RDOF winners already defaulted on $78M in bids — much more could follow

The telecom industry rejoiced when the Federal Communications Commission (FCC) announced last week it was prepared to release the first batch of funding — some $311 million — from the Rural Digital Opportunity Fund (RDOF) Phase I auction. But in the same breath the agency revealed a long list of winning bidders have already defaulted on their obligations and hinted many more could soon follow suit. So, where exactly do things stand?

A public notice issued by the FCC showed more than 60 bidding entities have defaulted on winning bids totaling $78,533,385.30 covering nearly 11,000 census blocks.

Default status means RDOF support “will not be authorized for these winning bids,” according to the FCC’s release. An FCC representative told Fierce RDOF funds that are not distributed “remain in the Universal Service Fund for later distribution through future funding mechanisms,” although the representative didn’t specify whether they’d be rolled over into the RDOF Phase II auction.

RELATED: LTD Broadband dealt blow as FCC prepares to issue $311M in RDOF funds

One company that already applied for a waiver, Redzone Wireless, asked to relinquish more than $500,000 in funding after discovering during the auction that the area it bid on was already served by a “municipally funded symmetric gigabit network.” It blamed municipal officials for not filing required coverage paperwork with the FCC.

Kathryn de Wit, project director of the broadband access initiative at Pew Charitable Trusts, told Fierce the RDOF award process offers “a very clear lesson for folks I think at every level of government to really understand why it is so important for states and the federal government in particular to coordinate on the availability of serviceable locations, on the accuracy of data and just understanding where have funds already been awarded.”

The initial default total is just a small fraction of the $9.2 billion that was awarded in the Phase I auction, which covered nearly 787,000 eligible census blocks. But the amount left on the table could still increase substantially as the FCC continues to vet the applications of winning bidders.

Letters sent

The RDOF Phase I auction was designed to provide support for broadband deployments in areas where there is currently no service which meets the FCC’s minimum speed standard of 25 Mbps downstream and 3 Mbps upstream. However, the proceeding has been plagued by concerns that coverage already exists in many areas set to receive funds.

In May, for instance, the Competitive Carriers Association warned up to $1 billion in RDOF funding could be misspent without corrective action from the FCC.  

Last week, the FCC sent letters to 197 auction winners, flagging census blocks that already appear to have broadband coverage. It urged bidders to withdraw their requests for funding in areas where the presence of existing service could be verified.

Cooperative Network Services, which tallied and mapped the locations identified in the letters, told Fierce a total of 15,187 census blocks were flagged for potential redundancy, representing 49,126 households and a population of more than 217,000 across 49 states (with Alaska the exception). An FCC representative confirmed the number of census blocks in an email to Fierce.

“We recommend that your waiver request include a showing that defaulting on these bids will serve the public interest by, for example, targeting scarce Universal Service funds to where they are needed most. We anticipate looking favorably on requests that make these showings,” the agency wrote to participants.

Winning bidders which received the letters were given until August 16 to respond.