NTCA Urges FCC to Reject Reverse Auctions for USF Distribution

October 10, 2006, Arlington, Va. - The implementation of reverse auctions for determining the distribution of universal service in areas with existing infrastructure and ubiquitous service would be a “serious mistake,” because of the potential risks and costs associated with the concept, the National Telecommunications Cooperative Association (NTCA) said in comments to the Federal Communications Commission (FCC).

The comments cite a paper by Alaska Pacific University Professor Dale E. Lehman which demonstrates the difficulties and dangers and inherent in applying reverse auctions in areas with existing infrastructure. Based on Lehman’s findings, NTCA says “correctly designing and implementing an effective reverse auction mechanism for [such areas] will prove tremendously challenging, if not impossible.”

According to the comments, while reverse auctions may be an appealing theoretical concept, their practical application is fraught with uncertainty and risk.

Additionally, a reverse auction would be time and labor intensive, prohibitively expensive, and technically burdensome. “The cost of administering the reverse auctions, preventing fraud, and monitoring the results would ultimately increase the size of the universal service fund and could outweigh any potential benefits gained from the process,” the comments said.

Noting that reverse auctions can not be considered a feasible method for USF distribution in areas with ubiquitous service and existing infrastructure, NTCA’s comments urged the FCC to consider four alternatives: Contact Caitlin Colligan at 703-351-2086

  • Apply a meaningful public interest test when considering future ETC designations;

  • Eliminate the identical support rule;

  • Provide alternative cost based support to rural wireless ETCs; and

  • Expand the base of USF contributors to include all broadband service providers.

These alternatives would accomplish the goals of providing sufficient, predictable and sustainable USF support with much less risk to consumers and providers, the comments said.

View NTCA comments

The National Telecommunications Cooperative Association is the premier association representing more than 560 locally owned and controlled telecommunications cooperatives and commercial companies throughout rural and small-town America. NTCA provides its members with legislative, regulatory and industry representation; meetings; publications and educational programs; and an array of employee benefit programs. Visit us at www.ntca.org.