Telcos Prepared To Move Forward Quickly on CAF II Projects

The FCC has realized over the past few years that the extremely high-cost areas are often interspersed with or adjacent to the high-cost areas, said Carol Mattey, Wireline Bureau deputy chief. So network operators would want to cover the whole area, not just artificially siphon off the extremely high-cost areas, she said. Expanding the CAF II auction to include remote areas would make it better for potential bidders to assemble rational, geographic territories to build out a network, Mattey said.

FCC build-out deadlines are aggressive, officials said, so telcos that accept funding are expected to get the ball rolling. Frontier, having accepted funds early in the process, has already begun build-out, said Allison Ellis, vice president-regulatory affairs. AT&T, which accepted near the deadline, plans to have shovels in the ground by the beginning of 2016, said Mary Henze, assistant vice president-federal regulatory affairs.

The auction could be a life-changing event for people in remote areas, Henze said. The FCC is looking at using the USF differently from previous times, with funding going to specific areas, she said. “Now, we have very specific obligations, very specific timelines, very specific things that if you take the money, you now have obligations and that’s what you’re going to do.” Everyone on both sides of this process has risks, Henze said, with the risk for carriers being attempting to make a business model work where no other carrier previously has been able to. “The same things factor in here: You may want fiber to the prem[ises] to every household, you may think that’s what you have to have, but we only have so much money, so much time, and you need to develop the balance between the obligations and the amount of money you have," Henze said. "This is going to be a very, very interesting experiment.”

As the deadline for accepting CAF II neared, Nelson said he wasn’t sure the offers would be accepted in South Dakota, but now that the carriers -- mainly CenturyLink -- have accepted funding, he's happy to see it working out. The most important thing the South Dakota PUC did was to encourage the companies to look at the possibilities very seriously and in some cases stretch beyond what might have been a normal business case and take money for places they might have skipped in the past, he said. Nelson's biggest concerns as a state regulator are who's going to monitor the build-out timeline, whether the states play a role in that process, speed verifications and how quickly the auction can be done. “Time is of the essence to get that done,” he said. “Then, once the rules are laid out, I think the commissions play the same role and that’s encouraging, not just the ILECs, but everyone else, to become interested in bidding. … I don’t care who covers the blocks, as long as they get covered.”

The FCC has a very difficult problem where it's expected to figure out how to get broadband to more locations but hasn't been given any extra money to do so, said Robert DeBroux, TDS Telecom director-public policy and federal affairs. Keeping Mattey up at night the past six months have been the rules for competitive bidding for the price-cap carriers and the ongoing rate of return overhaul, she said. The only way to squeeze out more from the same money is to make sure funds are used as efficiently as possible and directed to the areas where it may be less expensive to build broadband, said Mattey. “That’s sort of the hard reality of this equation,” said DeBroux. “The competing goals of trying to treat every company fairly and give every company a fair share of the dollars available and the goal of getting as many locations [connected] per dollar spent are not always synchronized.”