Overview

The Connect America Fund Phase II (Phase II) is part of the Commission’s reform and modernization of its universal service support programs.  In 2018, the Commission conducted an auction (Auction 903) to allocate Phase II support to certain eligible areas across the United States.  Auction 903 ran from July 24, 2018 to August 21, 2018.  103 bidders won $1.49 billion over 10 years to provide fixed broadband and voice services to over 700,000 locations in 45 states.  (See full auction results.)

The 2018 Phase II auction followed an earlier allocation of Phase II support to price cap carriers based on a cost model.  In 2015, ten price cap carriers accepted an offer of Phase II support calculated by this model in exchange for deploying and maintaining voice and broadband service in the high-cost areas in their respective states.  The areas for which price cap carriers did not accept model-based support, as well as other areas, were made available in the Phase II auction.

 

Phase II Auction Information

Budget

$198 million in annual support (a total of $1.98 billion for 10 years).  The Commission adopted a $2.15 billion total budget for the Phase II auction, but set aside up to $170.4 million total to allocate through New York’s New NY Broadband Program.

Support Term

10 years of support; support disbursed in equal monthly installments. Disbursements to winning bidders begin after the winning bidder submits a long-form application and becomes authorized to receive support.

Deployment

Phase II support recipients must:

  • Offer commercially at least one voice and one broadband service meeting the relevant service requirements to the required number of locations in the following timeframe:
    • 40% of the required number of locations in a state by the end of third year of support
    • An additional 20% in each subsequent year
    • 100% by the end of the sixth year of support
    • The exact deployment schedule is determined by the carriers themselves, not the FCC.  
  • File with USAC annual reports and build-out milestone certifications, as well as data on the locations where service is available.  Failure to meet the terms and conditions of support can result in increased reporting obligations and possible withholding and/or recovery of support.
  • Offer at least one broadband and voice service at rates that are reasonably comparable to the rates for similar service in urban areas.  The FCC uses its annual Urban Rate Survey to determine the range of rates that are reasonably comparable.

Technology-Neutral Service Tiers

Bids were accepted for four service tiers, each with varying speed and usage allowances, and two latency tiers, one high latency and one low latency. Winning bidders must offer the service associated with their winning bid.

 

Performance Tier

Speed

Usage Allowance

Weight

Minimum

≥ 10/1 Mbps

≥ 150 GB

65

Baseline

≥ 25/3 Mbps

≥ 150 GB or U.S. median,
whichever is 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 & MOS of ≥4

25

 

Bids were considered simultaneously, so that bidders proposing to meet one set of performance standards competed directly against bidders that propose to meet other performance standards.  Bids were placed as a percentage of the reserve price for the area subject to the bid in a descending clock auction, with lower bids selected first.  The support amount that a winning bidder receives accounts for any weights associated with the performance tier and latency.  (See the Auction Procedures Public Notice for more details on hte auction design.) 

Eligible Areas

The Commission made eligible for the Phase II auction census blocks in states where price cap carriers declined the offer of model-based support, extremely high-cost census blocks nationwide (excluding NY, AK, PR, VI), and certain other census blocks that were removed from the offer of model-based support.  To be eligible, a census block could not have been served with voice and broadband of at least 10/1 Mbps (based on Form 477 data) by an unsubsidized competitor or price cap carrier.

The FCC published the final eligible census blocks for the auction on February 6, 2018.  The final areas were based on FCC Form 477 data as of December 31, 2016 (the most recent publicly available FCC Form 477 data at the time).  The final eligible areas superseded the preliminary eligible areas that were released previously.  

Two-Stage Application Process

Short-Form Application — Entities seeking to participate in the auction had to establish baseline financial and technical capabilities in order to be found eligible to bid. There were two pathways for establishing eligibility:

  • Demonstrate two years of experience providing a voice, broadband, and/or electric distribution or transmission service and submit one year of audited financials (if an applicant with at least two years of experience is not audited in the ordinary course of business, it can instead submit one year of audited financials within 180 days after being announced as a winning bidder but had to submit one year of unaudited financials with its short-form application), or
  • Submit three years of audited financials with the short-form application and a letter of interest from an eligible bank willing to issue a letter of credit for a specified amount

Entities could wait until after they were announced as winning bidders to obtain eligible telecommunication carrier designations from the relevant states or the Commission, if applicable.  (See the Form 183 Short-Form Instructions for more information.)

Long-Form Application Winning bidders must:

  • Provide in their long-form applications additional information about qualifications, funding, and the network that they intend to use to meet their obligations
  • Within a specified number of days, submit a letter from an eligible bank committing to issue a letter of credit; upon notification that the entity is ready to be authorized, must obtain a letter of credit from an eligible bank that remains open and covers disbursements until build-out is complete and verified
  • Within 180 days of being announced as winning bidders, certify they are eligible telecommunications carriers in any areas for which they seek support and submit relevant documentation

Once a winning bidder’s long form application is approved, it will be authorized to begin receiving support.  (See the Form 683 Long-Form Instructions for more information.)

Any entity that filed a short-form application is subject to a forfeiture in the event it defaults prior to becoming authorized to receive support.  Defaults include, but are not limited to, failing to meet submission deadlines, defaulting on a bid, or otherwise being disqualified for any reason. 

Timeline & Deadlines

Short Form Application Filing Window Opened March 19, 2018
Short-Form Application Filing Deadline March 30, 2018
Mock Auction July 18 - 20, 2018
Bidding Began July 24, 2018
Bidding Ended August 21, 2018
Form 683 Divide Winning Bids Window Opens September 14, 2018, 10:00 a.m. ET
Form 683 Divide Winning Bids Window Closes September 14, 2018, 6:00 p.m. ET
Form 683 Long-Form Filing Window Opens October 1, 2018, 10:00 a.m. ET
Form 683 Long-Form Filing Deadline October 15, 2018, 6:00 p.m. ET
Form 683 Letter of credit commitment letters, detailed technology and system design descriptions due November 5, 2018, 6:00 p.m. ET
Form 683 ETC designations and certification letters, and auditied financial statements (if applicable), due February 25, 2019, 6:00 p.m. ET

 

Contact

Please email questions about the Phase II auction to auction903@fcc.gov.  You can also contact members of the Commission's Rural Broadband Auctions Task Force:

Chelsea Fallon, Director: Chelsea.Fallon@fcc.gov

Kirk Burgee, Deputy Director: Kirk.Burgee@fcc.gov

Nathan Eagan, Chief of Staff: Nathan.Eagan@fcc.gov

Documents

Education

Data

Application

Results

Bureau/Office: 

Updated: 
Wednesday, October 10, 2018