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FCC Math Puts Rural Broadband at Risk

Broadband subsidy could leave up to 30% of rural Ohio without high-speed internet

In December 2020, the FCC’s Rural Digital Opportunity Fund (RDOF) conducted a nationwide, $10 billion reverse auction to bring high-speed internet to rural areas. In Ohio, the auction awarded $170 million to 11 providers for a total of 191,000 households. According to comments filed by the Buckeye Hills Regional Council (BHRC) with the FCC on behalf of the state of Ohio, up to 30% of the RDOF eligible footprint could wind up with no access at all.

“To drive economic development, broadband needs to reach every household” says Misty Crosby, BHRC executive director. “That’s why we want to make sure RDOF funds are spent wisely.”

The problem boils down to accounting and accountability.

Fiber optic networks are expensive to install. With costs in remote locations ranging from $6000 to $30,000 per household, RDOF auction winners will face significant financial pressure to abandon more expensive locations. In fact, the FCC’s payment model incentivizes this.

RDOF pays each provider a fixed, per-household sum based on the statewide average of that provider’s auction winnings. Following this approach, a cluster of homes along a state highway could generate a surplus, while a single household at the end of a mile-long dirt road could cost 30-40 times more than the subsidy payment. This disparity encourages providers to use funds meant for low-density locations to help pay for mid- and high-density areas.

With low penalties for non-deployment, consumer advocates are concerned that providers ultimately will drop isolated households and census blocks rather than absorb the true cost of reaching those locations. In an analysis conducted by Tom Reid of Reid Consulting Group, a provider could draw 85% of available subsidy while declining to serve 30% of their territory. According to Reid, public accountability is the best way to ensure broadband reaches all households.

Historically, FCC funding recipients face few public disclosure requirements, and the Commission’s process for monitoring progress is opaque. To ensure that RDOF recipients meet their commitments, Buckeye Hills proposes requiring monthly, public, household-level progress reporting with subsidy payments tied to independent third-party verification.

The full report can be found here.

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