RDOF Stakeholders Debate Amnesty, Bash Reverse Auction

Representatives from ISPs, trade groups and state governments agreed that the FCC’s Rural Digital Opportunity Fund reverse auction process was flawed but disagreed about whether or how the agency should grant amnesty to some RDOF participants. “You should not be penalized for circumstances you could not have foreseen,” said Philip Macres of Klein Law Group, representing a coalition of RDOF participants calling for amnesty during a Broadband Breakfast panel Wednesday. Entities seeking amnesty after failing to meet RDOF obligations are just trying “to game the process,” said Republican Missouri state Representative Louis Riggs. “They treated us like a colony, you know-- extract wealth from us, give us nothing in return.”

The FCC should grant an amnesty period that allows RDOF participants to relinquish their winning areas without penalties because those companies are suffering from unpredictable, skyrocketing costs for the materials needed for broadband infrastructure, Macres said. An amnesty would incentivize the companies to default promptly while there’s time to get coverage to those areas through the BEAD program, said Quinn Jordan, Executive Director of the Mississippi Broadband Association. “We’ve got this tight window, and we owe it to those RDOF households,” he said. Most of the panelists said they believed the FCC was leaning toward eventually granting some form of amnesty.

WTA Counsel Gerry Duffy and Free State Foundation’s Seth Cooper said it would hurt future auctions to allow RDOF participants to default without facing penalties. Lowering the risk of overpromising could have consequences for similar programs, Cooper said, calling it “a moral hazard.” Companies seeking amnesty are doing so for financial relief, Macres said. With penalties, there is “no incentive” for companies to give back their RDOF territories to allow them to be covered by BEAD, he said. “We're just going to have to wait until years five and six to see if there's enough money to make that build possible,” Macres said. “If you guys want to play Thelma and Louise and go to the cliff and see how long it's gonna take, we can go there, but you know, I can't tell you what's going to happen.”

All of the panelists had a dim view of how the RDOF reverse auction was conducted. “The Chairwoman inherited a flawed system,” said Jordan. “The whole industry has recognized there should be floors on reverse auctions.” The auction pitted large fiber providers against satellite and other providers who brought the price down, said Elizabeth Bowles, CEO of RDOF participant Aristotle Unified Communications.

Macres compared the unforeseen price increases in the costs of construction to a “force majeure” that shouldn’t be held against the companies. Bowles said her company has no plans to default on its RDOF obligations but also conceded that prices have risen steeply. She said penalties should be assessed on a case-by-case basis. “RDOF defaults don’t help anyone,” she said. Riggs said funds from RDOF defaults should go back to the states, which since COVID have all created offices overseeing broadband dissemination. “We will forgive your debt,” Riggs said. “Get the heck out of the way. Let the folks who actually do this well do it.”