Looking Ahead to the Connect America Fund Phase II Auction

Under the new Trump Administration, the Federal Communications Commission (FCC) moved quickly to take concrete steps to advance parts of Chairman Pai’s digital empowerment agenda to advance broadband across America. In February, the FCC voted to adopt rules for the upcoming Mobility Fund Phase II auction and the Connect America Fund Phase II auction. More recently, the Chairman established a Task Force to oversee the two auctions, signaling that these auctions are a priority for the agency. That’s progress – but the real question is – what needs to happen next to have successful auctions for these universal service subsidies? The Connect America Phase II auction will focus on two discrete areas of the country – 1) areas where the incumbent telephone company declined an earlier offer of universal service subsidies, and 2) areas that are deemed extremely costly to serve, based on a FCC-developed cost model. The nearly $200 million in annual funding over a ten-year term – almost $2 billion overall – is far below the amount calculated by the model to serve these areas using fiber technology, but support levels could be significantly lower to the extent winning bidders can leverage existing assets or deploy alternative technologies.