FCC Funding

FCC Funding formulas designed to allocate grants to businesses providing broadband in rural areas

Abner Womack and Keith Eisberg

August 18, 2021

Serious consideration should be given to modifying FCC granting formulas, before the next RDOF bidding process, to consider the possible longer run economic and social consequences associated with each level of funding.

REASONS:

1. Current FCC objective is to provide grants to broadband businesses that cover the largest areas at least cost to the government

2. For this reason lower-level broadband providers - fixed wires, cable and satellite are given weighting advantages over higher level fiber providers because structural cost per area is significantly higher

3. Fiber charges per unit of Mbps are lower than competitors

4.Examples of bidding process results for Missouri in the last two auction rounds: 

I. 2018 CAFII FCC auction of $1.5 billion
$255 million to Missouri bidders
Amounts to 17% of FCC grant funds
$176 million (69%) awarded to one wireless provider 

II. 2020 RDOF auction of $15 billion
$346 million to Missouri bidders of $9.2 billion awarded
Amounts to 3.8% of FCC grant funds
$197 million (57%) went to fixed wireless providers.

III. If Missouri had achieved the same 17% the award would have been $1.6 billion 

5. From survey results with 7 electric Coops providing fiber and two Regional Planning Commissions:
I. Fiber providers experienced significant growth in several economic and social categories.
II. Regions with lower-level services experienced much lower growth and continued out migration. 

6. Heavy formular weighting gave significant advantages in the bidding process to lower providers. 

7. Bidding starting at $100 million for a district often wound up at $6 million category. 

8. The bidding process extended until the time clock ran out with $5.8 billion still on the table. 

9. Balancing formulas relative to State’s geography, topology, etc., consideration should be given to setting up several pilot projects to study more carefully the combination of broadband services that best services the expansion and growth of a region 

10. Current formulas designed for one-size-fits-all do not provide enough options to prevent the lower-level services from dominating the free-market bidding process.