Thoughts on Rural Broadband Subsidies for the New Decade

Benton Institute for Broadband & Society

Wednesday, December 18, 2019

Digital Beat

Thoughts on Rural Broadband Subsidies for the New Decade

Dr. Christopher Ali


Last summer, Federal Communications Commission Chairman Ajit Pai proposed the Rural Digital Opportunity Fund, or RDOF, a ten-year, $20.4 billion program designed to support broadband deployment in those rural-remote areas left behind by the private market. Despite an acronym that recalls a particular red-nosed reindeer, the FCC called RDOF “a critical next step in the FCC’s ongoing effort [to] provide rural America with the same opportunities available in urban areas.” To this, Chairman Pai added:

In short, we’re proposing to connect more Americans to faster broadband networks than any other universal service program has done. I’m excited about what this initiative will mean for rural Americans who need broadband to start a business, educate a child, grow crops, raise livestock, get access to telehealth, and do all the other things that the online world allows. And I look forward to kicking off this new auction next year.

The proposed amount – $20.4 billion – echoes the funding allocated for the FCC’s incumbent Connect America Fund Phase II program (“CAF II”), which stands at approximately $23.8 billion. CAF II support has been divided between 10 price cap carriers – the largest telecommunication companies –  who receive $1.2 billion per annum between 2015 and 2021, and 103 competitive bidders who receive just $148 million per annum between 2018 and 2028.

The proposed structure of RDOF aims to solve one of the major flaws in CAF II: allocation. Originally, $9 billion ($1.5 billion annually for 6 years) was earmarked specifically to price cap carriers with few requirements in terms of build out. Indeed, price cap carriers only had to build out networks capable of 10 Mbps download and 1 Mbps upload speeds, a far cry from the FCC’s current definition of broadband (25/3) and measly compared to average download speeds today (96.25mbps according to Ookla). These providers used the 10/1 threshold as an upward limit and the results have been underwhelming.

The FCC took steps to rectify the CAF II debacle in 2018 when it began the CAF Phase II Auction, which auctioned off subsidies to the lowest bidders, rather than simply handing money over to the largest providers. This “reverse auction,” amounting to $1.48 billion over ten years, also broadened the applicant pool, moving away from the FCC’s dogmatic allegiance to legacy telephone companies and included cooperatives and competitive builders. Nevertheless, the amount (which was derived from the money not accepted by carriers in CAF II) – $148 million/year for 10 years – is miniscule compared to the hundreds of millions given to price cap carriers every year.

The proposed RDOF seeks to mimic the purported success of the CAF Phase II Auction by once again awarding subsidies based on the least amount of support rather than a handout. In the auction, applicants will bid downwards to provide the best service at the lowest cost. In contrast, in the original CAF II program, the FCC simply offered price cap carriers hundreds of millions of dollars with the hopes that they would do good by it.

The FCC has proposed the $20.4 billion in RDOF funds be spent in two phases. The first phase will mete out $16 billion to those census blocks that are completely unserved, while the second phase will see the remaining $4.4 billion awarded to partially served census blocks. The minimum speed threshold for award winners will be 25/3, but the FCC will favor those applicants who pledge to provide above baseline higher speeds (100/20 with an allowance to use at least 2 terabytes of data per month) and at gigabit speeds (1 Gbps/500Mbps) with a 2 TB cap.

RDOF has received a mixed welcome to the world of broadband funding. Public Knowledge, for instance, is skeptical that, given the FCC's reclassification of broadband service in the repeal of network neutrality regulations, the Commission may lack authority to reform the existing Universal Service Fund to provide stand alone broadband. But Conexon lauded the program as “a true opportunity for rural America” adding “it is also an opportunity for the Commission to begin to redeem itself for past mistakes.”

To be sure, $20.4 billion is nothing to scoff at for rural broadband deployment. In 2017, the FCC estimated that it would cost approximately $80 billion to deploy fiber to the home to the “14% of locations lacking access.” While the ultimate amount will, of course, be substantially higher given that far more than 14% of American households lack broadband, the proposed $20.4 billion will go a long way in bridging the digital divide if it is spent correctly.

I say “if spent correctly” because there are major issues with RDOF that require attention.

  1. This is not new money; it is old money with a new name. FCC press releases intimate that the $20 billion is new money, that is to say, funds additional to what is currently being spent. Instead, RDOF is simply a repackaging of CAF II with improvements. The FCC never misses an opportunity to pat itself on the back, but we need to take such proclamations with a grain of salt.
  2. We still have mapping issues. RDOF will continue to use data from the infamous FCC Form 477 to determine unserved and underserved locations. As numerous studies and articles attest, the FCC’s broadband data is woefully inaccurate, leading to an exaggerated estimate of who is connected in America. Dozens of communities are reported as being served, when they are anything but. These communities will find themselves ineligible for the bulk of RDOF, since $16 billion is proposed to be reserved for unserved areas and only $4.4 for underserved. Commissioner Jessica Rosenworcel shares this concern, writing in her partial dissent to RDOF: “I therefore find it surprising that the Commission proposes spending $16 billion dollars - nearly 3/4 of the USF support the FCC intends to use over the upcoming decade - without any improvement to the data it will use and without any reliance on updated and improved maps to tell us where the money needs to go.”
  3. Big telco continues to dominate. Big telecommunication companies dominated CAF II and are eligible for RDOF. They largely failed at connecting rural America when given the chance in 2011 with the first and second phases of CAF, and RDOF proposes few safeguards to make sure it does not happen again.
  4. The baseline is set at 25/3. 25/3 was already inadequate when it was made the broadband standard by the FCC in 2015 and now, in 2019, the FCC proposes to make it the baseline for RDOF. Making matters worse, the threshold is asymmetrical, prioritizing download (consumption) over upload (production). We need a forward-looking, symmetrical threshold, not 2015 standards.
  5. The myth of “technological neutrality” remains sacrosanct. One overarching principle of FCC universal service regulation is the concept of “competitive neutrality” which includes a commitment to not unfairly favor nor disfavor one technology over another. Unfortunately, technological neutrality often results in technological blindness. Regulators set such low speed baselines that public dollars end up supporting companies using antiquated (e.g. DSL) or inconsistent (e.g. satellite) communication technologies.

My concern is that companies that win this public support will build networks using antiquated or untrusted tech that are only capable of 25/3 service. The communities relying on these connections will be considered “served” and ineligible for future funding. RDOF has the potential to strand rural communities with 2015-standard networks for many years to come.

We need forward thinking policies that will anticipate our connectivity requirements 10 years from now when RDOF is completed. In his pathbreaking report, Broadband for America’s Future, Benton Institute’s John Sallet recommends that 100/100 Mbps symmetrical speed should be the baseline for companies receiving subsidy. Considering that the average download speed in the country is 96.25, 100/100 would be a worthy goal and consistent with the FCC’s 2010 National Broadband Plan which aimed for 100 million Americans having affordable access to 100/50 service by 2020.

The public comment period on the RDOF proposal closed on October 21, and the FCC is hopefully using this time before the holidays to review the 2,671 pages of comments it received. Hopefully the Commission is also using this time to reflect on a decade of inconsistent rural broadband policy.

As we approach a new decade, the FCC is charged with finishing the job it started with the original Connect America Fund in 2011: connecting the unconnected. This auspicious responsibility got off to a terrible start in the 2010s, when the FCC gave billions of dollars to the legacy telephone companies and abandoned rural America to the whims of Big Telco. In the interim years, amidst failed broadband maps and inadequate network connections, we’ve also seen small, rural, and local ISPs do the job the FCC originally charged the big companies to do. They did more with less and are still doing it today. There’s a lesson in their success. Let’s hope the RDOF embodies this lesson and that this new program, new year, and new decade brings about a renewed commitment to rural connectivity.

Christopher Ali is a Benton Faculty Research Fellow and Assistant Professor in the Department of Media Studies, University of Virginia. During his two-year Benton Faculty Research Fellowship, Ali will continue work on his new book project, Farm Fresh Spectrum: Rural Interventions in Broadband Policy, which investigates the relationship between farming communities, communication technologies, and communication policy in the United States.

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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