The billion dollar fight to cross the digital divide gets dirty

Some of the companies that won money in the FCC's RDOF program are facing a growing, noisy chorus of critics that argue they won't be able to meet their obligations.

Mike Dano, Editorial Director, 5G & Mobile Strategies

April 8, 2021

7 Min Read
The billion dollar fight to cross the digital divide gets dirty

The knives have come out in a fight over government money meant to fund the construction of broadband networks in rural areas.

"A rigorous engineering analysis has identified significant shortfalls in the Starlink capacity," wrote satellite rival Viasat in a recent filing with the FCC.

"It is extremely unlikely that Resound [Networks] will be able to deliver the broadband services it promises," wrote a group of smaller telecom providers in their own filing to the FCC.

"There is no indication that LTD [Broadband] has the technical, engineering, financial, operational, management, staff or other resources to meet RDOF [Rural Digital Opportunity Fund] build-out and service obligations," wrote the Minnesota Telecom Alliance and the Iowa Communications Alliance in a joint filing to the FCC.

At issue is the $9.2 billion in US government money earmarked late last year for telecom services in rural parts of the US. LTD Broadband, SpaceX's Starlink, Charter Communications, Resound Networks, Windstream, Frontier, Starry and CenturyLink were among the big winners in the FCC's RDOF auction.

But many of those winners – particularly those employing satellite and fixed wireless technologies – are facing growing criticism that they won't be able to meet their obligations to provide speedy broadband connections to rural Americans.

Further, the issue has gained dramatically more importance after President Biden proposed allocating billions of more dollars for digital divide programs that might work exactly like the RDOF.

Enforcement proceedings

In developing its rules for the RDOF auction, the FCC initially indicated it might prevent low Earth orbit (LEO) satellite companies like Starlink from participating in the event, and fixed wireless providers like Resound from supplying 1Gbit/s services. After all, such technologies are either unproven or widely regarded as poor alternatives to fiber or cable networks.

However, shortly before the start of the auction, the FCC reversed course and said it would allow all kinds of companies, including SpaceX's Starlink, to participate in the RDOF. In order to efficiently dole out its RDOF cash, the FCC conducted a reverse auction where companies and entities that submitted the lowest bids for covering a particular area won.

But the agency warned bidders that they better be sure they can meet their RDOF obligations if they do win.

"We remind potential applicants that they are certifying under penalty of perjury in their ... applications that they are technically qualified to meet the public interest obligations," the agency wrote. "The commission may initiate enforcement proceedings against applicants that submit threadbare or wholly unrealistic technical showings."

Earlier this year, the companies that won RDOF money began filing their "long form" applications with the FCC, which describe in detail how they plan to meet their obligations. The FCC has not made those applications public; some of them reportedly contain thousands of pages of technical details.

However, the absence of those public filings haven't stopped some companies from concluding that some RDOF winners simply don't have what it takes to build out broadband networks in rural areas.

Flinging disparaging allegations

"MTA [Minnesota Telecom Alliance] is not asserting that LTD's long form application(s) should be denied on the basis of assumptions or industry hearsay. However, MTA is aware of no evidence whatsoever that LTD possesses the technical, operational or administrative staff resources to build and run a 102,005-location broadband network and company in Minnesota, much less a 528,088-location broadband network and company in fifteen states," the group wrote. "In reviewing LTD's long form applications, the commission should not accept 'blue sky' promises that sufficient staff will be hired at some future time, but rather should impose upon LTD the burden of proving that very substantial progress has already been made in hiring the large technical, operational and administrative staff needed to build and run the proposed Minnesota and Iowa RDOF networks and those in the other thirteen states."

LTD isn't the only company facing such scrutiny.

"Viasat is writing to urge the commission to fully and thoroughly examine the pending RDOF long form application of SpaceX," the company told the FCC. In a 43-page filing, Viasat laid out an extremely detailed analysis of what it said are the capabilities of SpaceX's Starlink LEO broadband network.

"Even the complete 4,408 satellite Starlink configuration does not have enough satellites within view to deliver enough bandwidth to meet the combination of ... performance requirements (100 Mbit/s downstream speed with an 80/80 availability, 2 TB per month per location and 100 msec latency)," Viasat wrote. "This is the case even if each visible satellite were fully dedicated to serve only the set of RDOF locations that can see those exact same Starlink satellites."

Both LTD and Starlink have pushed back against such criticism. Indeed, LTD wrote that MTA and others "seem content to fling disparaging allegations against LTD that have no basis in fact and – to cover up the obvious flaws in their arguments – seek to shift the burden to LTD to try to prove what they cannot. The commission should see past this gambit."

LTD – the top winner in the RDOF auction with a total of $1.3 billion in funding – told Light Reading earlier this year that the company's network buildout will rely almost exclusively on fiber.

Resound too has been fighting back against criticism that it can't provide 1Gbit/s services over its wireless and wired networks. Indeed, the company's top management held a virtual meeting with FCC officials just last month to explain exactly how Resound plans to spend the $311 million it won in the RDOF.

"Resound has significant capital resources to deploy alongside its RDOF support, including up to $500 million in capital from its owners and up to $100 million in a credit facility," the company wrote in its summary of the meeting. "Mr. Curtis [Tyson Curtis, CEO of Resound Networks] responded to speculative claims about its bidding strategy by pointing out that Resound spent six months, 10,000 man‐hours and more than $1 million in pre‐auction expenses to conduct significant due diligence."

Continued Resound: "Claims that Resound is undercapitalized, bid irresponsibly and lacks experience are entirely false and misleading. The commission cannot rely on conjecture from uninformed parties to undermine the auction results and prejudge the FCC's comprehensive vetting of Resound's long form application."

Regulatory lose-lose

How Acting FCC Chairwoman Jessica Rosenworcel and the rest of the commission might rule on the topic is unclear. Some have urged the agency to publicly release the long form applications filed by winning bidders, essentially to disinfect them with sunlight. Others have said the FCC should allow a third party to review the filings before allocating billions of dollars in federal money.

The agency plans to monitor RDOF winners as they construct their networks, and it can halt funding if winners can't meet their obligations. But that process could take years to play out, and it could potentially be prevented if the agency simply rejects the applicants it thinks won't be able to meet their buildout obligations.

However, if their applications are rejected and their winnings go to other companies, it's a reasonable bet that some of the blackballed RDOF winners will sue the FCC over that decision.

"The winners hold the most chips in any negotiation with the FCC," wrote the financial analysts at New Street Research in a recent note to investors.

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Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

A version of this story first appeared on Broadband World News.

About the Author(s)

Mike Dano

Editorial Director, 5G & Mobile Strategies, Light Reading

Mike Dano is Light Reading's Editorial Director, 5G & Mobile Strategies. Mike can be reached at [email protected], @mikeddano or on LinkedIn.

Based in Denver, Mike has covered the wireless industry as a journalist for almost two decades, first at RCR Wireless News and then at FierceWireless and recalls once writing a story about the transition from black and white to color screens on cell phones.

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