The FCC’s New Initiative Punishes States That Have Tried to Close the Digital Divide
The FCC’s New Initiative Punishes States That Have Tried to Close the Digital Divide
The FCC’s New Initiative Punishes States That Have Tried to Close the Digital Divide

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    Last week, the Federal Communications Commission (FCC) released its Report and Order about the new Rural Digital Opportunity Fund (RDOF), which provides $20.4 billion to fund broadband deployment in rural areas over 10 years. However, the Order, as written, could actually broaden the digital divide by punishing states that have taken steps to fund broadband deployment while rewarding states that have been unwilling to put up their own money.

    RDOF funds are to be awarded through two phases in an attempt to prevent so-called “overbuilding,” another term for having competition. Essentially, the FCC wants to first use federal dollars to serve people who have no service whatsoever. After connecting those Americans, the FCC would then allocate federal funds to help those who have some broadband service, even if that service is low-quality or prohibitively expensive. Thus, during Phase I of RDOF, the FCC will award $16 billion to areas that are “wholly unserved.” During Phase II, the FCC will award a much smaller amount of money, $4.4 billion, to partially served areas, as well as wholly unserved areas that didn’t receive funding in Phase I. According to the order, partially served areas include census blocks that already have at least one provider offering speeds meeting the FCC’s definition of broadband (currently 25/3 Mbps upload and download speed, respectively), have been awarded U.S. Department of Agriculture ReConnect funds, or have received “funding through other similar federal or state broadband subsidy programs.”

    In a surprise move, between the publication of the draft Rule and Order and the FCC’s final vote on the Report and Order, the FCC added the line stating that census blocks receiving “funding through other similar federal or state broadband subsidy programs” would be ineligible for Phase I RDOF funds. In doing so, the FCC has likely impacted the ability of numerous states and millions of Americans residing in large rural census blocks to benefit from RDOF. According to a PEW Report from December 2019, 25 states have established their own broadband funds. According to research undertaken by FCC Commissioner Geoffrey Starks, nearly 30 states may find their eligibility for RDOF funds reduced or eliminated.

    However, it is difficult to estimate the true effect of this language, because how it will be implemented is maddeningly unclear. First, it is unclear how the FCC will gather information to know which census blocks have an internet service provider that is a state grant recipient. It’s also unclear how much funding disqualifies an ISP, and therefore the census block. And it’s unclear if the FCC will have a challenge process for blocks declared ineligible on the basis of receiving state funding in the same way it has a challenge process for deeming blocks ineligible due to existing coverage. This makes it impossible to assess the impact of the FCC’s last-minute decision. However, this language does not allow all ISPs to use both state and federal funding to deploy broadband.

    The FCC should, and traditionally has, encouraged states to promote broadband deployment. In fact, most federal grants encourage or require state matching funds because they are intended to supplement, and not supplant, state action. However, by precluding ISPs from combining state and federal funding to deploy broadband in certain census blocks, the FCC has punished states that have taken action to close the digital divide, and could prevent the digital divide from closing. The FCC has estimated that closing the digital divide will cost approximately $80 billion. Half of those funds are needed just to serve the two percent of customers who are hardest to reach with broadband because they live in areas with particularly low population densities and difficult terrain. The RDOF provides just a fraction of the funding needed to eliminate the digital divide even for these consumers. That is why it is so confusing that the FCC is discouraging states from stepping in to fill the gap.

    Of course, the FCC has said, in a footnote, that it does not intend to prevent ISPs from utilizing complementary funding. Specifically, it has no intent “to prevent winning bidders from accessing other funding sources, including from states.” This language prohibits ISPs in states who have taken initiative and already contributed funds to close the digital divide from getting federal and state funding while allowing ISPs in states who have not yet provided funding to close the digital divide to use both. By determining that the timing of state funding matters, the FCC is playing favorites, and punishing states who have tried to help their residents access broadband.

    In addition, the FCC’s Report and Order is preventing millions of Americans from accessing affordable broadband. In its Order, the FCC listed what areas would not be eligible for Phase I funding in order to prohibit overbuilding. By precluding areas with any existing providers or existing funding from receiving RDOF Phase I funding, the FCC is preventing competition, and therefore preventing many Americans who are able to receive broadband from being able to afford broadband. Those without access to multiple providers pay higher prices and receive lower quality broadband. These price increases can be significant. For example, some AT&T customers in regions without competitive providers pay up to $60 more a month than consumers in regions with competitive providers. Affordability is one of the key reasons that people who have broadband available do not subscribe to it. If the FCC wants to ensure that everyone in our nation actually subscribed to the internet, it needs to promote competition and enable areas served by monopoly providers to access RDOF funds.

    For these reasons, numerous states have taken issue with the FCC’s order. Last week, 23 members of the House Energy & Commerce Committee submitted a letter to FCC Chairman Ajit Pai, noting that this language is confusing and means “there is a high probability that there will be unserved areas overlooked and left out of this opportunity.” These members also asked Chairman Pai to reconsider this issue once states have had an opportunity to weigh in. We agree. The FCC’s insistence on punishing states trying to close the digital divide should not be tolerated, and the FCC should, in fact, reconsider this issue, once the states have had a chance to weigh in.


    Image credit: Gage Skidmore