FCC prepares to auction off $2 billion in broadband subsidies

by Steve Blum • , , ,

There’s $2 billion worth of broadband subsidies on the table at the Federal Communications Commission, and providers that are interested in competing for it have until Friday to register.

The FCC published a list of areas, primarily rural, that were left out of previous rounds of federal Connect America Fund (CAF) subsidies, mostly because it cost too much to build infrastructure there or because incumbent telephone companies didn’t accept the FCC’s offer in the last round. What those communities all have in common is that there’s no broadband service that meets its “minimum” standard of 10 Mbps download and 1 Mbps upload speeds.

What’s different this time is that the FCC is setting up a competition between companies and communities. The subsidies will be awarded via a reverse auction. There are complicated rules, but it boils down to a list of census blocks that are eligible, and a “reserve price” – effectively the maximum subsidy amount the FCC will consider spending in each area. Bidding will start at the reserve price and go down from there.

At the end of the process, some communities will eventually get broadband service upgrades and some won’t. If you add up all the reserve prices nationwide, it totals out to $6 billion, three times the available amount. Presumably, bids will come in under the cap, and something more than one-third of the eligible areas will be funded. Presumably.

Broadband speed also counts in the bidding. The FCC has a weighted bidding system that gives preference to projects that exceed the minimum. It set 25 Mbps/3 Mbps upload as the “baseline” level, with two additional tiers above it – “above baseline” at 100 Mbps down/20 Mbps up and “gigabit” at 1 Gbps down/500 Mbps up.

There are financial and technical requirements providers need to meet, in addition to the reams of bureaucratic paperwork that must be completed. Once prospective bidders have been vetted, the FCC moves ahead with the auction, which is scheduled to begin the end of July.