Transcript: Community Broadband Bits Episode 321

This is the transcript for episode 321 of the Community Broadband Bits podcast, "Analyzing the Auction with Jonathan Chambers." In this episode of the Community Broadband Bits podcast, Christopher Mitchell discuesses the recently released results of the Connect America Fund Phase II auction with Jonathan Chambers of Conexon.  Listen to the episode here.

 

Jonathan Chambers: Those are the gigabit tier bidders—and not just gigabit tier bidders. Those are the companies that have agreed in this process largely to build Fiber-to-the-Home networks. The winners are the residents of those communities.

Lisa Gonzalez: This is episode 321 of the Community Broadband Bits podcast from the Institute for Local Self-Reliance. I'm Lisa Gonzalez. Just last week, the Federal Communications Commission announced the results of the Connect America Fund Phase II auction. Entities bid to offer connectivity to rural areas, and winners will receive federal subsidies to develop infrastructure. In addition to some of the largest ISPs, bidders included rural cooperatives, smaller wireline and fixed wireless Internet service providers, and satellite Internet service providers. In this episode of the podcast, Christopher discusses the auction results with Jonathan Chambers of Conexon. Jonathan's firm worked with the Rural Electric Cooperative Consortium to develop bids for Fiber-to-the-Home networks in different rural areas where electric cooperatives serve members. Jonathan and Christopher discussed the history of the Connect America Fund and how the process has changed. They also discuss some pros and cons of providing public support for deploying networks in rural areas. Jon and Christopher analyze the results from this auction and what the final results tell us. Now here's Christopher with Jonathan Chambers of Conexon discussing the CAF II auction results.

Christopher Mitchell: Welcome to another edition of the Community Broadband Bits podcast. I'm Chris Mitchell with the Institute for Local Self-Reliance up in Minneapolis, Minnesota, today getting an update on some breaking news from last week, as you're hearing this. But we're going to be talking with Jon Chambers, a partner with Conexon Welcome back to the show, Jon.

Jonathan Chambers: Thank you Chris. Always great to talk to you.

Christopher Mitchell: Jon, you've been one of the people that's given me the most hope in terms of making sure that we have high quality Internet access to all of rural America, uh, in the near future, and we're gonna be talking about these CAF II auction results. But just briefly remind folks what Conexon specializes in.

Jonathan Chambers: Well first, thanks Chris. That's high praise. I genuinely appreciate you saying that. Conexon was founded by my partner Randy Klindt, who had built the first complete Fiber-to-the-Home network in a rural area with no government subsidies and built out to 100 percent of the membership of an electric cooperative. And so Conexon's mission, since that time Randy started Conexon, Conexon's mission has been to replicate success at Co-Mo Connect in central Missouri to build fiber optic networks, leveraging existing electric cooperative networks in order to build Fiber-to-the-Home to every single rural home and business in the country.

Christopher Mitchell: So Jon, in the past, you and I have talked a lot about the Connect America Fund in part because you know it better than anyone else we've had on the show, certainly. But you had been at the FCC as it was being developed. You are a critic of some of the ways it was implemented in terms of giving the money, so much of the money, to the big telephone companies, the big incumbents. But now, we're finishing up this auction. If I could just briefly layout what I think is how it's working. We've got two billion dollars at stake over 10 years that will be distributed to areas of the country that are hard to serve, although not the most remote. And these are areas that had either been declined by the big incumbents or were available for some other reason. And so you had anyone that had, you know, the ability to serve these areas could bid on them, and then the bids were sort of amalgamated into some combination of comparing the costs that one would charge to be able to do it with the ability of them to provide higher service. And I'm sure there's some sort of complex matrix used. In many ways, I want to just sort of like skate over that and talk about the results. But is that a summation that's more or less accurate?

Jonathan Chambers: So with one not pedantic point, it might sound like that. You said, "not the most remote," that is the areas in this auction. The areas in this auction were by definition, by the setup of the auction — the majority of the areas were the most remote areas in the country, considered by the FCC and their cost model that was produced years ago to be the very hardest and most expensive areas to serve in the country. What used to be called the remote areas fund, all of those areas were put into this auction. So it's a fair characterization. They want people to understand that this auction was addressing a question that the FCC and public policymakers across the country have grappled with for a long time, which is how do you get service to areas that are considered the most difficult to serve and are unserved today if the traditional incumbent telephone companies — the recipients of public funds in the past — if they are not providing service in those areas? Will someone else step up? Will someone else provide quality service? Will someone else serve areas that have gone unbidden, unwanted. They're sort of the undesired areas of the country, and the result you asked, the result of this auction is a resounding yes.

Christopher Mitchell: Thank you for correcting me. I did not know that the most remote areas were included in this. So I was trying to — in my mind, I thought it was more areas of Missouri, Iowa, you know. There's areas across the entire United States of course, but it's worth reiterating that these are the hardest areas to serve. Um, although the definition of hard goes from challenging to very challenging, perhaps is a way to characterize it.

Jonathan Chambers: Yeah, the definition as used by the FCC — there were three categories of areas in this auction, but again the most of the areas in most of the states was this category of remote areas, referred to as extremely high cost areas. That's under the cost models calculation. Extremely high cost meaning if you calculated the cost of construction, operation, maintenance of the network, these are the areas [that are] the one percent most expensive to build, to operate, and maintain — the one percent of the hardest to serve areas. And you would see in the auction, there were such areas everywhere in the country. And what made this auction and the results all the more remarkable was that sometimes these areas had — and areas the FCC auctioned off were census block groups — sometimes these census block groups had just a handful of locations and sometimes one, two, five, 10, you know, fewer than 50, most of them. And yet, with the exception of the Pacific Ocean, with the exception of the Commonwealth of the Northern Mariana Islands, every single census block group in the country received bids in this auction. And I'm telling you this not as insight as one who bid in the auction because we are still in what's referred to as the quiet period where what went on in the auction that's not public is something that can't be disclosed. What I'm talking about is the information that the FCC has made publicly available this past week, which is an extraordinary treasure for anybody that's kind of nerdy enough about how auctions work. The FCC released round by round bidding by every participant in the auction. So you can sort, you can sift through, you can see where bidders bid at what levels, what amount of funding they were seeking, what they were willing to take, what they were giving up on, where they won — you can see all of that if you want to spend the time looking through it. And I know the FCC gets criticized by some about transparency. I just want to say that Chairman Pai and this commission, in this respect and other respects, has been the most transparent commission in my experience going back 30 years, in that they have released information regularly that in other commissions has been kept confidential. And so anybody that's curious about it, they should go look at the public reporting, um, websites of the FCC and you can gather and learn. And it would be true if you're at a state commission or in a community or anywhere else that's trying to determine how these auctions would have worked, who might participate in their area. All of that is laid bare now

Christopher Mitchell: We're gonna dig into some of that and some of the big winners in terms of those who bid in a lot of different areas and where they came out. In particular, I want to talk about, Jon, how you feel that, you know, the group that you put together came out. But I think one of the key things that you and I wanted to discuss before we get there is this idea of universal service. And historically many at the FCC, although not all — you were not the only one, I get the impression — recognize that with changing technologies, with just different interest from entities like rural electric companies, rural electric cooperatives in particular, um, that this idea that universal service could only be accomplished by the historic telephone companies is wrong and that we need to think of universal service more broadly, and we would get significant benefits by doing so.

Jonathan Chambers: Yes, there was a serious debate at the FCC and at state and local communities for years, going back 25 years. You can see in some of what we worked on when I was a staff member on Capitol Hill working on the Telecom Act of 1996. There was debate on this point: the point of if you took away, through competition, the rich areas for telephone companies and as the telecommunications business became more and more competitive in populated areas, what would be left over would be unserved. Or if the folks who were left holding the bag were telephone companies, and all they had were the otherwise unserved areas because they were hard to get to, what would you do then? How would you support the telephone industry then? And so for decades, the federal government and state governments have had a policy, a series of policies, supporting universal service, the notion that those who live in rural and high cost areas deserved the same. The words of the statute are reasonably comparable service at reasonably comparable prices. Um, as you know, Chris, I usually would say that if somebody emphasizes the word reasonably, I figure they're not really talking about the same service. So I tend to think of universal service as comparable. You get the same. You get comparable service at a comparable price. And over decades the FCC reformed its programs in order to do this important public policy thing, which is as competition was taking root in urban areas, as new technologies were being deployed, as people were moving to mobile phones and dropping landline phones, as cable companies got into broadband, what would you do with rural? Because rural was left as a hard to serve place, and the debate came down to the incumbents largely [arguing] that they needed support. They needed sole support, that is they needed to be the sole recipient of public support in order to maintain service in hard to reach areas. The contrary argument had always been (and this wasn't new — this argument went back to the 1990s) would competitors come to rural areas if competitors also had an opportunity to get the same types of public support as the incumbents? You can find this debate rooted in the 1996 Telecom Act. You can see in the definitions of eligible telecommunications carrier how this debate started, and now, over 20 years later, you really have the first large scale example of how it's played out. So to the question of "Will folks go to rural high cost areas if funding is made available to them as well?" the answer is a resounding yes.

Christopher Mitchell: Except for the Northern Mariana Islands.

Jonathan Chambers: Except for CMNI, the Commonwealth of the Northern Mariana Islands. A resounding yes in that [it's] not just single bidders. There are — again, you can see this in the data — there were areas where we were bidding — and I think you can see this in the data today; you could look it up on the website — rural areas where there were five and six bidders. This is bidding in areas that have been considered the hardest to reach, bidding in areas where multiple bidders — two, three, four, five, six, eight bidders in single census block groups — [were] all bidding for the right to get funding to provide service. I'm not talking about areas like where I live in tony suburban areas around Washington DC. I'm talking about rural Oklahoma and rural Missouri and rural Texas and rural Iowa and rural Oregon. Everywhere in the country, multiple bidders [were] seeking to provide service. It is an extraordinary development. Now, still an extraordinary development on a relatively small scale because as important as this auction has been, the budget for this auction was $1.98 billion over 10 years — $198 million a year. At the same time, the FCC continues to spend over $4 billion, close to $4.5 billion, year in year out on what? On the same thing: on the combination of Internet service and voice service in rural high cost areas. So what this auction and the results allow the policymakers to do is to extend the success to other areas of the country. And it isn't just a success in terms of "Well, will anybody provide service?" The point you were making before about [how] the funding in the past went to incumbents only — the way it went to incumbents only then turned into a negotiation with the incumbent providers as to what level of service they would be willing to provide. And when I was at the FCC to consider this, because this was just a few years ago, the raging debate was whether four Megabits per second was possible or whether they might stretch at 10 Megabits per second. Know what you had in this auction? Tens of thousands of homes will now get gigabit service, not for the money that went to the telephone companies, but far less money. A fraction of the support that has been going and goes today to the telephone industry is going to go to providers like electric cooperatives to provide gigabit service. My group, the group that that I work for, of rural electric cooperatives is the single largest gigabit tier bidder in this auction. The cooperatives will receive $186 million over 10 years to build out gigabit service to all of the homes and small businesses in the territories where they got funding. That is in stark contrast to the current policy, which is still in existence today, of some places getting funding for four Megabit per second service and some places getting funding for 10 Megabit per second service. This is a difference that is just a few years in the past. So for those of us who were arguing just a few years ago that we could do better, this is a significant validation. And I'll say again what I started to say earlier, it's a significant accomplishment for this chairman and for this commission because this auction had been planned and discussed going back now three other chairmen, and this particular commission kept the trains running, got the job done, held the auction, ran a really, you know, ran a really good, efficient, administratively, easy auction for participants, and accomplished something of great significance

Christopher Mitchell: For people who aren't very familiar with you, you're not someone who's just out there trying to curry favor with the chairman. You've been critical of him in other places, and I think it's worth noting that, uh, when we praise Chairman Pai for these accomplishments, that it's true praise. Even though we may be critical him in other areas, that this is truly impressive.

Jonathan Chambers: It's a personal fault of mine, I suppose, that I am quicker to criticize than I am to praise. So I worked in a commission when it was Commissioner Pai and when many of the other commissioners were there. Look, I liked them all personally; I've been critical professionally. Um, but as you just said, I think it's important to applaud people when you agree — not just agree with them, but when they have accomplished something of significance. This deserves applause. The job's not over, but this step in the job — really, really outstanding work.

Christopher Mitchell: We're going to come to what the next big challenge will be for the FCC and one that we hope that the commission continues to get right. But one other thing I wanted to note is that some of the telephone incumbents particularly, um, a number of rural cooperatives and places in the Upper Midwest, in Montana [and] Idaho, they have been doing really good things with that money that was only available to them. And so I don't want people to think that we're painting with too broad a brush. But there certainly are a lot of telephone incumbents across the country that have taken a lot of money and have not reinvested in the kinds of connections that their communities are going to need to really thrive. Um, so with that, Jon, I'd like to get a sense from you, when you look at the aggregate amounts that the big bidders won, you know, it looks like there's a number of different technologies. You were the biggest gigabit provider. The satellite companies, Viasat in particular, was a big winner. Um, I believe Wisper, which must be a wireless service, was a big winner. What did you take away? And actually I want to know — one other one that was a pretty big winner and that's the folks from the Wilkes Telephone Cooperative out of North Carolina, which is expanding into Virginia. And I don't know, Jon, if they're going head to head with you, but I did just spend a few days with Eric Cramer, a past guest on the show, and I think they're going to be doing pretty interesting things. I'm pretty excited about them. I'm just curious, Jon, if you can give me a sense of your reaction to where most of the money is going, or at least the big winners.

Jonathan Chambers: I would characterize winners in a slightly different sense: not those who won money but those areas of the country that will now get a level of service that had not been possible for them in the past.

Christopher Mitchell: That's a great framing. I appreciate it.

Jonathan Chambers: The big winners for the group that I am associated with, the group that I worked for — that group, in addition to other electric cooperatives that bid in this auction — so Tri-County in Pennsylvania and Lake Region in Oklahoma and Maquoketa in Iowa — so there were other bidders in this auction also electric cooperatives. And collectively the electric cooperatives not only will be getting I think the total is $250+ million, but that is the lion's share of gigabit service. And then if you include some of them that you just mentioned, like Paul Bunyan, which is a telephone cooperative, those are the gigabit tier bidders — and not just gigabit tier bidders. Those are the companies that have agreed in this process largely to build Fiber-to-the-Home networks. The winners are the residents of those communities. The small businesses and the households in those communities are enormous winners because what they will get over the course of the next several years is world class telecommunications service, unrivaled anywhere in the world. That's what they will get, and they're going from a place today where they have, by definition, no one even offering 10 Megabits per second service. So that's a leap forward for those communities. Now, let me say the contrary, which is something that you just mentioned, a big winner in terms of company and a real question mark in my mind anyway in terms of service. So let us point to another auction which had similar results in the state of New York. New York held an auction over the past couple of years in which it awarded funds to folks who would do Fiber-to-the-Home, who would build Fiber-to-the-Home networks, except in areas where no one was bidding. And in those areas, New York was willing to offer funding for fixed wireless and satellite. And the results you had in New York were some 77,000 households will now have satellite service available to them, whereas neighboring communities, neighboring towns, and some cases just like down the street will have Fiber-to-the-Home service.

Christopher Mitchell: To be clear, so presumably the New York funds then just go to lower the cost of satellite for those households.

Jonathan Chambers: Well I don't think that Hughes in that case is going to launch a new satellite and put spot beams over those communities, so I think so. But Viasat, which was the satellite bidder in this auction and won a significant number of households and locations and I think the fourth [highest] amount of funding — well, Viasat and Hughes do very much the same sort of thing. You'll get satellite service. If you have nothing else, satellite Service is — that's laudable that they're investing their money in launching satellites and improving their service, all of that. To me, the question is, "Where do you spend public funds?" not where private funding goes. My theory would be — I'm not a theoretician and I'm not an academic and I don't engage in longitudinal studies and I'm not doing anthropology, but my theory would be that in a community that has Fiber-to-the-Home and a neighboring community where the homes have only satellite service available to them, that the fiber-fed homes will be more valuable. There will be more economic activity in those communities. Jobs will be more prevalent. Again, the housing prices will be on the whole higher and eventually the communities without Fiber-to-the-Home will start to wither. And the communities will then have to make a decision about whether they'll invest their own money in something that's comparable to their neighboring communities. What New York has done — and look, I've lauded New York for their efforts. They did a great job. What they've done is they've set up this, um, some community "haves" and some community "almost haves," and they can look across the border to the neighboring community and wish that they had the same thing. I think it'll have a profound effect on parts of New York. Now the FCC's steps put that on steroids because the FCC has now done the same thing, but they'd done it nationwide.

Christopher Mitchell: And Jon, I think a year ago, you and I were arguing that they should have not even allowed satellite to bid. Is that where we came down?

Jonathan Chambers: I was, while at the FCC, before I joined the FCC — I'm sorry, I left the FCC, a critic of the same thing. And so you know, pardon anybody who's listening who's heard me say this before. A lot of my time at the FCC was spent working with others in the commission to help reform programs that were beset with fraud: the Lifeline program, the E-rate program, the Telecommunications Relay Service program. Every single FCC program has had massive fraud over the years. The high cost rural program, not so much, but I was warning, based on what I had seen in the other programs. I was trying to set up a warning signal that fraud can happen in the high cost program as well. Here's what I mean by fraud: folks who were going to bid, who currently don't provide that level of service and who don't have a reasonable prospect of meeting their obligations. In the case of satellite, I don't know. I mean, there is a requirement under the FCC rules that recipients of this Connect America Fund offer voice service that meets a mean opinion score, a MOS score, of 4.0 or higher. Voice is not like some nice to have application. Voice, in this case — this is universal service funding under section 254 of the Communications Act — voice is the sine qua non of the support. You have to have voice, and the voice has to be of sufficient quality. So to me, one of the most interesting things over the coming months — and this will occur over the next six months. I hope it will occur because I hope that people don't discover this years from now. The providers of — and in this case it's really just the satellite voice providers. They have to demonstrate that their voice quality meets those tests, meets 4.0 or higher in this type of testing, that is a traditional telephone voice testing environment. My hope is that the tests are made public. My hope is that people can conduct independent tests. My hope is that all of this is done in the same transparent way that the FCC has made other information public so that the public will know what it's getting. I will tell you that while I was at the FCC, the satellite companies said directly to me and to others, including the chairman of the FCC, that they could not meet this standard. Perhaps something changed. Uh, you know, the physics hasn't changed. The latency hasn't changed. The speed of light hasn't changed. Maybe their testing methodology changed. That's why [having] tests that are open, public, available for inspection is hugely important because this service is carrier of last resort-type of service. These are areas where, for example, in the state of Missouri — Viasat's not in the state of Missouri, but I'm using this as an example of what happens if you don't perform with this CAF funding. AT&T, that rejected funding in the state of Missouri, also went to the Missouri Public Service Commission and asked that its carrier of last resort status be withdrawn. Whoever's getting this funding, they should expect to be the carrier of last resort. They are the provider of record. They are the one, the only game in town, so it's important that the services be of quality — voice service, Internet service. So it's not just voice then, but it's also that the speeds that people bid on in this auction are speeds that they can actually deliver. And what I had suggested a year ago, both in some posts I put online and in my discussion with you a year ago, was my concern that there would be bidders who bid outside of their capability, who strayed across their lane into somebody else's lane, who claimed to be able to provide something that they don't provide today and could not reasonably be expected to provide in the future. And by that, yeah, I don't just mean satellite. I mean the fixed wireless bidders who bid at 100 Megabit per second tier.

Christopher Mitchell: And that's what I wanted to wrap up with and to ask you, what happens if I'm in a part of Minnesota, if I'm in an area in which, for instance, a WISP got the money, and maybe you know, three of my neighbors can get 100 Megabit from them, but I can't? Does that mean that that wireless provider is not meeting its obligations or what happens there?

Jonathan Chambers: This is the risk. The way this auction is set up, as I said earlier the auction itself, the bidding, is one step. The next step that comes is every winning bidder, every bidder that is assigned a census block group, has to produce long form application submitted to the FCC, a technology plan, and they have to get ETC status from the states. So there are two referees on the field right now: the FCC and the state commissions. And those two referees can ensure that what somebody promised they will do, they demonstrate with their technology plan. So, to give you an example, we build Fiber-to-the-Home. We could show with a technology plan how we will build Fiber-to-the-Home, the technology we will use, you know, everything if you wanted to see it — the fiber paths, the fiber counts. You could go through all of that and demonstrate that GPON technology, for example, is capable of delivering the requisite speeds according to the FCC performance measurements. The FCC released a set of performance measurements that they expect every winning bidder to comply with. The question is, do you comply in three, four, five, six years from now when you have to meet certain FCC milestones, or do you have to demonstrate the capability to comply ahead of time? In your example, if you're not getting the requisite speed and your neighbors are, no, that's a failure. Now there would be a penalty years from now, but I think years from now is too late. I think years from now is the same kind of thing I saw at the FCC and programs in the past, where there would be fraud and fraud was caught only on the back end. There are certain steps that need to be taken on the front end. The technology plan is is right now, you know, the one deliverable because the winners and the auction won't have the service yet. But what they can do is they can show not just the spectrum that they would be using if they're a fixed wireless provider — this isn't like meet some wished-for thing. This is, you have to build out to at least 95 percent, make service available to at least 95 percent of the locations where you won bids. You'll have to show that you can deliver to at least 70 percent of all of the households and small businesses the speed that you bid for. If you bid at 100 Megabits per second, you have to show, not that you advertise 100 Megabits per second, but that you will actually deliver 100 Megabits per second to 70 percent of the households where the measurements would be taken at peak times. So it's consistent, minimum speeds. What you bid for was a minimum speed, and you can look at the performance measurement order that the FCC put out. That spells out what you have to do later. The question is, who's going to examine what's being done, what's being planned for? Can you meet those requirements with your current plan? And once again, I would suggest that the best way to do that is to have the two referees examine those plans, but also have them made public so the public can examine, determine for themselves whether it is plausible. I will give you one final counterexample. Verizon bid in this auction. I was surprised to see how broadly Verizon bid. Verizon bid in its own territory, wireline territory, and this is Verizon, remember, who turned down funding when it was offered to it several years ago. So a lot of the areas on the east and the northeast, were Verizon areas. But Verizon bid not only in its own territory, its own wireline territory, Verizon bid in wireless areas all across the country. They bid with the intention, of course, of using their mobile network to provide fixed wireless service — the same thing that AT&T does, the same thing that AT&T and Verizon and the other mobile operators have been working on for decades. Verizon didn't bid at 100 Megabits per second. Verizon, which has licenses of over 100 megahertz, 120+ megahertz of low-band and mid-band spectrum. Verizon, which is deploying 5G networks. Verizon, which has a backbone. Verizon, which is putting fiber all across the country — 1,700 count fiber where they're deploying 5G. Verizon, which has 100+ million subscribers. Verizon, which is one of the nation's largest telecommunications companies. The largest wireless company with all the resources at their disposal, Verizon, didn't bid at 100 megabits per second. So I'd ask you, if you don't have any licenses for spectrum, you don't have any exclusive right to use the spectrum — everything you're using is a shared resource. If you've listed — because one of the things that's now publicly available that wasn't available last week are the listings of what spectrum folks claimed in their short form application that they would use — if you're listing TV white spaces, which is not something that is used today, and that's the spectrum that you're claiming you will use to deliver 100 Megabits per second, or you're listing the education broadband service spectrum. If you're listening other shared spectrum resources — 3 to 5 Gigahertz, 5 Gigahertz — you're listing the bands that are used by Wi-Fi. That's your claim. You've got congested spectrum that you're going to use, that you're sharing, that's not even available to you necessarily like the TV white spaces — you're going to do that, and you're going to deliver to 70 percent of the households 100 Megabits per second service, something which is not delivered anywhere in the country today in rural areas? You're going to build out to 95 percent of the homes? We need a referee. We have referees in any competition, in sports competitions. If somebody commits a foul and you only find out about it years later, it's really not much solace.

Christopher Mitchell: First of all, I wanted to say that I reacted a little bit to the white spaces because, you know, we have seen white spaces in a number of areas, and it's usually 10 to 15 Megabits per second. And under current rules, it's not clear how it's going to substantially improve. Um, you know, I think some of the WISPs that I've talked to would say that in their areas, in Nebraska and Wyoming, there's not congestion. And I think that's your larger point. It's not that we can't trust any wireless anywhere. It's that we need to make sure that everyone is actually being served where promises have been made. And I strongly support that. My concern, like you I think, is like something I heard described as the New Jersey Devils defense, which was in hockey. For a period of years, apparently they decided to foul every time that they were on defense and just bet that the referees wouldn't call them on it constantly. It's almost like the Donald Trump political idea of if you just lie all the time, people can't respond fast enough. And that's to some extent what I think our concern is: is that we may see, you know, such a commonplace ignoring of the rules or non-enforcement of the rules that will really harm a lot of the rural areas that for which their tax dollars are paying to build better networks.

Jonathan Chambers: I agree with you, and I'm not critical of the WISPs in general or of the bidders who bid for levels of service that they provide today. You can see that in the bidding. There were bidders who bid at 10 megabits per second. They were bidders who bid at 25 Megabits per second. Do you know what happened to those WISPs by and large? Small mom and pops, you know, the ones the WISP organization would take around to the FCC and say, "See these small companies. They really need some help here" — well, they largely bid at their capability, and I'm not talking about them. I'm talking about bidders who bid beyond their capability

Christopher Mitchell: And probably may have crowded out the smaller WISPs.

Jonathan Chambers: Well, exactly. So when I said there were bidders who bid at 10 Megabits per second. WISPs — and I'm not going to identify them. You could look it up yourself. Everything I'm telling you could look up. Um, they didn't win. They didn't win. They got crowded out, and guess who crowded them out?

Christopher Mitchell: The WISPs that —

Jonathan Chambers: Large DC-backed companies who are betting on this auction and bidding at a 100 megabits per second. If the referees don't step up now, it's like your New Jersey hockey example. You know, there's this thing in basketball these days, the last couple of years, the NBA referees review the last two minutes in order to determine what calls they missed. It doesn't change the outcome of any game. You miss this call, it doesn't change the outcome, and it doesn't change the outcome of the auction. You know what it changes? It changes the prospects of every community that could have had service by somebody else that bid in this auction but didn't get it because they got outbid by somebody who bid outside their capability. There are two places that are now the forums for this issue to be resolved. One is at the FCC under the review, the long form application review, when folks submit their technology plan. And I'll tell you, when I was at the FCC and we were reviewing the same kinds of applications as part of the rural broadband experiment — I'll say this, that everybody knows the FCC doesn't have the resources to do it. They need to hire experts to help them out. The other place are the state commissions because nobody provides this service unless they get ETC status. And while there are a few state commissions that have deferred their ETC authority to the FCC, most of the state commissions remain as the entity that gets to decide whether you can receive federal funds or not.

Christopher Mitchell: Let's make it very plain as we wrap up here: if you're a citizen, a business owner, whatever, you should be communicating with your elected officials about this. You know, the state legislature can't make any decisions about this necessarily, but they can ask questions of the public utility commission or the public service commission to find out are they taking this seriously, how are they handling it, making sure that there's a light shined on it. And similarly, federal representatives in congress can ask the FCC, you know, how are you doing with this? We're deeply concerned about this issue, how are you dealing with it? And so that's in the short term something that we can do to make sure it doesn't just fall by the wayside.

Jonathan Chambers: Yeah. So exactly right, and to the extent that information is made public. You can look today and see who won in your area. If you know the identification of your census block group, which is also something you could look up, you can see who might be the winning bidder in your area. Public information like that is extraordinarily valuable. So the technology plans, I think those should be made public. We build Fiber-to-the-Home networks using GPON technology, GPON electronics. We build right to the home. There's like, there's nothing tricky about it. We just work with electric co-ops. We follow the electric system. We follow the electric lines all the way to the home. We can show that. If you're building a network that is spectrum based, you have to identify where your backhaul is coming from. Maybe you're building fiber to your radio equipment. You have to identify where are you placing the radio equipment, the spectrum you're using, the propagation of that spectrum, how you're getting use of certain spectrum, how you're overcoming the challenges of terrain and foliage. Are you requiring that people put up large masts on their houses? What's your technology plan to show what? To show that you reached 95 to 100 percent of the locations in those census block groups and you can deliver 100 Megabits per second and higher, minimum 100 Megabits per second, to 70 percent of the population at peak time. You show that, then you've done the job and you deserve the public money. And the people receiving your service will be the beneficiaries.

Christopher Mitchell: So with that, I think we need to wrap up. I'll say that for folks who are interested, the FCC has a public reporting system. This was auction ID 903. And I think if you just Google "CAF II auction results," you should be able to find things pretty quickly. Jon, thank you very much for spending all this time to talk about these issues. I think it's important to have gone a little long today to make sure that we set the groundwork because this, as you noted before, if this goes well, this will be how we deal with universal service moving forward and that would be a tremendous improvement.

Jonathan Chambers: Yes, this is the first large scale auction. There have been multiple universal service auctions: the Mobility Fund auction, the Rural Broadband Experiments, the Tribal Mobility Fund auction, CAF II auction. There will be a RAF auction, Remote Areas Fund auction, likely next year. There will be a CAF III after that. So getting this right, not just right in the rules — the right in the roles leading up to the auction? Terrific. I agree with everything. Terrific. Well done. The administration of the auction? Terrific. Well done. It's not over. What is done now over the next six months will affect those future auctions. So a $1.98 billion budget today — a little less than $1.5 billion is being spent. $15 billion, $20 billion, $30 billion will be spent in the future auctions in total, so an awful lot to get right here.

Lisa Gonzalez: That was Christopher and Jonathan Chambers of Conexon talking about the results of the recent Connect America Fund Phase II auction. You can find detailed information on the results of the auction at fcc.org/auctions. You can also find maps that show where Connect America Funds will be invested at the FCC website in the reports and research section. We have transcripts for this and other podcasts available at muninetworks.org/broadbandbits. Email us at podcast@muninetworks.org with your ideas for the show. Follow Chris on twitter; his handle is @communitynets. Follow muninetworks.org stories on twitter; the handle is @muninetworks. Subscribe to this podcast, and the other ILSR podcasts, Building Local Power and the Local Energy Rules podcast. You can access them wherever you get your podcasts. Subscribe to our monthly newsletter for original research at ilsr.org. Thank you to Arne Huseby for the song Warm Duck Shuffle, licensed through creative commons, and thanks for listening to episode 321 of the Community Broadband Podcast.

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