Windstream CEO: RDOF outcome uncertain for some of the biggest winners

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While Windstream CEO Tony Thomas is confident that his company can meet all of its requirements for Phase I of RDOF, he's skeptical that some of the other winners will be able to do so. (Tony Thomas/Twitter)

Windstream CEO Tony Thomas is confident his company can meet its RDOF requirements for building out FTTH internet to unserved rural areas over the next six years.  But Thomas was skeptical about some of the other big winners in the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF) reverse auction that were announced in December.

In the auction, Windstream snagged $523 million over 10 years to bring fiber-to-the-home (FTTH) services to close to 200,000 locations across its 18 state footprint.

"We're excited to be bringing broadband into rural America. It's really the center of Windstream's strategy," Thomas said in an interview with FierceTelecom. "We're going to get started right away.  We will, hopefully, have shovels in the ground in the second quarter."

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RDOF represents a $20 billion, 10-year opportunity for service providers and their vendor partners to build and connect faster broadband speeds in rural and unserved areas across the U.S. Phase I targeted rural areas that were wholly unserved census blocks where none of the locations have broadband speeds of 25 Mbps down and 3 Mbps up.

The FCC previously said the bidders that won funding would deploy high-speed broadband to over 5.2 million unserved homes and businesses, which accounted for almost 99% of the locations available in the auction. Moreover, 99.7% of the locations will be receiving broadband with speeds of at least 100/20 Mbps, with an overwhelming majority (over 85%) getting gigabit-speed broadband. The FCC previously said it would favor ISPs that could build networks in rural areas that feature gigabit speeds.

For Windstream, those faster speeds will be enabled by FTTH. Thomas said that while Windstream has extensive experience deploying fixed wireless access—it owns millimeter wave spectrum—FTTH was the clear choice.

"In RDOF, we don't believe fixed wireless was the right technology," Thomas said. "We're not confident, given the topography, that fixed wireless would have been a good solution. And there are also technical limitations in fixed wireless on the upload speed.

"We speak of that being someone who's spent extensive time and energy investing in fixed wireless technology. I think we have a very well informed view around the capabilities of fixed wireless."

As part of its Chapter 11 restructuring last year, Windstream shed more than $4 billion in debt and came away with approximately $2 billion in hand to fuel new growth as a privately-held company.

Windstream has embarked on a $2 billion project to expand the reach of its fiber and gigabit services into a large number of new locations. Given the scope of that project, as well as Windstream's previous experience, Thomas is confident that Windstream will meet all of its RDOF deployment obligations.

"With this $2 billion program, we'll be expanding to over 2 million locations that will be getting gigabit capabilities," Thomas said.  "RDOF is material, but it's 200,000 locations across our 18 state footprint. So the $2 billion program is a big step for driving more ubiquitous 1-gigabit coverage across our footprint.

"And the thing about RDOF is going into those harder to reach places where there are fewer households per square mile."

As it gears up to deploy aerial fiber and buried fiber, Thomas said Windstream is in the process of hiring more than 200 new employees. The RDOF build will expand Windstream's footprint by 2.5%.

In addition to bringing faster broadband to those who need it the most for applications such as remote learning, remote work and telemedicine, the RDOF builds also protect Windstream's current footprint while enabling it to edge out to new locations. Thomas said Windstream would jump into all 18 states at once as it uses internal resources and external partners to do the construction.

RELATED: Charter splashes some details on its fiber build outs across 24 states for RDOF

On Monday, Charter issued an RDOF-related press release about its build outs, which included a warning from CEO Tom Rutledge about pole permitting processes hindering its deployments. Thomas said it was a valid issue for Charter to bring up, but he didn't see a problem with pole permitting.

"Whether we own the pole or we have to get access to the pole through one of our partnerships, we're confident we'll be able to achieve that pole access," he said. "And that will not be a significant impediment to the delivery of broadband to these locations.

"The vast majority of the high-level planning has been completed. We did that to make sure we could go into the auction fully informed about the cost to build, at least within a margin of error, relative to the funding we've received. So we've done an extensive amount of work. Now we'll do the detailed engineering, route-by-route, mile-by-mile. That's what will be taking place now."

RDOF bidding process flawed?

Given their experience with deploying fiber and other access technologies, Thomas said service providers such as Windstream and Charter would be able to meet their RDOF commitments. Charter was awarded $1.22 billion in the auction and it bagged 24 states, which was the most in the auction. Charter will provide its service to more than 1 million locations.

RELATED: Charter scores big in Phase I of the FCC's RDOF auction for rural broadband builds

"Obviously, Charter is a seasoned operator with substantial assets," Thomas said. "But Charter and Windstream are really the exceptions when you look at the largest winners in this auction with limited to no track records of deployment, especially at this scale. And there are real technical hurdles to deploying a non-fiber technology into rural America."

On Friday, the Phase I RDOF winners submitted their required Long Form 683 Applications as well as garnering a letter of credit from investors to obtain their government funding. The letter of credit gives the FCC recourse in the event the service providers fail to meet their build out requirements. Thomas said Windstream faced no challenges to its letter of credit.

When the auction results were announced in December, eyebrows were raised when companies such as LTD Broadband, which pulled in $1.3 billion to provide service to 528,000 locations across 15 states, and SpaceX were among the biggest auction winners. SpaceX was awarded $885 million to provide its Starlink broadband to 642,925 rural homes and businesses across 35 states. 

A bi-partisan group of 158 congressmen recently sent a letter to the FCC, asking it to “thoroughly vet the winning bidders” of the first phase of the RDOF auction “to ensure that they are capable of deploying and delivering the services they committed to providing.”

RELATED: Congressmen worry RDOF funds will be squandered

"I think the ultimate outcome of this auction is still very much open," Thomas said, "and I think that'll play out over the next several years to see if these other winners will be able to meet the considerable commitments they made when they filled out that Long Form last Friday."

Phase II of RDOF will target partially served areas, including census blocks where some locations lack access to 25/3 Mbps broadband speeds.

"When we look at the outcome of RDOF Phase I, it looks like things got a little bit out of order from a process perspective," Thomas said. "In the spectrum auction, the bidders' maximum eligibility is determined by that amount of the deposit they make. So a bidder interested in winning a large quantity of licenses would have to submit a larger refundable deposit than if they had an interest in only bidding on discrete opportunities.

"We think that pushes more of the qualification process to the front at the beginning of the auction."