When the FCC announced the winners of the Rural Digital Opportunity Fund (RDOF) last December, many industry veterans were surprised by the appearance of LTD Broadband as the largest recipient of funds. The company managed to snag more than $1.3 billion to serve 528,000 locations across 15 states, but its capability to do so immediately drew skepticism from many (including us).
Now, a little less than a year later, the company's chickens are coming home to roost. In a recent ruling denying the company the expanded Eligible Telecommunications Carrier (ETC) status it needs to offer service in RDOF-awarded areas, the Iowa Utilities Board took LTD to task for a history of noncompliance and late payments:
Specifically, LTD had not complied with the Board’s February 22, 2019 order, as LTD had not yet filed a registration as a telecommunications service provider, was past due on its DPRS assessment, and had not yet filed an annual report with the Board for reporting years 2019 and 2020.
[B]eyond the procedural flaws in LTD’s Application, the company’s responses to Board . . . illustrate that LTD has routinely submitted regulatory filings with obvious errors, if filings were submitted at all . . . It is for this reason that the Board takes seriously LTD’s history of inconsistent compliance with this provision, as the regulatory burden is minimal and the consequence of failing to uphold the obligation ETCs pledge to carry out impacts the rest of the industry, the Board, and most importantly, the Iowans served by the program.
But the regulatory board took its comments a step further, basing its ruling also on the fact that the company's behavior in the state betrays what looks like a lack of ability to meet its bidding commitments during the auction:
The record in this docket does not merit the expansion of a credential that signals to the public that LTD has evidenced the technical and financial capabilities required to carry out the public interest obligations of those entrusted with federal funds. LTD’s responses and actions lack the candor that the Board would expect from a carrier seeking to evidence the expertise to take on this degree of expansion.
LTD responded by petitioning the FCC for more time, and was roundly denied.
Its arguments to the IUB and the FCC are revealing of the company's approach and attitude. To the Iowa Utilities Board, it tried to argue that its previous ETC status earned to deliver service from the Connect American Fund Round 2 (CAF II) grants in the state should also count for RDOF (winning areas in blue, right), even though the FCC explicitly said that providers were required to secure whatever additional elegibility required by state statute to expand service with the new funds.
Its subsequent petition to the FCC argued that LTD just misunderstood those local rules, and even though it missed the window it should be given an extension. In response, the FCC wrote:
LTD explains that it did not file its ETC designation application in Nebraska until April 28 and in Iowa and North Dakota until May 7, approximately five months after the release of the Auction 904 Closing Public Notice. LTD contends that it waited until those dates to file in these states due to its understanding that each state had a 30-day ETC approval process and that it therefore believed it would obtain ETC designation in all three states by the Commission’s June 7 deadline. LTD offers no explanation for why it did not file in these states sooner, or why waiting until the last possible moment to file (even if its assumptions about a 30 day approval process were correct) was a choice warranting waiver.
LTD won $2.3 million to bring service to almost 13,000 locations in Iowa, and nearly all of its bids were at the gigabit, low-latency tier. That's less than $200 per location on average.
RDOF was designed to eventually deliver more than $20 billion in subsidies to bring high-speed Internet access to parts of the country which for years have been neglected by monopoly providers more interested in extracting wealth from high-return areas. But its impact - at least insofar as LTD's behavior in Iowa shows - is trending towards what we feared: huge winners failing to meet obligations with clawbacks and delays, with the result being that tens of thousands of households around the country will go even longer with inadequate or no Internet access.
It's worth reading the IUB's full ruling [pdf], and other states would do well to follow Iowa's due diligence in making sure that the public's interests continue to be served.