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The Rural Digital Opportunity Fund: Conexon’s Comments filed with the FCC

A decade ago, the FCC set a course to put rural America at a long-term disadvantage to the rest of the country. At a time when the FCC projected that the vast majority of urban and suburban homes would have access to broadband at 100 Mbps speeds, the FCC established programs to limit rural broadband to 4/1 Mbps. At a time when the telecommunications and cable industries were deploying 1 Gbps to over 100 million households, the FCC incrementally adjusted these programs to 10/1 Mbps. Since the FCC established the Connect America Fund, it has committed tens of billions of dollars of the public’s money mainly to require modest upgrades to incumbent telephone networks to make 4/1, 10/1 and 25/3 Mbps service available.

The Connect America Fund Phase II auction was a partial break from the past, but one in which the FCC continued to reward subpar services in rural and high cost areas.

The Rural Digital Opportunity Fund is a true opportunity for rural America. It is also an opportunity for the Commission to begin to redeem itself for past mistakes. With one modification to the proposed rules, the Commission can better meet its requirements under Section 254 of the Communications Act.

The Commission should amend its auction rules to award funds to the highest tier bidder in each geographic area eligible for auction, provided the total amount awarded is within the RDOF budget. By declaring that the highest tier bidder wins at the clearing round price, the Commission will make the most efficient use of the budget, cover a greater number of locations and, most important, more closely adhere to the Communications Act’s mandate of service availability in rural, high cost and insular areas that is reasonably comparable to the services available to those living in urban areas.


In the Matter of Rural Digital Opportunity Fund Connect America Fund

WC Docket No 19-126
WC Docket No 10-90

Conexon, LLC, a member of the Rural Electric Cooperative Consortium (“RECC”), a consortium that included nearly two dozen electric membership cooperatives that participated in the Connect America Fund Phase II (“CAF II”) auction and intend to participate in the upcoming Rural Digital Opportunity Fund (“RDOF”) auction, hereby submits the following comments in response to the Commission’s proposals in its Notice of Proposed Rulemaking (“NPRM”) in the above-captioned proceeding. Conexon’s comments focus on two fundamental components of the RDOF auction scoring system that should be modified in advance of the RDOF auction if the Commission wishes to act in the best interests of the residents and businesses in rural communities.

First, as discussed in more detail below, at the RDOF auction clearing round, the Commission should award each geographic area to the bidder offering the highest level of service in that area, as determined by the least weight.  The remaining bidding rounds should only continue between those bidders in the same geographic area at the same bidding weight.

Second, the reliability of rural broadband infrastructure should not be sacrificed to the interests of bidders who choose not to protect their services from interference. Services using licensed versus secondary, shared and/or unlicensed spectrum should be accorded different weights – whereby spectrum licensees are favored over those using relying upon secondary, shared and/or unlicensed spectrum to satisfy their RDOF performance requirements.

I. The Commission Should Employ a Two-Stage RDOF Auction to Initially Ensure that There is a Sufficient Budget to Cover All Bids and then to Award Funding to the Highest Performance Tier Bidder in each Geographic Area For both the CAF II and the RDOF auction, there are two distinct stages to the auction design: pre- and post-clearing rounds. Prior to the clearing round, the Commission’s auction design enables bidders to compete against each other: (1) across the country even though cost characteristics due to terrain and population density differ; and (2) between technologies that differ in capabilities.

To accomplish the first objective in the pre-clearing round, the Commission uses the Connect America Cost Model (CACM or CAM), which projects the costs of constructing, operating and maintaining a GPON fiber-to-the-home network to every census block in the country. The annual subsidy for high cost areas became the reserve price in the Rural Broadband Experiments, the CAF II auction, and now the RDOF auction. This process normalizes all parts of the
country and thereby allows bidders wishing to serve one part of the country to bid against those wishing to serve any other part of the country.

To accomplish its second objective of allowing providers of different technologies to bid against each other, the FCC established performance tiers and weighted different services according to speed, capacity, and latency. During the post-clearing rounds, the FCC does not permit any bidder to change bids by geography and bidding weights are used to pit bidders in the same geography
against each other until one bidder remains.

Years of work by the Commission staff, the telecommunications industry and one of the nation’s premier cost modelers produced multiple iterations of the FCC cost model. The CAM and its close cousin, the Alternative Connect America Cost Model (“ACAM”), have been used over the past five years as the basis for tens of billions of dollars of public spending directed by the FCC for rural broadband.

Conexon mentions these cost models to highlight the vast difference between the work and expertise that went into the development of the reserve prices and the lack of any similar work or even data undertaken by the Commission into the development of the weights and performance tiers governing the CAF II and the upcoming RDOF auctions. Yet, the bidding weights have a far more profound effect on the future of rural America. It is these bidding weights, at the
clearing round and afterwards, that deserve the most attention in this rulemaking proceeding.

To put it differently, years of time, effort and public funding were spent to develop a highly detailed cost model for a GPON, fiber-to-the-home network. That model used cost data from major telecommunications companies, takes into account terrain and density, uses data on maintenance and the life of equipment, as well as the location of millions of homes and small businesses. The cost model determines the subsidy necessary. And, that cost modeling
process is currently being used to fund tens of billions of dollars in rural broadband.

Whether or not one agrees with the model’s precision, the cost model produces a thorough, highly detailed and vetted set of data.  In contrast, with regard to bidding weights, the Commission appears to have taken a coin flip approach.

To understand how auction bidding weights were developed, one must understand the auction design theory of the Commission’s economists and Rural Broadband Auctions Task Force. Certain FCC staff believed that the lowest tier bidder must be able to bid against the highest tier bidder at the outset of the auction. Thus, in a 100-point clock auction of the type used in CAF II, the maximum difference between the bottom tier and the top tier could be no more than 90 points. In the CAF II auction, 90 points was the difference between a high latency, 10/1 Mbps tier bidder and a Gigabit tier bidder. Similarly, under the Commission’s RDOF proposal, there would be a 90-point difference between a high latency, 25/3 Mbps tier bidder and a Gigabit tier bidder. Under the Commission’s RDOF proposal, once 40 points of weight is accorded to high latency services, 50 points remain, which is then divided evenly between the
speed tiers. However, the Commission offers no rationale for proposing a 25-point difference between tiers.

In such a weighting system, 25 Mbps service will sometimes win out over 100 Mbps service or Gigabit service and 100 Mbps will sometimes win out over Gigabit service. But the Commission offers no rationale for electing to subsidize 25 Mbps service when Gigabit-tier service could be available and is within the RDOF budget. Nor does the Commission attempt to use data to demonstrate that 25
points is the correct value to place on such a consequential weighting system.

Does auction design require no more than a 90-point difference total between the lowest performance tier and the highest? Of course not. In fact, the data from the CAF II auction demonstrates that the 90-point difference between the high latency, 10/1 Mbps bidders and the low latency, Gigabit bidders had absolutely no impact on the auction. The clearing round in CAF II occurred at the 70% clock percentage by which time no 90-point weight bids remained.

Had the weights between the above baseline tier and the Gigabit tier in CAF II been 50 points instead of 15 points, the maximum spread would have been 125 instead of 90. The auction results would likely have differed only in that there would have been more Gigabit service awarded, but there would have been no change in
the number of bidders who won at the 10/1 Mbps, high latency tier. The number of such winning bidders would have been zero in both cases.

During the CAF II auction, the Commission was willing to trade off the long-term
interests of rural America for 15 points of weight, or 15% of a reserve price.
Now, the Commission appears willing to make that trade-off for 25 points of
weight. The results of the CAF II auction demonstrate that there are areas of
the country that would have won fiber-to-the-home service, but bidders dropped
out after the clearing round and now the areas will receive an inferior level
of service for the next decade or longer.

At best, by evenly dividing bidding weights between the tiers, the Commission’s
proposed weighting system in the RDOF auction is an expression of uncertainty
by the Commission. Since the FCC uses no data to inform the weighting decisions
regarding what rural communities and consumers prefer, those weights should
only be used to assist in the auction to determine budget sufficiency. Then, at
the clearing round, the equities should shift from whether there is a
sufficient budget to determining the best service available within the budget.

After the clearing round, the bidding between performance tiers should largely cease
and not be used to determine whether a rural community gets 25 Mbps, 100 Mbps
or 1 Gbps service. Instead, at that point, the Commission should award each
geographic area to the bidder proposing the highest performance tier and the
lowest weight in each geographic area. The only geographic areas that would
remain in the auction after the clearing round would be the areas where there
are two or more bidders with the same highest tier/lowest weight and the
auction would continue between and among only those bidders. All other bidders
would be dropped.

It is impossible to determine the appropriate weights with reasonable certitude.
Without using data on consumer preferences, any of the commenters’ weighting
proposals will likely be as arbitrary as the Commission’s proposal. However,
the Commission has access to hundreds of millions of data points about consumer
choices in the 477 data and has run regression analyses on consumer
preferences. Yet, the Commission elects not to use the data nor make it
publicly available.

As a result, the Commission should follow the only approach that is knowable.  If the total bidding meets the RDOF budget,
availability of Gigabit service should be preferable to 100 Mbps service, which
should be preferable to 25 Mbps service. In addition, low latency should be
preferable to high latency. In the provision of wireless services, services
protected from interference with spectrum licenses should be preferable to
services using secondary, shared and/or unlicensed spectrum and subject to
interference. The Commission should follow those preferences in making the
awards at the clearing round price.

This approach is more consistent with the law, economics, and the expressed
preferences of rural communities. By awarding a greater number of winning bids
at the clearing round price, the Commission will make the most efficient use of
the budget, cover a greater number of locations and, most important, more
closely adhere to the Communications Act’s mandate of service availability in
rural, high cost and insular areas that are reasonably comparable to the
services available to those living in urban areas.

Section 254 of the Communications Act language requires that the Commission ensure that:

Consumers in all regions of the Nation, including low-income consumers and those in
rural, insular, and high cost areas, should have access to telecommunications
and information services, including interexchange services and advanced
telecommunications and information services, that are reasonably comparable to
those services provided in urban areas and that are available at rates that are
reasonably comparable to rates charged for similar services in urban areas.

According to the National Cable and Telecommunications Association, Gigabit services are now available to 80% of all households in the country, which means that Gigabit services are now or will soon be available to well over 90% of households in urban areas.

[1] When the FCC examines the 477 data from its most recent data collection, it
will find that the vast majority of urban areas now have Gigabit services

In 2019, comparable means the availability of Gigabit service. By 2030, while RDOF
funding is still being provided, 25/3 Mbps and 100 Mbps will be wholly
insufficient and not reasonably comparable, and 10 Gbps is more likely to
become the benchmark for comparability.

The Commission should support inferior broadband service only when the option for
Gigabit service is not available. For example, if an area of the country
receives no bids at the Gigabit tier, then the Commission would properly award
funds to a bidder that would provide 100 Mbps or 25 Mbps in order to ensure
reasonable comparability to urban areas. For example, an area with a Gigabit
tier bidder, which also contains a 25/3 Mbps tier bidder would be awarded to
the Gigabit tier bidder. To continue the auction in that area would result in
one of two sub-optimal outcomes. Either the 25/3 Mbps tier bidder wins
relegating the rural area to an inferior service, or the Gigabit tier bidder
will win with less funding than was planned in the budget. The Commission has
already determined that 100% of the funding was necessary under the CAM, so an
outcome that reduces funding well below the budget risks violating a second
part of the Commission’s mandate, which is to ensure reasonably comparable
services available “at rates that are reasonably comparable to rates charged
for similar services in urban areas.”[2]

Conexon suggests that the Commission’s objective of the auction is to determine which
services should be subsidized within the budget, not at the least
possible cost. In fact, that is the way a different part of the auction is
structured. At each round, the auction software calculates the amount necessary
to fund the highest performance tier bidder (i.e., the lowest weight).
The clearing round occurs when there is sufficient budget to fund every one of
the highest tier bidders in every geographic area remaining. Then, a plus up
occurs at the clearing round.

During the CAF auction, the clearing round occurred when the clock reached 70%. At
that point, there was more budget than bids, so the auction software calculated
the amount of additional budget that could be spent and each bidder that was
the sole bidder left in an area was awarded 78.35%. Where there was a bidder in
a CBG at 70% and other bidders between 70 and 79%, the 70% bidder won at the
lower of 78.35% and the other bidder’s bid.

Instead of increasing the clearing round price, awarding a greater number of winning
bids at the clock percentage is a more efficient use of the budget. In so
doing, the auction will both cover a greater number of locations and achieve
the highest level of service available in each geographic area. Such an
approach will result in the highest levels of service to rural America, yet
require no more funding than the current proposal and will be within the budget
determined by the Commission.

II. The RDOF Auction Rules Should Favor Licensed Spectrum Holders over Entities that Rely Upon Secondary, Shared and/or Unlicensed Spectrum to Serve Rural Communities
In reviewing the bidder qualifications for the wireless bidders in the CAF II auction, with
very few exceptions, the intention of the wireless bidders is to provide
service using unlicensed spectrum. Bidder after bidder declared that they did
not hold any spectrum license for the delivery of internet service to homes and
businesses in any of the areas where they were placing bids. This point bears
repeating. Most wireless bidders in the CAF II auction held no spectrum
licenses for the provision of Broadband Internet Access Service (“BIAS”) in the
areas they sought to serve. Instead, the bidders typically offered a laundry
list of unlicensed spectrum bands (e.g., 3.5 GHz (CBRS), 2.4 GHz, 2.5
GHz (EBS), 5 GHz, TVWS) as if the incantation of spectrum bands is the same as
the ability to use those spectrum bands to actually deliver 100 Mbps BIAS.

The largest winning wireless bidders in the CAF II auction don’t even advertise the
availability of the service they committed to in their bids and have no
realistic way of knowing whether they can meet their CAF II universal service
requirements with unlicensed spectrum at those speed tiers.  This is because it is the nature of
unlicensed spectrum that no service has protection against interference by any
other user of the bands.

The 2.4 GHz and 5 GHz spectrum bands have long been the most heavily trafficked unlicensed
bands for uses as diverse as WiFi, baby monitors, cordless phones, garage door
openers, and video doorbells. Even if wireless bidders could deliver 100 Mbps
to rural customers by placing fiber close enough to every home, they cannot
protect against interference and so cannot guarantee that they will fulfill
their obligations. Only primary use spectrum licensees have such protection.

The unreliability of secondary, shared and unlicensed spectrum
warrants a significant scoring difference between primary use licensed and secondary,
shared and unlicensed wireless bidders.

The largest fixed wireless provider in the country, Rise Broadband, was the first recipient
of support from the Connect America Fund. Yet, it does not it maintain that it
can provide 100 Mbps broadband service with its fixed wireless platform. On its
website, it acknowledges a limitation of service availability that states:

Service Availability – The Service is subject to availability as it is contingent on available RISE facilities and unique signal path conditions between such facilities and the USER premises. Due to the nature of the Service technology, RISE reserves the right to deem the Service unavailable to the USER up to, including, and after the installation. RISE assumes no liability
whatsoever for any claims, damages, losses or expenses arising out of or
otherwise relating to the unavailability of the Service in USER’s geographical
area, for any reason, even where such unavailability occurs after installation
of the Service.[3]

Rise Broadband’s disclaimer is appropriate and commonplace for a wireless bidder
using unlicensed spectrum. However, such a service disclaimer regarding an
entity’s provision of broadband service is not appropriate when meeting
universal service obligations that are supported by public funds.

In the Mobility Fund Phase I auction, the Commission limited bidders to those who
hold licenses or those who have entered into long-term spectrum leases with a
While the same restriction to licensed spectrum may not be appropriate for the
RDOF auction, broadband services that depend upon secondary, shared and/or unlicensed
spectrum are unprotected from interference and, therefore, inherently less
reliable.  As a result, the Commission
should place additional scoring weight on bidders in the RDOF auction proposing
to use secondary, shared and/or unlicensed spectrum.

The choice of whether to ensure protection against interference or not is entirely
within the control of the wireless service provider. Those who do not hold
licenses today are certainly aware that they have an opportunity to participate
in the CBRS auction next June. If such bidders choose not to participate in the
CBRS auction, or do not have the financial wherewithal to be successful in the
CBRS auction, rural America should not have to suffer the consequences.

III. Conclusion

Chapter 8 of the National
Broadband Plan set out a 2020 goal for rural America: 4 Mbps download, 1 Mbps
upload.[5] For nearly a decade, the FCC, the expert
agency of the federal government charged with ensuring access to
telecommunications and information services to all Americans, has pursued
incrementalist policies that never allow rural America to catch up with the
rest of the country. The reasons are manifold: regulatory capture, missed
signals on the growth of the internet, significant budgeting and modeling errors,
and the soft bigotry of low expectations.

By 2031, a time when the RDOF monies will still be spent, 10 Gbps will be available to the vast majority of Americans. The Commission should not repeat the mistakes of the National Broadband Plan in underestimating the growth of the internet and overestimating the cost of building fiber networks. By its past incrementalist approach, the federal government has already spent more money on rural broadband than would have been necessary to build fiber optic networks to every rural home and business in the country.

Conexon’s request to the Commission is simple and achievable: within the budget already established for the RDOF auction, award funding to the highest tier bidder in each geographic
area. In short, at the auction clearing round, where there is a Gigabit tier
bidder, Gigabit wins. Where there is no Gigabit tier bidder, 100 Mbps wins.
And, only where there is no Gigabit or 100 Mbps tier bidder, the 25 Mbps tier
bidder wins. With such an approach, rural America wins.

[1] See

(stating 80% of U.S. homes have access to cable’s gigabit internet speeds).

47 U.S.C. § 254(b)(3).

[3] See
(“Service Characteristics”).

[4] See
Mobility Fund Phase I Auction Scheduled for September 27, 2012, Notice and
Filing Requirements and Other Procedures for Auction 901, 27 FCC Rcd 4725,
4751 ¶ 83 (2012) (“Each applicant will also be required to provide a
general narrative description of its access to the spectrum it plans to use to
meet Mobility Fund obligations in the particular area(s) for which it plans to
bid and certify that it will retain its access to the spectrum for at least
five years from the date of award of support.”); Id. at 4754 ¶ 96 (“…[O]nly
assured access is sufficient, which means that the access must be to licensed
spectrum subject to limited access.”).

[5] See,
p. 135.