Defaulting on the Rural Digital Opportunity Fund

Starry has defaulted on all of its $269 million of Rural Digital Opportunity funding (RDOF). There have been other defaults of RDOF, but no others of this magnitude. Starry is not required to disclose why it’s defaulting. Though, in the many articles about the RDOF default, there was a lot of speculation that the company doesn’t have the needed funding to complete the required builds. Starry reported 77,400 customers at the end of the second quarter of 2022 – gaining 14,300 customers in the quarter. The company claimed that it now passes 5.7 million potential customers. But the company has a big burn rate with a loss for the quarter of $33.9 million plus capital expenditures of $20.8 million. Even if funding is the issue, funding wouldn’t yet be an emergency for Starry. An RDOF winner has three years starting with the year after the awards – in this case until 2025, to cover 40% of the RDOF areas. But delaying the cancellation probably risks increasing fines from the FCC. I’ve also heard speculation from engineers that Starry might not have been happy with the performance of its technology in rural areas. It seems like a technology best suited to areas with decent household densities. With the default, all of the RDOF areas are back in play for other federal grants. Unfortunately for the customers in these areas that thought they had a broadband solution coming, they now need another broadband provider to step up and claim grant funding of some sort to bring broadband.