Rural Digital Opportunity Fund

The Federal Communications Commission's Rural Digital Opportunity Fund (RDOF) Phase I encouraged many with the promise of needed support to connect homes with true broadband services in unserved rural communities. However, RDOF’s Phase I exposed many issues that will likely lead to deployment delays, missed expectations, or worse. Specifically, some applicants that bid in the Gigabit tier have submitted unrealistic wireless network designs that are highly unlikely to produce Gigabit service to rural communities.

This paper considers specifically the extent to which fixed wireless services may be capable of delivering Gigabit‐level services in the kinds of sparsely populated rural areas that the Rural Digital  Opportunity Fund (RDOF) auction primarily seeks to serve. Fixed wireless networks will face difficult, if not insurmountable, challenges to provide Gigabit services in very select circumstances when attempting to service distant, non‐town rural subscribers.

Pressure is rising on the Federal Communications Commission and Congress to rethink the $8 billion Universal Service Fund that subsidizes phone and broadband service, as it teeters on a shrinking budget base. Big phone companies like AT&T, entities that benefit from USF programs, and public interest groups see the Biden administration as a new opportunity to press their case for an overhaul of the funding mechanism.

For some time, many experts have been warning that the universal service funding system is in a death spiral, as the base on which the fees are assessed—generally a telecom company’s interstate and international end-user revenues—is shrinking. The new Federal Communications Commission is forced to consider a rising assessment on a shrinking revenue base to address an increasing demand, with Ajit Pai’s FCC having not done any of the analytic, political, or legal work necessary to make adjustments. Pai was willing to spend billions to address the needs of rural communities lacking broadband.

Add Windstream CEO Tony Thomas to the list of those who have questioned whether some Rural Digital Opportunity Fund (RDOF) winners will be able to deploy the networks they committed to building at the level of funding they won. Without mentioning names, he said some “new entrants” that won RDOF funding believe they can “do something the established carriers can’t do using technology and economics that simply aren’t in the marketplace.”

Minnesota officials announced the winners of $20.6 million in grants to develop high-speed internet across Minnesota, the latest infusion of money approved by lawmakers to fully connect the state. Many celebrated the cash, which Steve Grove, commissioner of the Department of Employment and Economic Development, called a “vital” push to correct disparities in internet service that were highlighted during the pandemic. Yet the grants also drew frustration from some broadband developers. That’s because Gov.

Charter offered some details about its $1.2 billion Rural Digital Opportunity Fund (RDOF) win. Perhaps the most interesting detail is that Charter plans to spend $5 billion in total on the RDOF rural broadband buildout, which means the company will be investing $3.8 billion of its own money on RDOF projects.

On Jan 15, 2021, Federal Communications Commission Chairman Ajit Pai responded to several Members of Congress regarding the implementation of the Rural Digital Opportunity Fund. Lawmakers advocated for stringent oversight of the auction and encouraged the FCC to require detailed deployment schedules for review to ensure submissions can meet the time frame outlined by the auction.

SpaceX in the waning weeks of the Trump administration won preliminary rights to $886 million in government backing to provide rural broadband service via Starlink, its system of low-Earth-orbiting satellites. The federal government is now planning a final round of vetting before it bets big that Elon Musk’s technology can help close persistent gaps in US high-speed internet service. The FCC is requiring SpaceX and others in line for subsidies to demonstrate their financial and technical wherewithal to build out a network, and Jan 29 was the deadline for submitting those plans.

The first phase of the Rural Digital Opportunity Fund (RDOF) was for unserved markets, so given their high-cost nature it makes sense that affordable fixed wireless played such a large role. In the subsequent round, we expect fixed wireless to play a reduced role in underserved areas, which tend to be more densely populated. Technically speaking, with enough government support, unserved markets can be connected with gigabit speeds via fixed wireless, but execution risks and the ability to secure letters of credit (LOCs) could impede an operator’s ability to deliver on its bid.