The day before Independence Day, the FCC ruled on the controversial topic of amnesty for RDOF rural broadband funding winners who do not expect to meet some or all their buildout commitments. In nixing the amnesty proposal, the commission outlined alternatives to defaults and steps that providers considering defaults should take next.

The commission’s actions and comments also apply to providers that won funding in the earlier CAF II auction. Both the RDOF and CAF II programs awarded funding for a region to the provider that committed to deploying high-speed broadband for the lowest level of government support.

Some winners said costs have risen dramatically since the COVID pandemic and asked to be released from buildout obligations with reduced penalties because the cost increases could not have been predicted in advance.

The FCC didn’t buy that argument.

“[T]here is no demonstrated need for widespread relief from the RDOF and CAF Phase II default penalties,” the commission wrote in a 10-page public notice about the defaults.

The commission cited two data points to back up this claim:

  • Only 4% of CAF Phase II carriers report not timely meeting buildout milestones.
  • 71% of RDOF carriers report locations served a full year prior to the first deployment milestones required by the program.

Responding to the RDOF amnesty request was critical for the FCC as the U.S. gets set to award $42.5 billion for rural broadband buildouts through the BEAD Program. The commission confirmed that any locations subject to CAF II or RDOF defaults would be designated as eligible for BEAD on the National Broadband Map.

RDOF Defaults

In the default order, the FCC notes that transferring buildout obligations to another provider could be an alternative to defaulting. The commission noted that it already has approved some such transfers.

The commission also suggested that the financial costs of defaults could be minimized by early reporting of a decision not to complete a build.

Any provider contemplating a CAF II or RDOF default should reach out immediately to the FCC and to relevant state broadband offices or Tribal governments, the commission said.

“Earlier defaults can limit the support recovery and penalty costs to the carrier and also ensure that states and territories timely receive the necessary information for their BEAD planning,” the commission said in the order.

The order also notes that defaults associated with locations targeted for RDOF or CAF II builds also may be eligible for funding through the E-ACAM program. And it notes that the commission relaxed letter of credit (LOC) rules that might have prevented some providers from obtaining the LOCs required in the programs.

“The above examples demonstrate that the commission’s existing processes are sufficient to address early defaults and provide sufficient flexibility with respect to certain requirements for RDOF and CAF Phase II,” the FCC said in the order.

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