Electric co-ops want RDOF defaulters to pony up

  • The FCC has requested public comment on whether it should reduce penalties for companies that default on their RDOF program obligations

  • Electric co-ops said that granting amnesty won’t deter future defaults but will have the opposite effect

  • In comments to the Commission, NRECA said an amnesty period would be unfair to other rural providers who were willing and able to build per RDOF rules

As the FCC considers pleas for more lenient RDOF fines, electric co-ops are saying it's time for defaulters to own up.

ISPs have been defaulting on RDOF grants for years and have been struck with sizeable penalties from the FCC as a result. Last month a coalition of ISPs, unions and local officials penned a letter to the Commission appealing for a brief amnesty period, during which defaulting companies could surrender their contracts with reduced penalties. Mostly, they warned that locations covered by RDOF awards are ineligible for grants through the impending Broadband Equity, Access and Deployment (BEAD) program.

The proposal has triggered a public comment process, and some aren’t so keen on the idea of default forgiveness. Electric co-ops contend that granting amnesty won’t deter future defaults but will have the opposite effect.

In a letter to the FCC, the National Rural Electric Cooperative Association (NRECA), which represents nearly 900 rural electric co-ops, said the time for amnesty to have a positive effect on BEAD has passed, because most states’ Volume One plans for the BEAD program have already been approved by NTIA, and over half have begun or completed their challenge process to determine location eligibility.

The proposed remedy to RDOF defaults would set a “dangerous and disruptive” precedent for bailing out defaults in future grant programs, NRECA said in its comments to the Commission.

“To give participants a ‘get out of jail free’ card in the form of amnesty (no matter how abbreviated) and/or reduced fines would send a dangerous, ill-advised signal to internet service providers that default is a readily acceptable option regardless of the consequences to the communities left behind,” they wrote.

Additionally, NRECA said an amnesty period would be unfair to other rural providers who were willing and able to build per the RDOF program’s rules. It contended that many of the companies defaulting used nefarious ways to get RDOF bids in the first place, as a “significant number” of rural electric co-ops were underbid.

"While some awardees defaulted due to unforeseeable circumstances, many edged out fully capable rural providers through gamesmanship, by deliberately underbidding the competition or being irresponsibly unprepared to undertake a proper broadband buildout," said NRECA. The group claimed that many RDOF bids fell in the range of 10% to 30% of the number the FCC’s cost model determined was necessary to construct and operate broadband networks in each location.

This week Free State Foundation President Randolph May and Senior Fellow Andrew Long also submitted comments to the FCC opposing the amnesty window, with complaints that granting the request would further delay the connection of unserved households.

The case for amnesty

Even though the FCC announced its completion of RDOF application reviews in December, state broadband offices recently warned that defaults might continue until the program is over — 10 years from now.

RDOF and CAF II awardees have said they are unable to build their networks for a variety of reasons. Some RDOF winners, the initial amnesty proposal to the FCC noted, have placed blame on “circumstances beyond their control, including skyrocketing costs, [which] have made building their networks impossible without further funding.”

Gigi Sohn, executive director for the American Association for Public Broadband (AAPB), said there is a misconception that the proposal is to give a “free pass” for RDOF defaulters.

“I just want to make it really clear. We're just saying don't apply the full penalties,” Sohn told Fierce Telecom this month. “We’re saying apply more limited penalties to try to incentivize folks to default now as opposed to defaulting later.”

The amnesty proposal said that lowering the penalties for defaults will “incentivize awardees to relinquish their areas sooner rather than later, making the areas eligible for BEAD funding.” But the proposal also suggested that to further incentivize relinquishment, the Commission could consider increasing the penalties for awardees who default after the amnesty period is over.

New Street Research’s Blair Levin told Fierce it remains unclear the exact number of locations implicated in RDOF defaults that would not be eligible for BEAD funding, and therefore not get connected. While that number as a percentage of U.S. homes is likely low, “the prospect of continuing to be disconnected is a big problem for those living in such communities,” said Levin.