A group known as the Coalition of RDOF Winners is still hoping that the FCC will release additional funding to them to help cover the large increases in deployment that the winners have experienced since the RDOF rural broadband funding auction was completed in 2020, just prior to the start of the COVID-19 pandemic in the U.S.
One of the companies seeking extra funding is Aristotle Broadband, which won $62 million in the auction for deployments primarily in Arkansas and Mississippi, including persistent poverty counties. Telecompetitor talked to Aristotle Broadband CEO Elizabeth Bowles about this recently and exchanged emails with her yesterday. We also checked in with an attorney representing the RDOF winner coalition yesterday for an update.
Pandemic Inflation
The RDOF auction was designed to cover some of the costs of deployments to unserved areas. Funding for an area went to the company that committed to deploying service to the area at the lowest level of government support.
Although RDOF winning bidders were announced in 2020, the FCC did not authorize some winners until 2022. In Aristotle’s case, authorization came 18 months after the winning bidders were announced, said Elizabeth Bowles, Aristotle Broadband CEO, in a recent interview with Telecompetitor.
By that time, Bowles said, the pandemic had hit and “inflation was out of control.”
According to Bowles, we have gone from “where RDOF covered 40 to 45% of build costs to now covering 20 to 25% of the cost.”
The RDOF winner coalition argues that the FCC should be able to make additional funding available for RDOF winners that are in the situation that Aristotle has found itself in because the commission has only approved a small portion of the $20.4 billion that was allocated for the RDOF program.
As Telecompetitor previously reported, this occurred, for several reasons, including a considerable number of defaults.
Several U.S. senators also have asked the FCC to boost funding for RDOF winners. But FCC Chair Jessica Rosenworcel told them that “funding needs are projected on a rolling basis, and collected based on the expected upcoming distributions to authorized recipients. . . Thus, we do not have support in reserve readily available for reallocation to the extent that the total amount authorized for RDOF fell below the projected budget.”
As an alternative, she said the FCC would “carefully consider” waiver requests of commission rules about penalties for forfeited bids if some RDOF winners choose not to complete their builds.
Undaunted
Philip J. Macres, a principal with Klein Law Group who represents the Coalition of RDOF Winners, is not deterred by Rosenworcel’s comment.
Supplemental funding could conceivably come out of the remaining RDOF budget and could be accomplished by increasing the USF contribution factor in future quarters, he told Telecompetitor in our phone interview with him yesterday.
To support his argument, he noted that the FCC has increased the contribution factor to raise additional funding to cover modifications made to the A-CAM rural broadband funding program.
He also noted that USDA previously made an additional 10% of funding available to providers that had won money in the ReConnect program to cover unexpected increased costs that resulted from the COVID-19 pandemic.
When Telecompetitor asked Bowles about Rosenworcel’s suggestion to forfeit RDOF funding with a potential waiver of the associated penalty, Bowles said, “We want to serve these people. It’s not our intention or mindset that we would default on this.”
Bowles noted that the FCC already had planned for a higher contribution rate before the billions of dollars in defaults, and the commission could retain this higher amount and reallocate the defaulted amounts to current recipients on a pro rata basis.
Not Everyone Agrees
One of the associations representing rural providers has a different take on the plight of the RDOF winners whose costs have increased.
In a letter to the FCC, WTA—Advocates for Rural Broadband noted that RDOF applicants certified that they have sole responsibility for investigating and evaluating all technical and marketplace factors that may have a bearing on the level of RDOF support.
“This certification and associated due diligence requirements need to be strictly enforced in order to preserve the integrity” of the auction, WTA said.
Giving additional funding that bid to provide service for a certain percentage of the reserve would be unfair to companies that may have bid to provide service at a higher funding level but dropped out of the auction in response to the lower bid, the WTA letter argues.
Macres said the bidders could not have predicted the huge cost-increases that the COVID pandemic ultimately prompted when the RDOF auction was conducted in the fall of 2020.
“This is not a reverse auction issue; it’s a COVID issue,” said Macres.
The RDOF winner coalition has proposed several other possible ways to remedy the situation, including:
- RDOF payments in years 7-10 released in earlier years
- An extra year of funding and/or
- Relief from all or certain aspects of the letter of credit requirements on an expedited basis
But it’s unlikely that WTA would support any of these options.
In its letter, WTA advised the FCC in its letter to declare that RDOF “terms and conditions will not be waived or changed from those that constituted material elements of winning bids.”
Perhaps the FCC would consider some type of relief for the RDOF winners, considering that the commission may not want to see even more defaults on winning RDOF bids. On the other hand, the RDOF Coalition isn’t the only group that has its eye on the surplus $14 million in the RDOF budget.
Some stakeholders have suggested that some of that funding could be shifted to the Affordable Connectivity Program, which is due to run out of funding next year.
Updated to remove an incorrect reference about COVID timing
