How Not to Close the Digital Divide -- Part 1,421

Benton Institute for Broadband & Society

Friday, December 11, 2020

Weekly Digest

How Not to Close the Digital Divide -- Part 1,421

It is Day 1,421 of the Trump Administration. Federal Communications Commission Chairman Ajit Pai, from Day 1, has insisted that closing the digital divide is the Trump FCC's top priority. This week, the FCC announced the winners of over $9 billion worth of rural broadband subsidies -- the "single largest step ever taken to close the digital divide," according to Chairman Pai. But looking at the results may leave millions of rural residents apprehensive -- and disconnected.

Chairman Pai has planned his exit for Day One of the Biden administration, but as a Republican colleague made it clear he will not be helpful in ensuring open, affordable, universal broadband in the U.S. Last week, FCC Commissioner Brendan Carr urged the U.S. Senate to confirm Nathan Simington for a seat on the FCC -- so they can stall action at the commission come January. "I think it would be very valuable to get Simington across the finish line and help forestall what really would be billions of dollars worth of economic damage that I think a Democratic FCC would look to jam through from Day One."

Commissioner Carr would have served the country better by weeding out waste in the FCC's most recent attempt to close the digital divide. There are real concerns about the capabilities of the providers the FCC has picked to build these critical networks -- and about why some providers won subsidies to offer service in urban areas..

Winning Bids

A broad range of broadband internet access service providers successfully competed in the Rural Digital Opportunity Fund Phase I auction. These providers must now meet periodic buildout goals that will require them to reach all assigned locations by the end of the sixth year. They are incentivized to build out to all locations as fast as possible. The funds will flow to 180 winning bidders to provide service to 5,220,833 locations in 49 states and one territory. Although FCC rules allow for winning bidders to construct networks capable of just 25/3 Mbps broadband speeds, 99.7% of these locations will be receiving broadband with speeds of at least 100/20 Mbps, with an overwhelming majority (over 85%) getting gigabit-speed broadband

The biggest winners in the auction are LTD BroadbandCharter Communications, and the Rural Electric Cooperative Consortium, each receiving a little over $1 billion. Elon Musk's SpaceX was also a big winner. The top 10 winning bidders will receive over 75% of the RDOF Phase I funding:

  1. LTD Broadband, a wireless internet service provider, won $1.3 billion to bring broadband to 528,000 locations in 15 states.
  2. Charter, the cable company, won $1.22 billion in the auction to bring service to over one million locations in 24 states.
  3. Rural Electric Cooperative Consortium won $1.1 billion to serve 618,000 locations in 22 states.
  4. SpaceX, a satellite provider, won nearly $886 million.
  5. Windstream won $522.9 million for 192,567 locations in 18 states.
  6. Frontier, a telephone company, won $370.9 million for 127,188 locations in eight states
  7. AMG Technology Investment Group (Nextlink), a wireless internet service provider, won $429.2 million for 206,136 locations in 12 states
  8. ReSound Networks,a wireless internet service provider, won just under $310.7 million for 219,239 locations in seven states.
  9. Connect Everyone (Starry), a wireless internet service provider, won $269 million.
  10. CenturyLink, a telephone company, won $262.3 million for 77,257 locations in 20 states

The winning bidders must now provide the FCC financial statements, coverage maps, and certify that their network is capable of delivering to at least 95% of the required number of locations in each relevant state.

How Will Providers Deliver the Gigs?

The member coops of the Rural Electric Cooperative Consortium are expected to deploy fiber-to-the-premises (FTTP) technology to support gigabit speeds. (A consortium with the same name and some of the same membership won big in the 2018 Connect America Fund CAF II auction, a predecessor to the RDOF auction—and consortium members are deploying fiber gigabit service using the funding they won in that auction.)

Charter has been deploying fiber in rural areas – 30% of the company’s recent new builds were in rural areas and the company sees subsidized rural expansion as a key driver of customer growth. The company has explored fixed wireless, but to date has emphasized fiber for new builds.

On Thursday, Senator Shelley Moore Capito (R-WV) wrote to the FCC voicing her concerns about the ability of Frontier Communications to meet RDOF obligations. “If, during the review of Frontier’s long-form application for the West Virginia locations there are any questions or concerns about their ability to deliver on the commitment made in their short form application, I urge the FCC to reject their long-form application. The stakes are simply too high to provide nearly $250 million to a company that does not have the capability to deliver on the commitments made to the FCC. West Virginia cannot afford to be let down, yet again, by the failure of Frontier to deliver on promises made to federal partners,” Senator Capito wrote. She highlights Frontier's mismanagement of prior federal funding through the Broadband Technology Opportunity Fund program, resulting in $4.7 million in funds repaid to the federal government for improper use -- and Frontier's documented history demonstrating an inability to meet FCC deadlines for completion of Connect America Fund Phase II support in West Virginia. "The inability to deploy federal funds in a timely fashion to make improvements to a network delivering broadband service at speeds of 10/1Mbps or higher should raise significant concerns about their capacity to build out a network delivering one hundred times that level."

Some of the wireless internet service providers may also be planning to deploy FTTP to meet their gigabit obligations, according to telecompetitor, but Starry, for example, will rely on fixed wireless over millimeter wave spectrum which can support high speeds, albeit over relatively short distances. Windstream, a telephone company, may also provide fixed-wireless service in rural areas.

Can wireless really deliver? Paul Solsrud, product manager for Cooperative Network Services, expressed concern about how much funding might potentially be going to fixed wireless providers committing to provide high speeds.

“When comparing the initial cost estimate amounts based on the Connect America Model’s cost estimates ($29B) to the ending auction totals in the $10B range, it’s not clear whether these rural areas will get quality networks, much less the gigabit networks promised in the bids from WISPs,” Solsrud said. 

Doug Dawson, President of CCG Consulting, said the announcement “means the FCC believes that fixed wireless technology is the functional equivalent of fiber” even though the underlying point-to-multipoint architecture “can’t be used to deliver giant bandwidth to more than a few customers – and it’s not really designed to deliver gigabit download, and certainly not a symmetrical gigabit.” The result? “By allowing [wireless internet service providers] to claim gigabit capabilities, the FCC cheated huge numbers of people out of getting fiber.”

Christopher Mitchell notes that LTD Broadband only qualified to bid to build fiber at the gigabit tier. The company said it plans to do so with a mixture of fiber and fixed wireless services. Many of the areas where LTD won are adjacent to areas where local fiber network operators decided the subsidies were too low for them. Somehow LTD is going to get financing and the expertise to build these areas all out with lower subsidies than what local folks could do?  Seems improbable, Mitchell writes. He adds:

Once again, as we did after the CAF II auction, we have heard from some WISPs that they bid on realistic services - often 100 Mbps - only to be outbid by other WISPs that are claiming to offer speeds that the first WISPs think all but infeasible with existing technology. This is not a matter of some people being anti-wireless. It is a question of whether the FCC has any credibility when it makes rules. 

Joe Buttweiler, director of business development for Consolidated Telecommunications Company (CTC), said many in the industry don’t believe LTD can offer gigabit speeds with fixed-wireless technology, but said if they intend to use fiber, “we’d love to see the plans that they’re going to provide to the FCC.” Buttweiler said building a “full-fiber network throughout all of Minnesota” will be an expensive task that could be hard to fulfill at the cheap price LTD has promised. “I just have a really difficult time believing they can do it for that amount of money,” he said. There's “a lot of anxiousness right now about the results,” he added.

Can Satellite Broadband Deliver?

Big-name companies that qualified to bid in the auction but are not on the RDOF auction winners list include Verizon and ViaSat. Hughes Network Systems, which, like ViaSat, delivers broadband from geostationary satellites, won just $1.3 million in the auction. It’s interesting to compare the fate of the geostationary satellite operators with that of SpaceX, which operates non-geostationary satellites designed to provide lower latency. One of the auction weighting factors favored bids for lower-latency service. SpaceX has been launching dozens of satellites at a time in an attempt to build a massive constellation in space that would help serve remote or rural areas. The company received nearly $886 million from the FCC to help serve hundreds of thousands of customers in 35 states, a huge boost that could provide the financial underpinning for its Starlink project needs. SpaceX plans to deliver service supporting speeds of 100 Mbps downstream and 20 Mbps upstream.

Many remain skeptical of satellite broadband as a solution for rural areas. In 2019, Benton's Jonathan Sallet wrote:

Rural areas are not likely to receive affordable High-Performance Broadband service from satellite providers. In 2018, the satellite industry was capable of offering consumer services with download speeds up to 100 Mbps, albeit with substantially higher latency, but pricing for service is substantially more expensive than wireline services. For example, 100/3 Mbps service for $200 per month in 2018 was roughly three times the cost of comparable wireline service.

The Worst Kind of Overbuilding

Outgoing-FCC Michael O'Rielly has spent a good portion of his time at the commission railing against government subsidies flowing to build new networks in areas where broadband service is already available. Commissioner O'Rielly calls it "overbuilding;" Benton's Jonathan Sallet calls it "competition." 

But Commissioners O'Rielly and Carr have never addressed another kind of overbuilding -- when broadband providers receive multiple subsidies over time to upgrade networks so they can meet consumers' needs. Early analysis of Phase I RDOF winners illustrates that. As Christopher Michell writes, "CenturyLink, Frontier, and Windstream have already raked in billions for these [locations] from the Connect America Fund. Now the FCC is paying them again to do the job [they haven't] already done. We should not be surprised if the FCC ultimately allows them to offer well less than a gigabit and later qualify for still more subsidies."

We're Subsidizing Networks Where?

Since "Rural" is RDOF's first name, we expect the billions in subsidies to be flowing to build networks in sparsely-populated areas where no broadband networks reach today. Unfortunately, that's not always the case. 

S. Derek Turner, the research director at Free Press, took a closer look at the FCC's maps of winning RDOF bids and found that, in too many instances, funds are being awarded to subsidize the construction of gigabit networks in rich, densely populated neighborhoods of urban areas.

  • The luxury resort in Rancho Palos Verdes, California, right next to Long Beach.
  • The 16 locations in Griffith Park, Los Angeles, just off the Ventura Parkway.
  • Singapore Airlines and Korea Air facilities at Los Angeles International Airport.
  • The Calabasas, California neighborhood where the average home costs nearly $1.5 million.
  • The gated community in Corona Del Mar, California. 
  • A parking lot outside the Pentagon where SpaceX will soon offer service.

Turner invited readers to take a look at the RDOF maps ourselves, so we checked out Benton's hometown, Evanston, Illinois, which is the city directly north of Chicago.:

  • SpaceX is getting funds to serve 40 locations on Northwestern University's campus.
  • LTD received support to serve Northwestern's Illinois Technology Enterprise Center and portions of Evanston's busy thoroughfare, Green Bay Road. 

How Bad Is The Damage?

As Senator Capito noted this week, the stakes are just too high for the FCC to risk getting RDOF funding wrong. As FCC Chairman Pai noted, the auction should bring "welcome news to millions of unconnected rural Americans who for too long have been on the wrong side of the digital divide." But looking at the results raises fears that the FCC made some big errors that may leave millions of rural residents apprehensive -- and disconnected. Will wireless providers be able to deliver the high-speed broadband they have promised? Are too many dollars flowing to urban areas when rural areas remain unconnected? On Day 1,421 of the Trump administration, are you assessing the damage, Commissioner Carr?

Quick Bits

Weekend Reads (resist tl;dr)

ICYMI from Benton

Upcoming Events

Dec 14 -- The Courts, The Hill and The FCC - A Year in Review and Setting the Stage for 2021 (National Association of Telecommunications Officers and Advisors)

Dec 15 -- Quantum Internet Forum (FCC)

Dec 15 -- Building on What Works: An Analysis of US Broadband Policy (Information Technology & Innovation Foundation)

Dec 15 -- Addressing fiber network challenges to deliver 5G (VIAVI Solutions)

Dec 16 -- Tools for Broadband: RDOF and Other Rural Broadband Deployments (Broadband Breakfast)

Dec 17 -- Broadband Deployment Advisory Committee Meeting (FCC)

Dec 17 -- Tech on the Rocks Podcast Featuring Mignon Clyburn & Jonathan Sallet (Benton Institute for Broadband & Society)

The Benton Institute for Broadband & Society is a non-profit organization dedicated to ensuring that all people in the U.S. have access to competitive, High-Performance Broadband regardless of where they live or who they are. We believe communication policy - rooted in the values of access, equity, and diversity - has the power to deliver new opportunities and strengthen communities.

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Kevin Taglang

Kevin Taglang
Executive Editor, Communications-related Headlines
Benton Institute
for Broadband & Society
727 Chicago Avenue
Evanston, IL 60202
headlines AT benton DOT org

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