Viasat and the CAF II Reverse Auction

The FCC has done some very odd things over the years to try to solve the rural broadband problem. One of the oddest was the CAF II reverse auction that awarded $122.5 million to Viasat. Things move so fast in this industry that this award at times feels like ancient history, but the reverse auction just ended in August 2018.

There is a lot of grant money currently raining down on the rural broadband industry, but when this award was made, that wasn’t happening. It’s hard to fathom that only three short years ago that the FCC deemed that giving $122.5 to a geosynchronous satellite company was good policy.

This blog is not intended as a criticism of Viasat. If you live in a place where DSL is not available, then satellite broadband is your likely only alternative. Viasat satellite broadband has gotten better over time. The broadband on the ViaSat-1 satellite launched in 2011 was dreadfully slow. The company markets broadband as fast as 100 Mbps download on the ViaSat-2 satellite launched in 2017. The company plans three new ViaSat-3 satellites with even higher capacity, with the first to launch sometime in 2022.

My consulting firm does detailed market research in rural counties, and we’ve heard from satellite customers across the country. We’ve never met anybody that fully loves the product. The most common complaints are high prices, small data caps, and big latency. Prices are high compared to other forms of broadband, with the latest pricing from Viasat as follows:

Price Speed Data Cap
Unlimited Bronze $84.99 12 Mbps 40 GB
Unlimited Silver $119.99 25 Mbps 60 GB
Unlimited Gold $169.99 100 Mbps 100 GB
Unlimited Platinum $249.99 100 Mbps 150 GB

There is a $12.99 per month additional fee for equipment on top of these prices. A customer must sign a 2-year contract to get these prices, with a fee of $15 per remaining month if a customer breaks a contract.

We’ve been told by customers that download speed slows to a crawl after a customer exceeds the monthly data allotment. To put these data caps into perspective, OpenVault says that at the end of the first quarter of this year that the average U.S. home used 462 gigabytes of data. It’s not easy for a modern home to curtail usage down to 60 or 100 GB.

The biggest performance problem is probably the latency, which can be 10 to 15 times higher than with terrestrial broadband. The latency lag is due to the time required for the signals to go to and from the satellites parked at over 22,000 miles above the earth which adds time to every round-trip connection to the web. Most real-time web connections, such as using voice-over-IP or connecting to a school or corporate WAN, work best with a latency of less than 100 ms (milliseconds). We see speed tests on satellites with a reported latency between 600 ms and 900 ms.

I wonder about the long-term repercussions of this reverse auction grant award. Most federal programs prohibit providing a government subsidy to an area that is already receiving a federal broadband subsidy. Viasat is going to be collecting $12.25 million per year from the FCC through 2027. Will this mean that people unlucky enough to live where Viasat won the reverse auction can’t get faster broadband out of the wave of new grant funding? If so, these homes might be doomed to not get a landline broadband solution for decades.

The FCC should never have allowed geosynchronous satellite broadband into the reverse auction. Perhaps we can’t fully blame the FCC for not foreseeing the pandemic where rural people are screaming for better broadband. But it didn’t take much of a crystal ball in 2018 to understand that something better would come along sooner than the 10-year window they are providing in the Viasat award areas.

The FCC is likely to repeat this same mistake if it awards nearly $1 billion to Starlink in the RDOF reverse auction. If the federal infrastructure funding becomes available, there will be ISPs willing to build fiber to areas where Starlink will be getting a 10-year RDOF subsidy. It’s not too late for the FCC to change course and not make the RDOF award. Otherwise, the agency might be dooming a lot more people to not getting a permanent broadband solution.

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