UPDATE The recent Rural Digital Opportunity Fund auction was structured differently than traditional FCC spectrum auctions. “Bidders” in the reverse auction were awarded funds based on different criteria, such as latency, speed and how fast they believe a company can bring broadband to a rural area.
But now, some observers question whether some of the largest winners, like Charter and Starry Internet, can actually complete the task as originally stated in their FCC applications, reports Telecompetitor. It quotes MuniNetworks observer Christopher Mitchell as stating in a blog: “The auction resulted in far more gigabit – 85% of locations I believe – than anyone expected, at far lower subsidy than expected. However, there is a lot of frustration and confusion because it is not clear that some of the top bidders can deliver.” MuniNetworks is an advocacy group that provides resources for those who want to build municipal broadband networks.
Inside Towers reported that Charter Communications, listed as CCO Holdings, won the most locations, just over 1.05 million. Other big bidders include Windstream, which was awarded $522.9 million for 192,567 locations in 18 states; Frontier, which won $370.9 million for 127,188 locations in eight states and CenturyLink, which won $262.3 million for 77,257 locations in 20 states, according to the Commission.
Shirley Bloomfield, CEO of NTCA – The Rural Broadband Association, urged the FCC to scrutinize the winners. “As a matter of transparency and accountability for critical values for precious government resources, it is essential now for the FCC to vet thoroughly those who may have made promises behind the scenes in their applications claiming the ability to deliver Gigabit and 100 Mbps services using technologies that have never done so on a widespread basis – or at all – in rural America,” she said in a blog. Given that winners have six years to build-out systems, she worries “it will take years to show that rural America is still waiting for broadband and resources needed will be gone.” Bloomfield hopes the Commission “has a robust back-end review so the process won’t fail Americans again.”
In a blog entitled “Let’s avoid hand-wringing over RDOF results before the ink is dry,” Wireless Internet Service Providers Association President/CEO Claude Aiken calls the Monday morning quarterbacking “no surprise. Indeed, we saw the same thing years ago over the ability of certain CAF winners to perform and scale. But, wireless speeds that some said were impossible to deliver are now mass market offerings. Network builds that some said were improbable were finished years ahead of schedule.”
Aiken points out the Commission’s long-form process that comes next asks “hard questions of presumptive winners, thoroughly vetting program applicants’ proposals to ensure they are capable of meeting the program requirements. Early prognostications about the ability of certain winners to perform are judging the book by the first word of its title, potentially harming the program by impacting their ability to obtain additional capital or other regulatory approvals.”
At least one lawmaker has questioned the results. West Virginia Republican Senator Shelley Moore Capito told FCC Chairman Pai she’s grateful the auction awarded $362,066,660.20 to her state for broadband expansion. Nine providers won those subsidies; however she has “concerns” about Frontier’s ability to meet its obligations as a gigabit tier provider. “Frontier’s mismanagement of prior federal funding through the Broadband Technology Opportunity Fund program, resulting in $4.7 million in funds repaid to the federal government for improper use, raises significant questions about their ability to manage federal funds of this magnitude,” she wrote to Pai.
“Furthermore,” she stated, “Frontier has a documented pattern of history, demonstrating inability to meet FCC deadlines for completion of the Connect America Fund Phase II support in West Virginia.”
Capito also urged Pai to “closely scrutinize” Frontiers’ capability to finance these investments, particularly “as they emerge from a Chapter 11 bankruptcy restructuring.” Because of the nature of a “reverse auction, it is entirely possible, if not likely, that a bidder will be required to invest their own funds to cover costs above and beyond the RDOF subsidy.” She’s “concerned” about Frontier’s ability to raise enough capital to complete the financial restructuring and fund the network construction at the same time.
“The expense of constructing a network capable of delivering gigabit service is an expensive and daunting feat for a company in a strong financial position, let alone one that is in financial turmoil,” she wrote. Capito estimates Frontier would need to raise “over $250 million in private capital” to fund a gigabit network buildout in West Virginia. She urged Pai to reject the application if there are questions of this magnitude.