Charter throws its hat into RDOF ring, which could be bad news for CenturyLink and Frontier

Charter Communications plans to participate in the Rural Digital Opportunity Fund (RDOF) auction, making it the first cable operator to announce it was seeking billions of dollars from RDOF funding.

Charter announced its intention to participate in the RDOF auction in an 8-K filing Monday morning. In January, the Federal Communications Commission (FCC) announced its RDOF program for faster broadband speeds in order to help close the digital divide in rural areas.

RDOF will push out up to $20.4 billion in funding over the next 10 years to build and connect gigabit broadband speeds in unserved rural areas.

The RDOF initiative followed on the heels of the FCC's Connect America Fund (CAF) II program. For telco incumbents such as AT&T, CenturyLink, Windstream and Frontier, RDOF extended their CAF II funding for one additional year through 2021.

RELATED: FCC cues up Rural Digital Opportunity Fund to close digital divide

While cable operators have increasingly focused on their broadband offerings, due in part to decreasing video subscribers, they haven't been able to participate in government broadband funding programs.

"Charter’s entry is a big deal because it’s the first cable operator to officially announce its intention to apply for RDOF funds," said Dell'Oro Group's Jeff Heynen, senior research director for broadband access and home networking, in an email to FierceTelecom. "It certainly won’t be the only cable operator to do so, but it will likely be the largest. I think there will be a number of cable operators—think NCTC members—that will also apply for RDOF funds.

 "It will be an interesting process to watch, of course. However, keep in mind that the providers have eight years to complete the build outs using the funds granted."

While it’s a long way until the broadband networks are completed, Heynen said Charter's entry into RDOF could potentially impact Frontier Communications and CenturyLink's RDOF plans since its footprint overlaps with both of them.

"If you take a look at Charter’s coverage map, you can see they provide service in Colorado, Nebraska, Wyoming, and other rural areas," Heynen said. "Many of these serving areas came from its acquisition of Bresnan Communications/Optimum West from Cablevision back in 2013.

"Those are also areas that overlap with CenturyLink and Frontier, so there is a risk there that Charter gets the nod to build out using RDOF funds where those operators aren’t currently providing broadband that meets the 25/3Mbps threshold."

The first phase of RDOF will include $16 billion of funding nationwide. The RDOF process kicks off on Wednesday, which is when "short form" applications are due to be filed.

"Charter expects that these potential significant investments will generate long-term infrastructure-style returns for Charter shareholders by further taking advantage of the efficiencies of the scale and quality of our network and construction capabilities while offering our high quality products and services to more homes and businesses," Charter said in its 8-K filing.