Reverse Auctions will Benefit Rural Americans | Citizens Against Government Waste

Reverse Auctions will Benefit Rural Americans

The WasteWatcher

The Federal Communications Commission (FCC) under Chairman Ajit Pai has been working hard to ensure that rural areas of the country, mostly ignored or poorly served by the Obama FCC, will be getting much-needed access to the internet through a reverse auction that will help broadband companies access the universal service fund (USF).

Bridging the digital divide has been a hot topic for many years.  It is not as easy to connect rural communities as urban areas.  But there is no doubt there is a great need to give these hard to reach families and businesses greater access and connectivity to the internet so they can take advantage of the opportunities these connections will bring.  The most recent proposal to bridge the digital divide is through the use of a reverse auction to allow companies to bid for funding from the Rural Digital Opportunities Fund (RDOF).  Reverse auctions provide an opportunity for more companies to competitively bid on projects near areas they are already serving and enables the build-out of networks in areas of the country that are difficult to reach. 

A July 3, 2020 article by Hal Singer suggests that using the RDOF reverse auction process is more effective in deploying broadband to these communities than the Department of Agriculture’s Rural Utilities Service’s Broadband Technologies Opportunities Program (BTOP).  That is certainly true based on the disastrous results of  the Obama stimulus program, which spent nearly $7 billion to deploy broadband programs using the BTOP and the National Telecommunications and Information Administration’s Broadband Infrastructure Program.  Both of these programs wasted taxpayer resources to overbuild existing broadband deployments and purchase equipment that ended up sitting in warehouses.  Government money-dumping efforts like these do little to provide broadband access to unserved and underserved communities. 

However, even with the benefits of using a reverse auction to distribute USF funds in rural communities, the Eligible Telecommunications Carrier (ETC) provisions of the Telecommunications Act of 1996 creates a disincentive for non-ETC carriers to bid in the auctions.  The ETC provisions were intended to help small local telephone providers increase access to phone services to underserved and unserved communities.  ETCs must be approved by state commissions to apply for grants offered by the Universal Service Administrative Company, which administers the USF.  To receive an ETC designation from a state commission, a company must provide basic voice services within a certain geographical area and agree to be subject to state telecommunications regulations, which can create additional burdens far beyond those already imposed by the FCC.

Because the ETC provisions are statutory, only Congress can correct this deficiency in the law.  Rep. G.K. Butterfield (D-N.C.) has introduced H.R. 7160, The Expanding Opportunities for Broadband Deployment Act, which expands eligibility to receive grants from the USF, including through the RDOF bidding process to non-ETCs. 

The reverse auction process set forth by the FCC is designed to speed up broadband deployment to rural communities currently without minimum network download speeds of 25 Mbps.  The RDOF fund provides broadband funding to mostly rural areas of the country where customers are either unserved or underserved by potential broadband providers mostly due to the high cost to deploy broadband in these areas.  Expanding the law to allow non-ETCs to bid in the auction process will benefit even more Americans.

The FCC plans to conduct the reverse auction in two phases beginning on October 22, 2020.  During phase one, the FCC will auction $16 billion over ten years to companies willing to provide service to the 6 million homes and businesses located in census blocks that are currently considered unserved by the 25 Mbps download rate.  Phase two will deliver the remaining $4.4 billion plus whatever is left of the phase one funding to target any remaining unserved areas, as well as homes and businesses in census blocks that are considered underserved.  With 505 short form applications received by the FCC for phase one of the auction, Auction #904, it is clear that there is a great deal of interest by companies, many of whom are rural electric and telephone providers, in participating in this reverse auction that will help bring broadband to more Americans.  Of those applications, 121 are complete and the remaining applicants have until September 23, 2020 to complete their applications.  Bidding on Auction #904 will commence on October 29, 2020.

Bringing improved broadband to mostly rural communities and households will benefit all of America by improving communications services, and offering better opportunities for telemedicine, remote schooling, and precision agriculture applications that will enhance farming.  These connections are critical during and after the pandemic.