The FCC is building up a large potential pool of broadband funding. The original RDOF was set at $20 billion, with $4.4 billion set aside for a second reverse auction, along with whatever was left over from the first auction. The participants in the first RDOF auction claimed only $9.2 billion of $16 billion, leaving $6.8 billion. When the FCC recently decided not to fund LTD Broadband and Starlink, the leftover funding grew by another $2 billion. Altogether that means over $11 billion left in funds that were intended for RDOF.
We also can’t forget that around the same time as the RDOF that the FCC had planned to fund a 5G fund to enhance rural cellular coverage. Due to poor mapping and poor data from the cellular carriers, that auction never occurred. That puts the pool of unused funding at the FCC at $20 billion, plus whatever new FCC money might have accrued during the pandemic. That’s a huge pool of money equal to half of the giant BEAD grants.
The biggest question that must be asked before considering another RDOF reverse auction is how the country will be covered by the BEAD grants. It would be massively disruptive for the FCC to try to inject more broadband funding until that grant process plays out.
Commissioner Carr said that some of the FCC’s funding could go to enhance rural cellular coverage. Interestingly, once BEAD grant projects are built, that’s going to cost a lot less than was originally estimated. A lot of the money in the proposed 5G fund would have been used to build fiber backhaul to reach rural cell sites. I think the BEAD last-mile networks will probably reach most of those places without additional funding. However, there is probably still a good case to be made to fund more rural cell towers.
But there are larger questions involved in having another reverse auction. The big problem with the RDOF reverse auction was not just that the FCC didn’t screen applicants first, as Carr and others have been suggesting. The fact is that a reverse auction is a dreadful mechanism for awarding broadband grant money. A reverse auction is always going to favor lower-cost technologies like fixed wireless over fiber – it’s almost impossible to weight different technologies for an auction in a neutral way. It doesn’t seem like a smart policy to give federal subsidies to technologies with a 10-year life versus funding infrastructure that might last a century.
Reverse auctions also take state and local governments out of the picture. The upcoming BEAD funding has stirred hundred of communities to get involved in the process of seeking faster broadband. I think it’s clear that communities care about which ISP will become the new monopoly broadband provider in rural areas. If the FCC has a strict screening process up front, then future RDOF funding will only go to ISPs blessed by the FCC – and that probably means the big ISPs. I would guess that the only folks possibly lobbying for a new round of RDOF are companies like Charter and the big telcos.
The mechanism of awarding grants by Census block created a disaster in numerous counties where RDOF was awarded in what is best described as swiss cheese serving areas. The helter-skelter nature of the RDOF coverage areas makes it harder for anybody else to put together a coherent business plan to serve the rest of the surrounding rural areas. In contrast, states have been doing broadband grants the right way by awarding money to coherent and contiguous serving areas that make sense for ISPs instead of the absolute mess created by the FCC.
A reverse auction also relies on having completely accurate broadband maps – and until the FCC makes ISPs report real speeds instead of marketing speeds, the maps are going to continue to be fantasy in a lot of places.
Finally, the reverse auction is a lazy technique that allows the FCC to hand out money without having to put in the hard effort to make sure that each award makes sense. Doing grants the right way requires people and processes that the FCC doesn’t have. But we now have a broadband office and staff in every state thanks to the BEAD funding. If the FCC is going to give out more rural broadband funding, it ought to run the money through the same state broadband offices that are handling the BEAD grants. These folks know local conditions and know the local ISPs. The FCC could set overall rules about how the funds can be used, but it should let the states pick grant winners based upon demonstrated need and a viable business plan.
Of course, the simplest solution of all would be for the FCC to cut the USF rate and stop collecting Universal Service Fund revenues from the public. The FCC does not have the staff or skills needed to do broadband grants the right way. Unfortunately, that might not stop the FCC from tackling something like another RDOF auction so it can claim credit for having solved the rural digital divide. If the FCC plans on another RDOF auction I hope Congress stops them from being foolhardy again.