SATT Seeks $1.8M RDOF Transfer to Avoid FCC Default Penalties

WASHINGTON, August 27, 2024 – Internet Service Providers on the receiving end of broadband subsidies but can't meet their commitments basically have two options: return the locations and pay a fine, or transfer the locations to another ISP.

More and more ISPs in a jam are going with the latter option.

A recent example involved Southwest Arkansas Telephone and Television (SATT), which is seeking to transfer its awarded broadband project under the Rural Digital Opportunity Fund (RDOF) to another ISP - South Central Connect in Arkansas.

This proposed transfer, involving approximately $1.8 million in RDOF support for 453 locations, highlighted ongoing challenges faced by many RDOF recipients as they grapple with unforeseen circumstances, including rising costs.

The RDOF, a $20.4 billion initiative aimed at expanding high-speed fixed broadband service to rural homes and small businesses that lack it, has encountered obstacles since its inception. 

About a third of the $9.2 billion initially awarded under RDOF has already been defaulted on, as providers across the country cite skyrocketing deployment costs that have made it difficult, if not impossible, to fulfill their obligations. The program has also faced criticism for awarding duplicative broadband grants in certain service areas, further complicating the broadband expansion efforts.

As the FCC reviews SATT’s application for this transfer to South Central Connect the outcome could have broader implications for other RDOF recipients struggling under similar circumstances.

With the agency recently deciding not to grant blanket amnesty for RDOF defaulters, companies like SATT, a wholly-owned subsidiary of Southwest Arkansas Electric Cooperative Corporation, was apparently among those providers feeling the pressure. 

By transferring its RDOF obligations to South Central Connect, the company would sidestep the steep penalties associated with defaulting on the program.

South Central Connect, previously authorized by the FCC to receive over $20 million in RDOF support and additional funds from the Connect America Fund Phase II Auction, has been deemed an experienced player in the Arkansas broadband market.

South Central Connect offers gigabit-speed fiber to 1.1% of the state's population, focusing on the southwest central region, including cities like Arkadelphia and Friendship. Meanwhile, SATT serves a smaller portion of Arkansas, just 0.4% of state residents, with its services extending deeper to include areas near the Texas border, such as Alleene and Mineral Springs. The two providers' coverage areas are adjacent, with South Central Connect's territory largely bordering SATT's.

Upon review, both SATT and the FCC determined that the transfer of SATT's RDOF award to South Central Connect posed no public interest harms and aligned with public interest.

The transfer of these serviceable locations is now contingent on South Central Connect submitting a Letter of Credit and a Bankruptcy Opinion Letter to the Universal Service Administrative Company for approval.

Once approved, USAC will begin transferring all future and withheld payments to South Central Connect, ensuring the buildout proceeds as planned, with the original fiber-to-the-premises technology intact.