The announcement coincided with news of another service provider failing to fulfill their initial bid within the program. Wavelength, a service provider from Arizona, defaulted on its commitment to deploy services to 12,418 locations, after failing to demonstrate its financial qualifications to receive RDOF support adequately. 

Three years prior, the FCC had announced granting RDOF awards totaling $9.2 billion in Phase I of the auction. However, following the comprehensive long-form process, the final awards amount to slightly over $6 billion. This indicates that more than $3 billion, or one-third, in awards were defaulted on, meaning that the bidder couldn’t fulfill the promised project.

The FCC has faced considerable backlash for what critics say is an insufficient screening of applicants and overreliance on winning bidders’ long-form submitted after the auction.

Three of the initial largest winning RDOF bidders, LTD Broadband, SpaceX, and fixed wireless startup Starry, contributed to nearly $2.5 billion in defaults, with several smaller defaults also recorded.

A total of 379 of the original 427 long-form applicants have successfully secured winning bids, with 97 percent of locations covered by winning bids for Gigabit speed service. 

Notable winners include Charter Communications, bidding as CCO Holdings, securing a significant $1.1 billion to deploy services to over 993,000 locations spread across 24 states. 

The Rural Electric Cooperative Consortium, with more than 90 participating electric cooperatives across 22 states, brought in $1.05 billion to serve nearly 600,000 locations.

Windstream Communications acquired $522 million to serve 192,501 locations, while AMG Technology Investment Group, bidding for Nextlink, won $428.9 million to serve 205,000 locations. Frontier obtained $427.8 million for 148,000 locations, and CenturyLink secured $262 million for service areas spanning 20 states.

There has been no word on what will happen with the more than $3 billion in defaulted RDOF funds. RDOF was originally budgeted for $20.4 billion, but it’s not clear when or if the remaining money will be awarded.

Service providers that default on RDOF bids are subject to a $3,000 base violation charge, with additional violations for each census block group forfeited in a bid.

The USF spends about $8 billion annually to fund four internet subsidy programs for rural infrastructure, low-income households, schools and libraries, and healthcare providers. It has been funded since 1996 by fees on phone bills from voice providers, with the Federal Communications Commission’s Universal Service Administrative Company responsible for collecting and distributing the money.

Consumers’ Research, along with other conservative groups, has been on a legal offensive against the USF, filing multiple federal suits alleging the fund is unconstitutional and taking the chance to air its concerns again in October by challenging the FCC’s contribution factor for this quarter. 

In each suit – two pending before the Fifth Circuit and one pending before the D.C. Circuit, with another struck down by the Sixth Circuit in May – the group argues that Congress did not put proper guardrails on the commission’s authority to collect the fund and that the FCC abused what authority it does have by handing responsibility to USAC.

The Eleventh Circuit disagreed. In a ruling issued on December 14, the judges found that Section 254 of the Telecommunications Act of 1996, which sets out the commission’s USF responsibilities, is in line with statutes that have survived similar challenges in the past. 

Section 254 directs the FCC to collect fees from telecommunications carriers to support universal service for low-income and rural areas, and to implement policies around the fund that are “necessary and appropriate for the protection of the public interest, convenience, and necessity.” Consumers’ Research alleged this is too broad to satisfy the nondelegation doctrine, a legal standard which requires Congress to articulate an “intelligible principle” when delegating duties to federal agencies, but the Eleventh Circuit found the law meets that standard.

The court also ruled that the FCC oversees USAC closely enough that the fund is still functionally under the agency’s control, not improperly delegated to a third party as the suit alleged.

That follows similar reasoning to the Sixth Circuit’s decision and an initial ruling from the Fifth Circuit. But the Fifth Circuit agreed in July to rehear the case with a full panel of five judges, signaling a potential reversal of its previous decision. Oral arguments took place in September and no ruling has been issued yet.

In a concurring opinion, Eleventh Circuit Judge Kevin Newsom expressed dissatisfaction with the precedent that kept Section 254 standing, saying its “mealymouthed shibboleths provide no meaningful constraint,” but that statutes he finds similarly vague have been found to provide enough guidance to avoid being struck down.

If the Fifth Circuit were to find the law in violation of the nondelegation doctrine, it would tee the issue up for potential review by the Supreme Court.

The leader, Adam Geisler, president and chief operating officer of Tribal Ready, said that the digital divide persisted on tribal lands partly because federal agencies and internet providers haven’t met funding and deployment obligations.

In the “Ask Me Anything” event, Geisler, a member of the La Jolla Band of Luiseño Indians, discussed his journey from being tribal leader to a division chief for tribal broadband connectivity at the National Telecommunications and Information Administration, and eventually to his role at Tribal Ready.

Geisler emphasized the importance of understanding tribal sovereignty, which he described as the ability of tribes to govern their people, lands, and processes. He highlighted the unique political standing of tribes in the United States and their relationship with the federal government.

One critical aspect of this is the importance of tribal data sovereignty, which involves control over the collection, access, and use of data related to tribes.

In addition to the federal government’s failure to uphold its trust responsibilities, industry broadband has had shortcomings despite being subsidized. Federal funding alone will not close the digital divide without policy and statute revisions for flexibility and practical application, he said.

Geisler also touched on the successful allocation of the 2.5 GigaHertz (GHz) band of spectrum to tribes, viewing it as a step in the right direction but insufficient in fully addressing connectivity needs.

He advocated for a mixed-technology approach to broadband solutions, recognizing that different technologies like fiber, wireless, and satellite can complement each other to provide comprehensive coverage.

The Universal Service Fund is a roughly $8 billion annual broadband subsidy for low-income households, schools, libraries, and healthcare providers. It’s funded by fees on voice service providers, leading to talks of reform as voice revenues decline and broadband adoption increases.

The Federal Communications Commission administers the fund, but has left it to Congress to change the USF’s contribution base, citing doubts about the agency’s legal authority to make that change on its own.

A Senate working group, which does not include the senators who proposed the new legislation, has been evaluating potential reforms to the fund since May.  

Commenters to that working group largely supported fees on broadband providers as a more sustainable long-term solution for the fund. A more contentious point has been whether or not to call on some tech companies to contribute as well.

The argument is that tech companies which operate largely online, like Google and Amazon, should pay into the USF because they benefit so directly from more people being able to access broadband. 

Tech companies have opposed the proposition, saying broadband companies are a more stable source of funding. FCC Commissioner Brendam Carr and broadband companies publicly support the idea.

So does the bill proposed on Thursday. It would direct the FCC to expand the USF contribution base to both broadband and online tech companies, known as “edge providers.” Those edge providers would be limited to companies responsible for more than 3% of the country’s internet traffic and with more than $5 billion in annual revenue.

Multiple broadband industry groups came out in support of the legislation, including USTelecom, which represents major providers like AT&T and Lumen, and two rural broadband coalitions.

Conservative groups are also challenging the USF in court. The right-wing nonprofit Consumers’ Research and other organizations currently have four pending suits alleging the fund is unconstitutional.

They argue Congress gave the FCC unfettered authority to collect a tax by establishing the fund in 1996, and that the FCC abused that authority by delegating USF management to a nonprofit under the commission’s control.

The Fifth Circuit Court of Appeals reheard one such case with a full panel of judges on September 19 and has yet to issue a ruling. The Sixth Circuit struck down a petition from the group in May, while the Eleventh and D.C. circuits also have yet to issue rulings. 

Senators Markwayne Mullin, R-O.K., Mark Kelly, D-A.Z., and Mike Crapo, R-I.D., proposed the bill. Kelly, along with Senate working group leader Ben Luján, D-N.M., reintroduced another bill in March that would also direct the FCC to research the feasibility of tapping big tech for funds.

Bipartisan legislation from Congress made it clear that states needed to offer a low-cost broadband plan to residents to qualify for BEAD funding. For the uninitiated, the ACP is a $30-a-month subsidy that an eligible consumer can use towards any broadband plan a participating service provider offers.

In fact, many providers have started offering broadband plans at a $30 price point so the effective cost of broadband to the consumer is zero. Using ACP is an easy way for ISPs to meet the affordability requirement, a “short-hand” of sorts for them to offer affordable plans using an existing — and successful — model.

However, the ACP is expected to exhaust its funding in the first half of next year, leaving a potentially disastrous scenario for families who may have little savings or discretionary income. Ultimately allowing the ACP to end leaves a crucial question unanswered: what good are networks if people cannot afford to connect to them?

During a congressional oversight hearing in May, National Telecommunications and Information Agency Administrator Alan Davidson explained to Members of Congress that the BEAD program will be negatively impacted if continued funding for the ACP is not found. He emphasized that for low-income rural Americans, the ACP is the lifeline ensuring they can afford to access the internet. Without it, some providers may hesitate to deploy in rural areas over fear that the investment will be sustainable. Subscribership concerns may prove to be a limiting factor on which rural areas are served.

The ACP extends every BEAD dollar further. A study conducted by Common Sense Media found that the ACP could reduce the BEAD subsidy needed to incentivize providers to build in rural areas by up to 25% per year. According to the study, ACP reduces the per-household subsidy required to incentivize ISP investment by $500. Simply put, ACP improves the economic case because it 1) effectively lowers the cost of service, 2) creates a customer base with less churn, and 3) makes subscribers easier to acquire because of the massive public and private investment in raising awareness for the program.

But if the ACP is allowed to end, the federal government could end up overspending on every broadband deployment made through BEAD. This ultimately means BEAD networks will fail to connect millions of Americans.

The ACP is more than a simple affordability program; for over 21 million households; it’s a gateway to our ever-increasing digital society. Without it, millions of Americans will be unable to see doctors, visit with family, shop, and engage with their communities online. At the same time, the ACP plays a significant role in future infrastructure deployment. Allowing the ACP to end all but ensures that millions will be disconnected and future funding dollars won’t go the distance to close the digital divide.

Ryan Johnston is senior policy counsel at Next Century Cities. He is responsible for NCC’s federal policy portfolio, building and maintaining relationships with Federal Commissions Commission officials, members of Congress and staff, and public interest allies. Working with various federal agencies, Ryan submits filings on behalf of NCC members on technology and telecommunications related issues that impact the digital divide such as broadband data mapping, benchmark speeds, spectrum policy, content moderation, privacy, and others. 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 expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

The FCC has said in its approved rules it will accept legitimate logistic and economic barriers as defenses from companies accused of discriminatory practices, and will evaluate those claims on a case-by-case basis. Companies found to be in violation of the new rules will be subject to the commission’s existing enforcement measures.

The measure, proposed in October, passed on party lines, with the three Democratic commissioners voting in approval and the two Republicans dissenting. 

“Many of the communities that lack adequate access to broadband today are the same areas that suffered from longstanding patterns of residential segregation and economic disadvantage,” said FCC Chairwoman Jessica Rosenworcel. 

In adopting the order, the commission will also begin accepting comments on establishing a civil rights office within the agency and imposing additional reporting and compliance requirements on broadband providers.

The commission was required by the Infrastructure, Investment and Jobs Act to develop policies to prevent gaps in broadband access among different races, ethnicities, income levels, and other demographic characteristics – known as digital discrimination. Its adoption of those rules comes on the two-year anniversary of the IIJA, the deadline set by the law.

In an update to the public draft that was released in October, the approved rules exempt providers participating in the $42.5 billion Broadband Equity, Access and Deployment program and the FCC’s Universal Service Fund. The policies of those programs, commissioners said, already prevent disparate deployment in service areas that are difficult or expensive to reach.

Industry groups have been lobbying against the rules, meeting with commission staff repeatedly in recent weeks to advocate a lighter touch. Civil rights groups have applauded it, making a push of their own to urge commissioners to stand firm.

The Joe Biden administration also supports the rules, asking commissioners to adopt a similar digital discrimination framework weeks before Rosenworcel’s announcement.

The commission approved additional measures at its November 15 open meeting, including an order aimed at protecting victims of domestic violence, an inquiry into artificial intelligence’s impact on robocalls, and an order addressing SIM swap fraud.

Safe Connections Act

The commission adopted an order implementing the 2022 Safe Connections Act, a law aimed at protecting the privacy of abuse survivors.

The order requires mobile providers to allow domestic abuse victims to quickly separate phone lines from family plans. It also requires providers to omit from customer-facing logs any records of calls or texts to abuse hotlines. 

Large and medium-sized providers will have 12 months to comply with these requirements, while small carriers will have 18 months.

Abuse survivors will be able to receive six months of support from the FCC’s Lifeline program, a monthly internet discount funded by the Universal Service Fund.

Artificial intelligence and robocalls

The commission voted to move forward with a notice of inquiry on using artificial intelligence to prevent robocalls.

Commissioners will seek comment on which AI technologies are relevant to the FCC’s authority to protect consumers from scam calls. That will include feedback on how AI could be used to help the commission combat robocalls, and on how it could be used by bad actors to facilitate those calls now and in the future.

The move comes as the FCC has taken an aggressive stance on scam calls, moving in October to block call traffic from 20 companies for lax enforcement policies and extending in August strong identity verification requirements to a wider array of voice providers.

It will also seek input on verifying AI-generated voices and texts from callers or trustworthy entities legitimately using such tools.

SIM swap and port-out fraud

The FCC also voted to adopt an order addressing two common cell phone scams: SIM swap fraud and port-out fraud.

SIM swap fraud involves scammers transferring a victim’s account from one subscriber identity module, or SIM, generally a physical card used to verify a user’s identity, to another SIM out of the victim’s control. 

Port-out fraud involves scammers opening an account with a different wireless provider and arranging for a victim’s number to be transferred – or ported out – to the new provider.

Both allow scammers to pose as their victims online.

The new rules set up a framework for preventing this kind of fraud that, among other measures, requires providers to notify subscribers whenever a SIM change or port-out request is made. The order also kicks off an inquiry into harmonizing these rules with existing FCC and government policies.

Democratic lawmakers sought $100 billion, while their Republican counterparts countered with $65 billion, saying the former’s proposal was wasteful and excessive. The final score was $65 billion, with $42.5 billion of that earmarked for infrastructure in the Broadband Equity, Access and Deployment program, or BEAD.

Crucially, the BEAD program adopted a new definition of what adequate broadband would look like: 100 Megabits per second download and 20 Megabits per second upload.

It turns out, that speed threshold is serving as a key reason why money from BEAD and other programs will be used to cover already-subsidized projects under an older Federal Communications Commission program that has only recently completed some broadband builds using older technology.

Broadband Breakfast has analyzed the data and spoke with experts and former FCC officials about the pitfalls and problems with the Connect America Fund Phase II, or CAF II, a $10 billion funding program that started in 2014.

FCC officials working on the program said they knew the 10 Mbps download and 1 Mbps requirement was low and would lead to further subsidization down the road.

But they went ahead with it because they needed a political win after the low adoption of the program’s predecessor: Connect America Fund I.

Right after the program started, the FCC changed broadband speed requirements

The problems started just six weeks after the CAF II program was finalized, when the FCC in 2015 approved a new definition of adequate broadband: an internet connection of at least 25 Mbps download and 3 Mbps download.

Critically, it didn’t migrate the CAF II threshold over to the new definition out of fear it would disincentivize interest in the program.

“In retrospect I can say it was a mistake having 10 * 1 Mbps be the standard for CAF Phase II,” said Carol Mattey, a former FCC bureau chief who worked on the plan.

The program offered large telecommunications companies, called price cap carriers, annual funding in exchange for providing that 10 * 1 Mbps service to rural areas across the U.S. without access to faster connections.

The FCC was desperate for providers to get on the program. It realized that it had many more years to formulate a reverse auction process, which would be used under the program’s successor, the Rural Digital Opportunity Fund, and so it was trying to entice providers to accept money by keeping the speed threshold low.

‘It was scandalous… it was graft’

Instead of waiting to formulate the reverse auction, which involves the providers bidding for the lowest amount of public dollars, they wanted to show that they were committed to connectivity – even when they knew that the speeds were low.

“It was scandalous, what the commission did,” said Jonathan Chambers, the FCC’s policy head during CAF II’s implementation. “It was graft.”

Chambers said he and the economists in his office were opposed to subsidizing price cap carriers at 10 * 1 Mbps from the beginning. He saw it as a giveaway to a powerful industry with too few strings attached.

In 2012 and 2013, the FCC offered price gap carriers a baseline of $750 per location to expand internet at the then-minimum broadband speed of 4 * 1 Mbps under CAF I. Five companies, including AT&T, Lumen, and Frontier, accepted a total of $225 million.

That didn’t feel like much to agency staffers who spent years updating the High-Cost Fund, which had provided companies subsidies with much fewer obligations than CAF I.

“Basically nobody took it,” Mattey said. “At the time, it felt like a failure. We’d gone through all this trouble to reform universal service and nobody wanted the money.”

All that amounted to a situation in which FCC staff felt they needed a success after the lackluster CAF I, according to Mattey. With a competitive bidding procedure known as a “reverse auction” still years away, that meant getting big telecom companies to work with the agency on another round of funding.

Those companies had already pushed back on raising the minimum speed from 4 * 1 Mbps to 10 * 1 Mbps, and setting an even higher benchmark would have risked another round of refused money.

“There was a desire to make this a success,” she said. “Better to take an incremental success than to be bold and have an absolute failure.”

CAF II and CAF I were always intended to be a stepping stone, she said. It would serve as a stopgap measure to get people connected while the agency worked out the process for an auction, in which companies would compete for subsidies with plans for building and maintaining new infrastructure.

But the FCC had never administered a reverse auction for broadband subsidies before, and creating one took time. The CAF II auction, in which areas the price cap carriers turned down were put up for auction, took a total of seven years to put together and was not ready until 2018.

Carol Mattey

Even FCC Chairman Tom Wheeler felt the pressure

Tom Wheeler, the FCC chairman at the time, declined to talk about the negotiations among commissioners and telecom companies. But he told Broadband Breakfast he felt the pressure Mattey described.

He confirmed that the 10 * 1 Mbps benchmark was set as low as it was out of fear the price cap carriers would refuse the money if it meant a more substantial upgrade.

The low benchmark worked. Ten companies accepted a total of more than $1.5 billion each year for the next six years in exchange for getting 10 * 1 Mbps service to more than 3.6 million homes and businesses. They would ultimately build to slightly more locations and get a seventh year of funding at the same amount, for a total of more than $10 billion.

But the tradeoff was ultimately not worth it for Mattey. Upping the standard to 25 * 3 Mbps and letting areas turned down by price cap carriers go to auction would have served them better than funding such low speeds, she said.

Michael O’Rielly, a commissioner at the time, concurred with CAF II’s adoption. He said in public statements at the time that he had reservations about the program’s speed benchmark. But he told Broadband Breakfast that in hindsight he feels the low speeds were better than nothing for unserved areas.

“I’ve seen those that have nothing and can’t get connected,” he said. “If you can give them 10 * 1 they can actually do something with it, even if it’s not everything you can do with 100 * 20.”

Michael O’Rielly

93 percent of locations received service of only 10 Mbps * 1 Mbps

The three biggest winners at the time were Lumen, AT&T, and Frontier Communications. Lumen led the pack with a $514 million annual award, while AT&T and Frontier were given $428 million and $283 million, respectively. Windstream received almost $200 million.

The price cap carriers were supposed to get money each year until 2020, when they were required to have finished deploying upgraded infrastructure in their respective areas. Citing pandemic supply chain issues, they took another year. That meant builds finished as late as 2021 were providing 10 * 1 Mbps service – a technological standard deemed by BEAD to be obsolete.

Companies followed the minimum standard set out in the program. FCC data, reported to the agency by those companies, show more than 93 percent of all locations served with CAF II infrastructure received only 10 * 1 Mbps service.

And that took place after the commission had declared 10 * 1 Mbps as substandard. That 93 percent of locations represents about 3.7 million homes and businesses across the country that are now limited to no more than 10 * 1 Mbps internet service.

Most of those, more than 2.9 million, did not receive service on their internet connections until 2019 or later.

That 10 * 1 Mbps threshold was too low for the program to meaningfully connect people, said former FCC Commissioner Jonathan Adelstein. He left the commission in 2009 to head the Department of Agriculture’s Rural Utility Service, an infrastructure funding agency that supports broadband deployment.

“Well, 10 * 1 was our standard in 2010,” he said. “For people to be building that in 2020 is really inadequate.”

New money being spent to cover the failings of old money

Some of those have already been targeted with more federal money. In 2020, the FCC put areas with internet below 25 * 3 Mbps, including those served by CAF II recipients, up for a reverse auction process, the Rural Digital Opportunity Fund. Under RDOF, companies competed for subsidies with plans to cost-effectively build and maintain new infrastructure.

Winners have been allocated more than $6 billion to build and operate networks over the next 10 years under the RDOF program, according to the FCC, with another $14 billion still earmarked for the program. The minimum speed threshold for the auction was 25 * 3 Mbps, but the fiber being deployed by winners almost always provides speeds far in excess of that.

As part of RDOF, the price cap carriers lost 1.2 million homes and businesses to outside bidders, about a third of their previously subsidized locations. Competitors demonstrated to the FCC they would be able to get better internet for less money to the same areas price caps had been receiving money to serve.

Almost every single winning bidder committed to deploy fiber-optic cable: The fastest, most future-proof technology available.

Lumen, the biggest CAF II recipient, lost more than 250,000 locations through the RDOF process. It beat out competitors for just 19,000 locations.

Frontier lost another 285,000 homes and businesses, beating competitors in more than 10,000.

AT&T lost more than half a million locations in the RDOF auction, winning zero locations.

Those losses came largely at the hands of smaller companies and local cooperatives. Charter, the major cable company, also scooped up locations across the county.

Jonathan Chambers

Is there a silver lining?

CAF II did make some positive changes to broadband subsidies generally, Mattey said. There were no requirements at all for funding recipients before the program, which instituted speed minimums and reporting requirements.

Mattey and others also drew up a process for determining exactly where subsidized companies were operating, which again did not exist before. And then there was the smaller CAF II Auction, which happened in the areas where price cap carriers turned down CAF II funding.

The auction happened in 2018 and got faster service for less money. A total of 100 bidders won $1.49 billion over 10 years to serve more than 700,000 locations. The minimum required speed was still 10 * 1 Mbps, but more than half the winning bidders committed to serve customers with 100 Mbps download, and more than 99 percent committed to 25 * 3 Mbps.

BEAD, the latest round of broadband subsidy, requires minimum speeds of 100 * 20 Mbps and prioritizes fiber. Areas receiving less than 25 * 3 Mbps are designated “unserved” and given special priority for funding. States are not allowed to allocate BEAD money elsewhere until all unserved areas are set to be provided with high-capacity broadband.

FCC data still shows more than 800,000 CAF II-funded locations still have no reliable, fast internet infrastructure nearby, and are not among the 1.2 million with RDOF commitments. That puts them at the front of the line for BEAD funds. It’s not clear whether the remaining 1.6 million homes and business in the proximity of faster technology are themselves being served with that speed, meaning they may well also be slated for more federal funds.

“RDOF and BEAD are wholly replacing these networks,” Chambers said. “The FCC spent more than $10 billion, and what did we get for it? Nothing.”

The task force will ask the FCC and the Department of Agriculture to further improve broadband mapping efforts, prioritize subsidies for broadband on agricultural land, and take a host of other measures to ensure farmers have adequate broadband as the industry relies more on data and analytics.

Mandated by the 2018 Farm Bill, the task force is a joint effort of the FCC and USDA to study connectivity needs for precision agriculture – cultivating crops with the assistance of computational tools – and how to meet those needs in the future.

The task force is made up of subject experts split into four working groups with different focuses: agricultural broadband mapping, connectivity needs for precision agriculture, agricultural broadband deployment, and precision agriculture jobs and workplace standards.

FCC Chairwoman Jessica Rosenworcel rechartered the task force in August for what will be its final term, concluding in 2025.

On the mapping front, the task force will be pushing for higher resolution in the FCC’s BDC map. It will also recommend including more information in the map, like information on where coverage has been validated in the ground and some agriculture-specific building information.

Multiple working groups mentioned reforms to the USDA’s ReConnect program, a broadband subsidy set up by the 2021 Infrastructure Act. Task force staff said it should be amended to focus on funding infrastructure that would connect farms to high-speed broadband.

Those recommendations echo ones the task force put forward in November 2021, when it also asked for improved broadband mapping and data collection in addition to funding incentives.

Task force members also approved language expressing qualified support for the Last Acre Act, a bill introduced in the Senate in July. It would establish a fund under the FCC to provide the support for agricultural broadband projects.

Members had reservations about certain provisions of the law, like stringent eligibility requirements, but supported the spirit of funding broadband on farmland.

The task force will be submitting the approved recommendations to the FCC and USDA next week, said Task Force Chair Teddy Bekele.

Started in 2021 with $14 billion set aside by the Infrastructure, Investment and Jobs Act, the ACP provides over 21 million Americans with a monthly internet subsidy – $30 for low-income families and $75 residents of Tribal lands. The program is set to run out of money in 2024.

That would leave many Tribal residents faced with a voice between their internet bill and other essentials like food and electricity, said Linnea Jackson, the general manager of the Hoopa Valley Public Utilities District.

Her customers “need the internet for everyday life, but they also rely on that benefit” to make their monthly payment, she said at a webinar on Tribal broadband.

Allyson Mitchell, general manager of Tribal broadband provider Mohawk Networks, said the 500 ACP recipients on her networks are similarly reliant on the money to stay connected.

The Biden administration asked Congress last week to shore up the ACP with an extra $6 billion in its next spending package. That, White House estimates, would be enough to continue the program through December 2024.

A bipartisan chorus of lawmakers have been making similar pleas in recent months. Proponents of the program point to its roles in closing the digital divide – allowing low-income Americans to use the broadband infrastructure built with federal funding programs. In September, broadband companies pushed Congress to safeguard the ACP from gridlock on Capitol Hill by rolling it into an annual fund run by the FCC.

With a new speaker elected in the House, Congress has until November 17 to fund the government before the current stopgap measure runs out.

Jackson is hopeful that will include money for the ACP, she said, but she and her colleagues are bracing to make tough decisions if the fund dries up next year.

“We can’t just be providing service at no cost,” Jackson said. “We might have to look at shutting off those people, which is the opposite of what we want to do. We’re trying to serve an underserved community.”

Charter was required to expand its broadband infrastructure to cover 145,000 unserved and underserved locations in Upstate New York as a condition for approval of its 2016 purchase of Time Warner Cable. The company initially missed deployment obligations, but the state extended the deadline in 2019, allowing the company to stay in New York.

Despite the initial hesitance, Charter was happy with the results, said Chris Winfrey, the company’s CEO since December 2021.

“We thought it would be terrible. Turned out it was really good,” he said at the Society of Cable Telecommunications Engineers’ Cable-Tec Expo. “The penetrations were not only high, but they were quick. The cost to serve was low.”

The situation was so favorable for Charter that it became one of the biggest bidders in the federal Rural Digital Opportunity Fund in 2020, ultimately winning over $1.2 billion to serve over one million locations in 24 states. That’s just under the largest award under the program.

Several companies defaulted on RDOF winnings in 2021 after scrutiny around suspected exaggeration in deployment plans and complaints of flawed data collection prior to the program’s auction. Charter was not among them, but asked to be released from its obligations in several states, citing the existing presence of adequate broadband.

Winfrey said he is optimistic about undertaking more rural projects with the coming influx of public grant money. 

“This is a unique moment. I think we should take advantage,” he said.

The Joe Biden administration’s $42.5 billion Broadband Equity, Access and Deployment program is getting underway, with states submitting initial proposals to the National Telecommunications and Information Administration until December 27. One state, Louisiana, has had volume one of that proposal approved and is accepting challenges to broadband map data ahead of awarding grants. 

Some states still have unallocated money from the American Rescue Plan Act that can also be put toward broadband programs.

The ACP, which was initially injected with $14.2 billion, has nearly half of that left and is anticipated to run out of money in early 2024, according to industry experts.

Late last month, the president and CEO of broadband association US Telecom, proposed at a subcommittee hearing that broadening the contribution base to the USF from broadband and Big Tech revenues could allow the umbrella fund to absorb the ACP – instead of the program relying solely on Congress for funding.

Some panelists at the Broadband Breakfast Live Online event, however, warned that bringing the ACP into the USF too quickly would put too much pressure on the fund, while others acknowledged the importance of broadening the revenue base of the USF, which relies on voice service provider contributions.

Jonathan Cannon, policy counsel of technology and innovation at the R Street Institute, argued that using taxpayer dollars to fund either the ACP or the USF, as opposed to relying solely on ISP contributions, might be the way forward to support low-income residents using broadband.

“If we’re talking about expanding the contribution base, then every single American taxpayer is a beneficiary of the broadband service and maybe that’s a better way to generate that revenue,” said Cannon. He was particularly enamored of the ACP because of it is “a tech neutral voucher that flows directly to the customer.”

He and other noted that the Lifeline fund telecom subsidy, which also targets supporting low-income families, only has an enrollment of almost 7 million despite being an option for decades. Despite less than two years of existence, the ACP serves almost 21 million Americans.

Deborah Lathen, president at Lathen Consulting LLC, said that in the short term, it would be better to have Congress appropriate funds for the ACP immediately, while considering USF reform in the long term.

“We’ve been talking about Universal Service reform forever, and I think if you start pulling ACP into it now, that is the quickest way that we will…not have funding,” she said.

Christopher Lewis, President at Public Knowledge urged the Federal Communications Commission, which administers both the ACP and the USF, to use its own authority to alter the USF contribution base. He said all broadband providers should contribute to the USF as a way to reform the fund and sustain the ACP.

Kirsten Compitello, national broadband digital equity director at consulting firm Michael Baker International, a sponsor of Broadband Breakfast, added that if taxpayer dollars are used to support the ACP in some manner, it is important to communicate to individuals that they are making an investment in a “community and social benefit.”

Our Broadband Breakfast Live Online events take place on Wednesday at 12 Noon ET. Watch the event on Broadband Breakfast, or REGISTER HERE to join the conversation.

Wednesday, October 11 – Will the Affordable Connectivity Program be Renewed?

The renewal of the Affordable Connectivity Program has been a subject of considerable ambiguity in recent months. There have been widespread predictions that the program, which offers $30 and $75 monthly internet discounts to low-income households, is likely to dry up in early 2024. While experts have voiced concerns the end of the ACP will spell disaster for ongoing broadband expansion efforts, Congress has yet to take any action to replenish the program. What lies ahead for the ACP and its 19 million beneficiaries across the nation? Join us to hear from experts in the field as we discuss the fate of the ACP and explore potential pathways for promoting digital inclusion in the United States.

Panelists

• Kirsten Compitello, National Broadband Digital Equity Director, Michael Baker International
• Christopher Lewis, President, Public Knowledge
• Jonathan Cannon, Policy Counsel, Technology and Innovation, R Street Institute
• Debra Lathen, President, Lathen Consulting LLC
• Drew Clark (moderator), Editor and Publisher, Broadband Breakfast

Kirsten Compitello serves as Michael Baker’s National Broadband Digital Equity Director and is an experienced Planner with a focus on public engagement, policy, community planning, and visual storytelling. She leads the development of digital navigation and equitable planning tools within Michael Baker’s broadband practice. Her recent work has included BEAD and DEA state plans, a regional broadband connectivity roadmap for PA, digital equity community engagement events, communication and advocacy guides to promote adoption and literacy, and digital navigator program development.

Christopher Lewis is President and CEO at Public Knowledge. Prior to being elevated to President and CEO, Chris served for as PK’s Vice President from 2012 to 2019 where he led the organization’s day-to-day advocacy and political strategy on Capitol Hill and at government agencies. During that time he also served as a local elected official, serving two terms on the Alexandria City Public School Board. Chris serves on the Board of Directors for the Institute for Local Self Reliance and represents Public Knowledge on the Board of the Broadband Internet Technical Advisory Group.

Jonathan Cannon is a policy counsel in technology and innovation at the R Street Institute. He researches and writes policy papers, op-eds and blog posts about significant topics related to technology and telecommunications; engages directly with leaders on key policy issue areas including ACP, net neutrality, spectrum, and broadband deployment.

Deborah Lathen, President of Lathen Consulting, LLC is the former head of the FCC Cable Services Bureau (now Media Bureau) and a seasoned communications and business attorney with vast experience and knowledge about broadband policy.  In 1998 Deorah wrote the first FCC report Understanding Broadband and most recently partnered with Paul Garnett in authoring A Handbook for the Effective Administration of State and Local Digital Equity Programs.

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.

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The Universal Service Fund spends about $8 billion each year to fund four internet subsidy programs for low-income households, schools, libraries, and healthcare providers. While it is now used to provide discounted broadband, it has been funded since 1996 by fees attached to monthly phone bills from voice providers.

Consumers’ Research is continuing an offensive against the program, with three additional pending suits alleging the Universal Service Fund is unconstitutional. Their most recent petition centers on the Federal Communications Commission’s September approval of the fund’s contribution factor – used to determine the money landline companies will pay into the fund – for the last quarter of 2023.

Along with other petitioners, the group is asking the Fifth Circuit to review the approval, taking a chance to raise again issues it has put forth in its other suits. Its main allegation is that in establishing the USF, Congress gave the FCC unfettered authority to collect a tax. The FCC further abused that authority by delegating the collection and administration of the fund to a non-profit under the commission’s control, the petition alleges.

In March, the Fifth Circuit denied a similar petition from the group, ruling both that Congress gave the commission sufficient guidance on how to run the fund and that the FCC has enough control over USAC to delegate responsibilities to the entity.

But the court agreed in July to rehear the case with a full five-judge panel, instead of the three who initially ruled on the matter. Oral arguments took place on September 19. The court has not yet issued a ruling.

The Sixth Circuit issued the group a denial in May, using similar reasoning to the Fifth Circuit’s first ruling.

Consumer’s Research has cases pending in the Eleventh and D.C. Circuits.

A senate working group is exploring potential changes to the USF’s contribution base The FCC has been looking to update to a more sustainable model – like contributions from broadband providers and tech companies – as voice revenues decline, but has left it to Congress to give the commission explicit authority to do so.

The Affordable Connectivity Program provides about 20 million low-income households a $30 monthly internet discount. That money is paid by the government to providers giving those households broadband service.

When customers receiving ACP discounts stop using a provider’s broadband service, the provider is required to report that to the FCC so money is only disbursed for active users. Typically, anywhere from a third to one half of an ACP provider’s subscribers will be de-enrolled each month, according to the report from the Office of the Inspector General.

But the OIG said that it found “dozens” of providers report few, if any, of these lost customers, making it likely the providers are taking government subsidies for broadband service they are not providing. It did not name the providers.

“We strongly suspect [the unnamed providers] are not complying with program usage and related de-enrollment rules,” the OIG wrote.

One company repaid the commission almost $50 million after being approached by the OIG. That’s one third of all ACP subsidies the provider received from June 2021 to July 2022.

The OIG released data from five of the suspect providers showing they failed to de-enroll more than three percent of their monthly subscribers, making them and similar providers outliers among ACP providers. One provider had over 1 million subscribers.

The office said in its report that it has gathered additional evidence of the same providers taking ACP money for subscribers who are not using their service. Those investigations are ongoing.

In 2021, the OIG found similar abuses in the Emergency Broadband Benefit program, a predecessor to the ACP. The office again found dozens of providers reporting more households with dependent children than existed in several school districts.

In response to the report, the FCC released a public notice directing the Universal Service Administrative Company, the arm of the agency responsible for administering the ACP and other broadband subsidy programs, to strengthen its monitoring around de-enrollment and other requirements.

The ACP, a $14 billion fund set aside by the Infrastructure, Investment and Jobs Act, is set to dry up in April 2024. There have been repeated calls for Congress to renew the program.

The industry is concerned that the $14-billion ACP program, which discounts monthly services for low-income Americans and those on tribal lands, is going to run out of money by early next year. Meanwhile, it is universally agreed that the Universal Service Fund, which includes four high-cost broadband programs, is struggling to maintain its roughly $8-billion annual pace without a diversification of its revenue sources.

Jonathan Spalter, president and CEO of USTelecom, told the Communications and Technology subcommittee studying the future of rural broadband on September 21 that Congress could both support the sustainability of the USF and the ACP by forcing contributions from broadband and Big Tech revenues.

The idea is that the extra revenue would solve the USF sustainability question by allowing the fund to continue to support the existing four programs under its purview, while also allowing it to adopt the ACP program, hence removing that program from reliance on Congress for money.

“We can have Congress give the FCC the authorities that it requires to be able to expand the contribution base, integrating the ACP within USF program, and thereby allowing the potentially out of control contribution factor that will potentially bog down the viability and longevity of the Universal Service Fund mechanisms to go down,” Spalter said.

“And in so doing it can expand the contribution base sufficiently to allow not only broadband but importantly the dominant Big Tech companies to participate so that we would effectively fuse the Affordable Connectivity Program with [high-cost program] Lifeline and do so in a way that would actually not require appropriated dollars from Congress.”

The ACP currently has around 21 million Americans signed up, but the FCC says many more are eligible. The commission has been allocating money to outreach groups to market the subsidy program.

While some have argued that the Federal Communications Commission could unilaterally expand the contribution base of the USF, the commission has elected to wait for Congress to make the requisite legislative reforms to give it that authority.

Forcing Big Tech companies, which rely on the internet to deliver their products, has been an idea tossed around by experts and promoted by Federal Communications Commissioner Brendan Carr. Meanwhile, forcing broadband revenues to contribute to the fund has also received good support.

The concern for the ACP program is that the internet service providers rely on the $14 billion to continue to offer discounts.

“With funding set to be depleted early next year, initial notices of service termination could be out during the height of the holiday season in December – that’s a present none of our constituents deserve to receive,” said Congresswoman Doris Matsui, D-Calif.  

“Poverty is everywhere, but higher in rural America, in our region the reason most people can’t adopt service is due to lack of affordability, this impacts more households than lack of infrastructure alone,” said Sara Nichols, senior planner of the Land of Sky Regional Council of Government.

“It’s a program we simply can’t afford to lose,” added Nichols.

Broadband providers building infrastructure with funding from the $42.5 billion BEAD program will be required to participate in the Affordable Connectivity Program. The ACP, comprised of $14 billion set aside by the 2021 Infrastructure, Investment and Jobs Act, provides monthly internet subsidies of $30 for low-income households and $75 for residents of tribal lands and in high-cost areas. 

Federal Communications Commission Chairwoman Jessica Rosenworcel testified to the Senate on September 19 that the money is set to dry up as early as April 2024.

That could prevent people from being able to access the networks built with BEAD funds, said Angie Kronenberg, president of tech trade group INCOMPAS.

“That’s before the network has even been built,” she said of the estimated end date. “We really, really must have this issue addressed.”

A coalition of 45 members of Congress signed in August a letter to House and Senate leadership urging them to find money for the ACP in the appropriations bill that will fund the government for the next year. Congress is likely to miss the October 1 deadline for that bill and trigger a government shutdown.

The Universal Service Fund, which spends roughly $8 billion annually to fund four internet subsidy programs, also has an uncertain future. Lawmakers are looking to change its funding mechanism – currently a tax on voice providers – and conservative groups are challenging the fund in court.

Panelists said the USF subsidies, which help low-income households, healthcare providers, schools, and libraries, in addition to rural providers in expensive-to-serve areas, will be essential for ensuring consistent, long-term access to broadband infrastructure built with BEAD and other federal funds.

“Getting people onto the network is the goal here, it’s not just planting a flag or ‘mission accomplished’ banner for building the network,” said Mike Romano, executive vice president of the Rural Broadband Association.

Scott Woods, president of public-private partnerships at broadband grant company Ready.net, agreed that expanding networks is only part of the goal for the BEAD program.

“We could spend $200 trillion on infrastructure,” he said, “but if the people it’s designed to impact can’t afford it, it’s stranded assets.”

The discussion was moderated by David Bronston, special counsel at Phillips Lytle, LLP.

If you missed the BEAD Implementation Summit, sign up for Broadband Breakfast’s BEAD Starter Pack for $35/month (cancel anytime). You’ll get access to all the videos and each of the three Breakfast Club reports prepared for the BEAD Implementation Summit:

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• August 2023 – Precursors to BEAD Implementation: A Deep Dive Into Prior Broadband Programs
• September 2023 – A Deep Dive into the BEAD Program’s Matching Funds

Already a Broadband Breakfast Club member? Watch the videos!

“Middle mile” refers to the infrastructure running between communities that connects their local networks to the internet backbone. Money from the $42.5 billion Broadband Equity, Access and Deployment program can be used for middle mile infrastructure, but last mile builds — internet connections to individual homes and businesses — are prioritized.

“Middle mile is the problem in terms of affordable rural broadband. Plain and simple,” said Joel Daly, a senior vice president at network company Zayo. “If you’re far away from a major internet exchange, that infrastructure is expensive.” 

The National Telecommunications and Information Administration approved in June nearly $1 billion for middle mile projects, over $90 million of which went to Zayo for projects in three states. All told, the money will fund over 12,000 miles of fiber-optic cable to supplement the BEAD program. 

Laurel Leverrier, the assistant administrator of the US Department of Agriculture’s Rural Utilities Service Telecommunications Program, said her experience working on rural broadband projects reflected Daly’s observation. She recounted laying hundreds of miles of fiber and an undersea cable before even breaking ground on last mile connections in Alaska.

“In a lot of places where we see these unserved locations, it really is the lack of middle mile service that is driving that,” she said. “Oftentimes if there’s a good middle mile facility, companies and communities can extend off of that.”

Keeping additional middle costs down will be key for reaching every unserved area – those with the slowest and sometimes nonexistent internet – panelists said.

Dr. Tamarah Holmes, director of the Virginia Office of Broadband, said her state is facilitating partnerships between utility companies and unserved communities to make use of their existing fiber infrastructure and avoid some of this cost.

Through its Utility Leverage Program, the state is using over 3,800 miles of existing fiber across 17 projects to aid last mile builds. 

“It’s been a game changer for us,” she said.

Chaz Eberle, director of outreach at the Treasury Department’s Capital Projects Fund, a $10 billion program set up with the American Rescue Plan Act, noted that CPF funds can be used to support middle mile builds so long as they directly benefit last mile infrastructure.

He pointed to Tennessee, which was awarded $158 million for middle mile builds under the program. The state pitched these as primers for BEAD projects, but other states have successfully applied by providing evidence of current demand for broadband in unserved areas, Eberle said.

If you missed the BEAD Implementation Summit, sign up for Broadband Breakfast’s BEAD Starter Pack for $35/month (cancel anytime). You’ll get access to all the videos and each of the three Breakfast Club reports prepared for the BEAD Implementation Summit:

• July 2023 – A Deep Dive into Allocations Under the Broadband Equity, Access and Deployment Program
• August 2023 – Precursors to BEAD Implementation: A Deep Dive Into Prior Broadband Programs
• September 2023 – A Deep Dive into the BEAD Program’s Matching Funds

Already a Broadband Breakfast Club member? Watch the videos!

The USF spends roughly $8 billion each year to support four programs that provide internet subsidies to low-income households, health care providers, schools, and libraries. The money comes from a tax on voice service providers, causing lawmakers to look for alternative sources of funding as more Americans switch from phone lines to broadband services.

The Federal Communications Commission administers the fund through the Universal Service Administration Company, but has left it to Congress to make changes to the contribution pool.

The report argues that broadband providers should be one of those sources. It cites the fact that USF funds are largely used for broadband rather than voice services and that broadband adoption is increasing as phone line use decreases.

“The USF contribution base needs to change to account for the fact that connectivity implies not just voice telephone services, but predominantly broadband internet access,” the report says.

It also rebuts arguments for adding tech companies like INCOMPAS members Google and Amazon to the contribution pool, saying they represent a less stable source of income for the program and that added fees for services like streaming could affect . 

The report is the latest salvo in an ongoing dispute between tech companies and broadband providers over who should support the USF in the future, with broadband companies arguing big tech should be tapped for funding as they run businesses on the networks supported by the fund.

Sens. Ben Lujan, D-N.M., and John Thune, R-S.D. established in May a senate working group to explore potential reforms to the program. The group heard comments in August  from associations of tech and broadband companies, each outlining arguments for including the other industry in the USF contribution base.

The calls come weeks after the FCC announced funding offers under the Enhanced Alternative Connect America Cost Model, or Enhanced ACAM. The model allocates support to providers already receiving funding through the Universal Service Fund.

The new allocation of funds takes into account whether an area is already served at the required speed threshold – 100 Mbps download and 20 Mbps upload, faster than the previous Connect America Cost Model – by an unsubsidized provider. Areas the FCC deemed to be served only by an unsubsidized provider were excluded from awards and less money was made available to recipients operating in the same area as an unsubsidized provider.

Providers who were offered Enhanced ACAM funding must accept or decline their offers by September 29, but the FCC will accept challenges from awardees and make adjustments to the awards until 2025.

In a September 15 filing to the FCC, NTCA – The Rural Broadband Association said the process for challenging these determinations is insufficient and urged the agency to require unsubsidized carriers to certify their reported coverage where Enhanced ACAM funds .

The challenge process is lacking, the association said, because it relies on the FCC’s broadband map and the accompanying challenge procedures. 

The map data includes maximum speeds available at a given location, but it does not reflect potential decreases in speed that happen when many people are simultaneously using a fixed wireless network – the technology many rural providers use – and does not include information on standalone voice service, which a provider must offer to meet the agency’s definition of an unsubsidized competitor.

The agency told Enhanced ACAM recipients to submit concerns on these and other issues not captured by the map via public comment in its docket system and to challenge unsubsidized coverage and speeds through its standard broadband map challenge process. 

FCC speed data is also difficult to challenge, the NTCA said in its filing. Challenges alleging a carrier’s provided speed is lower than that recorded in the data cannot be submitted in bulk, but must be submitted individually. That makes it difficult to determine if an unsubsidized provider offers lower speeds than they reported for large areas.

Requiring certifications from unsubsidized providers would provide “a well-structured and well-defined supplemental process,” for submitting challenges to Enhanced ACAM allocations, the association wrote.

The NTCA met with agency officials ahead of the award announcements to ask for the same certification, according to an ex parte filing from July 24.

Agriculture Secretary Tom Vilsack touted the nomination in a statement, saying that Gooden “is a widely-respected, accomplished champion for affordable housing, community advancement, and economic development. His public service career is informed by a lifelong commitment to agriculture and rural development.”

Gooden is the current director of state operations for rural development at USDA.

If confirmed for the position, Gooden would be responsible for overseeing the activities of the Rural Utilities Services, which encompasses the Water and Environment Programs, the Electric Program, and the Telecommunications Program, which is dedicated to improving the quality of life for rural Americans through providing funds to deploy rural telecommunications infrastructure.

The administration may seek additional funding for broadband through the department. RUS Administrator Andy Berke, the former mayor of Chatanooga, Tenn., who also served as a Commerce Department official with the title, “special representative for broadband.”

Running USDA’s Rural Utilities Service Isn’t Andy Berke’s First Act in Broadband

If selected for the position, Gooden would fill the void left behind by Xochitl Torres Small, who resigned from the role and was later confirmed by the Senate as deputy secretary of agriculture this past July.

The fund’s money comes from a tax on voice service providers, putting its future in jeopardy as more Americans switch from phone lines to broadband services. The USF spends roughly $8 billion a year to buoy four programs that provide internet subsidies to low-income households, health care providers, schools, and libraries.

In filings submitted to a Senate working group evaluating potential reforms to the program, telecoms argued in public comments that some of this money should be paid by tech companies who provide online services. Tech companies advocated tapping more broadband providers for funds.

The Computer & Communications Industry Association, a trade group representing some of the biggest tech companies in the U.S., said in an August 21 filing that the USF could be saved by one action: “include all providers of internet connectivity in the USF contributions base.”

The National Telephone Cooperative Association, a group of smaller broadband providers that serve rural areas, argued in an August 25 filing that tech companies gain so much from expanded broadband coverage that they should pay directly into the USF, saying “internet-based businesses that benefit from widespread availability and affordability of broadband should contribute to that objective.”

The constitutionality of the USF’s funding model is being questioned in court. On September 19, the Fifth Circuit Court of Appeals will rehear a case brought by the conservative nonprofit Consumers’ Research. 

The group argues that in establishing the USF with the Telecommunications Act of 1996, Congress gave the FCC unfettered authority to collect taxes. It also alleges that the FCC has abused this authority by delegating the distribution of funds to a subordinate organization, the Universal Service Administration Company. 

The Fifth Circuit originally struck down the petition, saying Congress put adequate guardrails on the FCC’s authority. Three of its five judges were present to hear arguments and hand down a ruling, but the rehearing in September will involve the full court.

The Sixth Circuit denied a similar petition from Consumers’ Research on the same grounds as the 5th Circuit. The group has suits pending in the Eleventh Circuit and D.C.

Sens. Ben Luján, D-N.M., and John Thune, R-S.D., convened the working group in May to evaluate potential reforms to the USF’s structure and guide future policymaking.

The November 2021 Infrastructure, Investment and Jobs Act and the Consolidated Appropriations Act (passed by Congress in December 2020) provided $3 billion to fund tribal broadband infrastructure through the Tribal Broadband Connectivity Program.

Tribal broadband access lags behind the rest of the country. Program funds are used to subsidize monthly internet costs, conduct studies and plan for future projects, and to upgrade and expand infrastructure.

After receiving more than $5 billion in grant requests, the NTIA disbursed almost $2 billion to over 190 tribes in the first round of Tribal broadband funding, which ended in July. Some tribes did not receive the full amount they applied for, but instead were given a small fraction in what the agency calls “equitable distribution grants.”

In a report by the watchdog’s infrastructure director, Andrew Von Ah, the Government Accountability Office says these tribes were never told why they received significantly less funds than they applied for.

The availability of second round of Tribal funding, announced in July, is expected to allocate nearly $1 billion. Applications are open until January 2024.

The grant application process is lengthy and is a strain on tribal resources. This is especially true for smaller tribes, who “might have a part-time IT person if they’re lucky… They don’t have technical resources,” said Lisa Hanlon, CEO of the telecom company Teltech Group and Cherokee Nation citizen, at a conference earlier this year.

With a second of funding also announced in July, constructive feedback “could help these applicants improve their applications and increase confidence in the impartiality of the program’s award process,” the GAO wrote.

Of the 191 first-round grants, 30 percent were equitable distribution grants. Yet these grants accounted for just 2 percent of the total funding awarded, the report said.

The NTIA told GAO that it does not intend to provide feedback to equitable distribution grant recipients because, as they received some funding, they are not technically unsuccessful under the law.

The agency is also understaffed, it wrote in a response to the report, and would better be able to serve equitable distribution grant recipients by assisting them with the smaller projects they are able to fund.

“This effort would effectively provide the same benefit as receiving constructive feedback,” the NTIA wrote.

“Keeping the people of rural America connected with reliable, high-speed internet brings new and innovative ideas to the rest of our country and creates good-paying jobs along the way,” said Vilsack. “These investments will support economic growth and prosperity for generations to come.” 

ReConnect investments are creating opportunities for people regardless of their zip code to have a connection for more, he said. Of the $667 million announced, $493 million will be through grants and $174 million through loans. It will fund 37 projects.  

All told, the Joe Biden Administration has invested $3.1 billion in rural broadband through 179 ReConnect projects which will improve opportunities for over 430,000 Americans in rural America, said Vilsack. ReConnect still has $260 million left to be awarded under the IIJA which will be invested over the next several months, he said. 

The minimum requirement for this program is 100 Mbps symmetrical, said White House officials. This will ensure that networks are scalable for increased demand in the future and to spur investment in next generation farming equipment that need connection to high-speed internet and can increase farming efficiency, said Andy Berke, administrator of the USDA’s Rural Utilities Service at the announcement. 

The investments are part of the fourth round of the ReConnect Program, a key part of the White House’s internet for all initiative to connect everyone in America to high-speed internet by 2030.  

“We are delivering this funding because the internet is no longer a luxury,” said Mitchell Landrieu, senior advisor to the President at the announcement, saying the funding will change people’s lives. “High-speed internet can connect people to economic and educational opportunities miles away.” 

The USDA announced last year the fourth round of funding for the ReConnect program after high interest in the third round of funding. 

The announcement includes investments in Alaska, Arkansas, Arizona, California, Illinois, Iowa, Kansas, Michigan, Minnesota, Mississippi, Missouri, Nevada, New Mexico, North Carolina, Ohio, Oklahoma, Oregon, South Carolina, Texas, Virginia, Washington, Wisconsin and the Marshall Islands.  

In North Carolina, Star Telephone Membership Corporation is receiving a $24.9 million grant to benefit over 2,600 people, 84 businesses, 117 farms and four educational facilities across the state. In Oregon, Pioneer Telephone Cooperative is receiving a $24.9 million grant to benefit over 2,000 people, 50 businesses, 205 farms and one educational facility. 

Early last year, nonprofit research house Consumers’ Research and communication service provider Cause Based Commerce asked the U.S. Court of Appeals for the Fifth Circuit to find that Congress gave the FCC unfettered delegated authority to raise revenues akin to taxation under Section 254 of the Telecommunications Act of 1996.  

Consumers’ Research claimed that the FCC has illegally delegated the taxation authority to a private entity, the Universal Service Administration Company. It asked the fifth circuit to take action against the FCC’s “unfettered power” to “define the scope of universal service.” 

The appeals court ruled in March that Congress provided sufficient guidance to the agency when administering the fund, put in place guardrails to guide that administration, and that the FCC has sufficient oversight of USAC to allow for the subordination. 

A rehearing of the case means that the full court will reconsider the case and the previous ruling is vacated. A majority of the circuit judges in “regular active service” voted in favor of rehearing the case with a full panel of judges instead of the three who heard it the first time after parties filed a petition for rehearing. 

Oral argument has not been scheduled, according to the short order. 

William Hild, executive director of petitioner Consumers’ Research, told Broadband Breakfast in a statement in March that “with the acknowledgement that our case is ripe and that we have standing, we will look forward to continuing the legal fight to defend consumers from the unconstitutional USF tax on their phone bills set by unelected bureaucrats.” 

Consumers’ Research has also taken the issue to the Sixth Circuit, which sided with the FCC, and the Eleventh Circuit, which heard oral arguments this month and has yet to reveal where it stands. 

“In its subordinate role, USAC provides the FCC with fact-gathering, ministerial, and administrative support,” the Sixth Circuit decision said. “It submits for approval to the FCC the underlying data and projections that the FCC then uses to calculate the contribution factor.” 

“Critically, the FCC is not bound by USAC’s projections,” the decision added, noting the FCC may approve or deny the contribution recommended by USAC. 

The more appellate courts that rule on the matter, the greater the chance of disagreement between them, making it easier for Consumers’ Research to appeal to the U.S. Supreme Court. 

Industry leaders have come out in support of the Fifth Circuit’s original decision, claiming that it recognizes the importance of the USF to connect Americans to broadband services. Greg Guice, director of government affairs at advocacy group Public Knowledge, said in March that “the Fifth Circuit has once again affirmed the importance of our nation’s universal service mission and the FCC’s obligation to ensure it is achieved by placing the program on a sound financial footing.” 

Since its creation by Congress in the 1996 Telecom Act, the USF has become a program that millions of families, community anchor institutions and small businesses rely on to get connected. It has been especially valuable for families and businesses that rely on it for work, school and telehealth at home.

The USF spends about $8.5 billion annually to help fund affordable connectivity in rural areas, low-income households, schools, libraries and rural hospitals. Today, the Federal Communications Commission is working to make high-speed broadband as ubiquitous as telephone service, and broadband is the essential communications technology the USF now supports.

While the USF remains vital in an ever-increasing connected world, it is in serious jeopardy of surviving. To fund the programs, telecom providers are required to pay a certain percentage of their interstate and international telecom revenues, known as the “contribution factor.” Typically, telecom providers collect these USF fees from their customers on their monthly bills.

However, the telecom revenues that fund the USF have declined over 60 percent in the last two decades. As a result, the contribution factor has skyrocketed from about 7 percent in 2001 to a historic high of about 30 percent today, as a higher portion of telecom revenues is needed to sustain the fund. That means certain consumers and businesses are now paying an additional 30 percent on top of their phone bills in order to fund the USF.

Telecom revenues continue to decline so rapidly because customers today rely more on broadband services and less on landline and mobile phone services, but broadband revenues do not pay into the USF. While the FCC has modernized each USF program to help support broadband service, it has not modernized its funding mechanism to require broadband services to pay into the Fund even though historically the agency has required supported services to be included in the contribution system.

Without intervention, the contribution factor is predicted to rise to 40 percent by 2025. This is unsustainable and puts the stability of the entire USF at risk. In fact, the contribution factor has become so high that it has led some groups to challenge the USF in federal court as unconstitutional, which also threatens the sustainability of the USF.

Reforming the USF funding mechanism is urgently needed and long overdue

Over 340 diverse stakeholders have come together as the USForward Coalition calling on the FCC to move forward with USF reform by expanding the contribution base to include broadband revenues. This solution is based on the recommendation in the USForward Report (that INCOMPAS helped commission), which was written by USF expert and former FCC official Carol Mattey.

The USForward Report explains that the most logical way to reform the contribution system and sustain the USF is to include broadband revenues in its funding assessment. Under this approach, the contribution factor is estimated to fall to less than 4 percent. It also means that the services that get USF support are paying into it, rather than solely relying on telecom customers, including those that have not made the switch to broadband, such as older Americans.

In fact, some members of Congress understand the urgency of reform and also want the FCC to act. The Reforming Broadband Connectivity Act, for example, is a bipartisan, bicameral bill that would require the FCC to reform the contribution system within one year.

Some question whether large tech companies should be assessed to contribute to the USF, and the short answer is “No.” Tech companies invest $120 billion each year in global internet infrastructure, and unlike broadband providers, these companies do not request or receive USF funding for these investments.

The FCC also lacks the authority to regulate tech companies and doing so would require Congress to act. This would further delay reform and expand the FCC’s regulatory authority over all online content and services — an overreach that many question as too broad since nearly every business today has an online presence and uses the internet to conduct business. Moreover, proposals to target certain tech companies risk skewing the online marketplace and competitive markets.

Some also question whether we still need the USF at all, and the short answer is “Yes.” While Congress allocated tens of billions for broadband, most of this investment is targeted for deployment, yet a significant portion of the USF programs focus on affordability. We not only have to make sure we build out our broadband networks, but also that communities can then afford to subscribe to these services.

The FCC should not wait to reform the USF. The USForward Report sets out a real plan that the FCC can and should implement. Congress should encourage the FCC to act now and save the nation’s critical connectivity program.

Angie Kronenberg is the president of INCOMPAS, where she manages the policy team and its work before federal, state and local governments, as well as leading the association’s efforts on membership and business development. 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 expressed in Expert Opinion pieces do not necessarily reflect the views of Broadband Breakfast and Breakfast Media LLC.

Every five years, Congress passes legislation that covers agricultural and food programs in the Farm Bill, which includes rural broadband programs. The foremost of which is the US Department of Agriculture’s ReConnect Program which offers grants for broadband infrastructure deployment that connects rural addresses. 

Congress can help push rural networks forward by encouraging fiber builds, which can be accomplished by keeping minimum speeds at 100 Mbps download and 100 Mbps upload, said Roger Nishi, vice president of industry relations at Waitsfield and Champlain valley Telecom.   

High-speed internet is essential for precision agriculture techniques that connect farm equipment and buildings to reduce input costs and improve yields, added Jesse Shekleton, director of Broadband Operations at Jo-Carroll Energy.  

“Demands for bandwidth on farms will continue to grow,” he said, arguing that fiber should be prioritized in rural builds due to its future-proof capacity.  

The agriculture industry is trending toward a need for multi-gig service by 2030, he said. If we only build out the needs of today, we are not considering the needs of the future, he noted. 

Justin Forde, vice president of government relations at ISP Midco, disagreed, claiming that the USDA needs to be technology-neutral to ensure that all locations are serviced by the most reasonable technology with regards to terrain and weather complications that could bar fiber deployment.  

“It is simply irresponsible to try to drive fiber to all these rural locations,” claimed Forde. Customers do not need 100 Mbps symmetrical speed and it is unreasonable to deploy it, he continued.  

CEO of Farmers Telecommunications Cooperative, James Johnson, said in response that 20 percent of rural consumers use 1 gigabit speeds and that speed demands will only continue to grow. 

Inter-Agency Coordination 

Witnesses also urged Congress to encourage federal agency cooperation to avoid overbuilds and duplicative grant funding. 

The release of the updated memorandum of understanding in August of 2022, which outlined the coordination between the National Telecommunications and Information Administration and the Federal Communications Commission, is a good start, said Nishi.  

However, these agencies need continual oversight from Congress to ensure they are working together to connect all Americans to broadband, he said.  

In December, Sen. John Thune, R-S.D., introduced a bill that would merge the ReConnect program with the agency’s other broadband funding initiatives.  

The coalition, including Sens. Ben Ray Lujan D-N.M., Amy Klobuchar, D-Minn., and Deb Fischer, R-Neb., argued the Rural Internet Improvement Act would facilitate the efficient dispatch of funding to rural areas. The bill would also limit the disbursal of ReConnect funds to areas in which at least 90 percent of households lack broadband service. 

The bill has been introduced to the Senate Committee and is awaiting a vote. 

Hearings regarding the 2023 Farm Bill will continue through the first months of the year. The current legislation is set to expire on September 30. 

“Historically, the USF has always been paid for based upon the services that is supports,” said Angie Kronenberg, president of trade association for competitive networks, INCOMPAS, urging lawmakers to include all broadband internet revenue in the contribution base for the USF.

Kronenberg was testifying in a Senate Subcommittee on Communications, Media and Broadband hearing Thursday.

The USF is a nearly $10 billion fund that relies on dwindling voice service revenues to fund several programs that support low-income broadband access in the United States.  

Adding broadband companies to the contribution base will build the fund to a more sustainable level and can be done without any change to the Federal Communication Commission’s statues, said Kronenberg. 

Professor at Boston College Law School Daniel Lyons disagreed, saying that adding broadband companies will not solve the structural problems with the USF.

“Whether you are talking about adding broadband providers or adding edge providers, once you start taxing those services, you create structural incentives that rearrange the way the internet works in ways that we can’t predict in advance,” he said. 

Instead, Lyons urged Congress to make the USF a program based on federal appropriations. Doing so would make the program subject to hard budget constraints and oversight from Congress, he said. 

Including Big Tech in the contribution base is a topic of much debate across the industry. The FCC has left it to Congress to institute legislative reforms that would allow it to make changes to the contribution base. 

The fund has been under scrutiny as the voice service revenues which is relies on are dwindling. The USF supports programs such as Lifeline, which supports affordable access to broadband internet for low-income households. 

Correction: A previous version of this story incorrectly stated that INCOMPAS President Angie Kronenberg urged that big tech companies be included in the USF contribution base. In fact, she said that broadband companies should be included in the contribution base. The story has been corrected. 

Non-profit research house Consumers’ Research and communications service provider Cause Based Commerce last year asked the U.S. Court of Appeals for the Fifth Circuit – and the Sixth and 11th circuits – to find that Congress under Section 254 of the Telecommunications Act of 1996 gave the FCC unfettered delegatory authority to raise revenues akin to taxation for the fund that provides basic telecommunications services and that the commission has illegally delegated that authority to a private entity known as the Universal Service Administration Company.

The Fifth Circuit denied the petition on the grounds that Congress gave sufficient guidance to the agency to determine what to do with the $9-billion fund, put in sufficient guardrails for its administration, and that the FCC has enough oversight over USAC to subordinate some authority to the private body.

In a decision on Thursday, the Sixth Circuit came to the same conclusion using much of the same reasons as the Fifth Circuit.

“So long as Congress ‘shall lay down by legislative act an intelligible principle to which the person or body authorized to [exercise the delegated authority] is directed to conform, such legislative action is not a forbidden delegation of legislative power,” the Sixth Court said.

Those principles, as laid out in Section 254, include Congress’s explicit order to the FCC to ensure telecom services are of decent quality, reasonably priced, available equally in rural and urban areas, and funded in a nondiscriminatory manner.

“Together, these principles provide comprehensive and substantial guidance and limitations on how to implement Congress’s universal-service policy, and in turn, how the FCC funds the USF,” the Sixth Circuit said in its decision.

“Congress’s decision to grant an agency the ability to address new concerns while still constricting the agency’s discretion to do so within the statute’s purpose and principles does not turn a statute with an intelligible principle into an unconstitutional delegation,” the decision added.

The decision also noted that Congress limited the FCC’s authority by explicitly stating that federal funds should go to certain communications carriers and bound them to certain uses of the money. It also noted a “soft cap” in the language of the size and budget of the program.

The Sixth Circuit also agreed with the Fifth Circuit that there is no violation of the private-nondelegation doctrine by virtue of the fact that the FCC delegates the authority to USAC to set the amount to be collected from the communications companies for the fund because USAC is subordinated to the regulator.

“In its subordinate role, USAC provides the FCC with fact-gathering, ministerial, and administrative support,” the Sixth Circuit decision said. “It submits for approval to the FCC the underlying data and projections that the FCC then uses to calculate the contribution factor.”

“Critically, the FCC is not bound by USAC’s projections,” the decision added, noting the FCC may approve or deny the contribution recommended by USAC.

In a joint statement, trade groups Competitive Carriers Association, NTCA Rural Broadband Association, and USTelecom said, “Today’s decision is a win for the millions of rural and urban consumers as well as anchor institutions that rely on the services supported by the federal Universal Service Fund.

“As the court decision today confirms, Congress’ direction to the FCC—more than 25 years ago—to collect contributions in support of the universal service program is constitutional,” the statement added. “We believe that other courts considering similar challenges should come to the same conclusion.”

The USF is under financial pressure due to its reliance on voice service providers, a relic of its past. There is collective agreement that reform is needed, with recommendations for expanding the funding base including drawing on broadband service revenues, Big Tech contributions, and relying on general taxation.

In a report to Congress last year, the FCC said it would prefer to have congressional approval to expand the contribution base. As such, a bill introduced in both chambers in March would require the FCC to study and make rules on expanding the funding base.

“We’ve been promised for decades by the biggest carriers in the world that they’re going to bring good connectivity to southeastern rural Oklahoma, and they haven’t,” said Rob Griffin, Tribal broadband coordinator for the Choctaw Nation of Oklahoma. “They’ve failed, so we’ve worked with regional operating carriers, we’ve worked to build our own fiber networks, and we’re working to gain access to applications and grants over the next couple of years to work with other ISPs and other regional operating carriers.”

Much of this development is being bolstered by federal funding. On March 23, the National Telecommunications and Information Administration announced two new grants through the Tribal Broadband Connectivity Program, bringing its total to more than $1.75 billion awarded to 135 Tribal entities.

Several Tribal entities are also hoping for funding through the Broadband Equity, Access and Deployment program, although the map being used to allocate BEAD funds has been criticized for inaccurately representing Tribal areas.

Although the federal grants present a significant opportunity, Griffin noted that the lengthy application process can be a barrier, particularly for Tribes with limited resources.

Smaller Tribes “might have a part-time IT person if they’re lucky… They don’t have technical resources,” agreed Lisa Hanlon, CEO of the Teltech Group and Cherokee Nation citizen.

Another layer of complexity comes from the number of different federal agencies offering grant funding, each with their own specific requirements and nuances, said Paul Narro, director of public policy for local internet service provider TekWav.

As the grant programs continue, Hanlon advocated for Tribal entities to work with local providers to maximize federal funding, benefiting both parties. In order for such partnerships to be successful, she said, providers must understand the structure of the specific Tribal nation they are working with and then to listen to what the Tribal leaders actually want.

Griffin advised providers to take a long-term approach to working with Tribal nations.

“We’re thinking in terms of how to build things for the next 100 years,” Griffin said. “And when you think like that, your economies of scales are different and your planning stages are different. So if you’re in the process of working with a Tribal nation, just gear your thinking around, ‘How can I help this Tribe and really build a partnership over the next 20, 40, 60 and 100 years?’”

The Reforming Broadband Connectivity Act of 2023 – a previous version of which was introduced two years ago – would require the FCC within one year of the enactment of the bill to solidify rules to reform how the fund is supported and within 120 days to conduct a study on the need to broaden the fund’s base and submit the report to Congress.

The contents of the bill should include the “relative equities and burdens” of the changes on consumers, businesses and seniors, who often bear the brunt of the cost of support because the fund is currently supported by landlines.

The House version was introduced by Lizzie Fletcher, D-TX, Joe Neguse, D-CO, and Angie Craig, D-MN, and the Senate companion was introduced by Amy Klobuchar, D-MN, and John Thune, R-S.D.

“Ensuring broadband service in the most remote, hardest-to-serve areas requires a sustainable Universal Service Fund with a sustainable funding formula,” Brandon Heiner, senior vice president of government affairs at industry association USTelecom, said in a statement. “Senators Amy Klobuchar (D-Minn.) and John Thune (R-S.D.) recognize that the contribution mechanism must be reformed to preserve connectivity for rural Americans. Directing the FCC to initiate a rulemaking to expand the contributions base will help secure the future of universal service.”

The bill’s introduction follows an FCC report to Congress that requested the legislative body provide the commission with the authority to change the fund’s contribution base.

The USF, which includes four high-cost programs supporting basic telecommunications services for institutions and low-income Americans, receives roughly $9 billion a year from voice service providers, whose revenue base has been dwindling for years.

The reliance on those providers has called into question the fund’s sustainability. Various experts have proposed different remedies, including expanding the base to include contributions from broadband service providers, large technology platforms, and from the general taxation pool.

Prior to the FCC’s report to Congress, some experts argued that the commission can unilaterally expand the fund’s base. Those same experts warned that Congress may take too long to implement necessary legislation.

On Friday, an appeals court denied a petition that challenged the FCC’s authority to raise funds and subdelegate the work of coming up with the quarterly contribution amounts providers must pay into it. The petition must go through two more levels of appeal.

Early last year, non-profit research house Consumers’ Research and communications service provider Cause Based Commerce asked the U.S. Court of Appeals for the Fifth Circuit to find that Congress under Section 254 of the Telecommunications Act of 1996 gave the FCC unfettered delegatory authority to raise revenues akin to taxation for the fund that provides basic telecommunications services and that the commission has illegally delegated that authority to a private entity known as the Universal Service Administration Company.

But the appeals court denied the petitioners’ points in a decision Friday, ruling that Congress provided sufficient guidance to the agency when administering the $9 billion fund, put in place guardrails to guide that administration, and that the FCC has sufficient oversight of USAC to allow for the subordination. In other words, the FCC is not deviating far from the guidance and the limits imposed on it by the legislative house, according to the court.

On the first point, the three-panel court ruled that – contrary to the petitioners’ claim – Section 254 offers specific guidance, such as offering affordable telecommunications services of decent quality, making it equitably available in rural and urban areas, and funded in an equitable and nondiscriminatory manner.

“Rather than leave the FCC with ‘no guidance whatsoever,’ Congress provided ample direction for the FCC in S 254,” the decision read, adding Congress chose to “confer substantial discretion” over the USF’s administration to the FCC.

On the FCC’s revenue-raising ability, the court also ruled that Section 254 provides adequate limits on that ability. Section 254 “certainly, did not leave the matter to the FCC ‘without standard or rule, to be dealt with as [it] pleased,’” the decision read. “Instead, § 254 requires that the FCC only raise enough revenue to satisfy its primary function.”

Those limits under the provisions of Section 254 include specific guardrails for the expenditure of those funds on telecommunications services that are essential, deployed in public networks by telecoms, and consistent with the public interest.

“Taken together, these provisions demonstrate that the FCC is not in the dark as to the amount of funding it should seek each quarter,” the decision said, referencing how much USAC needs to collect from the largely voice service providers to sustain the fund. “Instead, § 254 sets out the FCC’s obligations with respect to administration of the USF and the FCC, in turn, calculates what funds are necessary to satisfy its obligations.”

Finally, the petitioners argue that the FCC has violated the private nondelegation doctrine by giving authority of the USF over to USAC with no oversight, in part because the FCC only has 14 days to approve the amounts to be collected for the fund and thus rarely exercises its power to change the contribution amount. The petitioners’ argue that the combination of those factors make it so that USAC, not the FCC, administers the fund.

But the court disagreed on that point as well. First the court established that federal statutory law expressly subordinates USAC to the FCC, with the private entity not being able make policy or interpret provisions or the intent of Congress. Second, it said the FCC dictates how USAC calculates the contribution amount and reviews the calculation after the private entity makes a proposal. Third, it noted that those proposals made by the USAC must be approved by the FCC before they are required of the communications companies. Finally, the agency allows for challenges to USAC proposals and “often” grants those challenges, the court ruled.

Still more appeals to go

The court, however, ruled against an FCC argument that the petition is “time barred” because it was not brought when Section 254 was enacted by Congress. The court noted that constitutional challenges are allowed when the approval of contribution amounts by the FCC are applied to companies.

That said, the petitioners also filed appeals in the 6th and 11th Circuit courts on the matter.

“While we are disappointed that the three judge panel ruled against us, we are encouraged that they saw through the FCC’s absurd preliminary arguments, including that our case was not timely,” William Hild, executive director of petitioner Consumers’ Research, told Broadband Breakfast in a statement. “With the acknowledgement that our case is ripe and that we have standing, we will look forward to continuing the legal fight to defend consumers from the unconstitutional USF tax on their phone bills set by unelected bureaucrats.”

The Schools, Health and Libraries Broadband Coalition, whose institutions are recipients of the fund’s money, also filed a brief in the case and said in a statement on Friday it was pleased with the decision.

“SHLB is extremely pleased that the court recognized the importance of the universal service program for the thousands of schools, libraries and health care providers that receive Universal Service Fund (USF) support,” said its executive director John Windhausen. “In the 1996 Telecom Act, Congress provided the FCC with both specific guidance and flexibility to adjust the USF program over time to embrace changes in the marketplace.

“With two more decisions to go, support for thousands of anchor institutions nationwide is still in jeopardy,” Windhausen added. “If the USF is ruled unconstitutional, it would put at risk the funding for four key programs: the Connect America Fund, Lifeline, Schools and Libraries (E-Rate), and Rural Health Care.”

Greg Guice, director of government affairs at advocacy group Public Knowledge, which filed a brief in the case, added “the Fifth Circuit has once again affirmed the importance of our nation’s universal service mission and the FCC’s obligation to ensure it is achieved by placing the program on a sound financial footing,” adding the organization hopes the other courts “take notice of this opinion and rule consistently.”

The National Lifeline Association, which advocates for the continuity of the USF program Lifeline, and industry association INCOMPAS also praised the decision. The latter added “we believe reforms to the USF are necessary to ensure this critical service can continue to exist.”

Those reform calls stem from concern that the fund is unsustainable because it is largely supported by voice service providers who have seen dwindling revenues as more Americans use other forms of communication.

The FCC has left it to Congress to provide it the authority to make changes to the fund for its long-term support, including possibly expanding the base to include broadband service providers and Big Tech.

“It is incumbent on Tribal leaders, citizens and allies to gather data on a scale large enough to ensure that Tribal nations receive the billions of dollars that are available and necessary to complete broadband expansion projects,” said Joe Valandra, CEO of the new entity.

Hear Joe Valandra of Tribal Ready during Broadband Breakfast Live Online on March 8, 2023: A Status Update on Tribal Broadband

Valandra, a member of the Rosebud Sioux Tribe of South Dakota, said that Tribal entities should receive at least $5 billion of the $42.5 billion of federal funds available under the bipartisan infrastructure law’s Broadband Equity, Access and Deployment program.

The $5 billion number, he said in an interview, is “a very rough calculation that I did based upon the priority being unserved” individuals, and based open the gaping lack of available broadband in Indian County.

Valandra has more than 25 years of experience in executive-level leadership roles in the public, private, government, and non-profit sectors, including an extensive background in Tribal economic development.

Virtual broadband office aims to speak for Tribes

Valandra was highly critical of the Federal Communications Commission’s broadband serviceable location fabric, which he said dramatically undercounted locations and availability for broadband in rural and Tribal areas.

“If the FCC’s fabric were the only tool that were used to allocate these funds, Indian country would be left out,” he said. He cited the broadband map’s representation that the Rosebud Sioux Tribe of South Dakota was served, which he said wasn’t accurate.

In the view of Tribal Ready, the solution is for Tribal Nations to sign up for the Virtual Tribal Broadband Office at TribalReady.com. The new entity works in close partnership with Ready.net, he said, which gives Tribal Ready access to data and other broadband tools.

Just as every state and territory has a state-wide broadband office, Tribes need to be represented through a voice in Washington focused on their needs, said Valandra.

“We hope to become or to acquire a number of ISPs so that we can partner with Tribes to give them the type of knowledge and expertise and regulatory framework to really run those networks and to preserve ownership and control for Tribes,” he said.

Others on the team emphasize the crucial role of broadband data, and other broadband resources, to ensuring maximum funds for Indian country.

“High-speed broadband is a resource – a means to an end,” said Scott Dinsmore, vice president of external affairs at Tribal Ready. “It takes resources to achieve sustainable high-speed networks and the world-class access to economic, education, healthcare and other benefits that come with it.”

Tribal Ready said that it believes the best way to achieve this is to create data and guidelines that help states design fair and inclusive challenge processes. Tribal Ready also emphasized ensuring that Tribal data sovereignty is secure and protected.

Before launching Tribal Ready, Valandra worked in the Indian gaming industry for more than the decade of the 1990s, before coming to Washington. In 2005, he became chief of staff for the National Indian Gaming Commission, a position he occupied until 2007. He subsequently worked extensively in the field of in the Tribal communications.

• On the Ninth Day of Broadband, my true love sent to me:
  $9 Billion Universal Service Fund
  8,132,968 census blocks and a national Broadband Fabric
  7.7% annual inflation rate
  Wi-Fi 6E
  5 Federal Communications Commissioners
  $42.5 billion in Broadband Equity, Access and Deployment funds
  Section Two-30 of the Communications Decency Act
  24 Reverse-Preemption Pole Attachment States
  and A Symmetrical Gigabit Network.

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. 

 Download the complete 12 Days of Broadband report

Over the past year, the conversation over what to do with the fund has reached ever-increasingly levels of urgency. The contribution percentage — the tax on voice service providers that is often passed down to consumers — climbs with the demands of the fund. In other words, there is an inverse relationship with taxed revenues and the contribution percentage — the lower the voice revenues to draw from, the higher the percentage demanded from fund, which is adjusted by the Universal Service Administrative Company every quarter. 

Critics have urged the FCC to make significant expansions to the contribution sources of the fund, including taxing broadband revenues and forcing Big Tech to pay because they benefit from internet infrastructure. 

Still others — including AT&T — have recommended that Congress step in and have the funds come from general taxation, which was met with concern that the fund’s pot of money would fluctuate with constantly changing political personnel. 

Meanwhile, a bill that would require the FCC to study and report on the feasibility of having Big Tech pay into the fund made its way out of the Senate Commerce Committee in May. But nothing since. 

Hence the concern as to what the FCC did when it temporarily handed the hot potato over to Congress — how long will it take? 

Congress must move legislation forward, which takes months as it has other business to deal with. Even after the many months of bill passage, the FCC must draft its own proposal that must go through a public comment process. 

This was the concern of critics who said the FCC already has the legal authority to act unilaterally, without the intervention of Congress to get the process started. One of those critics includes Carol Mattey, former deputy chief of the FCC, who last year published a report saying the agency must expand the contribution base to include broadband revenues. 

Following the report’s publishing, Mattey and advocate Public Knowledge argued that the FCC has the legal authority to expand the base on its own. 

But in the FCC report to Congress on the USF this summer, the agency wasn’t so sure. 

“On review, there is significant ambiguity in the record regarding the scope of the Commission’s existing authority to broaden the base of contributors,” the report said.

“As such, we recommend Congress provide the Commission with the legislative tools needed to make changes to the contributions methodology and base in order to reduce the financial burden on consumers, to provide additional certainty for entities that will be required to make contributions, and to sustain the Fund and its programs over the long term.”

The deference to Congress pleased the two Republicans on the commission, Brendan Carr and Nathan Simington, both of whom — no less interested in the sustainability of the fund — preferred the legislative body make the determination.

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.

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.

“These reports detail problems customers have faced, including either having their benefits initiated, transferred to a new provider, or changed to a different plan without their knowledge or consent,” Pallone wrote.

“Other customers have reported a delay in the application of the benefit or a requirement to opt-in to future full-price service, which has resulted in surprise bills that have been sent to collection agencies.”

“There have also been reports of aggressive upselling of more expensive offerings, requirements that customers accept slower speed service tiers, and other harmful and predatory practices,” he added.

Pallone asked the providers for several categories of records, including each company’s number of benefit recipients, complaint-resolution protocols, degree of knowledge of incorrect customer bills, protections against upselling, and more. Letter recipients include AT&T, Comcast, T-Mobile, and Verizon.

The ACP, established by the Infrastructure Investment and Jobs Act of 2021 and overseen by the Federal Communications Commission, subsidizes monthly internet bills and device purchases for low-income applicants. Non-tribal enrollees qualify for discounts of up to $30 per month, and qualifying enrollees on tribal lands for discounts of up to $75 per month. Enrollees also qualify for one-time discounts of $100 on qualifying device purchases.

The EBB program was the predecessor to the ACP.

The ACP, a favorite of many politicians and federal entities, including the White House, is no stranger to controversy. In September, the FCC Office of Inspector General issued a report that found the ACP doled out over $1 million in “improper payments” to service providers due to “fraudulent enrollment practice[s].”

The Universal Service Fund, created in 1997 to improve telecommunications connectivity nationwide, is funded primarily by voice-based services. In recent years, voice-based subscriptions have substantially dropped, creating a revenue crisis and leaving remaining voice-based customers to foot a climbing per-person USF bill.

To rectify this imbalance, industry players have proposed a variety of new funding sources. The two core options are direct taxation by Congress, or by broadening the base of the USF.

The latter option would require broadband providers to contribute to levies collected by the Universal Service Administrative Company, a non-profit entity accountable to the FCC.

Urging Need for FCC Action on Universal Service Fund, Expert Says Congress Too Slow

Speaking at the Friday conference of the Schools, Health and Library Broadband Coalition, Greg Guice, director of government affairs at Public Knowledge, argued that the FCC has the legal authority to require broadband service providers to contribute to the USF.

“The language of the statute says every carrier shall contribute and any other provider of telecommunications that the Commission decides may contribute to Universal Service,” he said.

Angie Kronenberg, chief advocate and general counsel at industry trade group INCOMPAS, said Congress shouldn’t be relied upon for intervention: “It is very helpful when Congress recognizes that there is a problem and is willing to appropriate, but that is not a sustainable, predictable model.”

Petition Challenges Constitutionality of Roles FCC, USAC Play in Universal Service Fund

The USF has of late made substantial investments in broadband projects, and many industry experts say broadband services should be required to contribute thereto. In August, however, the FCC declined to unilaterally reform the fund’s contribution system and asked Congress to review the matter.

“On review, there is significant ambiguity in the record regarding the scope of the Commission’s existing authority to broaden the base of contributors,” the Commission’s report stated.

Alex Minard, vice president and state legislative counsel at NCTA – The Internet and Television Association, suggested Congress should be the driver of USF reform.

Policy Groups Want Bigger Contribution Base to Shore Up the Future of the Universal Service Fund

“Maybe the FCC does have the legal authority – maybe – to include broadband revenues,” said Minard. “If we’re going to…newly tax such a significant part of the economy, maybe it’s Congress that should be making this decision, and not an independent federal regulatory agency.”

Minard also argued the need for USF reform is less urgent than some believe. “It has been in crisis for 20 years,” he said. “What’s a little bit longer?”

“Some of [the problems voiced native panelists at the roundtable] could simply be avoided by better, more aggressive, more continuous, more humble consultation, and you’re going to save yourselves a ton of headache,” said Schatz, a Hawaii Democrat. “I’m wondering if you need to get a little better about talking to and listening to native communities at every step in the process.”

“Chairman, I think you put that extremely well,” responded Umair Javed, chief council for the office of FCC Chairwoman Jessica Rosenworcel.

Tyler Iokepa Gomes, deputy to the chairman of the Department of Hawaiian Home Lands, told the committee of difficulties faced by native Hawaiians in obtaining spectrum licenses. Since the DHHL is a state entity, not a Tribal government, Gomes said, it was forced to compete against two local, native communities in a waiver process. Gomes said that his agency’s competition with the other waiver applicants caused considerable friction in Hawaii’s native community at large.

Low digital literacy is also a problem for some native communities attempted to secure spectrum licenses. “When it comes to technology, a lot of people seem to be scared of it,” said Keith Modglin, director of information technology for the Mille Lacs Band of Ojibwe, a federally-recognized Indian Tribe.

Modglin argued that education initiatives to raise digital literacy and explain the intra- and intercommunity benefits of spectrum would benefit his band greatly.

The land of the Mille Lacs Band is a “checkerboard,” meaning that Tribal lands are interspersed with non-tribal lands, said Melanie Benjamin, the tribe’s chief executive officer. According to Benjamin, navigating government’s failure to account for this status caused substantial delays for her tribe.

In addition to improving communication, Schatz called on the FCC to take affirmative actions to ease regulatory burdens on small tribes. “There are some really under resourced native communities, and it shouldn’t be a labyrinth to figure out what they’re eligible for,” he said. “Try to figure out some one-stop shop, some simple way to access the resources that they are eligible for under current law.”

Javed acknowledged a need for the FCC improve its communication with native communities, but he said the FCC is making strides in other areas. “While spectrum is one piece of that puzzle, I think we are making a lot of progress in some of our programs like the Affordable Connectivity Program, updates to the E-Rate program, some of our mapping efforts as well,” he said.

In his opening statement, Ranking Member Glenn Thompson, R-Penn., said that the NTIA and FCC were invited to testify before the committee but declined. “Their absence is noted, and it illustrates their indifference towards the needs of rural Americans and our rural communities,” said Thompson. Rep. Rick Allen, R-Georgia, also panned the NTIA and the FCC for failing to appear.

“The question is: Are they dodging coming here today because they don’t want to be accountable for their flawed record?” Thompson told Broadband Breakfast, adding a Republican-controlled Congress may be more aggressive in its oversight of the two agencies. The midterm elections are in November.  

“If given the opportunity to chair this committee…should that happen, the next time we ask them to come here it will be with a subpoena,” Thompson said. “We’ll put some teeth behind it.”

In addition, Thompson said during the hearing that the United States Department of Agriculture – which runs the ReConnect broadband program – is the best-suited agency to administer rural broadband deployment – not the NTIA or FCC. “I don’t have a lot of trust in NTIA or FCC. They received significant dollars back under the stimulus [act] back in 2010 and they failed to bridge the digital divide,” he said during the hearing.

“I remain disappointed that USDA was largely excluded from playing in its essential role, a role that it plays very effectively…in bringing broadband…into rural communities,” Thompson added. “It is the best situated agency to help rural providers serve their communities.”

Contacted by Broadband Breakfast, the NTIA and FCC did not respond to a request for comment.

The NTIA was allotted $42.5 billion by the Infrastructure, Investment and Jobs Act to distribute to the states for that end. The federal government has also been rolling out American Rescue Plan Act funding to the states, which are actively being used to address gaps in connectivity. 

At the hearing, Xochitl Torres Small, Agriculture’s undersecretary of Rural Development, and Chris McLean, acting administrator for the Rural Utilities Service, emphasized the importance of interagency information and best-practice sharing in mapping, funding, and network deployment efforts.

“We meet with the FCC, NTIA, and the Treasury on a biweekly basis – and frankly, regularly more often – both to establish a regular cadence of communication and to work through those sticky issues,” said Small.

Farmers need broadband

The hearing was held as the committee prepares the 2023 “farm bill,” which will be the latest in a series of agricultural investment packages that originated in the 1930s. Farm bills are often passed at five-year intervals, and exact provisions of each farm bill vary as time passes and circumstances change. The latest farm bill, the Agriculture Improvement Act of 2018, included funding for conservation initiatives, crop subsidies, crop-insurance support, and the Supplemental Nutrition Assistance Program.

The Agriculture committee must shepherd the 2023 farm bill to President Joe Biden’s desk before the 2018 package expires in September 2023.

Garrett Hawkins, president of the Missouri Farm Bureau, testified to the broadband needs of farmers. “Today’s farmers and ranchers, we use precision [agriculture] techniques to make decisions that impact everything from fertilizer to the amount of water that’s needed for our crops to the amount and type of herbicides that are applied,” Hawkins said. “These are just a few examples of how farmers are using connectivity to bump yield, improve environmental impact, and increase profitability.”

Eric Slee, Wireless Internet Service Providers Association’s vice president of government affairs, issued a statement Thursday supporting the Agriculture Committee’s work. “WISPA strongly encourages Congress to work toward a Farm Bill that among other things targets broadband funding to truly unserved locations on a tech-neutral basis, and avoids duplication of services financed by private and federal resources,” the statement said.

The six providers are NextLink Internet, California Internet L.P., Connect Everyone LLC, GigaBeam Networks LLC, Safelink Internet LLC, and Shenandoah Cable Television LLC. The states in which the winning bids will serve are Virginia, West Virginia, Nevada, Pennsylvania, Ohio, Illinois, Colorado, Arizona, Alabama, Wisconsin, Texas, Oklahoma, Nebraska, Louisiana, Kansas, Iowa, Indiana, Illinois, and Minnesota.

The largest amounts will go to Illinois with $212 million, Arizona with $140 million and Iowa with $130 million.

“This round of funding supports projects using a range of network technologies, including gigabit service hybrid fiber/fixed wireless deployments that will provide end-user locations with either fiber or fixed wireless network service using licensed spectrum,” the FCC said in a press release.

The announcement means the FCC has committed over $6 billion from the $9.2-billion fund, which initially announced winners under a different-look commission in December 2020, but which was scrutinized over the past year-and-a-half due to claims that the winning bids would go to areas that don’t need the connectivity promised. Under new Chairwoman Jessica Rosenworcel, the FCC has been purging the fund of what it sees as potential wasteful spending and provided those winning bidders with opportunities to let go of those bids.

The new commitment comes three weeks after the commission denied RDOF money to two such winning providers – broadband satellite service provider Starlink and the largest winner in the reverse auction process, LTD Broadband. The former was said to have a still-developing technology with a high-cost upfront commitment, while the latter had issues with getting certification from certain states by the time it was spurned.

FCC Commissioner Brendan Carr challenged the denial after saying he only learned about them in a press release.

The FCC’s E-Rate program supplements schools and libraries securing affordable telecommunications and broadband services through the Universal Service Fund. Earlier this year, the FCC released a proposal that would “streamline program requirements for applicants and service providers, strengthen program integrity… and decrease the risk of fraud, waste, and abuse.”

The proposal suggests implementing a central document repository, called a bidding portal, through which internet service providers would submit bids to the program administrator, the Universal Service Administrative Company, instead of directly to applicants at a state and local level. Currently, libraries and schools announce they are seeking services and service providers apply directly to those institutions.

With the adoption of this proposal, applicants would be required to submit competitive bidding documentation that would enable applicants to compare competing bids and the USAC would establish timeframes on when applicants are able to review the bids that providers submit.

The proposal is in response to a September 2020 report by the Government Accountability Office which addressed what the GAO considers the E-Rate program’s key fraud risks. It reported that E-Rate participants could easily misrepresent self-certification statements by violating competitive-bidding rules or processes. These violations could occur without the Commission’s or USAC’s knowledge because they do not have direct access to the bidding information.

The GAO suggested that allowing the USAC direct access to obtain and monitor bidding information would improve security and strengthen program controls.

Proposal widely panned by CoSN and educational technology directors

However, response to the proposal was widely negative, with commenters raising concern that changing the process would needlessly complicate a system that, according to Verizon, is already promoting fair and open bidding on E-Rate contracts.

The Consortium for School Networking, the State Educational Technology Directors Association, and the National School Boards Association claimed that the Commission’s past reliance on state and local procurement requirements has been a success and has not led to an undue amount of fraud and abuse, negating the need to update the process.

Creating a national bidding portal could also interfere with existing state and local bidding requirements and unduly complicate the bidding process, hindering E-Rate participation, said the National Association of Telecommunications Officers and Advisors in its comment to the FCC.

“A bidding portal would interfere with existing state and local bidding and procurement processes, which would likely cause significant issues for applicants and may cause some to have to drop out of the E-Rate program,” read NATOA’s report.

The establishment of a national E-rate bidding portal would be “unnecessary, burdensome and will increase the complexity of, rather than simplify the E-rate program,” agreed South Dakota’s Department of Education in its statement.

National level or local level changes

Since the FCC’s announcement in December, the proposed changes have been subject to much debate. John Harrington, CEO of Funds for Learning, wrote in April that the E-Rate changes would be detrimental, claiming that procurement decisions are best made at the local level, rather than a “one-size-fits-all system.”

Furthermore, John Windhausen, executive director of the Schools, Health & Libraries Broadband Coalition, said in December that the proposal will burden applicants, despite the potential benefits of eliminating at least some forms of fraud. Windhausen claimed that there is not enough evidence to show that a new portal is needed.

However, the proposal has not been universally dismissed. In a comment filed last week, the United States Department of Justice, Antitrust Division, which is responsible for enforcing antitrust laws, expressed support for the proposal saying that it would “enhance the ability of the FCC’s Office of Inspector General to detect and deter fraud in the E-Rate program.”

The DOJ added that the update would allow for more robust enforcement of laws, including investigation and prosecution of antitrust and related crimes that occur during E-Rate procurements. “All responsive service providers and applicants are in a position to complete the additional step,” said the DOJ in response to critics citing undue burden.

The proposal remains in consideration at the FCC.