Rural Digital Opportunity Fund

TekWav, Nextlink, and Plains Internet won Rural Digital Opportunity Fund (RDOF) funding in the December 2020 reverse auction. Two of the three providers were quoted as saying that the cost to build the networks to satisfy the RDOF obligations has doubled since they won the award – the third said costs have risen materially. Most providers I’ve been working with estimate the increase to be between 15% and 30%, differing by region and the planned technology.

The Rural Digital Opportunity Fund (RDOF), a Federal Communications Commission plan to spend over $20 billion to close the digital divide, drew interest from startups and household-name carriers alike. But several upstart winners have dropped off the winner's list because of financial problems or the inability to supply high-speed Internet access. Top 10 bidder Starry said that it is withdrawing from the RDOF program, under which it had been awarded nearly $270 million in funds to cover 108,506 locations in 9 states.

Broadband internet access and speeds will increase for homes and businesses in and around Madelia, Minnesota thanks to a collaboration by the companies Midco, Crystal Valley Cooperative, and Land O’Lakes. Land O’Lakes and Crystal Valley helped Midco in finding locations to place infrastructure. Rather than laying a lot of new fiber lines to homes and far-flung farm sites, the project uses a system of towers and antennas to get high-bandwidth signals to customers. “The Madelia project is a bit unique, it is a hub site,” said Ben Dold senior VP of operations for Midco.

In 2020, the Federal Communications Commission committed to providing Starlink, a satellite internet network operating in 40 countries by Elon Musk’s SpaceX, with $885.5 million to expand broadband in unserved rural areas of the United States. But in August 2022, the FCC announced with almost no explanation that Starlink would receive nothing.

Inflation is wreaking havoc on several broadband operators’ rural build plans, making financially tough projects even tougher. A number of operators with Rural Digital Opportunity Fund (RDOF) commitments stated that the cost estimates for their builds have skyrocketed. Some are finding it difficult to find banks willing to lend them the money needed to complete their projects. That means those broadband providers without a hefty amount of cash on hand could be at risk of defaulting on their obligations.

Starry has defaulted on all of its $269 million of Rural Digital Opportunity funding (RDOF). There have been other defaults of RDOF, but no others of this magnitude. Starry is not required to disclose why it’s defaulting. Though, in the many articles about the RDOF default, there was a lot of speculation that the company doesn’t have the needed funding to complete the required builds. Starry reported 77,400 customers at the end of the second quarter of 2022 – gaining 14,300 customers in the quarter. The company claimed that it now passes 5.7 million potential customers.

The Federal Communications Commission said it was ready to authorize Starry's winning Rural Digital Opportunity Fund (RDOF) bids in eight states. However, the company has told the FCC that it plans to default on all its winning bids, including those in one additional state. Starry had a winning bid totaling about $269 million. The news of the default came in an FCC public notice that also listed some other companies that had informed the FCC of plans to default on at least a portion of their winning bids. Defaulting companies are subject to a base forfeiture of $3,000 per census block group

The Federal Communications Commission's Wireline Competition Bureau, in conjunction with the Office of Economics and Analytics, has authorized Rural Digital Opportunity Fund (Auction 904) support for 1,865 winning bids. This is the 14th round of funding authorization for the RDOF program. All information, including the winning bids found in Attachments A and B, can be found here.

A new report entitled “U.S. Cable: What is Embedded in Valuations?” is optimistic about cable’s broadband prospects. Analysts at MoffettNathanson say they believe the market is undervaluing cable’s growth prospects. Moffett's analysis shows a big part of the stock drop can be traced to the current cost of capital, which is something that can change in the future and doesn’t go to the underlying prospects for cable’s broadband business.

Spectrum is constructing a fiber-optic network expansion project that will bring gigabit broadband and other Spectrum services to over 4700 homes and small businesses in Wexford County (MI). Spectrum services are already available to some residents and small business owners in the buildout area. The buildout is part of Spectrum’s approximately $5 billion investment in unserved rural areas, which includes more than $1 billion won in the Federal Communications Commission’s Rural Digital Opportunity Fund (RDOF) auction.