Tag Archives: LTD Broadband

RDOF Defaults

The Benton Institute for Broadband & Society pieced together the statistics for defaults to date on the FCC’s RDOF and CAF II reverse auctions.

The RDOF (Rural Digital Opportunity Fund) was the biggest attempt at the time to solve the rural broadband gap. The FCC had originally slated $20.4 billion to award to ISPs in a reverse auction, meaning the ISP willing to take the smallest subsidy for a given area won the funding. Winners were to collect the funding over 10 years and had up to seven years to build the promised networks.

The program ran into problems in several dramatic ways. First, the FCC chose the areas eligible for RDOF using its badly flawed broadband maps. RDOF was supposed to be awarded to Census blocks where nobody could buy broadband of 25/3 Mbps or faster. Unfortunately, the FCC maps had huge numbers of blocks where ISPs claimed exactly 25/3 Mbps ability, and those areas were not eligible. The non-eligible eventually became most of what is being addressed now with BEAD, which indicates how poor the maps were at the time. In a problem that is still plaguing the BEAD process, the FCC made the funding available in what is best described as a checkerboard of eligible and non-eligible areas.

At the close of the BEAD auction, ISPs had claimed over $9.2 million in RDOF subsidies to serve over 5.2 million locations. Benton has assembled a spreadsheet that shows that 1.9 million of those locations and $3.3 billion were defaulted. The two biggest defaults came from FCC action. The FCC decided that Starlink broadband did not meet the speed goal of the plan, and the FCC canceled $852 million that was to cover 630,000 locations. The FCC canceled awards of $1.3 billion to cover 528,000 locations for LTD Broadband after the FCC decided the company didn’t have the financial and technical ability to fulfill its commitments.

The Benton spreadsheet shows 135 entities that defaulted on BEAD or the CAF II reverse auction. The reason for some of the defaults is obvious. Thirty ISPs won subsidies to build to less than 50 locations. It’s likely that most of them were trying to win larger areas and defaulted because the paperwork burden of complying with RDOF wasn’t worth the tiny amount of subsidy.

The other major reason for defaults is the amount of subsidy. The average award for the defaulted areas is $1,732 in RDOF subsidy per location, paid out over ten years. Starlink had asked for $1,353 per location. LTD Broadband won awards of $2,501 per location. The other awards average out to $1,503 per RDOF location. It’s not hard to imagine ISPS looking at the size of these awards and deciding they couldn’t make the math work – particularly after inflation ballooned due to the pandemic.

As Benton warns, the defaults may not be over. Most of the RDOF winners should have built 40% of their locations by the end of 2024. I’ve been working with a lot of Counties that haven’t seen any progress on RDOF and are wondering if the networks will ever be built. I hope Benton follows up by getting a tally, by State, of where RDOF has already been built. I would assume any ISP that isn’t meeting the 40% obligation is probably a good candidate for additional default.

This all sounds negative, but there have been networks built all over the country from the RDOF funding. Numerous electric cooperatives built networks more quickly than the FCC’s required timeline. Charter was a huge winner and says it is far ahead of schedule on RDOF. Yet risk of further defaults is alarming. I know there are a lot of rural folks who are counting on the remaining RDOF networks being built, because further defaults mean areas with no broadband solution.

FCC Getting Serious About RDOF Defaults

In December, the FCC issued fines for two ISPs that the FCC says defaulted on RDOF obligations. RDOF was the FCC subsidy program where broadband subsidies were awarded by a reverse auction that ended in December 2020.

The fines are substantial and were set at $3,000 per passing for the defaults. I think the FCC is using these fines to issue a firm warning to any other  RDOF winners who might be considering default.

The first fine was to Etheric Communications for $732,000 for 244 locations. Etheric was one of the largest RDOF winners, having won $248.6 million to cover 64,463 locations. The FCC said that Etheric had failed to become designated as an Eligible Telecommunications Carrier (ETC) for the affected passings.

A much larger fine of $21.7 million was levied again GigFire (or LTD Broadband) for defaulting on 7,238 locations. Apparently, LTD Broadband has rebranded as GigFire, and the FCC levied the fine against both entities since it seemed uncertain of the relationship between LTD Broadband and GigFire.

LTD was largest RDOF auction winner, having won the auction for 528,088 passings and claiming $1.32 billion in RDOF subsidy. The FCC had rejected most of LTD’s claimed winnings. The FCC concluded that the company would not be able to deploy at the scope and scale needed to meet the RDOF obligations. The FCC levied the current fines against GigFire saying that the company failed to obtain ETC status for the effected passings, and because the FCC doesn’t believe the company didn’t meet the funding requirements in its most recent filings.

Default on RDOF are not new and there has been fines in the past from other defaults from companies like larger companies like Charter, Nextlink, and Breezeline. A number of small defaults happened soon after the end of the auction.

I’ve heard a lot of rumors about possible RDOF defaults over the last six months. I have no idea if any of these rumors are real. In many cases, the rumors seem to stem from counties who are getting nervous because they don’t see any construction started yet by RDOF winners. In many counties the RDOF awards cover a substantial part of a county, and counties fear having defaults after it’s too late to redirect these areas to the upcoming BEAD grants.

RDOF deployment rules require that a winner deploy 40% by the end of 3 years, 60 percent by the end of 4 years, 80% by the end of 5 years, and 100% by the end of 6 years. For most RDOF winners, the third year will be 2024. Unfortunately for nervous counties, the build-out requirements are measured on a statewide basis. An RDOF winner that won in multiple counties in a state could be meeting its statewide obligations without doing any construction in some counties.

It will be massively disruptive if there are any RDOF defaults after the BEAD grant process is underway, especially since most BEAD grants will likely be awarded this year. The FCC would still have the RDOF funding and could transfer the award to somebody else – assuming it could find somebody willing to tackle the areas for the level of funding that was set in 2020 before high inflation and higher interest rates. The FCC also has the ability to hold another RDOF auction, and it was anticipated there would be a second round of RDOF until BEAD grants seem to be covering the same areas that would be eligible for RDOF.

FCC Nixes Starlink and LTD Broadband

On August 10, the FCC issued a press release denying the long-form applications of Starlink and LTD Broadband in the RDOF reverse auction. This is big news because these are two of the biggest winners of the reverse auction. LTD Broadband was the largest winner of the auctions at $1.32 billion while Starlink had claimed over $885 million in the auction.

The FCC press release quoted FCC chairman Jessica Rosenworcel asking why the FCC should subsidize Starlink since it’s a “still developing technology” that requires customers to pay for a $600 dish, even with the FCC subsidy. I have to imagine that the FCC was relying, at least in part, on Ookla speed tests that show that Starlink’s performance has been worsening over time as more customers come onto the network. The speed tests also show that Starlink doesn’t meet the 20 Mbps upload speed that Starlink pledged to meet in the auction. We may not know the full reasoning behind the rejection unless the FCC follows this press release with a longer document.

The release says that the FCC rejected LTD Broadband because the agency deemed that the company was not capable of deploying a network of the scope, scale, and size required to satisfy the RDOF buildout requirements. This is not surprising since LTD is a small regional WISP in Minnesota that promised to build a fiber network that would cost many billions of dollars. LTD has already been having problems and had failed to win state approval for Eligible Telecommunications Carrier status in seven of the fifteen states where the company won the RDOF auction. There is also an open proceeding at the Minnesota Public Service Commission asking to revoke the existing ETC status.

These two cancellations of RDOF will have a significant ripple effect through the rest of the carrier world. The areas that were claimed in the RDOF auction have been off-limits for other federal grants like ReConnect. This ruling means that any areas that were claimed by these two companies can now be included in future federal grants.

The other issue caused by RDOF is that the awards were by Census block, and this resulted in award areas that have been described as swiss cheese. This meant that the RDOF awards were not contiguous but were often a scattering of Census blocks mixed in with areas that seemed to be identical but were mysteriously not included in RDOF – fully as a result of faulty FCC maps. This made it nearly impossible in some cases for other ISPs to seek grants for the areas not covered by RDOF since the areas are scattered.

I’m only speculating, but I suspect that the pending BEAD grants have a lot to do with the FCC decision. If the FCC had awarded the RDOF, then folks living in the Starlink areas would have been precluded from getting fiber or other broadband that is faster than Starlink. This was a particularly troublesome situation in my part of the world, where Starlink won the RDOF reverse auction in some of the western mountainous wooded counties in North Carolina. We now have a lot of evidence that Starlink struggles in heavily wooded areas.

The risk of awarding the RDOF to LTD Broadband is that the company would fail to execute on the fiber buildout. It wouldn’t be evident for a number of years if the buildout wasn’t going to succeed, and by that time, all of the current state and federal broadband grants would be long gone. I think this rejection shows that the federal government is really hoping that the BEAD grants will bring broadband to all rural areas.

There are still a few other large RDOF winners that have not been awarded. These are companies that are proposing gigabit wireless capability. The FCC is obviously not yet ready to make the awards to these companies, but it’s also apparently not ready to reject them. The clock is ticking for these areas. ISPs and local governments need to know if these areas won’t get RDOF since it takes time to plan for the BEAD grants, so it’s important for the FCC to make or reject the remaining RDOF applications soon.