The Voluntary IP Service Transition Auction

The Internet protocol (IP) interconnection transition generates unavoidable costs for intercarrier compensation (ICC)-dependent rural carriers, and deferring those costs to “future proceedings” predictably leads to pressure for permanent new Universal Service Fund (USF) support. The Technology Policy Institute proposes a Voluntary IP Service Transition Auction (VISTA) that converts those implicit future liabilities into explicit, time-limited transition payments. Small incumbent carriers could voluntarily bid to exit federal eligible telecommunications carrier status and associated legacy obligations, while other providers bid to assume restructured service obligations for consolidated territories. The auction would close only where the combined cost of exit payments and time-limited support is lower than the net present value of continuing high-cost subsidies. Modeled on the broadcast incentive auction, VISTA reveals market prices for exit and entry, enables consolidation where it is efficient, incorporates fixed wireless and low earth orbit satellite as credible competitors in high-cost areas, and allows the IP transition to proceed without expanding the long-run size or scope of the USF.