Inflation, COVID Prompts RDOF Winners to Seek Supplemental Funding

A coalition of winners in the Rural Digital Opportunity Fund (RDOF) reverse auction recently filed an “Emergency Petition,” asking the FCC to authorize supplemental funding to auction winners and to speed up funding payment timelines. The Commission approved the long-form applications of several low-bidders in the 2020 auction gradually over 2021 and 2022. However, bidders say the effects of inflation and the COVID-19 pandemic on the economy, are causing their support distributions to fall short of what they need to complete broadband projects.

“Due to the impacts of COVID along with new, multibillion-dollar federal fiscal policies and pandemic-prompted broadband deployment funding programs, construction costs have skyrocketed—at a minimum of 30 percent, but some by as much as 100-300 percent,” the coalition says. “These massive cost increases could never have been anticipated by the Commission or the RDOF winners prior to the auction.”

The petition does not specify which auction participants are in the coalition but says that each was a successful bidder at the end of the Phase I auction in late 2020.  At that time, the FCC announced that 180 participants submitted successful bids for $9.2 billion in RDOF support. That was substantially less than the $16 billion the Commission originally planned to distribute through the Phase I auction. After the Commission completed review of winning bidders’ long-form applications, Phase I distributions went down to about $6 billion.

Members of the NRTC Phase I RDOF Consortium in 14 states were high bidders in the auction. The FCC later approved several NRTC-member long-form applications between October 2021 and May 2022 totalled more than $150 million in support.

FCC Chairwoman Jessica Rosenworcel has so far opposed supplemental funding for RDOF winners. In a June letter to members of Congress, Rosenworcel noted that the Commission gathers funds for the RDOF auction through the universal service high-cost fund contributions process. After completing long-form reviews, the FCC only budgeted for $6 billion in RDOF distributions through that process. “Thus, we do not have support in reserve readily available for reallocation to the extent that the total amount authorized for RDOF fell below the projected budget,” Rosenworcel said.

Prior to the Phase I auction, the FCC developed a cost model to set the reserve prices for auction bidders. The coalition petition calls for the FCC “rerunning” that cost model to determine the appropriate amount of supplemental funding to the winning bidders. “Use of such an objective standard to determine supplemental funding will also preserve the integrity of the RDOF process by ensuring winning bidders are not placed in a better position as a result of the supplemental funds; rather, such funding will be designed solely to remedy the unprecedented and unforeseeable pandemic-prompted cost increases,” the petition says.

Under RDOF rules, the FCC pays the winning amounts to auction participants over a 10-year period following approval of the long-form application, based on broadband project reaching certain construction milestones. The petition suggests releasing funding on a faster timetable. “Such relief would help assuage the immediate and significant financial pressures facing RDOF winners, thereby helping to ensure the viability of RDOF deployments in the short term,” according to the petition.