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FCC proposes rules for $20 billion rural broadband fund auction

The reverse auction will distribute funds to help close the digital divide in rural America.

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FCC Chairman Ajit Pai visits with workers laying fiber optic cable in North Dakota. 

FCC

The Federal Communications Commission will vote on rules later this month for its proposed plan to allocate $20.4 billion in funding to broadband providers serving rural areas in the US. The fund, which will be allocated over the next 10 years, will also be available to cable providers, wireless companies and electric co-ops, which have traditionally been excluded from such government subsidies, in an effort to finally close the rural digital divide. 

FCC Chairman Ajit Pai introduced the proposed rules for the Rural Digital Opportunity Fund to FCC colleagues on Wednesday. The full FCC will vote on the rules on Jan. 30. 

"This new fund would target rural areas across the country where residents currently lack access to adequate broadband and would deploy high-speed broadband to millions of rural Americans in an efficient and effective manner," Pai said in a statement.

The rules call for a two-phase reverse auction to distribute the money in the fund, which means the lowest bid wins the auction. The first phase will offer $16 billion in funding for areas of the country where no high-speed broadband is available today. The second phase of the auction will go to areas that are partially served by broadband. Areas that don't receive funding in the first phase can continue to bid on funds in the second phase of the auction. 

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The auction would also prioritize bids from broadband providers that promise to deliver faster speeds over providers offering services with lower speeds. This means if two bidders meet the FCC's clearing price, the one that offers the faster speed will win the subsidy. The auction will also prioritize areas that currently lack internet download speeds of 10 Mbps as well as prioritizing funds for tribal lands. Phase one of the auction is expected to begin later this year, FCC officials told reporters in a briefing.

The agency estimates that roughly 6 million locations would be eligible for the first phase of the auction. 

The FCC voted in August to develop the Rural Opportunity Fund, which essentially replaces the Connect America Fund II auction for distributing Universal Service Fund money to rural carriers. The new fund was established to allow carriers to bid on the rights to use the funds to provide broadband and voice service in underserved high-cost areas, such as rural communities. 

One of the big differences between this fund and the FCC's Connect America Fund II auction is that the fund will also allow any company delivering broadband to bid on the money. This means funding won't be restricted to incumbent phone companies, which have traditionally been given first dibs on government subsidies in rural markets. Instead, cable providers, public utilities, and wireless companies will also get a crack at the funds to build broadband networks. 

While the establishment of the fund largely has bipartisan support in the FCC and in Congress, some Democrats have argued that the funds shouldn't be distributed until the FCC completes efforts to improve its broadband mapping to ensure there is an accurate picture of where broadband exists and where it doesn't. The FCC's current form 477 data collection process has been widely criticized for over estimating which areas have coverage. 

But FCC officials told reporters that the first phase of the auction uses data about areas that lack coverage, which isn't in dispute. Pai said in a blog post Wednesday that he wants to get the funds to carriers serving rural areas as quickly as possible, which is why the auction has been split into two phases. Once the FCC has more accurate broadband deployment data, he said, it will begin Phase Two of the auction to allocate funds to partially served areas. 

"We don't want millions of rural Americans to wait longer than necessary to obtain the economic, educational and health care opportunities provided by high-speed broadband," he said.