RDOF postmortem: Can the FCC fix these problems in Phase II?

FCC meeting room
Former FCC Commissioner Michael O’Rielly and CCA CEO Steven Berry suggested maybe there won’t – or shouldn’t be – a Phase II auction, at least not as originally imagined. (Photo by Mark Wilson/Getty Images)

It might be hyperbole to say the Federal Communications Commission’s (FCC) Rural Digital Opportunity Fund (RDOF) Phase I auction was a disaster. But it certainly came with a fair share of problems, the repercussions of which are still being felt as waiver requests for winning bids roll in and disputes over whether or not certain bidders were qualified in the first place rage on. So, how can the FCC ensure the Phase II auction isn’t plagued by the same issues?

Competitive Carriers Association (CCA) CEO Steven Berry told Fierce it all comes down to maps. The RDOF Phase I auction was designed to direct broadband support to areas known to be completely unserved, with funding eligibility for each area determined by coverage maps compiled by the FCC. But Berry said the maps, and by extension the Phase I auction, were “flawed from day one.”

“You’ve got to get good maps and you need reliable data. And I hope that that is the unambiguous prerequisite for any follow on RDOF II [auction],” he said.

Alexi Maltas, CCA’s SVP and general counsel, explained the core of the issue was the FCC’s reliance on what is known as Form 477 data, which operators submit to the agency to provide updates about where they offer internet access which meets FCC benchmarks. Among other issues with Form 477, Maltas noted not all broadband providers have to report their data to the FCC, which means someone could be offering gigabit fiber-to-the-premises and “it just may not show up.”

The mapping issue has led to a wave of waiver requests as the FCC and winning bidders sift through thousands of supposedly eligible census blocks that are either already served or don’t require service (for instance, because they’re simply airports or parking lots).

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Berry pointed out the maps put out by the FCC don’t just impact the agency’s own broadband funding efforts, but are also used to determine eligibility for state-level support. “We need to clear up this misunderstanding of the data and at least get one reliable data set that not only the federal government – and all the programs that have been made available – but states and localities can rely upon.”

An FCC spokesperson told Fierce the agency is working on it: “The Commission staff is hard at work collecting more detailed broadband coverage data that is necessary before any further auctions for support are conducted.”

Vetting

Brian O’Hara, senior director of regulatory issues for telecom and broadband at the National Rural Electric Cooperative Association (NRECA), raised bidder vetting as another key issue for RDOF Phase II.

He called for more rigorous scrutiny of potential bidders’ short form applications, which are submitted before the start of the auction. “Yes, they could kick people out” if they find their long-form applications lacking upon review after the sale is closed, he said, “but why would you do that on the back end when you could do that on the front end?”

Specifically, O’Hara said the FCC should look at applicants’ financial and operational capacity to see whether they would be equipped to meet large obligations.

“Maybe if a company has let’s say a $15 million operational budget regularly, right, should there be some sort of parameter where they can only bid on X amount more?” he asked. While NRECA doesn’t have an answer yet, he said it’s worth looking at whether there should be a threshold of “what would be reasonable that someone could scale up to.”

Timing is an issue

But former FCC Commissioner Michael O’Rielly argued the more upfront scrutiny there is, the longer the agency – and industry – would have to wait to start the Phase II auction, which is likely already years away.

He noted bidders already have to meet certain criteria in order to participate, and it’s pointless for the FCC to waste precious time deeply vetting those who don’t end up being “real bidders.” He also noted adding more upfront hoops could “really shrink the pool of who can bid that might be qualified.”

“I don’t have a problem with a new entrant if it’s eligible and capable of meeting the standards that are set in providing service,” O’Rielly said. “What often happens is you get an incumbent saying oh, it should have five years of tax records and should have all these different things that most smaller companies may not have.”

O’Hara also said NRECA wants more transparency into how the FCC evaluates fixed wireless and satellite service providers and an accounting of whether they were able to deliver the services promised in Phase I.

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“I’d hate to see some of these communities left behind if these technologies don’t work out,” he said. “I think in the next year or two the FCC’s going to have to take a hard look at some of these winners to really decide how they’re going to go.”

O’Rielly, who stressed he has no insight into or involvement in the FCC’s decision-making process, asserted all technologies should be allowed to compete so long as they meet the FCC’s performance standards. If the U.S. government wants certain technologies or companies excluded, then Congress should step in and pass legislation saying so, he added.

Will it happen at all?

The RDOF Phase I auction doled out $9.2 billion in funding from a total pot of more than $20 billion, meaning the Phase II proceeding is set to allocate more than $11 billion for broadband. In an interesting twist, both O’Rielly and Berry suggested maybe there won’t – or shouldn’t be – a Phase II auction, at least not as originally imagined.

“I’d put good money that it’s not going to happen, or is going to be reformatted completely different just like the other programs were when I came in and we redid the old programs, like CAF Phase II was different,” O’Rielly said. He pointed to a mix of political opposition and an expected influx of billions in broadband funding from Congressional infrastructure legislation.

“There’s a boatload of money going in. And if you’re the Commission, in my old seat I would say ‘gee whiz why are we putting money for the same purpose,’” he continued, adding “keep in mind this is the last block of money they have under their current budget.”

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Similarly, Berry argued, “We have an opportunity to rethink the underlying purpose of RDOF II” and reassess where the real areas of need are if billions are already flowing toward fixed broadband.

He argued some, if not all, of RDOF II funding “may be better assigned to ensuring that we have national ubiquitous [5G] connectivity to go along with the fiber networks that are clearly going to be funded with extremely high dollar amounts. So, yeah, I think we can do better.”