Rural broadband group wants 'specific conditions' on RDOF waivers

If the FCC decides to grant certain winners of federal broadband funding the opportunity to surrender their awarded locations, it should "at the very least impose two specific conditions," according to NTCA–The Rural Broadband Association.

Essentially, those conditions include ensuring that defaulting providers still pay a proper penalty, and that they be prevented from re-bidding on defaulted locations in other broadband programs.

The rural broadband group made its points known in a letter signed by NTCA Executive Vice President Michael Romano and filed with the FCC on Friday, March 8.

The NTCA filing was posted following the FCC's request for comment on another letter – filed by a coalition of nearly 70 broadband stakeholders – asking the FCC to allow winners in the Rural Digital Opportunity Funding (RDOF) and Connect America Fund II (CAF II) to default on some locations with limited penalties, in order to make those locations available for the Broadband Equity Access and Deployment (BEAD) program. Initial reply comments are due to the FCC by March 26.

Potential for 'perverse incentives'

The discussion around relief follows a rocky RDOF process that initially saw the FCC award $9.2 billion for phase one of the program in 2020, but later saw that number drop to $6 billion following provider defaults and the FCC's final review of long-form applications at the end of last year. With the threat of more providers bailing on their awards, and with federally funded locations ineligible for the $42 billion BEAD program, there's concern that many locations won't be served at all. Hence the push to incentivize providers to relinquish their awards sooner to free them up for BEAD, with lower penalties.

Related:Broadband coalition asks FCC to grant RDOF relief for BEAD's sake

However, as NTCA's letter warns, allowing providers to drop from those programs without penalty could create "perverse incentives that reward parties who 'bid low' in one program (and thus precluded others from serving certain areas) by allowing those same parties now to 'hop' to a different program based upon perceived better terms and economics, even while committing to deliver nothing better in doing so."

No 'get out of jail free cards'

According to the letter signed by Romano, NTCA "supports providing a pathway for parties to surrender some of the locations that they were awarded in the CAF Phase II or RDOF auctions while they recommit to serve the remainder." But the letter adds that it is "essential ... that any such pathway to relief must not provide 'amnesty' in the form of a 'get out of jail free card' for those that choose it."

Related:FCC solicits comments on request for RDOF, CAF II amnesty

To that end, NTCA proposed "two specific and explicit conditions." First, that providers only be granted relief if they pay a prorated portion of the default liability that is "equal to the full amount that otherwise would have applied had they been in default at the end of the term for the locations in question."

And second, said NTCA, any party seeking a waiver "must be precluded, along with its affiliates and subsidiaries ... from seeking funding for deployment at those same locations through federal or state grant programs." 

The letter added that such parties could still "generally" participate in programs such as BEAD, but that they should not be permitted to seek BEAD or other public funding for the locations surrendered.

"Absent this second condition, the Commission would create perverse incentives for parties – and their affiliates or subsidiaries, in the case of creative corporate structuring – to escape from RDOF or CAF Phase II obligations in pursuit of more favorable economics under another program," said NTCA's Romano.

Apply scrutiny

In addition to these conditions, the group also recommended that waiver requests be well scrutinized and publicized.

The FCC should "evaluate the extent to which the party is seeking to turn back in only the relatively highest-cost portions of its RDOF and CAF 2 awards while retaining the relatively lower-cost remainder," said NTCA.

Further, the group requested the FCC "facilitate public review and input" on waiver requests, a move that it said would help state broadband offices in their BEAD planning processes.

"Indeed, in addition to permitting appropriate review and input by other stakeholders, such a process would be essential to allow states themselves – those that would administer potentially (re)awarding these locations through the BEAD program – to weigh in and raise any concerns regarding how adding these locations to their BEAD eligibility maps might enhance or undermine their ability to achieve 'Internet for all'," said Romano.

Getting public input on waiver requests would be a departure from how the FCC has been handling RDOF/CAF II defaults thus far. Most recently, the Commission published a notice in late February stating that two providers (BARConnects, LLC and North Alabama Electric Cooperative) notified the FCC they will not fulfill their RDOF/CAF II commitments for certain census blocks and thus "will be subject to penalties." The notice added that those locations are now "eligible for funding from other federal and state funding programs."