Here’s how NextLink—the biggest CAF II auction winner—is spending its $281M

NextLink is hoping to expand its current coverage area. (NextLink)

NextLink, the internet service provider owned by AMG Technology Investment Group LLC, was the biggest winner in the government’s recent Connect America Fund Phase II (CAF II) auction. Specifically, NextLink will get around $281 million of the $1.5 billion that the FCC distributed to telecommunications companies around the country so they can deploy services to rural areas in order to cross the digital divide.

What does NextLink plan to do with all that money?

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“We’ve got a lot of buying to do,” said Bill Baker, CEO of NextLink.

Baker said that NextLink plans to dramatically expand its current fixed wireless network into locations in Texas, Oklahoma, Kansas, Nebraska, Iowa and Illinois. He said the company is currently evaluating equipment from a wide range of vendors, though he declined to name them, and he said the company expects to make a decision on its vendor partner or partners sometime in the next few months.

Baker explained that NextLink needs to carefully select its vendor partners because the government’s CAF II money includes specific stipulations on the kinds of services NextLink must offer (25 Mbps or, in some locations, 100 Mbps), when those services must be up and running (within the next six years), and how long NextLink must offer services (10 years). Thus, Baker said that NextLink can’t simply buy the cheapest equipment available; he said the company needs to select a partner that will be able to stick around and continue to support equipment throughout the duration of the government’s CAF II requirements.

“We’re fully committed to servicing that commitment,” Baker said of the government’s CAF II money.

RELATED: Here are the top 100 winners of the FCC’s $1.5B CAF-II auction

The Connect America Fund Phase II auction is part of a broader effort by the FCC to close the digital divide in rural America. The FCC released the names of the winners of its $1.5 billion auction in August, and the quiet period for that auction recently ended, thus allowing Baker to discuss NextLink’s plans.

The FCC said that 53% of all homes and businesses served with support from the auction will have broadband available with download speeds of at least 100 Mbps. 19% will have gigabit service available. And 711,389 locations—all but 0.25%—will have at least 25 Mbps service available.

Notably, a large number of the top winners in the auction said they plan to use fixed wireless technology to build out telecommunications services in rural areas.

Indeed, Baker said that NextLink currently counts around 26,000 subscribers, with the vast majority using the company’s existing fixed wireless services. He said NextLink’s fixed wireless service primarily works in the 3 GHz and 5 GHz bands using equipment from Ubiquiti Networks and Cambium Networks.

Interestingly, Baker said that NextLink often needs to build its own towers in order to cover its service areas, either because there are no towers in those locations or because existing tower providers aren’t offering access to their towers for the right price.

And with the government’s CAF II money, Baker said that NextLink will be able to significantly expand its operations. For example, he said the company currently operates its service across around 500 towers—and he said the company will likely need to increase the number of towers it uses to fully 3,000 to completely cover its CAF II markets. Baker said the company would likely reach that number by both building its own towers and leasing existing towers from other tower providers.

As for what spectrum and network technology NextLink will use, Baker said NextLink would likely continue to use 3 GHz and 5 GHz spectrum for its services, and would also potentially use the newly freed 3.5 GHz CBRS band, once that spectrum is made available in an auction.

In terms of the network technologies NextLink might use, Baker said the company is evaluating both proprietary transmission standards as well as LTE technology for its network build-out. He said the company would likely use LTE in locations where it needs to serve a larger number of customers because LTE supports carrier aggregation technology—a technology that essentially allows providers to glue together different spectrum bands to increase speeds. But Baker said that, in more rural areas with fewer customers, NextLink may use a proprietary technology because it would likely be less expensive than LTE.

“We’re very much in the rural marketplace,” he said.

As for actual services and pricing, Baker said that NextLink currently provides 50 Mbps fixed wireless speeds for $149 per month and 25 Mbps speeds for $89 per month. He said the company can, and does, provide faster services on a custom basis.

He said that, in the areas covered by CAF II money, NextLink will likely offer similar pricing and speeds. Specifically, he said that in CAF II markets where 25 Mbps speeds are required, he said NextLink would likely charge around $89 per month for services, and in CAF II markets where 100 Mbps speeds are required, he said NextLink would likely charge the market rate of around $128 per month.

“The CAF II program is just a great opportunity to bridge that divide to rural markets that just aren’t being serviced,” Baker said.