January 14, 2021
VIA ELECTRONIC MAIL AND ECFS
Hon. Ajit Pai
Hon. Jessica Rosenworcel
Hon. Brendan Carr
Hon. Geoffrey Starks
Hon. Nathan Simington
Federal Communications Commission
45 L Street, N.E.
Washington, DC 20554
Re: Rural Digital Opportunity Fund, WC Docket No. 19-126
Dear Commissioners: I am writing to alert you to serious concerns about the recently-concluded Phase I RDOF auction, and to suggest some immediate, proactive steps you can take to salvage this process, as well as longer-term reforms. Before the auction, GeoLinks made the Commission aware of its concerns that inexperienced providers might seek to bid at the “gigabit” service tier, relying on use of wireless equipment that is not capable of actually achieving the required level of service See GeoLinks ex parte submissions in WC Docket No. 19-126, May 29 and June 1, 2020, available at https://ecfsapi.fcc.gov/file/105302068625296/GeoLinks%20RDOF%20Ex%20parte%205.29.2020.pdf and … Continue reading As it explained at the time, GeoLinks has extensive, successful experience engineering a Gigabit+ network across numerous types of terrain (spanning some of California’s most challenging topographies and topologies) utilizing various equipment types and accounting for potential equipment shortfalls. GeoLinks therefore has first-hand knowledge of both the great potential of wireless broadband to bring high-speed Internet access to remote rural areas, and the obstacles and limitations faced by those seeking to deploy this technology. Unfortunately, the results of the Phase I auction suggest that many other RDOF bidders lacked this experience with wireless broadband and submitted bids that are far from feasible in reality. Bidders who appear to be relying on wireless technology submitted bids in the gigabit tier for areas that cannot feasibly be served at these speeds due to geographic obstacles, and submitted bids that appear to be financially unrealistic in other areas. Although the apparent strategy of making it relatively easy for bidders to pass the short-form application stage “succeeded” in attracting a large number of bidders who drove down subsidy levels and created the appearance of extending gigabit service to many rural areas, this strategy is likely to boomerang by resulting in (a) a large number of defaults at the long-form stage, assuming the Commission carries out its stated intention to vet applications carefully; and (b) many RDOF awards going to companies who prove unable to perform their public service obligations, especially if the vetting of applications is less thorough.
It would be wrong to downplay the danger of unqualified companies receiving awards based on the fact that the Commission will hold letters of credit and will be able to recoup the support paid to these companies if they do not perform. The letters of credit will reimburse the Universal Service Fund, but they will do nothing for the rural consumers whose need for improved broadband access will be frustrated. The Commission will not even determine non-compliance with the final buildout requirements until after six or eight years, and then will give the company another 12 months to remedy its non-compliance FCC 20-5, para. 59 Rural customers may get no service for nine years, and then have to wait for the Commission (presumably) to conduct a new auction or some other process to find a different company that is willing to serve them.
GeoLinks recognizes that the ability of winning bidders to perform cannot be known until the Commission reviews the long-form applications for both technical and financial adequacy, and sees how many winning applicants are able to obtain commitments for letters of credit. If, as we suspect, there is a high rate of defaults at this stage, it would be grossly unfair to rural customers to make them wait for the yet-unscheduled Phase II auction to find replacements for defaulting applicants. If anything, the need to fill gaps in broadband deployment is greater today than it was when the Commission decided to hold the RDOF auction. The COVID-19 pandemic has accelerated demand for broadband for persons working from home, students learning from home, and for general social interaction. Many experts forecast that this demand will not disappear once the pandemic is over See, e.g., Jonathan Sallet, What 2020 Taught Us About Broadband, Benton Institute for Broadband & Society (Nov. 20, 2020), https://www.benton.org/blog/what-2020-taught-us-about-broadband … Continue reading. Accordingly, the Commission should treat defaults at the long-form stage as an issue requiring urgent action to achieve the intended goals of the RDOF program.
GeoLinks suggests the following concrete steps that the Commission can take now to ensure that the goals of the RDOF program can be achieved and that rural customers are not kept waiting years, or decades, for affordable high-speed broadband Internet access:
• Do not grant any waivers of the letter of credit commitment letter requirement, or the final letter of credit requirement.
• Even if an applicant provides a letter of credit, require full documentation of the financial feasibility of their proposed deployment. (FCC 20-77, para. 312)
• Do not grant any waivers of the technology and system design requirements (FCC 20-77, paras. 306-311), and carefully scrutinize all long-form applications to ensure that all technical parameters of the proposed system are fully documented and present a feasible plan. Staff should be directed to reject any applications that fail to meet the requirements in full, and to allow only a single, limited-time opportunity for applicants to correct any deficiencies in their initial filings.
• Schedule a re-auction of support for all census blocks that were awarded in the Phase I auction to an applicant that subsequently defaulted. This re-auction should take place within six months after the staff completes its review of long-form applications for financial and technical sufficiency (but no later than mid 2021), rather than waiting for the yet-unscheduled RDOF Phase II auction.
• Limit participation in the re-auction to parties who qualified to bid in the Phase I auction and did not subsequently default; or to parties who did not apply to bid in Phase I but who can meet all the same eligibility requirements.
• In vetting any new short-form applicants, staff should be directed to apply the technical experience and financial adequacy requirements more strictly than they did in Phase I.
• Require re-auction bidders to provide a letter of credit capacity amount at the time of the short-form application, representing the funding limit for letters of credit that the bidder believes it may obtain. Using this capacity amount, the Commission should cap bidding at 125% of that letter of credit capacity. For example, if a bidder provides a letter of credit capacity amount of $100M the Commission should not grant auction funding of more than $125M to that bidder.
• In the re-auction, and in all future reverse auctions of support, require up-front deposits from all applicants. The Commission has a long history of requiring deposits in spectrum auctions, and this policy has worked well to keep default rates low. A deposit of $1,500 per census block group (half of the base forfeiture amount for defaults) would appear reasonable. For example, an applicant desiring to bid in up to 100 CBGs would have to post a deposit of $150,000. As in forward auctions, an applicant would not be required to link its deposit to specific CBGs, and should be able to switch its bids from one location to another in the course of the auction as long as its total number of outstanding bids in any given round does not exceed the number covered by its deposit. Deposits should be refunded pro rata at the end of the auction to any applicant whose number of winning bids was less than the number covered by its deposit, and upon the award of support to winning applicants. In addition to discouraging unduly speculative bids, this approach would make it easier for the Commission to collect forfeitures in the event of default, since at least a portion of the forfeiture amount would already be on deposit.
I respectfully urge the Commission to take action on these points as quickly as possible, before the processing of long-form applications is completed, to maximize the number of rural customers who will benefit from RDOF-funded deployment. I would welcome the opportunity to speak with you or your staff to discuss any questions you might have about these proposals.
/s/ Skyler Ditchfied
Chief Executive Officer
|↑1||See GeoLinks ex parte submissions in WC Docket No. 19-126, May 29 and June 1, 2020, available at https://ecfsapi.fcc.gov/file/105302068625296/GeoLinks%20RDOF%20Ex%20parte%205.29.2020.pdf and https://ecfsapi.fcc.gov/file/10602576508456/GeoLinks%20Ex%20parte%206.1.2020.pdf.|
|↑2||FCC 20-5, para. 59|
|↑3||See, e.g., Jonathan Sallet, What 2020 Taught Us About Broadband, Benton Institute for Broadband & Society (Nov. 20, 2020), https://www.benton.org/blog/what-2020-taught-us-about-broadband (“[E]ven after the present health crisis passes, the world is not going back to the way it was. … Work, learning, health care, government services, and other facets of everyday life will be more dependent on broadband in the future than in the immediate past.”); Liliane Offredo-Zreik, Broadband Networks: Predictions for 2021, Multichannel News (Jan. 4, 2021), https://www.nexttv.com/blogs/broadband-networks-predictions-for-2021 (“[H]igh levels of bandwidth consumption will continue in 2021 as some of the digitally enabled business models will persist and evolve to become an essential part of the strategic framework.”)|