RDOF Auction Ends but Confusion and Corruption May Just Be Beginning

The FCC's Rural Digital Opportunity Fund results are a puzzle. RDOF was the recent auction for large swaths of rural areas of the U.S. that have no broadband access, in large part because they were the territories of big companies like AT&T, CenturyLink (now rebranding as Lumen in hopes of improving its dismal image among its subscribers), Frontier, Windstream, and others. Up to $16 billion was at stake though the auction will actually disperse some $9+ billion dollars because many areas were bid well below what was expected. 

Please understand that this post is the best I can do right now - this is confusing and we are sorting our way through it. Please let me know if you can help us understand it. See our past coverage for more information.

The auction resulted in far more gigabit - 85% of locations I believe - than anyone expected, at far lower subsidy than expected. However, there is a lot of frustration and confusion because it is not clear that some of the top bidders can deliver. NTCA - The Rural Broadband Association - shared my original enthusiasm for RDOF and our concerns - best articulated over the years by Jon Chambers from Conexon - that the FCC was going to blow this auction by not ensuring those who bid had the capacity to deliver on the promised level of service. Shirley Bloomfield, CEO of NTCA, wrote this and recently tweeted on this:

Doug Dawson, President of CCG Consulting, has addressed this in the greatest detail so far, arguing that this “means the FCC believes that fixed wireless technology is the functional equivalent of fiber” even though the underlying point-to-multipoint architecture “can’t be used to deliver giant bandwidth to more than a few customers – and it’s not really designed to deliver gigabit download, and certainly not a symmetrical gigabit.” The result? “By allowing WISPS to claim gigabit capabilities, the FCC cheated huge numbers of people out of getting fiber.”

Here is how the auction worked: ISPs could qualify to bid at four different levels of service for groups of households, from “Minimum” (25/3 Mbps) all the way to “Gigabit” (1Gbps/500 Mbps).  But an ISP can't just bid for the gigabit level - they had to demonstrate to the FCC that they had the capacity to deliver services. If the FCC accepted an ISP’s claims regarding technology for a given tier, the ISP could bid at that level. But if the FCC allowed you to bid only with FTTH, you are not able - per the rules - to later decide to do fixed wireless. They had weights to compare whether it was a better deal for a subsidy of $100 to deliver gigabit or $43 to deliver 100 Mbps, for instance. In the end, lowest effective subsidy wins - the entity willing to offer the best service at the lowest subsidy would get it. 

ISPs qualify for each level for each state. This is what it looks like when the FCC allows an ISP to bid at the gigabit level with wireless, as Nextlink, Resound Networks, and Starry were:

(Search here yourself.)

Row 4 shows that AMG - Nextlink - has FCC permission to bid for areas to deliver a gigabit with wireless. How?  No one I have talked to really knows and many doubt the full population in many areas could get this service using current technology affordably.

But the real puzzle is LTD Broadband, the WISP that took away the biggest awards. They are slated to get $1.3 billion over the next 10 years to build gigabit to more than 500,000 locations - often islands in the middle of non-subsidized areas. 

Notice that LTD only qualified to bid to build fiber at the gigabit tier. They do not have permission to substitute wireless, from what I (and everyone else I have talked to) understand.

 

OK, so what? Assume that LTD will just build fiber. Cooperative Network Solutions has published a map of the winners. These are high cost areas that were bid so long ago that successful fiber network operators in the adjacent areas decided the subsidies were too low for them. Somehow LTD is going to get financing and the expertise to build these areas all out with lower subsidies than what local folks could do?  Seems improbable.

Mike Dano at Light Reading says this of LTD: “The company said it plans to do so with a mixture of fiber and fixed wireless services.” That mix had better be something like 99.9% fiber and .01% wireless from what we are seeing in the PRS database. 

Here is what to watch out for - will the FCC change the rules here retroactively to accommodate auction winners that cannot do what they promised? It has a history of doing that - they changed rules in CAF II to help Viasat after it won areas despite being unable to meet the rules as specified regarding quality of phone calls. Few noticed and fewer cared despite it harming hundreds of thousands of Americans. (The Oregon Congressional delegation has tried at least a little to act on this, to their credit.)

So while some are talking about how fixed wireless did really good in the auction, the question is more whether the FCC has seriously screwed up or whether top bidders shrewdly assumed they could later convince the FCC to move the goal posts to accommodate them. Don’t think it is possible?  Do you think the FCC wants to admit it screwed up distributing billions of dollars? Better to quietly change the rules. 

In scanning the winning bids, this is what we see regarding the technologies that winning bidders can deploy per the rules as written.

CenturyLink, Frontier, and Windstream have already raked in billions for these properties from the Connect America Fund. Now the FCC is paying them again to do the job it hasn’t already done. We should not be surprised if the FCC ultimately allows them to offer well less than a gigabit and later qualify for still more subsidies. 

Once again, as we did after the CAF II auction, we have heard from some WISPs that they bid on realistic services - often 100 Mbps - only to be outbid by other WISPs that are claiming to offer speeds that the first WISPs think all but infeasible with existing technology. This is not a matter of some people being anti-wireless. It is a question of whether the FCC has any credibility when it makes rules. 

RDOF is an embarrassment. It is hard to believe that this FCC is the same one that executed the CAF II auction fairly well, all things considered. But perhaps that auction was the aberration, not this one.