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ViaSat Continues Battle With Rural Interests Over Phase II Auction

Randy Sukow Jul 10, 2017

Last winter, the FCC adopted an order setting the formula for weighting bids in the future Phase II Connect America Fund (CAF) auction to close unserved gaps in rural broadband service. But as with many issues, issuing a decision does not necessarily settle the question. The battle continues between ViaSat, which argues that CAF money should go to those that will extend broadband to the greatest number of households, and a coalition of rural organizations, including NTCA, The Rural Broadband Association and NRECA, who wish to extend rural fiber-based service as rapidly as possible.

Back in February, the FCC’s order mainly favored the rural coalition by favoring low-latency, mid-speed (over 100 Mbps) bids. Opponents, including ViaSat, favored giving weight to bids closer the FCC’s current 25 Mbps downstream definition of broadband. At the time, Commissioner Michael O’Rielly dissented in part from the order, expressing sympathy for the ViaSat position.

ViaSat returned to the FCC two months later with new proposals for “structuring” the auction. Paul Milgrom of Stanford University presented a formula on ViaSat’s behalf that would have the FCC organize auction bids according to coverage area, shared infrastructure and the available budget.

“Our proposed winner selection rule absolutely prioritizes low-latency, high tier service. If the budget were ample relative to bids, gigabit/low-latency service would always win,” Milgrom said in the presentation. “With a tighter budget, the rule would trade away more than 3⅓ baseline/high-latency-served locations to serve one similar location with gigabit/low-latency fiber service.”

The rural coalition cried foul in its response last month. “ViaSat’s filing is procedurally defective as it proposes an entirely new formula for the auction. As such, it amounts to an untimely petition for reconsideration,” the group said. The coalition submitted its own technical white paper by Dr. David Salant of the Toulouse School of Economics in France to demonstrate that the ViaSat proposal would be little more than a reversal of the February order.

“If the FCC were to adopt the ViaSat plan, some higher-cost regions that could be served with higher-speed, lower-latency service would instead receive a lower-quality service without any corresponding value-savings contemplated by the weighting,” Salant said.

In the latest (likely not the last) salvo, last week ViaSat filed a statement from Milgrom: “Although the FCC has not yet adopted an auction mechanism, to make a comparison, Dr. Salant offers an interpretation of a design that the FCC might implement if it gives no consideration to coverage. This ‘Salant design’ is based on questionable logic and maximizes no coherent objective [though it does confuse the reader about ViaSat’s proposed design].”

So, the two sides have their experts in full combat mode and ViaSat has the ear of one commissioner. Perhaps it will attract the attention of another two commissioners when the Senate confirms them later this year.

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