$14 Billion of Unclaimed Federal RDOF Funds

By Doug Dawson, June 21, 2023 | Original POTs and PAN article here

The FCC originally budgeted $20.4 billion dollars for the RDOF subsidy program to be spent over ten years. The original RDOF reverse auction offered $16 billion in subsidies. But in a story that is now well known, some entities bid RDOF markets down to ridiculously low subsidy levels, and only $9.4 billion was claimed in the auction and $2.8 billion of that ended up in default, including some of the bidders who had driven the prices so low.

That means that only $6.4 billion of the original $20.4 billion has been allocated. The question I’m asking today is

‘What the FCC will do with the remaining $14 billion?

It seems unlikely that there will ever be another RDOF-like reverse auction. RDOF was meant to bring broadband to areas that were unserved according to the FCC’s broadband maps at the time of the reverse auction – meaning areas where no ISP claimed broadband speeds of at least 25/3 Mbps. But since ISPs are able to claim marketing speeds under the FCC mapping rules instead of actual broadband speeds, many millions of unserved locations were left out of the RDOF process.

Since the RDOF auction, there have been many billions spent to bring broadband to unserved areas through

  • ReConnect grants;
  • local ARPA grants;
  • state broadband grants; and
  • several smaller grant programs.

To understand how poor the original FCC RDOF maps were, even after these many grants, the latest FCC maps still show over 8 million unserved locations. Folks like me who look at the map at a granular level think there are even more areas that are still mistakenly claimed to have 25/3 Mbps broadband but that don’t in real life.

To be fair, the RDOF is doing some good things. A lot of electric coops, telephone coops, telephone companies, and independent fiber overbuilders are building networks using the RDOF subsidy as the basis for getting funding. Charter and a few other larger ISPs are building networks using the RDOF funding.

But the RDOF awards also left behind a lot of messes. First, it took too long to eliminate the default bidders. Areas claimed by these bidders were off-limits to other federal grants and most state grants – many of these areas would have fiber today had they not been in RDOF limbo.

The bigger problem is that the FCC made an absolute mess by awarding RDOF in what can be best called a checkerboard RDOF serving area. In a particular county (shown here), the areas to the east have no people due to large parklands, but in the rural areas where people live, the RDOF awards covered some areas but not adjacent Census blocks. The Census blocks that were not awarded have the same lousy broadband options and were not included in the RDOF award due to the mapping problems discussed earlier.

This creates a real challenge for anybody now trying to get a BEAD or other grant to serve what is left. The areas left after RDOF don’t make a big coherent serving area, but a jumbled mess of remaining Census blocks. For somebody building a fiber network, these checkerboard areas are a nightmare because a builder must go through RDOF areas to reach the remaining areas. It’s one more factor that will drive up the cost of the BEAD grants in counties that got a lot of RDOF funding.

The FCC is dreadful at awarding grants and subsidies. The RDOF process was used so the FCC didn’t have to review traditional grants where ISPs proposed coherent grant serving areas. This is the same FCC that gave over $11 billion to the biggest telcos for CAF II to upgrade DSL to 10/1 Mbps.

Now that the states have broadband offices, the easiest way for the states to award the remaining RDOF billions would be to let state broadband offices do the heavy lifting. It would be one more tool for state broadband offices – that hopefully would not follow the complicated BEAD rules. The worst possible way to use the money would be for the FCC to take some easy path to shovel the money out the door again – please don’t give us RDOF II!