EMPOWER Broadband, a subsidiary of Mecklenburg Electric Cooperative (MEC), is asking the Federal Communications Commission (FCC) to waive financing requirements attached to the provider’s takeover of thousands of subsidized broadband locations from RiverStreet Networks. It’s a move the cooperative says will save it millions of dollars in errant additional penalties.

It’s also highly representative of the ongoing challenges facing a program that has long been criticized for dysfunction and mismanagement.

The FCC program not only fell short of fulfilling its original promise, it now risks boxing numerous communities out from what could be a generational funding opportunity made possible by the 2021 infrastructure bill.  

During the 2018 Connect America Fund (CAF) Phase II auction, RiverStreet was awarded $32.1 million in financing to provide high-speed Internet to 13,518 locations in Virginia. RiverStreet is looking to divest 3,757 locations across three counties, poised to receive $8.1 million in annual CAF II broadband deployment support.

Image

According to a May RiverStreet filing with the FCC spotted by Broadband Breakfast, the divestment is necessary because the company “encountered certain obstacles that have prevented it from meeting its CAF II buildout milestones in the assigned CBGs.”

The Federal Communications Commission (FCC) says it won’t be providing broader relief for broadband operators that have defaulted on grant awards via the agency’s messy and controversial Rural Digital Opportunity Fund (RDOF) broadband subsidy program.

According to an FCC public notice, the FCC stated it found "no demonstrated need for broad relief" from provider penalties connected to either the RDOF or Connect America Fund II (CAF II) programs. It also shot down calls for a broader amnesty program for defaulters.

“Given the flexibility available under the existing default processes…we decline to provide a blanket amnesty,” the agency’s Wireline Competition Bureau said.

In a letter to the agency last February, a broad coalition of providers and consumer organizations suggested that either reduced penalties – or some sort of amnesty program – might speed up defaults, freeing areas for upcoming broadband infrastructure bill (Broadband Equity Access And Deployment, or BEAD) subsidies.

Image

The group was quick to point out that areas where RDOF and CAF II money has been committed are considered “served” for purposes of BEAD deployments, potentially boxing out many desperate U.S. communities from billions in potential funding.

“Many of the RDOF and CAF II awardees who cannot or will not deploy their networks are located in states with the greatest connectivity needs, like Missouri and Mississippi,” the authors wrote. “The Commission should not permit these unserved rural communities to face this type of double whammy and be left behind once again.”

But in its statement, the FCC insisted that changes to its approach aren’t necessary because, it claims, its existing processes are working.

The Rural Digital Opportunity Fund (RDOF) was supposed to drive affordable fiber into vast swaths of long-underserved parts of rural America. And while the FCC administered program accomplished some of that goal, a multitude of problems have plagued the program since its inception, putting both current and future broadband funding opportunities at risk.

The $20.4 billion RDOF program was created in 2019 by the Trump FCC as a way to shore up affordable broadband access in traditionally unserved rural U.S. markets.

The money was to be doled out via reverse auction in several phases, with winners chosen based on having the maximum impact for minimum projected cost.

During phase one of the program, the FCC stated that 180 bidders won $9.2 billion over 10 years to provide broadband to 5.2 million locations across 49 states and the Commonwealth of the Northern Mariana Islands.

But, according to ILSR data, roughly 34 percent of census blocks that won RDOF funding–more than $3 billion in awards – are now in default. All told, 287,322 census blocks were defaulted on by more than 121 providers as of December 2023.

Image

The defaults are only one part of a larger problem: namely that many communities bogged down in RDOF program dysfunction may risk losing out on the historic amount of federal funding to build modern broadband networks (BEAD) made possible by the 2021 bipartisan infrastructure law.

One Big Giant Mess

Five years ago, the Central Virginia Electric Cooperative (CVEC) announced the creation of the Firefly Broadband initiative, a subsidiary specifically built to leverage the co-op’s existing electrical assets to deliver affordable fiber to 13 underserved Virginia counties.

Half a decade later, the coop says it has successfully completed its $150 million expansion project, deployed 3,600 miles of new fiber, passed 40,000 total homes and businesses, and directly connected 20,000 state residents–many for the first time ever–in less than 52 months.

“Central Virginia Electric Cooperative partnered with Conexon to perform a feasibility study for a fiber build across their entire service territory – 13 counties and 3600 miles,” CVEC VP of Communications Melissa Gay told ILSR. “Once the target costs, offerings and take rates were determined, we chose to race to secure supplies and labor. Finding great partners has been a tremendous help to the success of our project.”

Image

Buoyed by numerous grants including a $28 million combination loan and grant from the USDA's ReConnect Program, Firefly now provides local residents symmetrical 100 Mbps (megabits per second) fiber for $50 a month, and symmetrical 1 Gbps (gigabit per second) service for $80 a month. There are no contracts and no data caps.

About 90 percent of households connected had no broadband access previously, according to Bruce Maurhoff, Firefly’s senior vice president and chief operating officer.

What Becket Town Administrator William Caldwell called “one of the most anticipated news [events]” in town was announced at the North Becket Village fire station weeks before Christmas.

But town officials weren’t there to roll out a shiny new ladder truck or to bring their kids to meet Santa. They were there to bring glad tidings of the launch of construction for Becket Broadband, a municipal Fiber-To-The-Home (FTTH) network that will usher high-speed Internet connectivity into this small Massachusetts hill town.

Since the town received a $3 million state grant to fund the initial work to build the network nearly four years ago, Sertex construction crews have been working and will continue through the winter to string fiber cables on utility poles along the town’s approximately 100 miles of roads with the build-out expected to be complete in 2022.

The project manager for the network’s construction is Westfield Gas & Electric, the city of Westfield’s gas and electric utility which received $10.2 million from the Federal Communications Commission’s (FCC) Connect America Fund Phase II (CAF II) auction to expand fiber networks in 20 nearby communities in western Massachusetts, including Becket.

The failure of policy and leadership at the federal level in addressing the digital divide was ever more clearly exposed as Covid-19 restrictions were put into place last spring. And, as the pandemic continues to rage, daunting connectivity challenges remain. 

Yes, the Connect America Fund (CAF) II program has doled out over $11 billion since 2015 in subsidies to the big telcos like AT&T, CenturyLink, Frontier, Windstream, and Consolidated ostensibly to upgrade rural broadband to speeds of at least 10/1 Megabits per second (Mbps). But, as Doug Dawson, president of CCG Consulting notes, it’s been a massive subsidy failure given that “even in 2015, it was ludicrous to spend money to build 10/1 Mbps broadband” – the same year the FCC defined broadband as 25/3 Mbps, which means “the FCC was investing in new Internet infrastructure in 2015 that didn’t qualify as broadband at the time of the award of funding.”

And there is reason to doubt that those subsidized upgrades were even completed, even as the FCC just extended the CAF II program for a seventh year.

So as states — and in many instances, local municipalities — step into the breach, the National Governors Association has released a new report that outlines a list of strategies governors can use to increase broadband access in underserved communities. 

Published just before Thanksgiving, the report first lays out the challenge:

According to the FCC, in 2018, at least 18.3 million people lacked access to fixed broadband in the United States that meets minimum [I]nternet access speed of 25/3. 1 Of those 18.3 million people, representing 6 percent of the total population, 14 million live in rural areas and 1 million live on Tribal lands, which amounts to 22 percent and 28 percent of those respective geographic populations [even as] studies have claimed that the FCC data is undercounting the number of people in the U.S. without fixed broadband access, and that the total may be as high as 42 million people.

When Craig Eccher, CEO Tri-County Rural Electric Cooperative, joined Christopher on the podcast last fall, he had an exciting project to talk about: the electric cooperative, after strong calls from its membership asking their utility to deliver broadband, stepped up and committed to an $80 million, 3,250-mile fiber build across the rugged terrain of rural Pennsylvania, the first leg propelled by $52.6 million in federal and state grants. Tri-Co Connections, the subsidiary building the network and serving as provider, has begun connecting residents in an aggressive plan to serve 10,000 users in the next three years. The move makes Tri-County the first electric co-op in Pennsylvania to enter the fiber space, and it's doing so in dramatic fashion.

More Humble Beginnings

Westfield Gas+Electric (WG+E) started its broadband division WhipCity Fiber and the buildout of their network five years ago. The project started with only serving Westfield, but WG+E is now contracting with other small towns in Massachusetts to assist in building and potentially operating their own fiber networks.

Today, WG+E is slated to help connect 12,400 households in 20 Massachusetts towns over the next 10 years. In order to do this, WG+E and WhipCity Fiber will receive more than $10 million over the next ten years through the Federal Communication Commission’s Connect America Fund Phase II auction, which awarded $1.5 billion in subsidies to broadband providers to expand rural connectivity across the nation. The 20 towns that are partnering with WG+E to build fiber networks are: Alford, Ashfield, Blandford, Becket, Charlemont, Chesterfield, Colrain, Cummington, Goshen, Heath, Leyden, New Ashford, New Salem, Otis, Plainfield, Rowe, Shutesbury, Washington, Wendell, and Windsor.

Adapting While Expanding

Westfield has been slowly building out its network, which is owned and operated by WG+E, and it is now roughly 75 percent complete. Lisa Stowe, the communications manager at WG+E, said that they temporarily paused new installations in Westfield due to the Covid-19 pandemic. However, she is hopeful that they will begin connecting new customers and resume their buildout of the network this year.

Image

To construct the WhipCity Fiber network, Westfield issued a $15 million bond. The city must pay down that bond and do routine updates to the network as they continue expanding. Stowe explained that they are well on track to having the network fully constructed within their original six year timeline.