PITTSBURGH, Sept. 19, 2017 - In comments filed yesterday, the American Cable Association called on the Federal Communications Commission to simplify its proposed bidding rules for the upcoming Connect America Fund (CAF) Phase II reverse auction so that participation is maximized and support is awarded most efficiently.

Under the Phase II program, the FCC will distribute up to $1.9 billion over the next ten years to service providers that commit to offer fixed voice and broadband services to residences and small businesses in price cap carrier areas that are unserved by broadband.  

"The FCC's proposed design for the CAF Phase II auction is more complex than it needs to be and will limit participation and undermine robust bidding. All but the most sophisticated and well-funded potential bidders will at best struggle to understand all the bidding rules and potential strategies and at worst throw up their hands and 'cry uncle.' As a result, bids will be higher than they should be and universal service funding will be wasted," ACA President and CEO Matthew M. Polka said.

ACA's comments called on the FCC to embrace four principles to maximize the chances of a competitive auction resulting from robust competition. ACA collaborated on the principles with Peter Cramton, Professor of Economics at the University of Maryland and a recognized auction expert. The four principles are:

Efficiency: Economic efficiency lies at the heart of any successful auction. The aim is to use the limited funds to maximize social welfare;

Simplicity: The design should be as simple as possible, and this aspect is best measured in terms of the simplicity of participating in the auction. Simpler auction designs tend to avoid guesswork and limit risks to bidders;

Transparency: A requirement of transparency is clear as are unambiguous rules that map bids to outcomes. With a transparent design, bidders understand how the auction is progressing so they can make informed choices about their bids. A transparent auction ensures the integrity of the process by enabling bidders to know why they won or lost and can confirm that the auction rules were followed;

Fairness: Equal opportunity is a basic requirement of fairness. Rules should be clear and understandable, even by less sophisticated parties, and should not unreasonably discriminate among parties. In particular, the design should refrain from favoring or disfavoring any party based on that party's size or market status.

ACA recommended that the FCC change its auction design to at least:

• Eliminate package bidding. As in many prior FCC auctions, the simultaneous clock auction without package bidding would still give bidders ample opportunity to piece together a desirable package of areas, without the complexity and bias inherent in a package auction; and
• Eliminate the ability of a bidder to shift its performance/latency tier once established in its initial bid. This simplification avoids complex gaming strategies that would otherwise undermine price discovery.