Connect America Fund (CAF) Presented to NARUC Staff Subcommittee on Accounting & Finance

Transcription

1 Connect America Fund (CAF) Presented to NARUC Staff Subcommittee on Accounting & Finance Terri Carlock Idaho Public Utilities Commission September 20,

2 Connect America Funds (CAF) Accelerate Growth in Broadband Deployment in Rural Areas Provide Support Payments (subsidies?) Unserved or Underserved Areas for Broadband High Deployment Costs 2

3 Some CAF II History In 2015, a number of large wireline operators including AT&T, CenturyLink, Frontier and Windstream accepted $9 billion over six years from Phase II of the Connect America Fund to expand broadband in their rural service areas. Later in March 2016, broadband support was provided for the nation's smallest carriers, providing $20 billion over the next decade. 3

4 CAF II Reverse Auction On May 26, the Federal Communications Commission released a Report & Order and Further Notice of Proposed Rulemaking (Order & FNPRM) to establish a framework to allocate over $2 billion in CAF support for rural broadband over the next decade ($200 million annually) to competitive providers (and others). 4

5 CAF II Reverse Auction Distribute money through a reverse auction competitive bidding process in which competitive providers can bid for support to deploy broadband in high-cost unserved areas not covered previously. 5

6 CAF II Reverse Auction FCC states it will "harness market forces" to expand broadband in "targeted" rural areas. FCC will adopt four technology neutral service standards with increased speeds and usage allowances. 6

7 Four technology neutral service downstream/upstream standards: Delivering 10/1 Megabits per second (Mbps) speed; Delivering 25/3 Mbps and offering a usage allowance of 150 GB a month; Meeting an above baseline tier that requires bidders to provide 100/20 Mbps and an unlimited monthly usage allowance; and Meeting a Gigabit performance tier that requires bidders commit to provide at least 1 Gigabit per second (Gbps) downstream and 500 Mbps upstream and offer an unlimited monthly usage allowance. 7

8 First major opportunity for competitive providers to receive a share of CAF support Design requires the FCC to evaluate all bids simultaneously so that bidders proposing different service tiers may be competing directly for support in the same area. FCC will evaluate bids through a ranking process that weighs certain criteria and takes into account the agency s preference for bidders that can deliver services at higher speeds, with greater usage allowances, and at lower latency standards. 8

9 Bidders designate one of two performance levels. Low Latency Low-latency bids must meet a standard that 95 percent or more of all peak period measurements of network round trip latency are at or below 100 milliseconds. High Latency High-latency bids must meet a two-part standard for the latency of both their voice and broadband service: (1) requirement that 95 percent or more of all peak period measurements of network round trip latency are at or below 750 milliseconds, and (2) with respect to voice performance, bids demonstrate a score of four or higher using the Mean Opinion Score (MOS). 9

10 Deployment Obligations The FCC expects winning bidders to meet the same set of defined deployment obligations as those that apply to price cap carriers that accept a state-level commitment. Specifically, the FCC will require deployment to be completed within six years of funding authorization, and will require winning bidders to roll out service on a strict schedule (40 percent by year three, an additional 20 percent each following year, and 100 percent by year six). 10

11 Challenge Process As with prior CAF initiatives, the FCC has included a limited challenge process that will permit unsubsidized competitors (such as cable operators, CLECs, and fixed wireless Internet service providers) to oppose subsidies in areas they already serve. However, competitors will not have the opportunity to update Form 477 broadband deployment data. The Bureau will release a preliminary list of eligible census blocks based on June 2015 Form 477 data, and will add census blocks to which price cap carriers accepting model-based support do not intend to deploy. The Bureau will then invite parties to comment within 21 days of publication if those areas have become served subsequent to the June 2015 Form 477 data collection. 11

12 Auction Process The FCC will score bids relative to the reserve price, set by the Connect America Cost Model. Model used to offer support to Price Cap carriers. Model available to evaluate alternative support mechanisms for Rate-of-Return carriers. 12

13 Auction Process Two-stage application filing process for participants in the Phase II competitive bidding process. Pre-bid short-form application, where a potential bidder will need to establish its eligibility to participate, providing, among other things, basic ownership information and certifying to its qualifications to receive support. After the auction, the FCC will conduct a more extensive review of the winning bidders qualifications to receive support through long-form applications. 13

14 Accountability & Oversight Various reporting requirements that will enable the FCC to monitor recipients progress in meeting their deployment obligations. Recipients of support submit annually the number and list of the geocoded locations to which they are offering broadband meeting the requisite requirements with CAF support in the prior 12-month period. Specify types of technology (e.g., fixed wireless, cable, fiber) that is being used to offer service to each location. If a carrier fails to comply with any of the FCC s reporting requirements and/or deployment obligations, the FCC reserves the right to reduce, recover, and withhold support until the noncompliance is remedied. 14

15 Unresolved items How to prevent providers from overbuilding existing networks. How to properly weight bids that commit to different performance levels in the competitive bidding process. How to achieve public interest objectives. 15

16 Contact Information Terri Carlock Deputy Administrator Utilities Division Idaho Public Service Commission Phone: (208)