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Why the Rural Digital Opportunity Fund is So Significant, and How to Succeed in Applying For RDOF

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Photo by Larisa Koshkina used with permission

TYSONS, Virginia, May 4, 2020 – The Rural Digital Opportunity Fund (“RDOF”) is a significant acceleration of the Federal Communications Commission’s efforts to subsidize the construction of broadband infrastructure in rural communities.

The FCC has pledged to allocate $20.4 billion of support, over 10 years, in two phases. That’s roughly $2 billion a year in broadband subsidies.

But the auction is a complicated process. Fortunately, on Tuesday, May 5, at 12 Noon ET, two knowledgeable organizations – the “broadband fabric” data and mapping experts at CostQuest Associates and attorneys from Marashlian & Donahue, PLLC, also known as The CommLaw Group – will explain what would-be bidders need to understand about RDOF in a FREE webinar, “How to Prepare and Effectively Bid in the Rural Digital Opportunity Fund Auction.”

The first phase of the FCC’s reverse-auction is expected to push out $16 billion (over 10 years), and is scheduled to begin on October 22, 2020. The second phase of the reverse-auction, of at least $4.4 billion (also over 10 years), would provide financial support for additional areas, including those locations unserved by phase one.

Here is how much of an acceleration RDOF represents over the Connect America Fund, Phase II (“CAF II”), the last FCC program to provide subsidies for rural broadband:

In 2018, CAF II offered $1.48 billion over 10 years, or $148 million a year in broadband subsidies. RDOF’s Phase I is expected be more than 10 times as large the widely-heralded CAF II auction.

Additionally, 713,176 locations – homes or offices – were funded through CAF II.  RDOF’s Phase I is expected to provide support for nearly 6 million locations –more than eight times the number of locations in CAF II.

Laying the groundwork for a reverse-auction process

Bit by bit, the FCC has been laying the groundwork for this bonanza of funding. On August 1, 2019, the agency initiated a Notice of Proposed Rulemaking on the RDOF. On February 7, 2020, the agency released its Report and Order detailing the steps it will be taking in Phase I of the auction, as well as the reasoning behind those decisions.

On March 2, 2020, the FCC released a Public Notice with its proposed bidding procedures and program requirements for this phase of RDOF, which has been denominated as Auction 904. An initial map of 5,907,896 locations – within about 66,000 census block groups – was released on March 17, 2020. Final reply comments on the bidding procedure were due on April 10, 2020, and the FCC is soon expected to finalize those procedures and release a timeline for the auction.

Organizations seeking to bid in RDOF will want to understand those details. But to be successful, they should also have a broader understand the context and requirements necessary.

Few are better situated to facilitate that understanding than CostQuest Associates – which was contracted by the FCC to design the Cost Allocation Model (CAM) that undergirded the CAF II auction, and also the RDOF auction – and attorneys from The CommLaw Group, who have helped hundreds of companies comply with the FCC’s broadband, telecommunications and auction requirements.

Register for FREE for “How to Prepare and Effectively Bid in the Rural Digital Opportunity Fund Auction,” on Tuesday, May 5, 2020, at 12 Noon ET.

The CostQuest / CommLaw Group webinar will be followed on the same day at 4 p.m. ET by a Federal Communications Commission webinar on RDOF. Attending the CostQuest / CommLaw Group webinar will better prepare potential bidders for the FCC webinar and for the FCC auction.

Short forms, long forms, and a brief description of the reverse-auction process

The FCC’s “Fact Sheet” on Auction 904, the first phase of RDOF, has an extremely bare-bones description of the timeline and deadlines. Once auction procedures are officially adopted and eligible census block group areas are finalized, the agency will open the window for the filing of “short form” application with basic information about the broadband providers’ proposed service. Filling this out is a prerequisite for bidding in RDOF’ first phase.

As is normal for its auctions, the agency will conduct a “mock auction” before the actual auction to familiarize would-be bidders on what takes place in an FCC auction or reverse-auction.

Bidding is scheduled to begin on October 22, 2020, and is expected to last for several weeks. There has been some pressure on the FCC to delay the auction because of the coronavirus pandemic. By the same token, others have pressed the agency to accelerate the auction to get more broadband funding to help cope with the pandemic. Agency-watchers expect the FCC to stick with its current schedule.

Following the conclusion of the auction, winning bidders submit what is a called a “long form” application. For funds to then be disbursed to winning bidders, this long form must include additional regulatory details, including proof of Eligible Telecommunication Carrier status for RDOF winners.

The FCC is expected to provide more details on the actual short form deadlines, as well as the mock auction, at the agency’s webinar at 4 p.m. ET on Tuesday, May 5. The CostQuest/CommLaw Group webinar will preview these requirements and give greater insight into how these different RDOF elements needs to fit together.

Differences between CAF II and RDOF, Phase I

The February 7 order governing the first phase of the RDOF auction builds upon the processes used in the CAF II auction, the agency’s first auction to award ongoing high-cost universal service support through competitive bidding in a multiple-round reverse auction. Unlike a spectrum auction, a this auction is a “reverse auction” because bidders are seeking money to offer services, and the winner is the one who offers to provide the service at the lowest price, weighted again service tiers and other conditions.

Perhaps this prior success at such a reverse auction has given the FCC the confidence to put rules in place for shoveling $16 billion — more than 10 times the amount of funds in CAF II –in just the first phase of RDOF.

Notwithstanding, the FCC did make some changes from the CAF II process. In addition to the increased funds, the FCC has raised the required minimum supported speed from 10 Megabits per second (Mbps) download / 1 Mbps upload in CAF II, to 25 Mbps / 3 Mbps in RDOF Phase I.

Additionally, the FCC has changed the tiers and the latency weights that it gives to particular broadband technologies. This is designed to “implement a framework that prioritizes faster broadband speeds of up to a gigabit per second,” according to the FCC’s February 7 order.

Understanding the “weights” associated with particular tiers of speeds and latency requirements (called “T +L” in the FCC’s proposed bidding procedures) is crucial to unlocking what is going on, and what proposed bidders will need to understand to be successful. This will be discussed in the CostQuest / COmmLaw Group webinar. Register for FREE for “How to Prepare and Effectively Bid in the Rural Digital Opportunity Fund Auction,” on Tuesday, May 5, 2020, at 12 Noon ET.

A controversy over mapping lingers in the background of RDOF

An additional controversy surrounding the first phase of RDOF is worth noting. It concerns the issue of broadband maps.

The FCC requires broadband providers to submit deployment data on its Form 477. Such data is collected within a nesting-doll framework of geographies called the FIPS Code, or the Federal Information Processing Specification. These codes include ID numbers for states, counties, census tracts (66,438 in United States), census block groups (211,267), and census blocks (11,155,486). The census block is the smallest unit of geography the U.S. government recognizes.

These geographical units don’t mesh well with broadband providers’ mapping service areas. Wireline providers use line drawings. The wireless industry employs radio frequency engineers to create propagation maps with polygons that predict coverage areas based on distance from towers. Both mapping techniques create shapefiles that can overlap with census geography and estimate which census blocks are covered.

However, if a census block is considered “covered” when only one person within that block can get broadband, that overcounts broadband availability. The average population of a census block is 30, but census blocks are defined by geographic boundaries, not by population. Blocks can be quite small in urban and suburban areas but hundreds of square miles in rural and remote areas.

Getting at the blocks that are partially served has been at the heart of the controversy over improving broadband mapping. In part to begin to resolve the question of measuring and mapping broadband locations better, in August 2019 – during the same meeting at which the FCC proposed the RDOF – the FCC proposed the creation of a new and more granular broadband map called the Digital Opportunity Data Collection (“DODC”).

This new and theoretically improved DODC has not yet been finalized, and the Democratic commissioners on the FCC have urged that that DODC should be completed before RDOF funds are awarded. But agency Chairman Ajit Pai instead proposed that RDOF be split into two phases.

The first phase – the $16 billion phase current the subject of Auction 904 – will only award funds for location in census blocks completely unserved by 25 Mbps/3 Mbps broadband.

As stated in the order, “Phase I will target those areas that current data confirm are wholly unserved; and, Phase II will target unserved locations within areas that data demonstrates are only partially served, as well as any areas not won in Phase I. By relying on a two-phase process, we can move expeditiously to commence an auction in 2020 for those areas we already know with certainty are currently unnerved, while also ensuring that other areas are not left behind by holding a second auction once we have identified any additional unnerved location through improvements to our broadband deployment data collection.” The order then footnotes to the DODC proposal.

The FCC has adopted Chairman Pai’s proposal, and so the nearly 6 million locations available for support in Phase I deliberately exclude locations within census blocks that are “partially served,” meaning that if one customer in a neighborhood can get broadband, that neighborhood may still be excluded from RDOF’s Phase I.

Why understanding the Cost Allocation Model is crucial to success

Reviewing the FCC’s map of initial eligible areas, released March 17, 2020, is a good place to start to understand costs of service, and how those costs interact with the cost allocation model. Doing so will be crucial to success in the RDOF. Think of this FCC map as the map of a donut hole: It is demonstrating precisely those areas in which broadband is not.

Therefore, these maps and accompanying datasets highlight the 66,000 census block groups that are likely to be eligible for service through RDOF Phase I. (A “challenge process” will allow broadband providers to attempt to knock out census block group from subsidized coverage if they can prove that they already offer service at 25 Mbps / 3 Mbps.)

These FCC maps include color-coded information about the number of eligible locations within each census block group, as well as the “annual reserve price” at which a block group will be subsidized.

Here, a little background is in order. In the early 2010s, as part of a years-long effort to transition universal service fund support, the FCC contracted to develop a Connect America Cost Model (“CAM”). Who developed this model for the FCC? CostQuest Associates.

The model that ended up being codified by the FCC in 2015 defined the costs at which subsidies would be granted. Incumbent local exchange carriers, known as “price cap carriers,” were given the opportunity to accept financial subsidies based upon the model, in exchange for offering 10 Mbps / 1 Mbps service by 2020.

As the FCC recounts in its February 7 order, “In areas where price cap carriers declined the model-based support…, support was to be allocated through the subsequent CAF Phase II auction, a competitive bidding process in which all eligible providers were given an equal opportunity to compete. The auction yielded 103 winning bidders… in 45 states.”

The “reserve price” listed on the FCC’s map shows the price, for each census block group, that the CAM uses to calculate the estimated cost, per household per month, to bring broadband to the average location in that census block group.

FCC regulation (specifically 47 CFR 1.21003(c)) gives the FCC the discretion to establish reserve prices prior to the auction. In CAF II, the FCC had set the minimum support threshold at $52.50 per location, with a per-location support cap of $146.10.

For RDOF Phase I, the FCC has lowered the minimum support threshold to $40.00 per location (or $30.00 per Tribal location), with a per-location support capped at $212.50 per household per month. In addition to potentially offering bidders the ability to bid on 66,000 census block groups (versus 33,000 in CAF II), the significantly wider range in reserve price availability is another reason why the funding in RDOF Phase I is certain to dwarf CAF II.

Since its work for the FCC in the creation of the CAM, for more than a year CostQuest Associates has developed what it calls a “broadband serviceable location fabric,” and which provides a foundation for broadband providers to understand how individual service locations geolocate within census blocks and census block groups.

The uses to which CostQuest data can be put in an RDOF application will be discussed on the webinar, together with an assessment of how broadband data should be used in preparing, assessing and complying with the terms of an RDOF grant.

To register for the webinar, please visit “How to Prepare and Effectively Bid in the Rural Digital Opportunity Fund Auction” to secure your spot on Tuesday, May 5, 2020 at 12 Noon ET.

Author Drew Clark, the Editor of Publisher of Broadband Breakfast, is also a telecommunications attorney at Marashlian & Donahue, PLLC, The CommLaw Group. Clark served as executive director of the Partnership for a Connected Illinois, the State Broadband Initiative in the land of Lincoln. PCI engaged in broadband mapping and planning, infrastructure investment, and digital literacy training.

For more than a decade, Clark has been one of country’s leading voices advocating for improved broadband mapping efforts and a rational geospatial system for collecting broadband data. The CommLaw Group and its sister company, The Commpliance Group, have helped hundreds of companies comply with the Form 477 and other FCC requirements. See Clark’s article, “Broadband Maps Are a Mess, So Now Let’s Focus on Actually Improving Them,” from July 2019. Also see “CostQuest and The CommLaw Group Join to Host Fine-Grained Webinar on Rural Digital Opportunity Fund,” from April 14, 2020.

Breakfast Media LLC CEO Drew Clark has led the Broadband Breakfast community since 2008. An early proponent of better broadband, better lives, he initially founded the Broadband Census crowdsourcing campaign for broadband data. As Editor and Publisher, Clark presides over the leading media company advocating for higher-capacity internet everywhere through topical, timely and intelligent coverage. Clark also served as head of the Partnership for a Connected Illinois, a state broadband initiative.

12 Days of Broadband

How Long Will it Take Congress to Revamp the Universal Service Fund?

Critics urged the FCC to expand the fund’s contribution sources, but the agency chose to punt the decision to Congress.

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Graphic courtesy of Dmitry Kovalchuk / Adobe Stock

From the 12 Days of Broadband:

The Federal Communications Commission this summer waived away the issue of revamping the Universal Service Fund, pointing to the need for Congress to give it the authority to make changes to the multi-billion-dollar fund that goes to support basic telecommunications services to low-income Americans and rural communities. 

Up to this point, the agency had a virtual megaphone to its ear with critics saying that it needs to make the changes necessitated by the fact that the nearly $9-billion fund this quarter is supported only by dwindling legacy voice service revenues as more Americans move over to broadband-driven communications services. 

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Expert Opinion

Bjorn Capens: Strong Appetite for Rural Broadband Calls for Next Generation Fiber Technology

The first operator to bring fiber to a community creates a significant barrier to entry for competitors.

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The author of this Expert Opinion is Björn Capens, Nokia Fixed Networks European Vice President

In July, the Biden-Harris administration announced another $401 million in funding for high-speed Internet access in rural America. This was just the latest in a string of government initiatives aimed at helping close the US digital divide.

These initiatives have been essential for encouraging traditional broadband providers, communities and utility companies to deploy fiber to rural communities, with governments cognizant of the vital role broadband connectivity has in sustaining communities and improving socio-economic opportunities for citizens. 

Yet there is still work to do, even in countries with the most advanced connectivity options. For example, fixed broadband is missing from almost 30 percent of rural American homes, according to Pew Research. It’s similar in Europe where a recent European Commission’s Digital Divide report found that roughly 18 percent of rural citizens can only get broadband speeds of a maximum 30 Mb, a speed which struggles to cope with modern digital behaviors. 

Appetite for high-speed broadband in rural areas is strong

There’s no denying the appetite for high-speed broadband in rural areas. The permanent increase in working from home and the rise of modern agricultural and Industry 4.0 applications mean that there’s an increasingly attractive business case for rural fiber deployments – as the first operator to bring fiber to a community creates a significant barrier to entry for competitors. 

The first consideration, then, for a new rural fiber deployment is which passive optical network technology to use. Gigabit PON seems like an obvious first choice, being a mature and widely deployed technology. 

However, GPON services are a standard offering for nearly every fiber broadband operator. As PON is a shared medium with usually up to 30 users each taking a slice, it’s easy to see how a few Gigabit customers can quickly max out the network, and with the ever-increasing need for speed, it’s widely held that GPON will not be sufficient by about 2025. 

XGS-PON is an already mature technology

The alternative is to use XGS-PON, a more recent, but already mature, flavor of PON with a capacity of 10 Gigabits per second. With the greater capacity, broadband operators can generate higher revenues with more premium-tier residential services as well as lucrative business services. There’s even room for additional services to run alongside business and residential broadband. For example, the same network can carry traffic from four G and five G cells, known as mobile backhaul. That’s either a new revenue opportunity or a cost saving if the operator also runs a mobile network. 

This convergence of different services onto a single PON fiber network is starting to take off, with fiber-to-the-home networks evolving into fiber for everything, where homes, businesses, industries, smart cities, mobile cells and more are all running on the same infrastructure. This makes the business case even stronger. 

Whether choosing GPON or XGS-PON, the biggest cost contributor is the same for both: deploying fiber outside the plant. Therefore, the increased cost of XGS-PON over GPON is far outweighed by the capacity increase it brings, making XGS-PON the clear choice for a brand-new fiber deployment. XGS-PON protects this investment for longer as its higher capacity makes it harder for new entrants to offer a superior service. 

It also doesn’t need to be upgraded for many years, and when it comes to the business case for fiber, it pays to take a long-term view. Fiber optic cable has a shelf-life of 75 or more years, and even as one increases the speeds running on fiber, that cable can remain the same.  

Notwithstanding these arguments, fiber still comes at a cost, and operators need to carefully manage those costs in order to maximize returns. 

Recent advances in fiber technology allow operators to take a pragmatic approach to their rollouts. In the past, each port on a PON server blade could only deliver one technology. But Multi-PON has multiple modes: only GPON, only XGS-PON or both together. It even has a forward-looking 25G PON mode. 

This allows an operator to easily boost speeds as needed with minimal effort and additional investment. GPON could be the starting point for fiber-to-the-home services, XGS-PON could be added for business services, or even a move to 25G PON for a cluster of rural power users, like factories and modern warehouses – creating a seamless, future-proof upgrade path for operators. 

The decision not to invest in fiber presents a substantial business risk

Alternatively, there’s always the option for a broadband operator to stick with basic broadband in rural areas and not invest in fiber. But that actually presents a business risk, as any competitor that decides to deploy fiber will inevitably carve out a chunk of the customer base for themselves. 

Besides, most operators are not purely profit-driven; they too recognize that prolonging the current situation in underserved communities is not great. High-speed broadband makes areas more attractive for businesses, creating more jobs and stemming population flows from rural to urban centers. 

But rural broadband not only improves lives, but it also decreases the world’s carbon emissions both directly, compared to alternative broadband technologies, and indirectly by enabling online and remote activities that would otherwise involve transportation. These social and economic benefits of fiber are highly regarded by investors and stockholders who have corporate social responsibility high on their agendas. 

With the uber-connected urban world able to adopt every new wave of bandwidth-hungry application – think virtual reality headsets and the metaverse – rural communities are actually going backwards in comparison. The way forward is fiber and XGS-PON. 

Björn Capens is Nokia Fixed Networks European Vice President. Since 2017, Capens has been leading Nokia’s fixed networks business, headquartered in Antwerp, Belgium. He has more than 20 years of experience in the fixed broadband access industry and holds a Master’s degree in Electrical Engineering, Telecommunications, from KU Leuven. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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Expert Opinion

Johnny Kampis: Federal Bureaucracy an Impediment to Broadband on Tribal Lands

18% of people living on Tribal lands lack broadband access, compared to 4% of residents in non-tribal areas.

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The author of this expert Opinion is Johnny Kampis, director of telecom policy for the Taxpayers Protection Alliance

A new study from the Phoenix Center finds that as the federal government pours tens of billions of dollars into shrinking the digital divide in tribal areas, much of that gap has already been eliminated.

The report, and a second from the U.S. Government Accountability Office, are more indications that regulations and economic factors that include income levels continue to hamper efforts to get broadband to all Americans.

The Infrastructure Investment and Jobs Act of 2021 allocated $45 billion toward tribal lands. This was done as part of a massive effort by the federal government to extend broadband infrastructure to unserved and underserved areas of the United States.

George Ford, chief economist at the Phoenix Center for Advanced Legal & Economic Public Policy Studies, wrote in the recent policy bulletin that while there is still plenty of work needed to be done in terms of connectivity, efforts in recent years have largely eliminated the broadband gap between tribal and non-tribal areas.

Ford examined broadband deployment around the U.S. between 2014 and 2020 using Form 477 data from the Federal Communications Commission, comparing tribal and non-tribal census tracts.

Ford points out in the bulletin that the FCC has observed several challenges for broadband deployment in tribal areas, including rugged terrain, complex permitting processes, jurisdictional issues, a higher ratio of residences to business customers, higher poverty rates, and cultural and language barriers.

Ford controlled for some of these differences in his study comparing tribal and non-tribal areas. He reports in the bulletin that the statistics suggest nearly equal treatment in high-speed internet development.

Encouraging results about availability of broadband in Tribal areas

“These results are encouraging, suggesting that broadband availability in Tribal areas is becoming closer or equal to non-Tribal areas over time, and that any broadband gap is largely the result of economic characteristics and not the disparate treatment of Tribal areas,” Ford wrote.

But he also notes that unconditioned differences show a 10-percentage point spread in availability in tribal areas, which indicates how much poverty, low population density, and red tape is harming the efforts to close the digital divide there.

“These results do not imply that broadband is ubiquitous in either Tribal or non-Tribal areas; instead, these results simply demonstrate that the difference in availability between Tribal and non-Tribal areas is shrinking and that this difference is mostly explained by a few demographic characteristics,” Ford wrote.

In a recent report, the GAO suggests that part of the problem lies with the federal bureaucracy – that “tribes have struggled to identify which federal program meets their needs and have had difficulty navigating complex application processes.”

GAO states that 18 percent of people living on tribal lands lack broadband access, compared to 4 percent of residents in non-tribal areas.

The GAO recommended that the Executive Office of the President specifically address tribal needs within a national broadband strategy and that the Department of Commerce create a framework within the American Broadband Initiative for addressing tribal issues.

“The Executive Office of the President did not agree or disagree with our recommendation but highlighted the importance of tribal engagement in developing a strategy,” the report notes.

That goes together with the GAO’s dig at the overall lack of a national broadband strategy by the Biden Administration in a June report. As the Taxpayers Protection Alliance reported, the federal auditor noted that 15 federal agencies administer more than 100 different broadband funding programs, and that despite a taxpayer investment of $44 billion from 2015 through 2020, “millions of Americans still lack broadband, and communities with limited resources may be most affected by fragmentation.”

President Biden has set a goal for universal broadband access in the U.S. by 2030. These recent reports show that the federal bureaucracy under his watch needs to do a better job of getting out of its own way.

Johnny Kampis is the director of telecom policy for the Taxpayers Protection Alliance. This piece is exclusive to Broadband Breakfast.

Broadband Breakfast accepts commentary from informed observers of the broadband scene. Please send pieces to commentary@breakfast.media. The views reflected in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

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