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February 24, 2020 by Tom Cohen

The Enormous RDOF Opportunity

 

The FCC’s January 30 vote to adopt rules and a start date of October 22 for the Rural Digital Opportunity Fund (RDOF) auction sets in motion an intense, high-stakes process for broadband providers to bid for $16B in subsidies to deploy networks to unserved areas over the next decade. Over the coming months, the FCC will issue additional critical information about this process, and we intend to keep you up-to-date on all of this action.  

Anytime now, the FCC is going to release a preliminary list of the unserved census blocks for the auction. Potential bidders should review this list to begin to identify areas that might present viable business opportunities. Existing broadband providers should review the list to make sure they will not be overbuilt by providers receiving government support. 

The FCC will then hold a brief “limited” challenge process. The FCC has determined that the eligible areas will be wholly unserved census blocks, largely in areas served by price cap carriers. But, since the FCC last received data indicating these areas are unserved, many providers have deployed new networks, and the FCC wants to give them an opportunity to challenge its data. After all, the government does not want to use limited funding if an area is already receiving 25/3 Mbps broadband service. So, providers that do not want to be overbuilt need to be on the lookout for the FCC’s release of the preliminary list and be prepared to file data demonstrating where they deployed facilities.

On February 28, the FCC will adopt a Public Notice with proposed auction procedures, most of which are the same as the FCC used in the CAF Phase II auction. However, you should note that the FCC is asking whether the minimum geographic bidding unit should be a census tract, rather than the smaller census block group, which was used in the Phase II auction. Using a census tract would give an advantage to providers seeking to bid for larger areas and likely decrease participation in the auction. (The proposed auction procedures will enable package bidding and so there should be no issue about combining census block groups to achieve network efficiencies.) The census tract proposal also could undermine the value of the “budget clearing round” rule, which is intended to increase bidding for higher performance networks, since satellite and fixed wireless service can more easily cover larger areas. I expect the FCC will adopt final auction procedures in the May/June timeframe.

In the CAF II auction, where the “lowest” bids prevailed, most of the areas were won by providers bidding to offer low-cost satellite and fixed wireless services. However, with the “budget clearing round” rule, gigabit providers stand a much greater chance of winning. Right now, I expect a two-tier auction. A gigabit (fiber) should prevail in any area where there is a business case that includes a subsidy that is roughly 75 percent of the reserve price. In all other, likely less dense areas, I expect a battle between satellite (25/3 Mbps with high latency) providers and various providers seeking to deploy fixed wireless technologies (50/5 Mbps). When going head-to-head at the minimum geographic bidding unit level, fixed wireless access will have the advantage over satellite due to higher speed and lower latency.

The Calix team and I will be focusing on educating you about the RDOF throughout the year. Please let us know if you have any questions and stay tuned for more information.

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