$20.4 Billion Rural Digital Opportunity Fund Adopted, With a Few More Tweaks

The FCC today adopted rules for the Rural Digital Opportunity Fund (RDOF), which will use a reverse auction to award $20.4 billion in rural broadband funding to be distributed over 10 years. The final order has not yet been made public but comments from today’s meeting indicate that the commission made a few tweaks to a draft order that was made public several weeks ago – including relaxing letter of credit requirements.

The Basics
As expected, the RDOF targets areas where the incumbent service provider is a price cap carrier and where broadband service at speeds of at least 25/3 Mbps is not available. Plans call for funds to be awarded in two rounds, with the $16 billion first round targeting areas completely lacking broadband according to FCC data. A second $4.4 billion round targeting additional areas will follow, after the FCC collects more granular broadband availability data through a revised Form 477 process.

The auction will be open to a wide range of service provider types and will use a weighting system to favor bids to deploy service at higher speeds up to 1 Gbps downstream and with lower latency. According to comments made by FCC Chairman Ajit Pai, the order adopted includes the 50/5 Mbps service tier that was not in the initial draft order that circulated within the FCC several months ago but was added at the request of USTelecom—The Broadband Association with the support of the Wireless Internet Service Providers Association (WISPA).

Some other carrier groups, including NTCA—The Rural Broadband Association, opposed the addition of the 50/5 Mbps tier, arguing that doing so would create two service tiers below what is experienced in urban areas. NTCA noted, however, that the impact of the lower service tiers would be mitigated by how the clearing round was handled.

According to officials at today’s monthly FCC meeting, the version of the RDOF order adopted at the meeting aims to encourage the deployment of higher speeds by awarding funding to bidders pledging to provide the highest level of service at the clearing round, when the total value of bids falls at or below the auction budget. Opening bids for an area will be based on an FCC deployment cost model.

Rural Digital Opportunity Fund Adopted, with Dissenters
Commissioners Jessica Rosenworcel and Geoffrey Starks dissented, in part, on the order. Their concerns related, in large part, to problems with FCC broadband availability data and with the speed tiers.

FCC broadband availability data is based on information collected from service providers through the commission’s Form 477. That data has come under attack, with virtually all industry stakeholders agreeing that it overestimates broadband availability, as it considers an entire census block to be served even if only one customer can get service. The FCC plans to collect that data more granularly and to use the revised data to target areas for the second auction round, but Rosenworcel said the commission should have established a challenge process so that people living in areas considered to have broadband but actually lacking service would have a means of participating in the first auction round.

Rosenworcel and Starks argued that the commission should have been more ambitious in establishing the speed tiers. Noting that 200 kbps was considered broadband 10 years ago, Rosenworcel argued that the 25/3 Mbps minimum will look equally outdated 10 years from now and said the minimum target should have been 100 Mbps.

Letter of Credit Changes
The change in the letter of credit (LOC) requirements is perhaps not surprising, considering that service provider associations as diverse as INCOMPAS, the National Rural Electric Cooperative Association, NTCA, USTelecom, NCTA – The Internet & Television Association and WISPA opposed the requirements outlined in an earlier version of the order.  According to the associations, the LOC requirements would have resulted in over $1 billion in RDOF support going to banks and financial institutions and would have deterred some entities from participating in the auction.

Although the FCC did not provide details about the LOC changes, officials at today’s meeting said that the changes aim to strike a balance between enabling numerous parties to participate in the auction and ensuring that auction winners meet deployment commitments.