Overview

The Connect America Fund Phase II (CAF-II) is part of the Commission’s reform and modernization of its universal service support programs.  In 2015, ten price cap carriers accepted an offer of Phase II support calculated by a cost model in exchange for deploying and maintaining voice and broadband service in the high-cost areas in their respective states.

Moving forward, CAF-II will use competitive bidding to efficiently support deployment of networks providing both voice and broadband service, thereby expanding broadband availability to millions more unserved Americans.

CAF 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.

Deployment

Must offer commercially at least one voice and one broadband service meeting the relevant service requirements to the required number of locations. Rates must be reasonably comparable to similar offerings in urban areas.  Must offer service to:

  • 40 percent of the required number of locations in a state by the end of third year of support
  • An additional 20 percent in each subsequent year
  • 100 percent by the end of the sixth year of support

The exact deployment schedule is determined by the carriers themselves, not the FCC.

Technology-Neutral Service Tiers

Bids will be accepted for four service tiers, each with varying speed and usage allowances, and two latency tiers, one high latency and one low latency.

 

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 will be considered simultaneously, so that bidders that propose to meet one set of performance standards will be directly competing against bidders that propose to meet other performance standards. 

The Commission has not yet adopted a specific auction design.  But it has decided that bids will be scored relative to the reserve price for the areas subject to the bid, with lower bids selected first, taking into account weights for the tiers. 

Mathematically, S = 100 x B/R + T + L, where S is the bid’s score, B is the current bid price, R is the reserve price, T is the weight assigned to the bid’s associated tier of service, and L is the weight assigned to the bid’s associated latency.

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 remain eligible, a census block cannot be served with voice and broadband of at least 10/1 Mbps (based on Form 477 data) by an unsubsidized competitor or price cap carrier.

A preliminary list and map of eligible census blocks have been released.  These are subject to updates, and a final list will be released at least three months prior to short-form application deadline. The NY census blocks in the preliminary list are no longer eligible for the Phase II auction, but may be eligible for the New NY Broadband Program.

Two-Stage Application Process

Short-Form Application — Entities seeking to participate in the auction must establish baseline financial and technical capabilities in order to be found eligible to bid. There are 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, 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 may wait until after they are announced as winning bidders to obtain eligible telecommunication carrier designations from the relevant states or the Commission, if applicable.

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. Any entity that files a short-form application to participate will be subject to a forfeiture in the event of a default before it is authorized to begin receiving support.  Defaults include, but are not limited to, failing to meet submission deadlines, defaulting on a bid, or otherwise being disqualified for any reason. 

Accountability

Recipients will be required to file annual reports and build-out milestone certifications, and to submit the locations where they offer qualifying service on a rolling basis. 

Recipients that fail to meet the terms and conditions of support are subject to non-compliance measures including increased reporting obligations and possible withholding and/or recovery of support.

Timeline

Specific dates and deadlines have not been announced.

Contact

The Rural Broadband Auctions Task Force can be contacted with any questions regarding the Connect America Fund Phase II Auction.

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

Michael Janson, Deputy Director: Michael.Janson@fcc.gov

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

Thom Parisi, Chief of Staff: Thomas.Parisi@fcc.gov

Documents

Education

Bureau/Office: 

Updated: 
Wednesday, September 13, 2017