The RDOF Grants – The Good and Bad News

The FCC recently approved a Notice of Proposed Rulemaking that proposes how they will administer the $16 billion in RDOF grants that are going to awarded later this year. As you might imagine, there is both good news and bad news coming from the grant program.

It’s good news that this grant program ought to go a long way towards finally killing off large chunks of big telco rural copper. Almost every area covered by these grants is poorly served today by inadequate rural DSL.

The related bad news is that this grant award points out the huge failure of the FCC’s original CAF II program where the big telcos were given $11 billion to upgrade DSL to at least 10/1 speeds. The FCC is still funding this final year of construction of CAF II upgrades. The new grant money will cover much of the same geographic areas as the original CAF II deployment, meaning the FCC will spend over $27 billion to bring broadband to these rural areas. Even after the RDOF grants are built, many of these areas won’t have adequate broadband. Had the FCC administered both grant programs smartly, most of these areas could be getting fiber.

Perhaps the best good news is that a lot of rural households will get faster broadband. Ironically, since the grants cover rural areas, there will be cases where the RDOF grant brings faster broadband to farms than will be available in the county seat, where no grant money is available.

There is bad news on broadband speeds since the new grant program is only requiring download speeds of 25/3 Mbps. This means the FCC is repeating the same huge mistake they made with CAF II by allowing federal money to spend on broadband that will be obsolete before it’s even built. This grant program will be paid out of ten years and require deployment over six years – anybody paying attention to broadband understands that by six years from now a 25/3 Mbps broadband connection will feel glacial. There is grant weighting to promote faster data speeds, but due to the vagaries of a reverse auction, there will be plenty of funding given to networks that will have speeds close to 25/3 Mbps in performance.

There is further bad news since the FCC is basing the grants upon faulty broadband maps. Funding will only be made available to areas that don’t show 25/3 Mbps capability on the FCC maps. Everybody in the industry, including individual FCC Commissioners, agrees that the current maps based upon 477 data provided by ISPs are dreadful. In the last few months, I’ve worked with half a dozen counties where the FCC maps falsely show large swaths of 25/3 broadband coverage that isn’t there. It’s definitely bad news that the grant money won’t be made available in those areas where the maps overstate broadband coverage – folks in such areas will pay the penalty for inadequate broadband maps.

There is a glimmer of good news with mapping since the FCC will require the big ISPs to report broadband mapping data using polygons later this year. Theoretically, polygons will solve some of the mapping errors around the edges of towns served by cable TV companies. But there will only be time for one trial run of the new maps before the grants, and the big telcos have every incentive to exaggerate speeds in this first round of polygon mapping if it will keep this big pot of money from overbuilding their copper. I don’t expect the big telco mapping to be any better with the polygons.

Another area of good news is that there will be a lot of good done with these grants. There will be rural electric cooperatives, rural telcos, and fiber overbuilders that will use these grants as a down-payment to build rural fiber. These grants are not nearly large enough to pay for the full cost of rural fiber deployment, but these companies will borrow the rest with the faith that they can create a sustainable broadband business using fiber.

The bad news is that there will be plenty of grant money that will be used unwisely. Any money given to the traditional satellite providers might as well just be burned. Anybody living in an area where a satellite provider wins the grant funding won’t be getting better broadband or a new option. There is nothing to stop the big telcos from joining the auction and promising to upgrade to 25/3 Mbps on DSL – something they’ll promise but won’t deliver. There are likely to be a few grant recipients who will use the money to slap together a barely adequate network that won’t be fast and won’t be sustainable – there is a lot of lure in $16 billion of free federal money.

It’s dismaying that there should be so many potential downsides. A grant of this magnitude could be a huge boost to rural broadband. Many areas will be helped and there will be big success stories – but there is likely to be a lot of bad news about grant money spend unwisely.

My Telecom Predictions for 2020

Technical Resource Shortage. There is already a growing shortage of fiber resources that includes engineers, construction companies, and fiber consultants. The upcoming $16.4 billion RDOF program will create a resource shortage in 2020 for those who can help companies seek grant funding. Once the grants are awarded, the size of the program will add stress to the resources needed to build networks. Companies that don’t line up their experts early might find themselves without help.

Broadband Price Increases Are Now Routine. The biggest ISPs including Comcast, AT&T, Charter, Verizon, and others have now made it clear that they will be raising broadband rates annually – at least in the majority of their markets where they don’t face real competition. Anybody building a business plan for a new market has to decide how to predict future rate increases.

5G Cellphones Will Prove to be a Joke. At least for 2020, almost everybody who spends extra for a 5G handset is going to be disappointed. The companies deploying millimeter wave spectrum are doing it in limited downtown areas of major cities – and the speeds are only faster outdoors. Carriers implementing low frequencies like 600 MHz and 850 MHz admit that service won’t be any faster than 4G LTE.

FCC Will Eliminate the Last Vestiges of Regulation. The FCC has been actively tearing down regulations affecting the biggest ISPs. The agency has completely deregulated broadband and killed net neutrality. They’re in the process of gutting the use of unbundled network elements They’ve preempted local authority on the placement of wireless infrastructure. Since there is a chance that the administration will change at the end of the year, the FCC will kill as many regulations as they can during 2020.

T-Mobile / Sprint Merger Will be Approved. While there is a lot of opposition to the merger, the reality is that Sprint is not particularly viable as a cellular carrier. The biggest cable companies are entering the cellular markets and will push down urban cellular prices. Dish Networks seems to have a viable plan to become a major carrier if the T-Mobile/Sprint merger is approved.

Courts Will Chip Away at the 5G Pole Attachment Rules. The authority of the FCC to override local policy for the placement of cellular infrastructure boils down to a state versus federal jurisdiction battle. The courts have already said that cellular companies must heed some historic preservation and aesthetics rules. Ultimately the courts will weaken, but not kill the FCC rules, giving cellular carriers more rights than they historically had, but not full carte blanche authority to place devices anywhere.

State Net Neutrality Will Be Almost as Powerful as Federal Policy. It will be hard for the big ISPs to comply with net neutrality rules in California and Washington without complying everywhere. It’s also likely that more states will pass similar net neutrality rules

The RDOF Grants Will Fund Poor Broadband Solutions. Unfortunately, the $16.4 billion RDOF grants will award some grant money to technologies that are not future-proofed. Since the grants can be awarded for technologies that deliver broadband speeds of as little as 25/3 Mbps, we’ll see money go to technology solutions that might be obsolete before the end of the RDOF implementation period.

Cellular Networks Will Continue to Degrade. The nationwide use of cellular data is currently doubling every two years, which is greatly stressing cellular network quality. The cellular carriers need to implement massive numbers of small cells, add new spectrum, and fully implement 5G to keep up with the growing demand. Since those solutions will take 3 – 7 years to implement, cellular network quality is going to get a lot worse before the problems are solved.

Household Bandwidth Usage Will Continue to Grow. OpenVault says the average home now uses 275 gigabytes of data per month, with cord cutting households using 520 GB per month. Opensignal and Cisco both report that household broadband usage continues to grow rapidly, at about 21% annually, or a doubling every 4 years. There is nothing to suggest this growth will be slowing.