Get in Line for the Rural Digital Opportunity Fund Auction
Friday, June 12, 2020
Weekly Digest
Get in Line for the Rural Digital Opportunity Fund Auction
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Round-Up for the Week of June 8-12, 2020
This week, the Federal Communications Commission established procedures for the first phase of the Rural Digital Opportunity Fund auction (Auction 904, if you're scoring at home). This initial round of the Rural Digital Opportunity Fund will provide $16 billion over 10 years to deploy networks that offer voice and broadband service to underserved rural areas. The bidding in the auction is scheduled to begin on October 29, 2020; the application window for potential bidders opens on July 1. The procedures aim to ensure that bidders have the business experience and financial means to deploy networks -- and intend to use a network technology that will allow them to meet performance requirements. Here we look at some steps for potential bidders considering participating in the auction.
I. Public Service Obligations
First, potential bidders should consider the obligations they will take on if they win a bid. Each Rural Digital Opportunity Fund auction winner will be required to offer voice and broadband services meeting performance requirements to fixed locations in exchange for receiving monthly payments of support over the 10-year term. The carrier must make these services available to the required number of locations associated with the eligible census blocks covered by its winning bids along with certain other newly built locations upon reasonable request. In the auction, the FCC will accept bids for service at one of four performance tiers (see table below), each with its own minimum download and upload speed and usage allowance, and for either high or low latency service. Winning companies must deploy broadband service that meets the performance tier and latency requirements associated with their winning bids. Support recipients must also test and certify compliance with the relevant performance requirements in accordance with the uniform framework that has been adopted for measuring and reporting on the performance of high-cost support recipients’ service.
Performance Tiers, Latency, and Weights
The FCC requires that an applicant offer service to at least 95% of the required number of locations across its bids in each state -- and assume a subscription rate of at least 70% for both voice services and broadband services by the final service milestone when determining whether it can meet the public interest obligations for its selected performance tiers and latency combinations.
The only applicants that can bid in the Gigabit performance tier are those applicants proposing to use a technology: 1) that has a proven track record of offering mass-market voice and broadband services directly to residential consumers; and 2) where there are concrete examples of such technology being used to offer service at speeds that would meet the requirements for the higher speed tiers or at low latency.
Thus, the FCC will not allow an applicant that intends to use any form of satellite technology -- whether geostationary, high earth orbit, medium earth orbit, or low earth orbit -- to select the Gigabit performance tier. Moreover, the FCC will not allow an applicant that intends to use geostationary, high earth orbit, or medium earth orbit satellite technology to select low latency.
An applicant proposing to use fixed wireless or DSL will have the opportunity to demonstrate that it is reasonably capable of offering service meeting the Gigabit performance tier public interest obligations even if it has not previously reported offering Gigabit broadband service. Likewise, an applicant proposing to use low earth orbit satellite technology will have the opportunity to demonstrate that it is reasonably capable of offering service meeting the low latency requirements.
For the Above Baseline, Baseline, and Minimum performance tiers and for high latency, the FCC retains its approach of reviewing all technologies on a case-by-case basis.
II. Applying to Participate
An application to participate in Auction 904 (a short-form application or FCC Form 183) provides information used to determine whether the applicant has the legal, technical, and financial qualifications to participate in an FCC auction for universal service support. Only eligible telecommunications carriers (ETCs) are eligible to win Rural Digital Opportunity Fund support. So applicants must be ETCs or certify that they will become ETCs within 180 days after winning a Rural Digital Opportunity Fund auction. ETCs must offer qualifying voice service using their own facilities. Generally, states determine whether common carriers qualify to be ETCs in particular areas. Each Auction 904 support recipient must offer Lifeline voice and broadband service throughout the eligible areas covered by its winning bids to qualifying low-income consumers pursuant to the Lifeline program rules. An ETC may also be subject to state-specific requirements imposed by the state that designates it as an ETC.
The short-form application is the first part of the process. The FCC’s determination that an applicant is qualified to participate in Auction 904 does not guarantee that the applicant will also be deemed qualified to receive support if it becomes a winning bidder. In the second phase of the process, each winning bidder must file a more comprehensive long-form application (FCC Form 683), which the FCC will review to determine if the applicant should be authorized to receive support for the winning bids.
An entity seeking to participate in Auction 904 must file a short-form application electronically via the Auction Application System prior to 6:00 p.m. EDT on July 15, 2020. An applicant must submit operational and financial information demonstrating that it can meet the public interest obligations associated with the performance tier and latency combination(s) for which it intends to bid.
How can a provider demonstrate it has operational experience and financial qualifications to participate in Auction 904? The FCC offers two options.
- An applicant can certify on its FCC Form 183 that it has provided voice, broadband, and/or electric distribution or transmission services for at least two years prior to the short-form application filing deadline (or that the applicant is the wholly-owned subsidiary of an entity that has done so), specify the number of years it has been operating, and identify the services it has provided. The applicant must file either audited or unaudited financial statements.
- If an applicant does not have at least two years of operational experience, it must submit financial statements that are audited by an independent certified public accountant from the three most recent fiscal years (i.e., 2016, 2017, and 2018), including balance sheets, net income, and cash flow as well as the audit opinion and accompanying notes. The applicant will also need a letter of interest from a qualified bank stating that the bank would provide a letter of credit to the applicant if the applicant becomes a winning bidder and is selected for bids of a certain dollar amount.
An applicant that submits the required audited financial statements and has a clean opinion letter would be deemed financially qualified to participate in the auction. For an applicant that does not have a clean opinion letter on all submitted audited financial statements, FCC staff will first determine whether the issue is material to the applicant’s participation in the auction. If so, any such applicants—and any applicants that submit unaudited financial statements—will be subject to a review of the full set of financial statements submitted with the short-form application, as well as other information submitted with the application and/or information submitted to the FCC in other contexts (e.g., financials filed with an FCC Form 481, revenues reported in FCC Form 499, etc.). To the extent this information does not sufficiently demonstrate that an applicant is financially qualified, the application will be deemed incomplete, and FCC staff may request further information from the applicant during the application resubmission period.
Each applicant must indicate the performance tier and latency combinations for which it intends to bid and the technologies it intends to deploy to meet the relevant public interest obligations. If an applicant intends to use spectrum, it must also indicate the spectrum band(s) and total amount of uplink and downlink bandwidth (in megahertz) that it has access to for the last mile for each performance tier and latency combination it selected in each state. Applicants must also include certification that they are technically qualified to meet the public interest obligations for each performance tier and latency combination and in each area for which they seek support, and a certification regarding its experience in providing voice, broadband, and/or electric distribution or transmission service. Eligibility to bid for specific tier and latency combinations will be determined on a state-by-state basis.
The FCC is requiring applicants to submit high-level operational information to demonstrate that they can be expected to be reasonably capable of meeting the public interest obligations (e.g., speed, usage, latency, and service milestones) for each performance tier and latency combination selected.
(see Short-Form Application Instructions)
Deadlines
Still interested? Here's some dates to keep in mind.
Short-Form Application (FCC Form 183) Filing Window Opens on July 1, 2020; 12:00 noon EDT
Short-Form Application (FCC Form 183) Filing Window Closes on July 15, 2020; 6:00 p.m. EDT
An Auction Bidding Tutorial Available (via Internet) by October 14, 2020
The FCC will conduct a Mock Auction October 26, 2020
The Rural Digital Opportunity Fund auction begins October 29, 2020
Quick Bits
- NTIA Data Reveal Shifts in Technology Use, Persistent Digital Divide (NTIA)
- Cox slows Internet speeds in entire neighborhoods to punish any heavy users (Ars Technica)
- Zuckerberg: Facebook will review policies after backlash over Trump posts (The Guardian)
- FCC Commissioner Starks Announces Digital Opportunity Equity Recognition Program (FCC)
Weekend Reads (resist tl;dr)
- FCC Adopts Bidding Procedures For October's $16 Billion Rural Digital Opportunity Fund Auction (FCC)
- FCC Issues Declaratory Ruling To Promote Broadcast Internet Services (FCC)
- FCC Acts to Accelerate Deployment of 5G Wireless Infrastructure (FCC)
- Roadmap for an Antitrust Case Against Facebook (Omidyar Network)
ICYMI from Benton
- Toward Inclusive Urban Technology (Denise Linn Riedl)
- Smart Cities, Inclusive Technology, and Public Service (Denise Linn Riedl)
- America’s Broadband Moment: Creating a Broadband Competition Policy Agenda (Jonathan Sallet)
- Broadband Won't Save Us (Kevin Taglang)
Upcoming Events
June 15 -- 2.5 GHz: An Opportunity to Exercise Your Tribal Authority (Merit)
June 16 -- Nomination Hearing for FCC Commissioner O’Rielly (Senate Commerce Committee)
June 17 -- FirstNet Public Combined Board and Board Committees Meeting (FirstNet)
June 17 -- Federal Funds and Opportunity Zones (Broadband Breakfast)
June 17 -- Measure the Digital Divide (NTIA)
June 17 -- The FCC’s Role In Reforming Section 230 (Information Technology & Innovation Foundation)
The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.
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