My good friend Ted Osborn sent me this educational deck about the Phase II Connect America Fund Auction. I found it very worthwhile to share. Ted is considered an expert in the CAF program.
1. $2.15Bn Public Funding over 10 years
for Broadband in Rural America
Ted Osborn, WISP Partners, Inc.
303.817.5732 | tosborn@wisppartners.com
___________________________________________
ALL RIGHTS RESERVED
2. Disturbing Trend in USF Spending
by: Michael O’Rielly, FCC Commissioner, July 7, 2014
Blog post: http://www.fcc.gov/blog/disturbing-trend-usf-spending
USF Reform – Enter Connect America Fund
CAF Phase II – Price Cap Carriers subsidy targeted at $1.68 Billion per year
To serve Rural Areas with 10/1Mbps+ over 10 years with State wide commitment
5. Source: WISPA (red areas have remaining subsidy – actual locations will vary)
6. Plus an additional subsidy for $450mm to be included in the auction
Source: WISP Partners Analysis Based on FCC Data
WEST MO CA NV OK WY CO KS NM
WEST
TOTAL
ANNUAL 36,438,268 55,366 287,602 26,194,511 8,354,250 426,530 336,238 3,883,590 75,976,355
EAST DE FL MD MA NJ NY
ANNUAL 970,518 703,988 6,909,137 4,419,168 1,314,651 28,410,892
EAST NC PA RI VA D.C.
EAST
TOTAL
ANNUAL 30,184 3,270,820 166,061 29,144,142 30,451 95,370,012
CAF payouts are linear over 120 months for $1.7Bn
7. Where and when will these networks be built?
What levels of service will be provided?
What technology platforms will we see?
What is this Auction about?
What does CAF mean beyond Phase II?
What does CAF mean for my business?
10. CAF Phase II – Auction Framework – Work in Process
Source: FCC Report & Order May 26, 2016
Buildout Year 3 Year 4 Year 5 Year 6
Completion 40% 60% 80% 100%
4 Speed Tiers
Bid credits or demerits
Speed
Minimum performance (-) 10/1 Mbps – Fixed Wireless/DSL
Baseline performance 25/3 Mbps – Fixed Wireless/DSL
Above baseline performance (+) 100/20Mbps – Fixed Wireless/Cable
Gigabit performance (++) 1,000/500Mbps – Fiber
11. Source: FCC Report & Order, May 26, 2016
2014 Broadband Experiment Now - The Phase II Auction
$100mm subsidy over 10 years $2.15Bn subsidy over 10 years
3 years audited financials required
1 year audited financials within 6 months
following notice of award
LoC covering the total amount for 10 yrs. LoC reduced as the network is built
100 largest banks
~3,600 Weiss rated banks at B-, plus
CoBank
12. August 2014 R&O – Rural Broadband Experiment – a $100mm Competition
Technology neutral
Performance based at 10/1 Mbps, or 25/3Mbps with <100ms RT latency
Challenging financial qualifications for small operators
August 2015 – Incumbent Price Caps elected to accept - $9Bn
Technology neutral
Performance based at 10/1 Mbps
Held first right of refusal prior to auction if all territory within a state were accepted
May 2016 – Report & Order provides the bid framework for a competitive auction with
$2.15Bn subsidy over 10 years.
Auction expected late 2016 or early 2017. Deployments mid to late 2017.
13. Source: FCC Caution: It is easy to draw the wrong conclusions on Award amounts per Location
Company Project State(s)
Total Support
Awarded
Total Census
Blocks
Total Price-Cap
Locations
Technology
Allamakee-Clayton Electric
Cooperative, Inc.
IA $ 1,453,593 209 665 Hybrid fiber/ fixed wireless
BARC Electric Cooperative VA $ 239,918 64 801 Fiber
Consolidated Communications
Networks, Inc.
ND $ 3,096,810 103 171 Fiber
Daktel Communications, LLC ND $ 875,000 109 508 Fiber
Delta Communications LLC IL $ 2,196,000 78 122 Fiber
Douglas Services, Inc. OR $ 2,375,000 325 2495 Fiber
Federated Telephone
Cooperative
MN $ 1,455,962 95 344 Fiber
First Step Internet, LLC ID, WA $ 415,855 116 453 LTE Wireless (3.65 GHz)
Midwest Energy Cooperative MI $ 211,532 31 421 Fiber
New Lisbon Broadband and
Communications, LLC
IN $ 37,696 7 24 Fiber
Northeast Rural Services, Inc. OK $ 3,465,610 314 2115 Fiber
Northern Valley
Communications, LLC
SD $ 2,022,120 258 411 LTE Wireless (4 GHz)
Paul Bunyan Rural Telephone
Cooperative
MN $ 1,962,000 134 1839 Fiber
Skybeam, LLC IA, IL, KS, NE, TX $ 16,942,887 3877 16751 Fixed Wireless
Total 15 States $ 36,749,983 5,720 27,120
14. How will you respond? First steps…
1. SWOT Analysis – Start now – Assess your goals and capabilities – be brutally honest.
2. Learn CAF to understand your interest in geographic funding areas. Learn the rules for
Performance, Technical readiness, Letters of Credit qualifications, Recapitalization needs,
Form 477 History, ETC status, and readiness to provide one year of Audited Financials.
3. Business Modeling to become clear on how to design, build and subscribe the
network; and how a grant subsidy will impact your cash flow and enterprise value.
4. Decide on your Areas of Interest to create your network build plan, know your costs in
great detail, develop your cash-flow business model for each area, develop a bid strategy.
Be prepared to execute in order to fulfill the FCC requirements.
The subsidy will go to somebody…
15. Ted Osborn, WISP Partners
303.817.5732 | tosborn@wisppartners.com
WP is a boutique consultancy with an assembly of multi-platform Internet experts
We are entrepreneurial executives, professional engineers, financial analysts, lawyers,
we are strategists and FCC advocates,
…our passion is rural broadband
We have guided our clients to secure BTOP Grants, RUS grants & loan guarantees, and
Connect America Fund competitions to win 11 of 12 bids for $16.9mm across 5 states
…our clients are Carriers, Rural Telco’s, WISPs, Communities, Research / Private Equity
Firms
16. Ted Osborn, WISP Partners
303.817.5732 | tosborn@wisppartners.com
Business Technical Legal
Strategy Development Network Assessments Transactions
Business Case Modeling Feasibility Assessments Regulatory
Public/Private Capital Advisory Network Design & Maps Spectrum Leases
Working with Bid Participants on CAF
Step 1: Free virtual consult to assess your fit for CAF
Step 2: Provide rapid analysis to assess business potential & strategy
Step 3: Engage per service category or Engage turn-key project management