FCC Hands Out $1.488 Billion in CAF II Auction

Bidders on the FCC's Connect America II (CAF II) broadband buildout subsidies wound up agreeing to build out to over 700,000 homes for $1.488 billion, far below the $2 billion over 10 years that was available and way below the starting (reserve) price of $5 billion. The extra $500 million may be added to the remote areas fund, the next broadband subsidy auction in the pipeline.

That is according to the results of the CAF II auction, which closed Aug. 22. The FCC said that more than half of the locations (713,176 to be exact) that ISPs agreed to serve will get download speeds of at least 100 Mbps. 

Almost 20% will get 1 gig service, and all but a fraction (.25%) will get at least 25 Mbps, more than double the CAF minimum of 10 Mbps.

Related: FCC Approves Final Pieces of CAF II Auction

The money will be allocated over 10 years to unserved areas in 45 states.The largest incumbent price cap carriers—AT&T, Verizon, CenturyLink—declined about $2 billion in Connect America Fund phase II (CAF II) support for building out broadband to high-cost, generally rural, areas, in 20 states, so the FCC is opened that pot of money up to competitors, like cable broadband providers, via auction. 

All that money is coming from the Universal Service fund for high-cost, mostly rural, areas for which there is no business case for building out broadband absent that subsidy. The FCC gave incumbent telcos the first shot back in 2015, though incumbents could jump back in as well, as some did--winning bidders included Verizon ($9,476,934 for 3,361 locations in seven states) and Frontier ($51,553 for 23 locations in one state), both former Bells.

“The successful conclusion of this first-of-its kind auction is great news for the residents of these rural communities, who will finally be able to share in the 21st-century digital opportunities that broadband provides,” said FCC chair Ajit Pai in a statement.

“By tapping the mechanisms of the marketplace, the Phase II auction served as the most appropriate and cost-effective way to allocate funding for broadband in these unserved communities, bringing the highest-quality broadband services to the most consumers at the lowest cost to the ratepayer.”

Other winning bidders of note included Viasat with $122,499,877 for 190,595 in 20 states. Winning bidders must build out to 40% of homes and businesses within three years of becoming authorized for the money and all of them by year six, with 20% increases each year after year three. 

"This Connect America Fund auction is a major win for consumers and for all of us who want all Americans to have access to broadband Internet access and who believe federal funds should be used efficiently to achieve that purpose," said American Cable Association President Matt Polka. "The winning bidders for this auction will deliver to consumers in high-cost areas higher-performance broadband service using far less universal service support than the price cap carriers that received model-based support are now doing in the areas they elected to serve. This auction, while certainly requiring fine-tuning, establishes the paradigm for awarding by auction model-based support in price cap territories when the non-auction approach is expected to sunset in a few years."

To check out all the winning bidders and bids, go here.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.