The Rural Digital Opportunity Fund: A Proposal to Include Local Community Support in the Auction

Federal Communications Commission Chairman Ajit Pai’s Rural Digital Opportunity Fund (RDOF) is the most significant rural infrastructure initiative of our time. At over $20 billion, there is sufficient funding in the RDOF to support the most advanced fiber optic services to every rural home in the nation. The program has the potential to become the Rural Electrification Act of our generation, especially if it fosters the same spirit of local initiative, local ownership and local control.

The Connect America Fund Phase II (CAF II) auction revealed how competitive bidding improved upon the universal service programs of the past: for a fraction of the funding per location, 100 Mbps and Gigabit-capable networks are being built. The CAF II auction also revealed important community preferences. The vast majority of member-owned organizations (e.g., rural electric and telephone cooperatives) bid at the Gigabit tier. Similarly, the vast majority of Gigabit tier funds in the CAF II auction were won by community organizations building fiber-to-the-home networks. Just as important, these networks are being built with less than half the federal funding paid out by the prior Administration.

The proposed RDOF auction will adhere closely to the CAF II auction, and adds one new component – consumer choice. Should a winning bidder fail to attract consumers, the FCC will withhold funds under a formula that uses the FCC’s cost model assumption that a universal service provider should be able to gain a 70% market share.  It’s a prudent, fiscally responsible approach. Yet, as proposed, the FCC will still distribute significant universal service funding to companies that attract few or no customers. Under the FCC’s proposal, a winning bidder in the RDOF auction that attracts less than 1% of the households and businesses would still receive over 50% of its RDOF funding. I believe an additional approach should be considered, one that would not disturb the current FCC proposal, would not affect the budget, and would give rural communities the opportunity to express their preferences at the outset. Imagine if rural communities in high-cost areas were given a say in how broadband funds would be spent. 

[Prior to joining Conexon, Jonathan Chambers served as Chief of the Office of Strategic Planning for the Federal Communications Commission. He was part of the senior leadership at the FCC that reformed $12 billion in annual federal spending, including the rural and high cost fund, e-rate, telecommunications relay services and the lifeline programs.]