UPDATE: FCC Rejects LTD Broadband’s Long-Form Application For Rural Digital Opportunity Fund Support

August 10, 2022 – The Federal Communications Commission (FCC) has announced it is rejecting LTD Broadband LLC’s long-form application to receive Rural Digital Opportunity Fund (RDOF) auction support. The announcement was made in an FCC News Release.

July 26, 2021 – LTD Broadband LLC, the biggest winner in the FCC’s Rural Digital Opportunity Fund (RDOF) auction, has been denied a waiver of a key RDOF deadline. As a consequence of that decision, LTD Broadband will be in default of its RDOF winning bids in California, Kansas, and Oklahoma. In total, LTD Broadband will be stripped of $271.8 million in RDOF support.

So what happened, exactly? The FCC’s Wireline Competition Bureau denied a petition submitted by LTD Broadband that sought waiver of the June 7, 2021 deadline requiring an RDOF winning bidder to be designated as an eligible telecommunications carrier (ETC) in areas it won RDOF support.[1] The Bureau found that LTD Broadband “failed to engage in good faith efforts to pursue and obtain the required ETC designation” in California, Kansas and Oklahoma.

Under the RDOF program rules, a winning bidder that was not already an ETC in the areas where it had won RDOF support was given 180 days from the release of the Public Notice[2] identifying all RDOF winners to obtain the necessary ETC designations.[3] The 180-day ETC deadline for RDOF Phase I auction winners was June 7, 2021.

Often, it takes a state public utility commission longer than 180 days to review and grant an ETC application. In those cases, an RDOF winning bidder is able to ask the FCC to waive the ETC deadline.

When the FCC reviews such a waiver request, it will “presume that an applicant acted in good faith if it filed its ETC application with the relevant state authority within 30 days of the release of the public notice identifying Auction 904 winning bidders.”[4] For RDOF, this “good faith” presumption deadline was January 6, 2021.

Because LTD Broadband failed to timely file ETC applications in California, Kansas, and Oklahoma, it was unable to gain ETC designation in those states prior to the June 7, 2021 deadline. This forced LTD to petition the FCC for a waiver of that deadline.

LTD Broadband State Petitions For ETC Designation

LTD Broadband was the biggest winner of the RDOF Phase I auction in terms of total support won. It was a winning bidder in 15 states, with 10-year support totaling $1,320,920,718.20 to serve 528,088 locations.

In California, LTD Broadband won $187,506,059.70 in RDOF support to serve 76,856 locations. In Kansas, it won $3,228,948 to serve 2,122 locations. And in Oklahoma, LTD Broadband won $81,098,352.90 to serve 39,889 locations. At the time, LTD had not been designated as an ETC in any of the three states.

LTD Broadband filed its application to be designated as an ETC in California on June 3, 2021; It filed its ETC application in Kansas on May 19, 2021; and LTD Broadband filed its ETC application in Oklahoma on June 7, 2021. None of these dates were anywhere close to the January 6, 2021, good faith presumption window:

• California on June 3, 2021 – 178 days after the RDOF Closing PN

• Kansas on May 19, 2021 – 163 days after the RDOF Closing PN

• Oklahoma on June 7, 2021 – 182 days after the RDOF Closing PN

Umm, what was LTD Broadband thinking? It makes absolutely no sense to wait nearly six months to file these three ETC applications.

With respect to California, LTD Broadband did contact the California Public Utilities Commission (CPUC) to inquire about the ETC designation process on January 6, 2021. However, LTD’s approach thereafter to navigating the requirements can only be described as a train wreck. Some insight into what happened can be gleaned from LTD’s Second Supplement and Third Supplement to its request for waiver of the FCC’s 180-day ETC designation deadline.

As explained in its FCC waiver petition, LTD Broadband waited to file ETC designation applications in Kansas and Oklahoma “for strategic reasons.” LTD said it anticipated running into opposition in both states. LTD also apparently had difficulty finding local counsel to assist with the ETC designation process in both states.

Wireline Competition Bureau Denies LTD Broadband’s Waiver Request

On June 7, 2021, LTD Broadband filed a petition with the FCC seeking a waiver of the ETC requirement for eight states where it won RDOF support: California, Iowa, Kansas, Nebraska, North Dakota, Oklahoma, South Dakota, and Texas.[5]

The Wireline Bureau’s Order only addresses the request for waiver for the states of California, Kansas, and Oklahoma.

First, the Wireline Competition Bureau concluded that LTD Broadband “failed to provide a compelling rationale for waiving the deadline to provide documentation of its ETC designation in California.” The Bureau noted that LTD filed its ETC application with the CPUC nearly six months after the RDOF Closing PN, while other RDOF winners in California were able to file ETC applications in January and early February. Of course, the disaster that was LTD’s California ETC application probably also contributed to the Bureau’s decision.

As for the Kansas and Oklahoma applications, the Bureau rejected LTD’s justifications as to why it waited over five and six months to file ETC applications in those states. Addressing LTD’s “strategic reasons” argument, the Bureau said “an entity’s specific corporate strategy or business considerations” do not justify a waiver extending an FCC requirement.

Remember, LTD had said it anticipated running into opposition in both states, so that’s why it waited. What, were they hoping no one would notice the filing if they waited five months since the end of the RDOF auction. Anyway, this is an extremely weak argument and somewhat counterintuitive. If you are facing a 180-day deadline and expect to face opposition, wouldn’t you want to file early enough to give yourself time to rebut that opposition before the deadline. That is generally what the Wireline Bureau said:

Indeed, LTD fails to support its argument that it delayed filing its ETC designation applications with Kansas and Oklahoma for “strategic reasons.” Even assuming that it faced the opposition to its ETC designations in these states that it was anticipating, LTD fails to explain why it did not file its applications within a reasonable time frame and then seek advice from experienced local counsel to rebut any actual incurred opposition. Thus, we do not find LTD’s explanation that it needed over five months to secure competent counsel to be a sufficient reason to demonstrate good cause to grant its waiver.[6]

The Bureau also rejected LTD’s argument that it shouldn’t matter when the ETC applications were filed because even if they were filed early, they would not have been granted within the 180-day window. The Bureau said “LTD misses the point here; regardless of whether it would or would not have received its ETC designation by the deadline, the Commission made clear that the Bureau should determine whether an entity engaged in good faith efforts to obtain an ETC designation when considering waiver requests. While entities that filed their ETC designation applications with the relevant state authority within the initial 30 day window are entitled to a presumption that they acted in good faith, we must undertake an individual, fact-based analysis for entities that filed outside of that window to determine if they pursued their required ETC designations in good faith.”[7]

Also, the Bureau had to explain the purpose of the 180-day ETC deadline to LTD:

Moreover, the purpose of the Commission’s deadline for securing ETC designation is to encourage applicants to act diligently in order to allow the Commission to move as quickly as possible toward disbursing critical universal service support. Every month of delay by LTD in seeking ETC designation amounts to another month of delay in satisfying that important public interest objective.[8]

It’s almost as if LTD was betting the FCC would rubberstamp its waiver request. In fact, LTD generally alluded to this in its waiver petition. LTD said that the FCC, when reviewing CAF Phase II auction long-form applications, “consistently waived the ETC certification deadline, determining that the benefits of additional time outweighed strict compliance with the deadline.” So that’s what LTD thought would happen here – a routine, pro forma approval of requests to waive the ETC deadline. The Bureau rejected this argument by distinguishing the two CAF Phase II waivers cited by LTD. In both of those cases, the ETC applications, unlike LTD’s applications, were filed months prior to the deadline and had legitimate reasons for delay.

LTD Broadband In Default Of RDOF Bids In California, Kansas, & Oklahoma

As a consequence of the Wireline Bureau’s decision, LTD Broadband will be in default of its RDOF winning bids in California ($187.5 million), Kansas ($3.2 million), and Oklahoma ($81 million). The Bureau will release a future public notice formally finding LTD in default of those winning bids. In total, LTD Broadband will be stripped of $271.8 million in RDOF support.

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[1] The Rural Digital Opportunity Fund Auction (Auction 904), AU Docket No. 20-34, Rural Digital Opportunity Fund, WC Docket No. 19-126, Order, DA 21-908 (July 26, 2021) (LTD Broadband Waiver Denial Order), https://docs.fcc.gov/public/attachments/DA-21-908A1.pdf. LTD Broadband sought a waiver of the ETC deadline for eight states: California, Iowa, Kansas, Nebraska, North Dakota, Oklahoma, South Dakota, and Texas. The Wireline Bureau’s Order addresses only the request for waiver for the states of California, Kansas, and Oklahoma.

[2] Rural Digital Opportunity Fund Phase I Auction (Auction 904) Closes; Winning Bidders Announced; FCC Form 683 Due January 29, 2021, AU Docket No. 20-34, WC Docket 19-126, WC Docket No. 10-90, Public Notice, DA 20-1422, (Dec. 7, 2020) (RDOF Closing PN), https://docs.fcc.gov/public/attachments/DA-20-1422A1.pdf. A list of the winning bidders is available here. An interactive map of the RDOF auction results is available on the Auction 904 web page. A summary of the results by state is available here.

[3] 47 C.F.R. § 54.804(b)(5).

[4] LTD Broadband Waiver Denial Order at ¶ 3 (citing Rural Digital Opportunity Fund, WC Docket No. 19-126, Connect America Fund, WC Docket No. 10-90, Report And Order, FCC 20-5, ¶ 81 (Feb. 7, 2020)).

[5] LTD Broadband LLC Petition of for Waiver of Section 54.804(b)(5) of the Commission’s Rules, AU Docket No. 20-34, WC Docket No. 10-90, WC Docket No. 19-126 (filed June 7, 2021), https://ecfsapi.fcc.gov/file/106070476913071/LTD%20Broadband%20ETC%20Waiver%20Request.pdf.

[6] LTD Broadband Waiver Denial Order at ¶ 12.

[7] LTD Broadband Waiver Denial Order at ¶ 13.

[8] Id.