FCC Officials Outline Plans for $100 Million in Funding for Rural Broadband Experiments

WASHINGTON, July 29, 2014 – In a webinar on Thursday, July 17, the Fiber to the Home Council hosted a webinar with Federal Communications Commission officials on a $100 million fund for expanding broadband capabilities to rural communities. FCC officials encouraged companies to apply for the funds, but also cautioning them of the heavy commitment.

The FCC voted at its July 11 monthly meeting to authorize the experiments, and applicants have until Oct. 14 to bid for funding. The $100 million will be split into three categories, said Jonathan Chambers, Chief of the FCC’s Office of Strategic Planning & Policy Analysis. About $75 million will be used for testing networks that service plans at 25 Megabit per second downloads and 5 Mbps uploads. Another $15 million will go to testing delivery service at 10 Mbps down/1 Mbps upload speeds in high cost areas. The remaining $10 million will go to 10 Mbps down/1 Mbps upload service in remote rural areas.

The experiment will allow the FCC to test its reverse auction mechanism for Phase II of the Connect America Fund, and to better see where interest for high-speed broadband is expressed and by whom.

As a rule, Chambers said the FCC will not discriminate between types of services: “In terms of the expression of interest we received, we got ranges of projects in the hundreds of thousands and hundreds of millions of dollars. We wanted to ensure we get some diversity in the projects.”

The key is cost effectiveness, he added.

“We’re just going to select the most cost-effective project first, and then the second-most cost effective, and keep selecting until we’ve used up the $75 million, and the [follow the] same process for the $15 [and $10] million,” Chambers said. “As long as people meet the performance criteria…there’s no beauty contest. There’s no, ‘we value one type of service more than another.’ It’s going to be run as a reverse auction. Low bid wins.”

Limits will be placed on how much funding certain projects can bid for so that “several winners” are chosen, Chambers said. For example, projects in the high performance bracket are limited to $20 million. A percentage ranking system will determine which bids are most cost effective. Once entities are selected, support will be granted annually over a ten year period and the grunt work of building out or upgrading networks should ensue quickly.

“People should not be reluctant because they have a smaller project or a different type of project at all in terms of filing and participating in the program,” FTTH Council’s Counsel Tom Cohen said. “Don’t say, ‘they’re only going to do two projects.’”

Only price capped carriers in areas eligible for Phase II of the Connect America Fund can participate in the experiments, added Carol Mattey, Deputy Bureau Chief of the FCC. Funds will be distributed on a census block-by-block basis, added Chambers, to ensure “the fairest comparative measure.”

To make the process easier, companies don’t have to be eligible telecommunications carriers at the time of entering their bid, Mattey said. If they’re announced as winners in the public notice, however, then they must seek a designation as such an entity.

But while “the FCC is making it relatively easy to submit an application,” Cohen told applicants: “you better have your homework and due diligence work in your back pocket. Once you’re selected, you undertake a real obligation to do this. You don’t want to be in default. There are accountability measures the commission has to have so you need to keep that in mind.”

To secure the FCC’s dispersed fundings, companies need to obtain a letter of credit from eligible banks, as was done with the Mobility Fund, Mattey said. If performance failures are observed, the FCC “will draw on the letter of credit and recoup the funding.”

The build-out requirements once a bid has won are largely the same as those for Phase II of Connect America, Mattey added. Each company has three years to build out to 85 percent of locations, and to the rest by five years. Companies that already plans set in motion can opt for an accelerated disbursement of funding if they can commit upfront to meeting deployment of broadband to 25 percent of their area within 15 months. In exchange, 30 percent of funding will be delivered upfront.

In conjunction with the experiment, Chambers concluded by saying that the FCC is also undergoing a proceeding on potentially raising the definition of high-speed broadband. Currently, the FCC defines it at 4 Mbps. But it is considering the prospect of raising it to 10 Mbps, and perhaps even beyond that, he said.