A somewhat divided FCC has voted to approve the process for handing out $20 billion-plus in subsidies to try and help close the digital divide. Democrats on the commission, who dissented in part, complained that most of the money was being spent before the FCC had figured out where it was most needed.
The Report and Order adopted a two-phase reverse auction framework for the Rural Digital Opportunity Fund, committing $20.4 billion in high-cost universal service support to bring fixed high-speed broadband service to millions of unserved Americans in high-cost areas.
The fund will go toward deploying high-speed broadband over 10 years to areas currently lacking fixed broadband service of at least 25 Mbps download speeds and 3 Mbps upload.
The FCC approved the auction last summer, but not the final rules for how it would be conducted.
Major broadband providers including NCTA-The Internet & Television Association, were okay with the fund and auction, but had a problem with the proposed requirement that those bidding for the subsidies "maintain letters of credit [LOC] for multiple years of service."
The final order voted Thursday (Jan. 30) was responsive to those concerns, as FCC commissioner Brendan Carr pointed out in his statement on the item.
"We made important changes to our letter of credit requirement," he said. "The original draft could have required winning bidders to spend over $600 million more than necessary on fees to financial institutions. And it could have prevented providers from participating in the program altogether, which would only decrease our chances of getting more broadband built out. So rather than tying up scarce dollars in financial institutions, we now free up more capital to go directly into the ground building out Internet infrastructure. In doing so, we also put new milestones in place that incentivize providers to build out on an accelerated basis.
The fund will allocate broadband subsidies through a two-phase reverse auction, with phase one offering $16 billion for areas that are wholly unserved with high-speed broadband, and phase two money going to partially served areas--"areas where some households have access to such service but others do not"--as identified by the FCC's new and more granular Digital Opportunity Data Collection. Phase two money would also be available to areas not receiving winning bids in phase one.
The FCC is estimating that about six million locations would be eligible for phase one bidding.
The auction prioritizes service with faster speeds and lower latency, so that if one or more bidders meets the FCC's clearing price, the one with the faster speed tier would be declared the winner. It also prioritizes getting broadband to those who have dial-up speeds (10/1) or nothing in a modem world, something Commissioner Brendan Carr had pushed for.
FCC officials speaking on background said they expected the phase one auction would happen later this year.
By taking a two-phase approach, the FCC can get funding to areas it knows are unserved, rather than having to wait for the FCC to complete its ongoing broadband mapping improvement efforts, FCC officials have said. Waiting for that data would only disadvantage millions without access to high speed, they argue.
Commissioner Michael O'Rielly praised the phase I targeting of completely unserved households, saying that should address concerns about giving out the money before the FCC improves its data collection.
O'Rielly also applauded the item's rejection of the demands of "some politicians" to provide duplicative support for some areas on New York.
FCC chair Ajit Pai said the FCC was taking a bold step to extend broadband to all Americans. He pointed out the FCC was increasing the weights for bids for higher speed, lower latency service.
He said the changes to the letter of credit requirement would save bidders up to 80% of the initial requirement, while still retaining the requirement to insure bidders can deliver on their bids and make the necessary investments to deploy broadband.
He said the rules would support faster, future-proof networks, and, ultimately, better, faster, cheaper broadband for all Americans. "Those who know rural America support the fund." He said the fund needed to be limited to areas where there is no broadband and where there are no other subsidies in play. He said companies should not be paid twice when they are already obligated to deploy broadband under another government program.
Commissioner Jessica Rosenworcel was not happy with the item and voted against it. She called it a broadband publicity stunt that would leave people behind because the FCC was handing out $16 billion before knowing where broadband was. She has continued to say that the FCC needs "maps before money and data before deployment."
“We are spending down three-quarters of our broadband funds for the next decade right here and now without doing any of the hard work necessary to figure out just where those dollars should go," she said. "To those who miss this election-year bonanza because our maps are wrong, we say good luck, we’ll deal with it later when our funds are already spent and too many communities in too many places have fallen further behind.”
She called the 25/3 Mbps high-speed standard "stale and backward looking" and said 100 Mbps should have been the table stakes. She said the program would set in stone data caps for the next 10 years, which she called "bonkers."
Related: FCC Approves Broadband Subsidy Auction
Rosenworcel said the item was rushed, with changes at the 11th hour. "In the end, this is not the broadband plan we need. It is guided by the desire to rush out the door and declare our broadband problems solved." She said she supported the impulse of the decision--to close the digital divide--but dissented "in all other respects."
Commissioner Geoffrey Starks said closing the digital divide was a moral imperative, but that this was not the way to do it. He said the order "fell short of his vision" including "doubling down" on the FCC's bad broadband data.
He agreed with Rosenworcel that the FCC needed to up its speed table stakes. He did not agree with the item's exclusion of money to states--New York was one of them--that got broadband funding from other subsidy sources, like the USDA's Rural Utilities Service. He said the FCC should have coordinated with the states so they were at least on notice of the exclusion.
He called the item a "ready, fire, aim" approach in explaining his partial dissent.
Pai said he did not want to delay any longer getting broadband to those who clearly did not have it, and that the FCC could review the phase II budget once it had the better data the FCC was collecting on broadband deployment.
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