FCC Proposes $22 Million in Fines for Rural Digital Opportunity Fund Defaults

In this Notice of Apparent Liability for Forfeiture (NAL), the Federal Communications Commission identifies two Rural Digital Opportunity Fund (RDOF) Phase I Auction (Auction 904) applicants that defaulted on their bids for support on August 10, 2022, and May 23, 2023, in apparent violation of the FCC’s rules (see applicants below). In light of the applicants’ defaults spanning 7,482 Census Block Groups (CBGs), this NAL proposes forfeitures for each of the two Auction 904 defaulters. The proposed forfeitures assessed here total $22,446,000. Each of these applicants defaulted on its respective bids for support by its failure to meet deadlines and requirements to which it agreed when it participated in Auction 904. This NAL relates only to those areas, deadlines, and requirements for which the FCC did not determine, in a prior release, that waiver was appropriate. By defaulting on their bids, these applicants hindered the disbursement of funds that could have otherwise been expended for the advancement of broadband access across primarily rural areas in the United States. The objective of Auction 904 was to facilitate the provision of broadband service to Americans in wholly unserved areas. The FCC took steps to protect the integrity, mission, and functionality of Auction 904 by advising auction participants to adhere strictly to all auction requirements and by providing for forfeitures for violations of those procedures.

• Etheric Communications LLC (Etheric), a wholly-owned subsidiary of Etheric Networks Incorporated, provides custom broadband services through a combination of fixed wireless and fiber technologies to residential and business customers across 10 counties in the San Francisco Bay Area. The FCC finds that Etheric apparently committed 244 violations by defaulting on 244 CBGs subject to forfeiture, which places the company’s base forfeiture at $732,000
• LTD Broadband LLC's (LTD) application was lacking in a number of ways.  First, LTD failed to provide proof of Eligible Telecommunications Carrier (ETC) designation, a requirement to receive universal service funds, in three of the states in which it had winning bids. Second, LTD did not show that it had available funds for all project costs that exceed the amount of support to be received for the first two years of its support term. Third, LTD did not, as required, differentiate between anticipated project costs and related funding for each of the areas for which LTD was seeking support, nor did LTD explain why its apparent assumption that all deployment costs are equal across all of its winning bids states and rural regions within each state might be reasonable. Fourth, a number of the cost assumptions on which LTD based its deployment costs were unrealistic, raising concerns that the overall determination of deployment costs was too low. Fifth, LTD did not provide evidence that it could cover the necessary debt service payments over the life of its loans. Sixth, LTD failed to provide specific and localized project designs; instead, LTD applied an unrealistic one-size-fits-all approach for the vast areas where it would be required to deploy last-mile fiber to every serviceable location and the supporting middle-mile and core infrastructures. The FCC finds that LTD apparently committed 7,238 violations by defaulting on 7,238 CBGs subject to forfeiture, which places the company’s base forfeiture at $21,714,000.