CoBank, a lender specializing in rural telecom, has added its voice to a growing chorus expressing concern about the ability of some Rural Digital Opportunity Fund (RDOF) auction winners to deploy networks capable of supporting the broadband speeds they have committed to deliver. CoBank concerns relate to technology, expertise and financial prowess of certain winners.
The RDOF auction awarded funding to bring broadband to unserved areas, with funding going to the company committing to do so for the lowest level of support. A weighting system was designed to favor bids to provide higher speed service with lower latency. The weighting system likely was responsible for a surprising 85% of auction winners committing to deploy gigabit service.
Although there were more than 200 winners in the auction, the top 10 winners combined won more than three-quarters of the funding. And the ability of some of those top 10 winners to deliver what they promised has come into question.
CoBank also raises concerns about the justice of the RDOF methodology.
One of the big winners was SpaceX, which is still in the process of deploying a constellation of non-geostationary satellites to support service at 100 Mbps. That technology is relatively unproven, but CoBank also questions whether the FCC should have awarded $885.5 million in RDOF funding to a company owned by the world’s richest man.
RDOF Winners and Broadband Speeds
As Telecompetitor and others have noted, the top 10 RDOF winners included companies that were allowed to submit bids based on using fixed wireless to deliver gigabit speeds, at least in some areas. Equipment makers told us this is technologically feasible using unlicensed millimeter wave spectrum and mesh technology, in which one customer acts as a repeater site for another customer. However, this technology is relatively unproven, especially for rural areas.
Some of the top 10 winners, including some that traditionally have used fixed wireless technology, submitted gigabit bids based on using fiber-to-the-premises (FTTP) as well as fixed wireless. Although FTTP is a proven technology, it’s costlier than fixed wireless and some critics have questioned whether some winning bids are really feasible based on an FTTP deployment.
CoBank raises a different concern – the size of some winning bids in relation to the winner’s existing operations. The report notes, for example, that LTD Broadband – the biggest winner in the auction – won support to provide coverage in 15 states, but currently only offers service in parts of two states.
CoBank’s research about LTD Broadband also suggests that the top speed the company currently offers is 35 Mbps downstream and 7 Mbps upstream. Those speeds are considerably less than the 100 Mbps to 1 Gbps speeds for which LTD Broadband won funding.
“Seems like lots of execution risk to us,” CoBank said of LTD Broadband in its report. (Telecompetitor spoke with LTD Broadband in late December, but the company was unwilling to say much about its RDOF win at that time, citing FCC quiet period restrictions.)
Another concern related to some RDOF winners, according to CoBank, involves to the letters of credit that the companies are required to obtain before funding can be released to them. A company seeking to grow seven-fold could have trouble obtaining the necessary letter, CoBank suggests.
CoBank’s report comes just days after a broad coalition of federal legislators sent a letter to the FCC urging the commission to closely vet RDOF winners.
Although not noted in the CoBank report or in the letter that the legislators sent to the FCC, a key concern if a big winner cannot obtain a letter of credit is that funding for an area will not be awarded to that winner, nor to anyone else in the near future.
While one might expect the FCC to award funding, instead, to the next highest bidder, that’s not how it worked with the Connect America Fund auction that served as a prototype for the RDOF auction and I would not expect it to work that way with RDOF either. Instead, the funding is likely to roll into the second phase of the RDOF auction, which will not occur until the FCC obtains more accurate broadband availability data – and at this time, no one seems to want to put a date on when that will occur.
That’s a big concern, considering that LTD Broadband won over $1 billion in funding for 15 states and considering that other winners in the top 10 won hundreds of millions in funding, each for multiple states.