Is The Next Mobile Auction On The Horizon?

For those who may not know, I spent most of the 2010s participating in auctions. From spectrum and the Connect America Fund Phase II Auction (CAF II) in the U.S. to various international auctions, I've lived a small portion of my life in the "bid room." So, whenever I hear the magic word, my ears perk up.

Unsurprisingly, I got a jolt recently when the term auction came up again. However, I'm not talking about spectrum auctions today. As much as I would love to opine on auction strategies and bidder considerations, I'll focus on a much different auction: The 5G Fund Phase I auction.

A Bit of Background

When we discuss federal funding support, our minds often go straight to broadband and the USF High Cost Fund. However, there's another fund with a lesser-known history: the Mobility Fund. The FCC ran the first-ever Mobility Fund Auction in 2012, allocating $300 million, following a recommendation in the National Broadband Plan in 2010. The goal was to provide advanced mobile voice and broadband services to areas without sufficient mobile coverage.

Nearly seven years later, following the successful CAF II auction, the FCC intended to auction $4.5 billion of support over a 10-year period with the Mobility Fund Phase II auction to "fill in the map" of 4G LTE across the nation. Much like the chaos we see today with the ongoing map challenges, this map was also not without significant problems and challenges.?

While many operators were eager for the fund to continue, not all utilized consistent implementations of wireless coverage models, resulting in a map that drastically overstated coverage levels. The FCC launched an investigation and discovered the inaccuracies in these models, leading to the suspension of what would have been a massive program and financial benefit for wireless operators, particularly those serving rural and remote areas. Does this situation sound familiar to you?

The 5G Fund

In 2020, the FCC issued a Report & Order that established the 5G Fund, which would allocate up to $9 billion for 5G broadband in rural areas, effectively changing the entire Mobility Fund direction. This process has loped along slowly until recently.

Just a few weeks ago, FCC Chairwoman Jessica Rosenworcel circulated a document of proposed rules to her FCC colleagues to get the 5G Fund auction moving. Here's what we know at this point:

• The auction will have up to $9 billion available.
• It will use a multi-round reverse auction (similar to CAF and RDOF).
• Target areas are unlikely to see unsubsidized 5G networks.
• Funds are intended for the development of 5G services.
• The fund will allocate $900 million as an incentive for deploying Open RAN in 5G Fund-supported networks.
• Eligible areas will be subject to the FCC Broadband Data Collection (BDC).

What About An Auction?

While we haven't seen the proposed document yet, and it likely will get modifications from the other Commissioners, there are some broad brush questions essential to understand and answer:

Who is eligible?

• One of the major challenges could be the high number of defaulters we're seeing from the Rural Digital Opportunity Fund (RDOF) due to the difficulties in deploying fiber networks.

• The FCC will establish eligibility to bid for funding, but we can assume bidders would have both mobile spectrum licenses and infrastructure to offer mobile services today. Supporting new entrants could be challenging for the FCC, considering the significant issues experienced with RDOF.

What constitutes 5G and spectrum?

• Since the fund focuses on 5G services, it's always noteworthy what standard needs to be in place in the network to qualify as 5G, especially given how the moniker is a branding point.

• We must consider the role of CBRS. Will it be considered an eligible band for bidding? Given its limitations in outdoor mobile wireless for 5G due to lower power restrictions, it's unlikely to attract much interest from investors and other potential participants.

• Conversely, if we focus primarily on the "mid-band" spectrum, few operators have the license structure to offer services in these bands. This could effectively limit this to a "big carrier" auction.

When will the auction take place?

• The big question is not only when an auction would occur but also how it aligns with the BEAD process and when challenges will be completed.

• From experience, I can tell you that implementing auction rules is not simple. When the auction "products" (such as the target areas) are dynamic, it's likely to take time to develop a bidding process that can handle this variability. A key focus will be on what is called the “bid stack” which helps the auction system prioritize and process bids.

What about Open RAN?

• I'm quite curious about the Open RAN provisions the Chairwoman is proposing. Given the significant effort at the NTIA around Open RAN technologies in the Public Wireless Supply Chain Innovation Fund, there are potentially interesting implications for those wanting to apply to the Fund or bid in the auction.

What about "Rip and Replace"?

• The ongoing effort to replace Huawei equipment in rural areas (e.g., Rip and Replace) continues to face a funding shortfall, so how might these funds help provide some relief for rural wireless providers?

What Does This All Mean

For my rural broadband friends, if you have existing mobile wireless services, this auction could provide a boost to your business and potentially assist with your Rip and Replace activities.

Conversely, for those without mobile wireless services, this could mean even more 5G fixed wireless services coming into your region.?

For anyone considering participating in the auction, it's essential to start formulating your strategies for target regions. While we don't know the final eligible areas yet, we've learned from prior reverse auctions that the best long-term strategy is to stick to your valuation and not be underbid. You can't achieve that if you don't know your numbers.

Regardless of how this plays out, this promises to be an interesting development in the mobile community, and we'll be following it closely.

What aspect of auction bidding do you find most challenging?

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