There is a veritable Who’s Who of big companies that have registered for the upcoming RDOF auction. All of the hundreds of small potential bidders to the auction have to be a bit nervous seeing the list of companies they could end up bidding against.
As a reminder, RDOF stands for Rural Digital Opportunity Fund and is an auction that starts in October that will award up to $16.4 billion in broadband funding. The money will be awarded by reverse auction in a process that favors faster technologies, but also favors those willing to take the lowest amount of grant per customer. The areas that are eligible for the funding are among the most remote places in the country, which is why the list of potential large bidders is puzzling.
There are some big cable companies on the list: Altice, Charter Communications, Cox Communications, Atlantic Broadband, Midco, and Mediacom Communications. These companies serve many of the county seats or other nearby towns to many of the RDOF areas. One has to wonder what these companies have in mind. The only one that has chased any significant federal grants in the past is Midco in Minnesota and North Dakota. Midco has been using grant money to extend fiber backhaul to connect its smallest markets, to build last-mile broadband in some tiny towns, and to build fixed wireless in rural areas surrounding its cable markets.
One has to wonder if the other cable companies have a similar plan. It’s incredibly inefficient to build traditional hybrid coaxial-fiber networks in rural areas, so it’s unlikely that the cable companies will be extending their existing networks. The RDOF auction is being done by Census blocks, which in rural areas can cover a large area. The winner of the auction for a given Census block must offer service to everybody in that block. I also have a hard time envisioning all of these big cable companies getting into the wireless business like Midco is doing, so their presence in the auction is a bit of a mystery.
Then there are the traditional large telcos including Frontier, Windstream, Consolidated Communications, and CenturyLink. These companies already serve many of the areas that are covered by the reverse auction. These are the rural areas where these companies have largely neglected the old copper wiring and either offer no broadband or dreadfully slow DSL. The minimum technology allowed to enter the auction must deliver 25/3 Mbps broadband. It’s almost painful to think that these companies would chase the funding and promise to upgrade DSL to 25/3 Mbps after these companies largely botched an upgrade to 10/1 Mbps DSL in the just-ending CAF II grants. The cynic in me says they are willing to pretend to upgrade DSL all over again if that means substantial grant money. I have to think that some of these companies are considering deploying fixed wireless. To the extent any of these companies is willing to take on new debt or use equity, they could also build fiber. None of these companies has built a substantial amount of fiber to truly rural places, but may these grants are the inducement they were waiting for.
Verizon and U.S. Cellular have registered for the auction. You have to think the cellular carriers will be deploying fixed cellular broadband like the 4G FWA product that Verizon just announced recently. These companies already have equipment on towers in many of the RDOF grant areas and would love to grab a subsidy to roll out a product they might be selling in these areas anyway.
Then there are the satellite companies SpaceX, Hughes Network Systems, and Viasat. Viasat has won federal grant money before for selling broadband from its high-altitude satellites. SpaceX is the wildcard since nobody knows anything about the pricing or real speeds they can provide. We know that Elon Musk has been lobbying the FCC to let him have a shot at the billions up for grabs in this auction.
There is another interesting wildcard with Starry. Their business plan is currently selling fixed wireless to large apartment buildings in center cities and they’ve developed a proprietary technology that’s perfect for that application. They must have something else in mind in chasing grant money in remote areas that are 180 degrees different than their normal business model. Starry founder Chet Kanojia is incredibly creative, so he probably has a new technology in mind if he wins auction funding.
There may be other big players in the auction as well since many of the registered bidders are participating under partnerships or corporations that are disguising their identity for now. I think one thing is clear and some of the rural ISPs and cooperative who think nobody else is interested in their markets will get a surprise early in the auction. These big companies didn’t register for the grant auction to sit on the sidelines.