“Punching Above Your Weight” – AMG Big Winner in CAF II Auction
The Federal Communications Commission’s Connect America Fund (CAF) Phase II auction concluded on August 21, 2018, with a total of 103 winning bidders set to receive support over 10 years amounting to $1.488 billion.[1] In exchange for funding, those winning bidders are required to deploy varying levels of broadband service to 713,176 locations in 45 states. The full list of winning bidders is available online. The FCC has also released an interactive online map showing the location of winning bids.
One big CAF II auction winner is AMG Technology Investment Group LLC, receiving a total of $281.28 million over ten years, to serve 100,581 locations in six states. This breaks out to the following:
Illinois – $35.33 million – 15,022 locations
Iowa – $50.6 million – 15,097 locations
Kansas – $37.35 million – 10,008 locations
Nebraska – $40.84 million – 8,768 locations
Oklahoma – $41.28 million – 17,883 locations
Texas – $75.85 million – 33,803 locations
AMG does business as NextLink, a “Texas-based Internet Service Provider delivering High Speed Internet and Voice Services throughout North Texas and Central Texas to residential, business, K-12 Education and government customers.”[2] According to AMG’s CAF II auction application, it has been in business for 5 years, and is headquartered in Hudson Oaks, Texas, just outside of Fort Worth.
NextLink currently provides fixed wireless Internet access service outside of the Dallas-Fort Worth metropolitan area, including the area between Dallas and Austin. Think about that for a minute. NextLink provides service in one area in one state. To meet its new CAF deployment obligations, NextLink will have to expand its operations to five new states. The land mass and number of locations it must now offer service to are exponentially greater than its current operations. The CAF obligations require support recipients to offer service to 100% of locations in the sixth year of receiving support. This is a huge expansion for NextLink.
On top of that, NextLink will have to offer a level of service that it currently does not offer anywhere. According to its website, NextLink’s two highest speed service tiers are 35/7 Mbps and 50/10 Mbps. The 35/7 service is priced at $119.95 per month, while the 50/10 Mbps is priced at $149.95 each month. AMG was a winning bidder in many census blocks to provide 100 Mbps service, something it currently does not even offer, let alone provide anywhere. That seems very odd.
How will AMG provide the service it has promised in exchange for CAF II funding? According to AMG’s auction application, it will use unlicensed spectrum for the last-mile technology. And it will also used unlicensed spectrum for wireless backhaul. In the five new states where it now must provide service, it appears AMG has no tower assets or access to rights-of-way. Further, it has not been designated as an eligible telecommunications carrier in any of those states.
To put everything in perspective, AMG must provide broadband service to an area much larger than its current service territory, at speeds it currently cannot or does not offer, and it will rely on spectrum it does not exclusively control. Will AMG be able to follow through on these promises? On paper seems like a long shot.
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[1] Connect America Fund Phase II Auction (Auction 903) Closes Winning Bidders Announced FCC Form 683 Due October 15, 2018, AU Docket No. 17-182, WC Docket No. 10-90, Public Notice, DA 18-887 (Aug. 28, 2018).