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Providers Increasingly Vocal in Raising Concerns About Rural Digital Opportunity Fund Auction

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February 11, 2021—Broadband providers are becoming increasingly vocal in their concerns over some of the winning bidders in the first phase of the Rural Digital Opportunity Fund that was completed last year.

In late 2019, the Federal Communications Commission announced that it would put more than $20 billion towards the expansion of broadband service in rural areas over the next ten years. Phase I of the program began in October of 2020, when the FCC began a reverse auction of the regions in need of coverage to broadband providers.

A reverse auction is the process by which the FCC opens with an initial bid for a region or locality and prospective broadband providers provide bids for what they would charge to provide broadband access to that area. Results from these auctions were made public in December of 2020.

Mammoth Networks CEO Brian Worthen said that his company participated in a few bids, principally in the Rocky Mountain region across three states. Mammoth Networks is a broadband provider based out of Wyoming. The company says it prides itself on covering hard to reach regions that other providers “shy away from.” He indicated that while he felt that the FCC’s auction process was well run and Mammoth Networks was the recipient of a contract, he was left somewhat confused by some of the contracts awarded.

Worthen’s chief concern was that many of the small broadband providers that were awarded contracts would not actually be able to fulfill them, and as a result would just end up “squatting” on the regions they were meant to serve.

Daniel Friesen, managing member and innovation officer with Ideatek Telcom, echoed Worthen’s confusion. “We were scratching our heads through the process,” Friesen said. Ideatek Telcom operates exclusively within Kansas, and as such expected to secure a contract in the state. Friesen indicated that the company was bewildered with the contract they received. “We really weren’t a major awardee,” Friesen stated. “Obviously it was disappointing for us.”

Friesen observed bidding that took place at the gigabit level was somewhat presumptuous. “I think one of the biggest elephants in the room here is the gig level with fixed wireless providers.”

The FCC seemed to just assume that these small providers possessed the technology and scale to fulfill their obligations, he said. It was shocking to see how low the bidding got in the midwest, and he added, “At [the level they were bidding] you might as well just do it for free.”

The impact of broadband mapping on the Rural Digital Opportunity Fund

Worthen commented that as the size of the broadband provider decreases often times the quality of their mapping does as well. He stated that he had come across small providers who did not file Form 477s with the FCC. Form 477 is a mandatory report that broadband providers must provide the FCC that outlines the extent of their coverage operations. Without accurate data, the FCC is working with outdated information. “The real dichotomy here is the FCC is operating on these [broadband] maps that aren’t encompassing what’s happening in rural America.”

Others were more optimistic about the awards. Brian Regan of Starry Inc. stated that Starry’s contract had him excited. As a business, Regan said that Starry aims to provide robust broadband coverage for those living in affordable housing. He explained that Starry received a contract that covered over 100,000 locations across nine states.

Regan emphasized that this endeavor needs to be viewed overall as a success. “The result of this [program] is that millions of locations across the country are going to get service that weren’t going to get it before,” even if there were some instances of failed broadband implementation on the peripheries. Regan stated that even if some broadband providers defaulted on their contracts or failed to perform, the initiative should still be considered a success.

Even with the issues surrounding the allocation of funds and the potential inaccuracy of mapping, most of the panel agreed that going through the first phase of the program was the right decision.

As a child of American parents working abroad, Reporter Ben Kahn was raised as a third culture kid, growing up in five different countries, including the U.S.. He is a recent graduate of the University of Baltimore, where he majored in Policy, Politics, and International Affairs. He enjoys learning about foreign languages and cultures and can now speak poorly in more than one language.

Universal Service

Advocates Call for Universal Service Fund to Include Broadband Revenues

Letter cites Carol Mattey report, which recommends broadening the base.

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Carol Mattey of Mattey Consulting LLC

WASHINGTON, November 29, 2021 – A broad swath of organizations on Monday is calling for policymakers in Washington to reform and stabilize the Universal Service Fund by broadening its funding base to include broadband revenues.

The Universal Service Fund, which supplies the nation’s low-income and rural and remote communities with basic telecommunications services, currently relies on voice service revenues, which has been a dwindling for years. Debate has emerged about how the fund can be stabilized, with some asking for the money to come from a congressional budget item and others asking for it to come from broadband revenues.

The latter is being recommended by over 254 organizations, including public interest groups, anchor institutions, trade associations and broadband service providers, in a Monday call to action letter to policymakers in Washington. The letter cites a September report by Carol Mattey, a former deputy chief of the Federal Communications Commission, which said broadband revenues should be incorporated into the USF base of money to draw upon.

“Unfortunately, this universal service system is in danger of collapse because the mechanism that funds it has not been updated since it was adopted nearly 25 years ago,” the letter said. The USF program is a relic from 1997 and a product of the Telecommunications Act of 1996.

The letter features organizations including Public Knowledge, the Schools, Health and Libraries Broadband Coalition, Gigabit Libraries Network, California Emerging Technology Fund, and a number of telecoms and telecom associations and anchor institutions from over a dozen states.

The contribution percent – the percent providers must pay of their voice revenues – has reached an all-time high in the second quarter this year, at 33.4 percent in the second quarter this year, and decreased slightly after that. Mattey and the signatories, however, warn that the contribution could soar as high as 40 percent in the coming years, as the fund operates at around $10 billion annually.

Citing the Mattey report, the letter suggests that including broadband revenues into the fund would reduce the USF fee to less than 4 percent, adding it would not stunt broadband adoption or retention, as fees are often passed down to customers.

“Our recommendation would reduce regulatory uncertainty, would better reflect evolving uses of services, would be straightforward to administer, and would be more equitable and nondiscriminatory for residential and business consumers than the current system,” the letter said.

“Moreover, the Federal Communications Commission could make this change under its existing authority without requiring new legislation,” the letter added, as Mattey and Greg Guice, Public Knowledge director of government affairs, said at a conference recently.

FCC Commissioner Brendan Carr suggested earlier this year that Big Tech companies like Google, Apple, and Facebook should contribute to the fund because they benefit from broadband services. FCC Chairwoman Jessica Rosenworcel called the idea “intriguing,” while FCC Commissioner Nathan Simington also raised the idea at an event in September.

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Universal Service

Experts Urge FCC Unilaterally Broaden Revenue Base of Universal Service Fund

Consultants say the Federal Communications Commission has the authority to do so.

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Carol Mattey and Greg Guice at INCOMPAS event on October 25.

WASHINGTON, November 3, 2021 – Telecommunications experts are recommending that the Federal Communications Commission unilaterally expand the revenue base of the Universal Service Fund to include broadband revenues, rather than waiting on Congress to do so.

Advocates such as Public Knowledge Director of Government Affairs Greg Guice cite congressional infighting over the bipartisan infrastructure bill as an example of inefficiency in the legislature that would stall the passage of urgent reform for the USF, a fund that helps deliver basic telecommunications services to low-income Americans and those in remote regions.

Telecommunications policy experts said at the INCOMPAS Show in Las Vegas October 25, on which Guice was a panelist, that it is essential that the USF force broadband revenues into the pool of funds, as the fund’s overreliance on voice revenues – even as those revenues decline – is putting a strain on the programs.

Guice and Carol Mattey, principal of Mattey Consulting LLC and former deputy chief of the FCC, told Broadband Breakfast Tuesday that the agency has the jurisdiction to broaden the base of the contribution to the USF under the Telecommunications Act of 1996 if it is in the public interest.

“My view is the FCC has the statutory authority to assess broadband internet access service,” said Mattey in an email. “Under existing law — specifically, section 254(d) of the Telecommunications Act of 1996 —  the FCC has the statutory authority to require any ‘providers of interstate telecommunications’ to contribute to the universal service fund if the public interest warrants.

“The FCC has classified broadband internet access service as an information service,” she added. “Under the ’96 Act, the definition of an information service is a service that offers the capability to generate, acquire, store, transform, etc. etc. information ‘via telecommunications.’”

Recommendations for reform

Mattey published a report in September that laid out the case for the fund to be expanded to incorporate a broadband range of money sources, including broadband.

And there has been no shortage of recommendations to help the fund prosper. Earlier this year, a panel of experts debated the merits of having Congress wholly assume contributions to the fund from general tax dollars, while others suggested that recommendation would destabilize the fund because it would swing with the political winds. Those people, instead, focused on simply broadening the base to include other sources, including broadband.

More recently, FCC Commissioner Brendan Carr penned an op-ed in Newsweek recommending the fund include contributions from Big Tech because that industry benefits from broadband. It was a suggestion that FCC Chairwoman Jessica Rosenworcel called “intriguing.”

But while Guice and Mattey argue for the FCC to step in and make changes unilaterally, in a one-on-one interview with the Internet Innovation Alliance in September, FCC Commissioner Nathan Simington – in pontificating about Carr’s recommendation for Big Tech contributions – said he didn’t want to get ahead of Congress on the matter, suggesting a wait and see approach.

USF in need of change

Over the last two decades, the USF has seen the revenues subject to its assessment decline by 63%. This money goes to support four main programs: high cost support for rural areas, Lifeline for low income areas, the E-rate program for schools and libraries as well as a rural healthcare support program.

This year, the contribution percentage relative to revenues hit an all time high.

The panel at the INCOMPAS show pinpointed the major factor behind declining USF revenues as decreases in mobile service revenues due to providers setting lower mobile rates. These decreases come despite continual increases in communications revenues overall.

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Funding

FCC Announces $163 Million in Second Round of Approved RDOF Funding

The agency is reevaluating winning bids after asking providers to ensure census blocks aren’t already served.

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Acting FCC Chairwoman Jessica Rosenworcel

WASHINGTON, October 7, 2021 – The Federal Communications Commission announced Thursday another approved round of funding from the $9.2-billion Rural Digital Opportunity Fund.

The $163 million in approved money will go to 42 providers who will drive fiber to the home for gigabit services covering 65,000 locations in 21 states over the next ten years, the FCC said Thursday.

“More help is on the way to households without broadband,” said FCC Acting Chairwoman Jessica Rosenworcel in a press release Thursday. “This is an important program for getting more Americans connected to high-speed internet, and we are continuing careful oversight of this process to ensure that providers meet their obligations to deploy in areas that need it.”

The FCC in July asked that providers conduct an assessment in areas for which they won money from the fund in December, because complaints emerged that the approved areas were already served with adequate connectivity.

The commission said 85 bidders chose not to pursue their bids in 5,089 census blocks because those areas were either served or could be wasted. Some attributed their enlightenment to updated FCC maps based on Form 477 data, an often criticized form of data collection that is reliant on service provider data.

The last round of approved money was last month, when the FCC approved a further 13 bidders.

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