum
≥ 10/1 Mbps
≥ 150 GB
65
Baseline
≥ 25/3Mbps
≥ 150 GB or U.S. median, whichever higher
45
Above-Baseline
≥ 100/20 Mbps
≥ 2 TB
15
Gigabit
≥ 1 Gbps/500 Mbps
≥ 2 TB
0
Latency
Requirement
Weight
Low Latency
≤ 100 ms
0
High Latency
≤ 750 ms & Mean Opinion Score ≥ 4
25

Auction Reserve Prices

The reserve price for a CBG is the sum of annual support per-location calculated by the CAM for all eligible census blocks in that CBG, subject to a cap at $146.10/location/month for census blocks with average costs exceeding the funding threshold, but below the extremely high-cost threshold.  Reserve prices for the eligible CBGs are indicated in column E of the CBG list referenced above.

Auction and Bidding Procedures

Bidders may submit a bid for a CBG, or package of CBGs, by specifying the PTLC they propose to deploy and a percentage of the reserve price (adjusted by their PTLC weight) that they are willing to accept.  The bid percentage and PTLC weight determine the level of support the bidder is requesting.[1]  During each round, the auction system will set a base clock percentage for each CBG and each bidder’s percentage must be equal to or greater than the round’s base clock percentage and less than the previous round’s base clock percentage. Rounds continue with a descending clock percentage, in 10% decrements,[2] until the aggregate amount of support represented by the bids is no greater than the CAFII budget.  Winning bidders will receive support implied by the bid percentage or the second-price rule, which is the percentage at which competition is resolved or the next highest bidder percentage.

Obligations of Winning Bidders

Recipients of CAFII support must offer broadband service at the PTLC level bid and at least one standalone voice plan; file annual reports; and meet buildout milestones (i.e., provide service to an increasing percentage of the required number of locations associated with the eligible census blocks by the end of the third (40%), fourth (60%), fifth (80%), and sixth (100%) years of the program).

Please contact Greg Whiteaker at greg@hermanwhiteaker.com or 202-600-7274 or Clare Liedquist at cliedquist@hermanwhiteaker.com or 202-600-7271 with questions and for more information about participating in the CAFII Auction.  Please contact us by Thursday, March 8th if you are interested in having H&W assist you with the application and Auction.


[1] The Commission uses the following formula to determine support:  Implied support = min {R, ((BP – PTLC Weight)/100)R}, where R denotes the area’s reserve price, BP denotes the bid percentage, and PTLC Weight is the weight assigned to the bidder’s PTLC selection.
[2] The Wireline Competition Bureau and Wireless Telecommunications Bureau have discretion to change the clock decrement to a lower or higher decrement, limited to 5% and 20%, if appropriate to manage the pace of the auction.