TR Daily RDOF Phase I Winning Bids Total $9.23B; $6.8B to Carry Over to Phase II
Monday, December 7, 2020

RDOF Phase I Winning Bids Total $9.23B; $6.8B to Carry Over to Phase II

The 180 winning bidders in the FCC’s Rural Digital Opportunity Fund (RDOF) Phase I auction (Auction 904), which concluded Nov. 25 (TR Daily, Dec. 1), are in total asking for only $9.23 billion of the $16 billion in 10-year support that was available in the auction, in exchange for which they have offered to serve 5,220,833 locations in 49 states and the Northern Mariana Islands with broadband—in most cases, with gigabit speed service, the FCC said in a public notice today.

"CCO Holdings, LLC (Charter Communications) was assigned the most locations, just over 1.05 million," the FCC said in a press release. The Charter locations are spread across 24 states, according to data released by the FCC.

"A broad range of providers successfully competed in the Phase I auction, including cable operators, electric cooperatives, incumbent telephone companies, satellite companies, and fixed wireless providers," the FCC added.

The $6.8 billion in unclaimed Phase I support—a dividend of the reverse auction design in which bidders win by offering to accept lower amounts of support for a given area than competing bidders—will be combined with the $4.4 billion previously set aside for the RDOF Phase II, in which bidders will offer to serve unserved locations in partially served census blocks. In the Phase I auction, bidders were competing for support to serve wholly unserved census blocks. The FCC indicated when it adopted the framework for the two-phase RDOF earlier this year that it would delay the Phase II auction until it has better broadband mapping data (TR Daily, Jan. 30).

The state not covered by the Phase I auction results is Alaska. The FCC has a separate mechanism covering Alaska, which has specific challenges including remote populated areas inaccessible by road and a short construction season.

"Of the 5,295,771 locations in the 61,766 eligible census block groups, approximately 99% of the locations are covered by winning bids. While winning bids are for a range of performance tiers, winning bids for downstream speeds of at least 100 megabits per second (Mbps) cover 99.7% of these locations, with over 85% of locations covered by winning bids for Gigabit speed service," the FCC said in the public notice released today in AU docket 20-34 and WC dockets 19-126 and 10-90.

"Winning bidders must submit a post-auction application for support (FCC Form 683) no later than January 29, 2021. Winning bidders that wish to assign some or all of their winning bids to related entities must do so by December 22, 2020, using the Divide Winning Bids process described" in the public notice, the FCC said.

However, it added, "[w]inning bidders that intend to file a long-form application covering all their winning bids are not required to participate in the Divide Winning Bids process. Any winning bidder that does not submit the Divide Winning Bids portion of FCC Form 683 prior to 6:00 p.m. ET on December 22, 2020, must file a long-form application that covers all its winning bids. In such circumstances, the winning bidder must file the long-form application in its own name, be designated as the eligible telecommunications carrier (ETC) to serve the relevant areas, be named in the requisite letter(s) of credit, and fulfill the public interest obligations associated with receiving Rural Digital Opportunity Fund Phase I support."

"A winning bidder may only assign its winning bids to a related entity that is named in its short-form application or that was formed after the short-form application deadline (i.e., July 15, 2020). The Auction Application System will not permit a winning bidder to assign its winning bids to another winning bidder. A related entity is an entity that is controlled by the winning bidder or is a member of (or an entity controlled by a member of) a consortium/joint venture of which the winning bidder is a member," the FCC said.

The Jan. 29 filing deadline covers the submission of eligible telecommunications carriers (ETCs); initial project overviews "describing at a high-level the applicant’s intended technology and system design for each state with a winning bid"; project funding descriptions; spectrum access descriptions where applicable; and ownership information, among other things.

It gave long-form applicants 70 days to submit letter of credit commitment letters, as well as detailed technology and system design descriptions—that is, until Feb. 15.

FCC Chairman Ajit Pai said, "I’m thrilled with the incredible success of this auction, which brings welcome news to millions of unconnected rural Americans who for too long have been on the wrong side of the digital divide. They now stand to gain access to high-speed, high-quality broadband service. We structured this innovative and groundbreaking auction to be technologically neutral and to prioritize bids for high-speed, low-latency offerings. We aimed for maximum leverage of taxpayer dollars and for networks that would meet consumers’ increasing broadband needs, and the results show that our strategy worked. This auction was the single largest step ever taken to bridge the digital divide and is another key success for the Commission in its ongoing commitment to universal service. I thank our staff for working so hard and so long to get this auction done on time, particularly during the pandemic."

In a research note, New Street Research LLP analyst Jonathan Chaplin said that while Charter "was the biggest winner with 1.1MM locations" and winning bids totaling $1.1 billion, it "won fewer markets than we expected." He noted that Spacex was the second biggest winner, with 600,000 locations and $900 million in winning bids.

"The next largest bidders were Rural Electric Cooperative Consortium and LTD Broadband; these top four bidders represent 55% of total auction locations. The top 20 bidders … represent 89% of locations auctions," he added.

In a statement, Louis Peraertz, vice president–policy at the Wireless Internet Service Providers Association, said, "WISPA congratulates our members who successfully participated in the RDOF auction. This work—the Industry’s and the FCC’s—represents a tremendously important step toward bridging the digital divide. It shows that reverse auctions can work in ways which build the marketplace and serve important public policy goals, enabling all Americans to participate from and thrive in our broadband-driven economy."

Mr. Peraertz added, "We remain buoyed by the fact that policymakers understand the rural divide must be eradicated and have exerted significant efforts and resources to get more Americans online. Properly designed reverse auctions can work to achieve those goals. Other policies—such as unleashing more unlicensed spectrum; licensing spectrum in county-based parcels; keeping regulations low for small providers; and increasing access to infrastructure and rights-of-way—are further important means to getting all Americans online. They can help the very smallest players continue the work they do 24/7/365, bringing broadband to Americans who might otherwise be cut-off from the abundant opportunities that the Internet delivers.

"As we continue to study results of the RDOF Phase I, we look forward to lessons learned that can help improve Phase II of the RDOF auction, which will even more granularly identify and then bring service to those who remain in the digital divide," he concluded. —Lynn Stanton, [email protected]

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