Federal broadband subsidy auction doesn’t favor California

by Steve Blum • , , ,

California could, in theory, get as much as $476 million in broadband upgrade subsidies from the Federal Communications Commission’s upcoming Connect America Fund (CAF) auction, but the actual total is likely to be a lot less.

Eligible broadband service providers will bid against a “reserve price” that the FCC sets as the maximum it will pay to fund broadband service at a minimum of 10 Mbps download and 1 Mbps upload speeds in (mostly) rural areas that lack it. It’s a reverse auction – providers will start with the reserve price and bid down from there.

Kern County is in line for the most money – $37 million – and Sutter County is up for the least – less than $10,000. But there’s no guarantee that either will get anything. The FCC has a total of $2 billion to hand out, against a nationwide reserve price total of $6 billion. Presumably, the reverse auction will bring that $6 billion total down, but it’s unlikely, to say the least, to go as low as $2 billion. So some, maybe most, eligible communities will be out of luck.

The eligible areas are a mixed bag. Some are classified extremely high cost places to serve, while others are part of statewide sets that incumbent telcos turned down in the last CAF round. For example, AT&T accepted $360 million in its Californian territory, but took a pass on Nevada. The FCC’s computerised process for determining eligibility produces a checkerboard effect regardless, but even so statewide batches will be more attractive to bidders than the extremely scattered extremely high cost census blocks.

Aside from 45 homes and businesses on the Oregon border in Modoc County, all of California’s eligible areas are either in the extremely high cost category, or in the equally random miscellaneous bucket. Which means we start at a disadvantage.

The auction is scheduled to begin in late July.