Faster speeds can offset higher costs in FCC broadband subsidy auction

1 June 2016 by Steve Blum
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What do I hear bid?

The Federal Communications Commission is defining 25 Mbps download and 3 Mbps upload speeds as “baseline performance” for the next round of Connect America Fund 2 (CAF-2) broadband subsidies. It’s not a hard requirement, but speeds at or above that level will give applicants extra credit when the FCC runs a reverse auction – probably later this year – to award $215 million in annual subsidies for ten years in eligible areas that weren’t included in the last round of CAF-2 awards.

The plan, which was approved by the FCC last month, sets out four different speed tiers and two latency benchmarks that will somehow be used to weight subsidy bids made during the auction. It’s leaving the details of the weighting scheme open to discussion for now, but the tiers are:

  • Minimum performance: 10 Mbps down/1 Mbps, which is the level incumbent carriers had to meet in order to exercise their right of first refusal for the last round. Also requires a 150 GB monthly data allowance.
  • Baseline performance: 25 Mbps down/3 Mbps up, which is the standard previously adopted by the FCC as the minimum needed to support “advanced services”, plus a monthly allowance that starts at 150 GB but can be revised upward as average U.S. data consumption increases.
  • Above-baseline performance: 100 Mbps down/20 Mbps up, with no data cap.
  • Gigabit performance: 1 Gbps down/500 Mbps up, with no data cap.

Service proposals will also be designated as either low latency – 100 milliseconds or less round trip – or high latency, which is defined as 750 milliseconds or less. In other words, satellite companies will be able to participate but, presumably, will have to make a better offer than low latency terrestrial bidders in order to prevail. How much better, though, is a decision the FCC is leaving for later.

Another question that FCC has to answer is which U.S. census blocks will be eligible for the subsidies. No time line has been set; commissioners simply told staff “to publish expeditiously a preliminary list of eligible census blocks”.