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The historic Rural Digital Opportunity Fund (RDOF) auction will get underway tomorrow. It’s a reverse auction that will award up to $16 billion to cover some of the costs of bringing broadband to unserved areas – a topic Telecompetitor covers on a daily basis.

It’s important to note how we got here. The $16 billion, which will be distributed over ten years, comes from universal service funding that historically was allocated to large telcos like AT&T, Verizon, Frontier, and others for rural service territories.

The FCC changed course a few years back, and instead of allocating those funds to the larger telcos, decided it would be better public policy to auction them off to any eligible carrier who agrees to serve those same territories with a minimum 25/3 Mbps broadband service. The vehicle to distribute these funds shifted to a reverse auction.

In the reverse auction, funding will go to the network operator that commits to deploying service for the lowest level of support. A weighting system will favor bids to deploy higher-speed, lower-latency service. More on that later in this post.

RDOF Auction Bidders

A wide range of entities – 386 in total — have qualified to participate in the RDOF auction, also known as Auction 904. Those 386 bidders represent over 600 network operators by some accounts, many of whom are participating as a part of a bidding consortium.

Bidders include cable companies such as Cox Communications and Midco; telecom companies such as Frontier, Verizon and Windstream; satellite broadband providers Viasat and newcomer SpaceX; small rural telecom companies; rural electric cooperatives; and fixed wireless providers known as WISPs (for wireless internet service provider).

Companies in the WISP category are less familiar outside the telecom and broadband industry, but some of them won hundreds of millions of dollars in a 2018 rural broadband reverse auction. That auction, known as Connect America Fund (CAF) II, awarded close to $1.5 billion and served as a prototype for the RDOF auction.

And while telecom providers such as Verizon and Windstream have been offering broadband using a mixture of fiber-fed copper and all-fiber networks, Windstream more recently has been deploying fixed wireless and likely would use that technology for any RDOF wins – and Verizon also has been quite bullish on fixed wireless recently.

Some traditional rural telecom providers that historically have used a wireline approach also may use any RDOF wins for fixed wireless (although many will choose fiber options as well). Fixed wireless technology has been improving rapidly so we should look for bidders that plan to use it to bid in the 100 Mbps speed category.

Rural electric cooperatives, on the other hand, are most likely to deploy all-fiber networks capable of supporting gigabit, or 1,000 Mbps service, and they also were big CAF II winners, as was Viasat.

Viasat will have tougher going in the RDOF auction, however, because it uses geostationary satellites that are so distant from Earth that the service doesn’t qualify for the low-latency bonus. Rival satellite broadband provider SpaceX has been launching non-geostationary low-earth orbit satellites and may bid as a low-latency provider.

The FCC ruled recently that it wouldn’t categorically prevent low-earth orbit providers from bidding in the low latency category. But it also changed the weighting system in a way that essentially will penalize high-latency bidders somewhat more in comparison with CAF II.

Here’s the RDOF auction weighting system:

RDOF Auction Eligible Areas

According to the FCC, about 5.3 million unserved homes and businesses are located in areas eligible for bidding in the Phase I auction.

A list of census blocks eligible for the auction is available here. It includes census blocks where FCC data shows that there is no broadband service available at speeds of at least 25/3 Mbps. Bidding, however, will be by census block group.

There has been considerable controversy about the accuracy of FCC broadband availability data, which tends to overstate broadband availability. If FCC data shows just one location in a census block having broadband available to it, that census block is not eligible for this RDOF auction, but will have to wait for a second one that currently has a budget of $4 billion plus whatever funding isn’t awarded in the RDOF auction.

Eligible areas for that auction will be determined using updated data that the FCC is in the process of collecting.

Network operators winning funding will have six years to complete deployments and will have to meet key buildout milestones along the way.

Get more details about the RDOF program through our extensive coverage here.

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