607 14th Street NW, Suite 400 • Washington, DC 20005-2164 • 202.326.7300 T • 202.326.7333 F • www.ustelecom.org

July 13, 2015 VIA ELECTRONIC SUBMISSION Ex Parte Ms. Marlene Dortch Secretary Federal Communications Commission 445 12th Street, SW Washington, D.C. 20554 Re: Connect America Fund, WC Docket No. 10-90

Dear Ms. Dortch:

A number of parties have recently submitted ex partes in the above-referenced proceeding proposing alternative approaches to implementing the CAF Phase II competitive bidding process.1 USTelecom submitted its own proposal on April 10, 2015, and is pleased to see the level of interest and creativity that others are bringing to this important issue. Diverse opinions and constructive debate are critical to helping the Commission design an effective and workable process. While the four proposals share a number of common features, they also differ in some important ways, and USTelecom would like to offer a few comments in response to the key topics addressed in these recent filings.

1. Geographic Scope

All four proposals agree that participants in the CAF Phase II competitive bidding process should be allowed to design their own packages of eligible census blocks (CBs). Allowing so-called user-defined packages is the only way to accommodate the diverse constraints of franchise areas, spectrum holdings, geographical features, rights of way, and other factors that can govern a provider’s ability to design and deploy a communications service. USTelecom strongly supports adopting user-defined packages of CBs. It is the only way to achieve a truly technology neutral process. We therefore oppose the overlay suggested by ACA and WISPA that would limit the scope of any package to the CBs within a county and, in the case of ACA, would rank and declare winners by county. USTelecom fails to see any benefit to

1 In addition to USTelecom’s April filing, proposals have been submitted by the American Cable Association (ACA, June 1, 2015), the Wireless Internet Service Providers Association (WISPA, June 30, 2015), and the Utilities Telecom Council (UTC, July 6, 2015).

Ms. Marlene Dortch July 13, 2015 Page 2 imposing county boundaries on the CAF II process except perhaps to advantage cable providers, whose franchise areas are defined by county. For all other providers this proposal would make it almost impossible to construct a package of CBs that contains the entirety of a logical and efficient network build.

For example, the service areas of many potential wireline broadband providers cross multiple counties in whole or in part. Under the ACA proposal, a wireline provider might win funding for a project in one county, but lose in the adjacent county into which its service area extends, but where it has fewer locations. The loss of part of the funding would very likely make the entire project uneconomic. Without a realistic chance of winning funding for an entire multi-county deployment, such providers may opt not to participate. In fact, ACA’s proposal would limit potential competitors to just the entities able to bid within a single county. Another disadvantage of the county approach is that it would require the Commission to rank, resolve conflicts, and declare winners up to 3,000 separate times. USTelecom continues to believe that a nationwide competition with user-defined packages of CBs will generate the most robust competition and the best results for consumers and the CAF Phase II program. While our proposal would have allowed packages as small as one CB, we recognize that administrative efficiency may require the Commission to set a minimum number of CBs per package, such as 50 per company per state. UTC’s suggestion to put an upper limit on the size of packages would seem to only ensure a larger number of packages and could potentially preclude network efficiencies.

2. Bidding and Ranking

For ranking packages and selecting winners, USTelecom proposed the use of a “Composite Efficiency Index” (CEI), which is the ratio of requested support per package bid to the Connect America Cost Model-derived support for the CBs contained in the bid. All package bids from across the country would be ranked by their CEI, with the winners being those with the lowest CEIs. By using an index based on the CAM support amount, projects in very high-cost/high-support areas could compete fairly against those in not-as-high-cost/lower-support areas, with winners rewarded for efficient use of the support offered. A system that ranked bids solely by support requested per location would, by contrast, favor the areas with low support amounts and could disproportionately allocate funding in particular states or regions. The WISPA proposal suggests that bids be placed and ranked based on five percent increments of the CAM support amount (i.e., 95%, 90%, 85%). While this constraint could, at least in theory, simplify bidding decisions, USTelecom believes that 5% increments of support are too large and could reduce price competition and result in more ties than would otherwise occur.

Ms. Marlene Dortch July 13, 2015 Page 3

The ACA proposal takes the novel approach of preventing competition on price. Winning bids (within each county) are selected solely based on number of locations served and are then awarded the model-based support amount by location. While the county-limited feature is already a fatal flaw of the ACA proposal, prohibiting price competition undermines the goal of a competitive bidding process – to maximize the effectiveness of limited public funding in delivering broadband to unserved and underserved areas.2 We do not have the benefit of the FCC’s insight into the experience of using the CEI for the Rural Broadband Experiments, but we continue to believe that the CEI provides the best balance of simplicity and efficiency.

3. Rounds and Stages

Both USTelecom and UTC support a multi-round bidding process, while both ACA and WISPA favor a single round of bidding. The exact number of rounds is less important than the fact that there must be more than one. USTelecom believes that multiple rounds of bidding is the only way to appropriately balance the desire for both coverage and price efficiency. The use of user-defined package bidding, which is a necessity, will inevitably create situations where packages contain overlapping CBs. In USTelecom’s proposal, these overlaps would be quickly resolved by dismissing the package that had the higher CEI. This dismissal, however, raises the potential for small packages to kick out large packages covering many times the locations. In a single round process, even in a county-limited process, there is no efficient solution to this dilemma and coverage would likely suffer. By the same token, a package that is not “in the money” in a single round process has simply lost. In a multiple round process bidders could adjust their dismissed packages to avoid the CB overlap or lower their CEI and enter the next round. In either case, the result would be increased coverage and/or a lower cost to the fund. The Commission could make a policy decision in favor of more coverage over lower price, or vice versa by determining what information about the prior round is released to participants. For example, providing bidders with post-round information about CBs contained in packages and not with pricing/CEI data would likely lead to adjustments that naturally resolved overlaps and expanded coverage.

The four proposals suggest from two to four speed-based “stages” that cover a range from a low of 4Mbps/1Mpbs to a high of 1Gbps/500Mbps, and the UTC proposal suggests that the first stage should be reserved solely for projects deploying FTTP. In general, USTelecom believes that more than two stages over-complicates the process and may actually reduce the benefit of competitive pressure by artificially segregating bidders. As far as the speed requirements themselves, USTelecom believes that the high end of the ACA proposal (Stage 1 =

2 It is also ironic that ACA now believes that model-based support is apparently “just right” since it has consistently argued that it is overly generous to price cap companies.

Ms. Marlene Dortch July 13, 2015 Page 4 1 Gbps/500Mbps) and the low end of the UTC proposal (Stage 2 = 25/3 to 50/6) are inappropriately high and not technology neutral. The ACA proposal clearly favors cable technologies, while the UTC proposal would preclude most if not all fixed wireless solutions. CAF Phase II-eligible communities by definition have no viable broadband service today and it will take all manner of providers and technologies to solve this problem. USTelecom encourages the FCC to establish requirements that are as inclusive as possible and that make a priority of delivering a useful level of high quality broadband service to as many locations as possible.

Pursuant to Commission rules, please include this ex parte letter in the above-identified proceeding.

Sincerely, Robert Mayer Vice President, Industry & State Affairs

cc: Carol Mattey

Katie King Heidi Lankau Alexander Minard Margaret Wiener James Schlichting

Name of Filer: United States Telecom Association Email Address: rmayer@ustelecom.org

Attorney/Author Name: Robert Mayer

Address For: Filer Address Line 1: 607 14th Street NW Address Line 2: Suite 400

City: Washington State: DISTRICT OF COLUMBIA

Zip: 20005

exparte: YES Type of Filing: NOTICE OF EXPARTE

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