Rural Digital Opportunity Fund

There have been several lawsuits over the last few years that challenge the legitimacy of the Federal Communications Commission's Universal Service Fund (USF). A suit from a non-profit group called Consumers’ Research argues that USF fees are taxes and that the original creation of the USF was unconstitutional since the Telecommunications Act of 1996 gave the FCC the power to levy taxes.

According to the Federal Communications Commission (FCC), 8.3 million households lack access to high-speed broadband. Providing universal access to communications service—initially voice service and now broadband—has always been a challenge in the United States. Although connecting urban, populated areas is relatively easy, serving sparsely populated rural areas is difficult due to differences in terrain and population density.

Two broad proposals have been advanced to modernize the Universal Service Fund's contributions system: 1) expanding the contribution base to include revenues from broadband internet access service, and 2) broadening the USF contribution base to include entities including edge providers such as streaming video providers, digital advertising firms, and cloud services companies. The most economically efficient option for reform is to expand the contribution base to include broadband internet access service revenues.

In June, the Biden administration allocated $42.45 billion in Broadband Equity, Access, and Deployment (BEAD) funding among states—the largest single pot of federal broadband spending in our country’s history. Biden officials at the National Telecommunications and Information Administration (NTIA) made these allocations despite repeated requests from lawmakers and communities across the country to first improve the data underlying NTIA’s funding decisions.

Spectrum launched the Internet, Mobile, TV, and Voice services to more than 200 homes and small businesses in Craven County, North Carolina. Spectrum’s newly constructed fiber-optic network buildout in Craven County is part of the company’s approximately $5 billion Rural Digital Opportunity Fund (RDOF)-related investment in unserved rural communities, which includes $1 billion won in the Federal Communications Commission’s RDOF auction. 

The  Universal Service Administrative Company (USAC) submitted projections of demand and administrative expenses for federal universal service support mechanisms for the fourth quarter of 2023. The Federal Communications Commission's Wireline Competition Bureau, in consultation with the FCC's Office of Managing Director, previously directed USAC to carry forward up to $211.50 million in unused funds from prior funding years to the extent necessary to satisfy funding year 2023 Rural Health Care program demand.

Charter Communications has frequently talked up the pace of its rural deployments, reaching 68,000 subsidized rural passings in the second quarter (Q2) of 2023. CFO Jessica Fischer said the Charter has a “tremendous opportunity” to expand its footprint to rural areas. Charter was one of the largest winners in the Rural Digital Opportunity Fund (RDOF) auction, and Fischer noted progress in those builds “has been going quite well” in terms of pace and penetration.

In rural areas, many large internet service providers (ISP) offer voice-over-IP. Nathan Smith, Director of Economics and Policy at Connected Nation said, “It’s likely that a lot of [Broadband Equity, Access, and Deployment (BEAD)] sub-grantees will add voice for an additional revenue stream." However, the BEAD Notice of Funding Opportunity does not require grant applicants to offer voice service, though the actual grants will be made by state governments who set their own rules. Ciena’s Solutions Marketing Senior Adviser Vinicius Santos expects some state broadband offices to ask applicants

LICT completed its spinoff of Michigan Broadband on August 31, 2023. The spinoff company is now known as MachTen. LICT, a rural broadband consolidator with operations in several states, withdrew from the Rural Digital Opportunity Fund (RDOF) program due to “substantial cost increases and other significant changes within the organization since we first participated and won in the RDOF public auction.”

Highline completed the construction of “The Thumb” service area, now offering fiber broadband to over 8,000 households in Sanilac, Tuscola, Lapeer, and St. Clair (MI) counties. Highline’s 823-mile fiber optic network was built with a combination of private investment backed by ITC Capital Partners and the Federal Communications Commission's Rural Digital Opportunity Fund (RDOF) grant program. While representing 14% of Highline’s total RDOF location commitment, Highline was able to complete this geographic portion of the network in two years rather than by the end of 2027.