The Federal Communications Commission (FCC) gave its blessing for another $700 million in winning bids to be authorized through the Rural Digital Opportunity Fund (RDOF) this week. This latest round of funding will go to 50 broadband providers for projects in 400,000 locations across 26 states.
All together with prior rounds, the FCC has announced $1.7 billion for RDOF. This latest round is the largest authorization of funds thus far, focused primarily on fiber and rural electric cooperatives.
Specifically, the main recipient of funds this round was Conexon Connect (Connect), a new fiber provider, powered by local co-ops, and managed by Conexon – a consulting firm that works with rural electric cooperatives on building broadband networks.
Of the $700 million announced this round, over $435 million was designated for Conexon Connect to build and operate fiber networks in 264,717 locations across Arizona, Florida, Georgia, Illinois, Kentucky, Louisiana, Mississippi and Missouri.
Connect is now the ISP arm of Conexon, which was founded in 2015 by Randy Klindt, who created Co-Mo Connect in Missouri, the first privately funded electric cooperative fiber network. Klindt runs Conexon in partnership with Jonathan Chambers, who previously served as chief of the office of strategic planning at the FCC.
As Chambers explained in an interview with Broadband World News, he got to know Klindt during his time at the FCC, when he was "keenly interested in remedying a fundamental flaw in the FCC's funding process" which he argues led the FCC to believe it lacked sufficient funding for fiber builds in rural areas.
"When I first met Randy [Klindt] and learned about what he was doing, he shared some of the details of their project and their cost," he said. "What so intrigued me by what Randy and Co-Mo had done was they were building a network for about half the cost of the FCC's cost model."
That led Chambers to join Klindt at Conexon in 2016, after departing the FCC.
Since then, Conexon has worked with electric cooperatives across the country to build fiber networks that the co-ops then operate, typically under subsidiaries. Connect, however, emerged from the company's work in Georgia, where the electric utility Central Georgia EMC wanted to own the network but not act as the ISP.
"They didn't want to operate the broadband business," said Chambers. "So our arrangement with them follows the same model that Randy developed and we have used with co-ops all across the country, with the difference being Connect. Connect is the provider of the services."
With the latest batch of RDOF awards, Connect will build and operate fiber networks through rural electric co-ops in eight states where the co-ops themselves would rather not be service providers.
In addition to over $435 million going directly to Connect, several other rural co-ops awarded this round are members of Conexon's Rural Electric Cooperative Consortium, whereby the company is involved in designing and building networks, as well as funding applications. (Of the 105-page FCC document naming all the winning bids, Chambers says "I think 80 to 90 pages were our projects.")
"We help people design and build networks, and we are interested – when an electric co-op is not – in operating the network," he said. "Because our main interest is making sure that everybody in the country has access, and this is the way to get that part done."
This latest authorization of RDOF dollars comes three weeks after the FCC announced it authorized $554 million for 11 service providers covering 180,000 locations in 19 states. That round was led by approvals for Windstream.
In a press release about the latest batch of funds, the FCC said it has been "working to clean up the Rural Digital Opportunity Fund to ensure funds go where they are needed and that winning bidders can meet the program's technical, financial, and legal requirements."
That includes sending "letters to 197 applicants concerning areas where there was evidence of existing service or questions of waste" as well as "denying waivers for winning bidders that have not made appropriate efforts to secure state approvals or prosecute their applications." The FCC says those denied waivers amount to more than $344 million that would have otherwise been awarded.
"We had asked them to do a vigorous scrub on the long-form applications, and I think there's probably 100 or so Congressmen who asked the same. So the FCC is definitely scrubbing things hard," said Gary Bolton, president of the Fiber Broadband Association.
On this episode of The Divide, Gary Bolton shares why he thinks municipalities and electric co-ops are becoming "the biggest emerging class of fiber deployers."
However, while Bolton says he's pleased to see "legitimate providers" as the winners this round, the reverse nature of the auction has overall been inefficient.
"The frustrating thing is, this is four rounds now of announcements – and we're at $1.7 billion," said Bolton. "Hopefully when we get through a RDOF II – if that ever happens – the vetting will be before the auction instead of after."
— Nicole Ferraro, site editor, Broadband World News; senior editor, global broadband coverage, Light Reading. Host of "The Divide" on the Light Reading Podcast