CPUC (sorta) offers $73 million subsidy kicker to RDOF bidders

29 October 2020 by Steve Blum
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Cpuc rdof kicker map 28oct2020

Internet service providers that win federal subsidies in the Rural Digital Opportunity Fund (RDOF) auction for particular census block groups (CBGs) may be eligible for at least $73 million in supplemental subsidies from the California Advanced Services Fund. And maybe twice that much.


Yesterday, the California Public Utilities Commission defined – at least to a useful extent – how much money will be offered as an incentive for ISPs to bid aggressively for RDOF money in Californian CBGs where the digital divide is the widest. It also updated the list of eligible areas and its online map, increasing the total from 279 CBGs to 331 CBGs, and boosting the number of eligible “locations” – FCC-speak for homes and businesses – from 95,000 to 110,000.

That means there’s less uncertainty about the CPUC’s intentions as the RDOF reverse auction begins today. The CPUC’s bureaucracy, which is mired in a hundred years of pseudo-judicial accretion, is stalling a final decision on whether or not the “kicker” will be formally and officially offered until mid-December, which might be after the RDOF auction is over. There’s always a chance that commissioners could vote to renege on the offer, but with the publication of dollar amounts the risk is significantly lower. The CPUC is putting its credibility on the line.

The deal on the table says that if an ISP prevails in the RDOF auction and wins a subsidy for an eligible CBG, then the CPUC will kick in at least an amount equal to 10% of the FCC’s ten year total “reserve price” for that CBG. That’s easily calculated – it’s equal to the FCC’s annual reserve price for a CBG, which helpfully is listed in the CPUC’s spreadsheet and its online map.

The “at least” caveat is there because the CPUC is proposing a two-level subsidy plan. The “Level 1” subsidy would be the above mentioned 10% of the total reserve price, which could total $73 million. The “Level 2” subsidy could be an additional 10%, for a total of 20% of the total reserve price. The final Level 2 amount will depend on the money available and, unfortunately, on the self interested wrangling amongst ISPs, various other parties (including your Humble Blogger) and CPUC staff.

Also in dispute are the conditions and requirements that would be attached to the CPUC’s money. The current proposal from CPUC staff would, among other things, require ISPs to deliver a gigabit-class network and offer it on an open access basis in order to qualify for Level 1 money, and offer dark fiber to tribes for Level 2 support. Those conditions were the primary topics addressed by the many commentators on the staff’s proposal, most of whom were angling to extract rents for themselves.

I like to think I’m not one of the rent seekers in the proceeding. I also like to think I know what I’m talking about. Judge for yourself.