The USDA should change the rules for the second round of ReConnect funding, said FCC Commissioner Michael O’Rielly in a letter to USDA Rural Utilities Service Administrator Chad Rupe. The rules currently in place could allow recipients to use funding to overbuild broadband to locations that already have it, O’Rielly said.

O’Rielly also expressed concern that the rules favor fiber deployments over lower-cost options and that the planned challenge process was not sufficiently consistent and transparent. In addition, he said the USDA should exclude areas subject to Universal Service Fund A-CAM or CAF BLS deployment obligations or where a network operator such as Charter Communications is required to provide broadband service as a condition of a previous merger approval. (Areas subject to Connect America Fund build-out requirements are already excluded.)

The second round of the USDA ReConnect program has a budget of $550 million, a bit less than the $600 million that was budgeted for the first round. The USDA is currently accepting applications for the second round.

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Overbuild Concerns
Rules for the first round of the ReConnect program targeted areas in which 100% of locations did not have broadband available to them, but rules for the second round allow network operators to apply for funding for areas in which 90% of locations lack broadband.

The revised threshold “will likely result in upgrading service in lower-cost areas that are not in need of broadband subsidies and leaving the hardest to reach areas without service,” O’Rielly said.

He added that “by allowing applicants to use scarce funding to duplicate service in parts of the territory that already have service, the decision enables wasteful overbuilding at the expense of those truly in need.”

Rupe had told O’Rielly that the threshold was changed so that areas with a negligible number of served locations would be eligible for funding. But O’Rielly said the new 90% standard “drastically overcompensates as a solution.”

He added that the new standard makes it more difficult for those wishing to challenge an area’s eligibility.

Favoring Fiber
O’Rielly’s concern that the USDA ReConnect rules for round two favor fiber deployments relates to the point system that will be used for scoring funding applications. Up to 20 points will be awarded for deployments that will provide symmetrical service at speeds of at least 100 Mbps.

According to O’Rielly, this approach “seems to unfairly and discriminatorily tilt the scales toward fiber-to-the-premises technology over others that would serve consumers just as effectively.” According to O’Rielly, more people would gain broadband connectivity if this criterion was not included or was assigned less weight.

Service performance is one of nine evaluation criteria for round two. Points are awarded based on criteria such as rurality of service area and the number of farms, businesses, educational facilities, healthcare centers or essential community facilities served. The fewest number of points associated with any of the criteria is five – for projects in an opportunity zone. The largest number of points associated with any single criterion is 25 – for the rurality criterion.

Doing a bit of math reveals that the performance/speed criterion represents 13.33% of total possible points. It’s also worth noting that, according to O’Rielly’s letter, the performance/ speed criterion was unchanged from the first ReConnect round.

“I regret that this scoring metric was not modified for the second round of funding,” he said.

On the Other Hand…
One thing that O’Rielly doesn’t consider in his analysis of the USDA ReConnect rules is local accountability. The rural telcos and rural electric companies that won the majority of funding in phase one of the ReConnect program, by and large, are based in or near the communities to which they will be extending service, and people in the community are likely to raise an uproar if funding recipients choose to overbuild locations that already have broadband rather than to extend service to unserved locations. A responsible applicant will base its funding request on what it needs to bring service to the unserved – and those are the locations to which it will build if funding is won.

I suspect local residents also will be disappointed if, after waiting so long for broadband, they receive service that doesn’t come close to what people in urban areas can get.

I’d be interested to hear what readers think of O’Rielly’s assertion that it’s unfair to favor higher-performing service. I’m sure readers have some strong opinions on that – and perhaps about some of his other concerns as well.

Join the Conversation

3 thoughts on “FCC Commissioner O’Rielly Wants USDA to Change the ReConnect Rules for Rural Broadband Funding

  1. Seems that Commish O'Rielly wants lower speeds, which eventually will become outdated or eventually "defined" by the FCC as "under-served". Wouldn't it make much more sense to set the bar high and allow reputable service providers to deploy broadband? Forget the method of deployment. When comparing, fiber does exceed everything else capacity-wise in the long-term. A rough analogy would be to eliminate the 3-pt line in basketball simply because one team can't make that shot. So is Commish O'Rielly now wanting to give low-speed service providers a "participation award"? I hope the answer is "NO!".

  2. Fully understand Commissioner O'Rielly's position on funding overbuilding practices to be in stark contrast with the objective of universal connectivity. But to support a "slowband" model that enables non fixed fiber architectures is in direct conflict to the overbuilding position. Place HFC cable, DSL copper, satellite, microwave, et cetera, on an equal footing with fiber and in a few years tax payers will be forced to support overbuilding these mediums with fiber. This is pointless, more pointless than the current 25/3 FCC broadband definition, which once improved, will further lend itself to fiber.

  3. O'Reilly's "not a single location overbuilt" criterion does not reflect the reality that I am working with right now. In the serving area of my project, cable companies cherry picked the more densely populated area around town and village centers and on the main roads. Since a rural coop is involved, the most viable places to put hub sites (i.e. FTTH OLTs) are at electrical substations — which necessarily are located in population centers. Thus, the only way to reach unserved customers is to hang fiber through already-served areas. Does it really make sense to pass potential customers without being allowed to serve them? To make all that fiber a stranded asset on the rural provider's books? In whose interest is it to protect incumbents from competition, since, according to a survey, customers are dissatisfied with their incumbent providers and want an alternative? Similarly, fixed wireless does not observe sharp artificial boundaries. If a WISP's coverage area overlaps an already-served area, is it to turn down viable customers to avoid competing with incumbents?

    It's true that few residential customers can utilize more than 25/3. This was also true of 10/1 a few years ago, and 10/1 is no longer sufficient. One can argue that the demand curve reaches a plateau at around 25 Mbit/s. This not a safe assumption. My project overlaps a lot of CAF-funded 10/1 DSL, which despite being relatively new is now obsolete. This is not an effective use of taxpayer money. It makes no sense to try to protect incumbent telcos' long-since depreciated copper assets; those have been milked long enough. It makes no sense to protect cable plant that is in such poor shape that it cannot support 100/100 with DOCSIS 3.1; it's up to the MSO to upgrade their decrepit plant. It's true that fixed wireless can't support 100/100 within a modest-sized, wooded, hilly coverage area. Favoring 100/100 reduces the number areas that can't economically support FTTH and must be served with fixed wireless. So what? Is the government's primary objective to treat all technologies "fairly" or is it to serve the best interest of consumers?

    Does O'Rielly really want to be seen as weighting the interests of incumbents more heavily than those of consumers? Does he believe that the FCC should encourage competition or suppress it?

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