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Windstream : FCC Awards $9.2 Billion for Construction of Rural Broadband Networks

12/07/2020 | 05:00pm EST

By Ryan Tracy

WASHINGTON -- The Federal Communications Commission dedicated $9.2 billion to fund construction of rural broadband networks over the next decade, in what the agency's leader called the biggest ever U.S. step to extend high-speed internet service.

The funding will go to internet service providers, from established rural operators such as Windstream Holdings Inc. to newcomers such as cable provider Charter Communications Inc. and Elon Musk's SpaceX. The companies bid against each other in an auction designed to steer public money to the company willing to build the fastest network in each area at the lowest cost.

"I'm thrilled with the incredible success of this auction, which brings welcome news to millions of unconnected rural Americans who for too long have been on the wrong side of the digital divide. They now stand to gain access to high-speed, high-quality broadband service," said FCC Chairman Ajit Pai.

The providers have 10 years to build the networks, with incentives to do so sooner rather than later. The FCC said the auction covered more than 5 million homes and businesses in 49 states. In about 85% of locations, the providers promised ultrafast "gigabit" speed, the agency said. Most of the remaining locations would see download speeds of at least 100 megabits a second, capable of large downloads.

Of the 180 companies that made successful bids, LTD Broadband LLC secured the most funding -- about $1.3 billion -- to serve more than 500,000 homes and businesses. The company has previously used tower-mounted "fixed wireless" technology. Charter, operator of the Spectrum brand, secured about $1.2 billion to serve more than 1 million locations across 24 states. A consortium of rural electric companies won about $1.1 billion.

Other entrants offering new, less-tested technologies also won funding, including Space Exploration Technologies Corp., which is launching a network of low-Earth-orbiting satellites. SpaceX sought eligibility for the auction over some objections from competitors using more established technologies, and secured $885 million to serve locations across 35 states.

Representatives of LTD, SpaceX and Windstream had no immediate comment. A Charter spokeswoman declined to comment, citing rules that restrict auction participants from discussing bids.

Among states receiving funding, California topped the list with $695 million, followed by Mississippi at $495 million.

The FCC said the auction saw "vigorous competition," covering virtually every geographic area it opened for bidding. Officials had set aside $16 billion for the auction but ended up needing $9.2 billion. The remaining $6.8 billion is expected to be available in another planned FCC auction targeting additional unserved locations.

Nick Del Deo, an analyst at telecom research firm MoffettNathanson, said the slate of winners reflected the new program's more competitive design. Past federal subsidies mostly favored incumbent telephone companies and offered fewer dollars through auctions.

"This time around, they structured it totally differently, so it was a lot of nontraditional players," including wireless broadband providers and rural electric cooperatives, Mr. Del Deo said. "It's good public policy."

The auction is part of a yearslong, so far partially successful push to extend broadband service universally across the U.S., a need made all the more pressing this year as large numbers of Americans work and learn from home during the coronavirus pandemic. Since 2012, the FCC has spent at least $35 billion on the cause, while the U.S. Agriculture Department and states have their own subsidies. The FCC funding comes from fees on Americans' telephone bills.

Nevertheless, the FCC reported recently that millions of Americans still lack access either because they don't have access to a network or they can't afford it.

One persistent problem is a lack of detailed maps of broadband networks. The FCC relies on data reported by internet service providers to determine where broadband networks exist, so it can fund construction in places that don't have it. But providers can report serving a whole area even if they reach only a single home or business there. That means if one home in a rural area has a broadband connection, the FCC might not fund construction to reach the neighbors.

Democrats on the FCC had argued for delaying the latest auction until the agency could be more confident in its broadband data. Mr. Pai, a Republican, argued that despite the data flaws, the FCC knew enough now to help many areas. He said future auctions will cover still-unserved locations. The FCC has sought more funding from Congress to fix data gaps.

Mr. Pai said last week he will leave office after President-elect Joe Biden is inaugurated on Jan. 20, leaving the job to a still unnamed Democratic successor at the FCC.

Mr. Biden has called for extending broadband to every U.S. household.

--Drew FitzGerald contributed to this article.

Write to Ryan Tracy at ryan.tracy@wsj.com

(END) Dow Jones Newswires

12-07-20 1659ET

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