After deciding to shut New York and Alaska out of a rural broadband fund, Federal Communications Commission Chairman Ajit Pai has made another change that could reduce or eliminate funding available for ISPs in other US states.

When the FCC yesterday approved the $20.4-billion Rural Digital Opportunity Fund (RDOF), the order contained a new provision that bans funding for areas already receiving money from any similar federal or state broadband-subsidy program. The new provision is so vague and expansive that it could affect areas in dozens of states or exclude some states from receiving money entirely, according to Democratic FCC Commissioner Geoffrey Starks.

"Based on my initial research, that means that the nearly 30 states that fund rural broadband through their own programs may find their eligibility reduced or eliminated," Starks said before yesterday's vote. "These provisions discourage badly needed state-federal partnerships, risk unequal application of the rules between states, and create an unnecessary risk of litigation."

The draft version of the order, released publicly on January 9, excluded areas that already receive funding through the US Department of Agriculture's ReConnect Program. The final version approved yesterday hasn't been released publicly yet, but Starks said that it contained a much broader provision:

The version of the order now before us excludes from RDOF any area that the commission "know[s] to be awarded funding through the US Department of Agriculture's ReConnect Program or other similar federal or state broadband subsidy programs, or those subject to enforceable broadband deployment obligations."

The limit applies to Phase 1 of the program, which will distribute up to $16 billion of the $20.4 billion. The FCC says the first phase will "target those areas that current data confirm are wholly unserved," and the remaining money will be set aside for the future second phase.

ISPs that obtain money through the program will be required to expand their networks to new homes and businesses. Each grant will provide annual support for 10 years, so the $16 billion in Phase 1 will amount to $1.6 billion a year. Phase 1 support will be distributed in a reverse auction beginning later this year.

Starks and fellow Democrat Jessica Rosenworcel partially dissented from yesterday's vote.

“Surprise last-minute change”

Consumer-advocacy group Public Knowledge said the late addition to the order "may ban grants for millions of unconnected Americans." Public Knowledge Senior VP Harold Feld said:

Read broadly, this surprise last-minute change impacts almost every state in the Union. Nearly every state either has its own broadband subsidy program, receives funds under the Department of Agriculture ReConnect program, or receives other federal funding for broadband. Even read narrowly, this would appear to cut off millions of unconnected rural Americans from a program designed explicitly to help them. According to a Pew Report published in December 2019, 35 states have funds that directly subsidize broadband. Numerous other states have funds that might qualify as a 'subsidy' or 'enforceable broadband deployment obligations,' depending on how the FCC order defines these terms.

State-by-state lists of broadband programs and funds are available here and here.

The definitions used by the FCC will matter, because any single government program is unlikely to cover all the rural areas in a state with modern broadband service. Unless the new limit is carefully tailored to apply only to homes and businesses that are already slated to receive government-subsidized broadband, it could result in some unserved areas having no chance of getting modern Internet service in Phase 1 of the RDOF.

Pai hasn't revealed which areas will be excluded from the program as a result of the change, nor has he said whether the FCC has determined which areas will be excluded. We contacted Pai's office yesterday and will update this article if we get a response.

Pai defends new limit

Pai argued that the new limit that Starks objected to will prevent spending federal money twice in any given area. Pai said:

We must target our limited funds to bring broadband to those that will otherwise not be served. That means limiting our efforts to areas that do not have broadband and where there are no current federal and state programs, fiscal or otherwise, that will ensure that broadband is deployed in the near future. I cannot condone handing companies additional taxpayer money to deploy broadband in areas where they are already legally obligated to deploy broadband. Paying someone twice to do something once is something that everyone should oppose.

Before making the change, Pai's office released a list of 48 states where ISPs can participate in the reverse auction along with the number of potentially eligible homes and businesses in each state. Those numbers presumably will be revised downward because of the new limit. The FCC said it shut New York and Alaska out of the program entirely "because of previously established programs to fund rural broadband in these states."

US Senate Minority Leader Chuck Schumer (D-N.Y.) and Sen. Kirsten Gillibrand (D-N.Y.) objected to New York's exclusion, saying that it would leave parts of New York unserved. The senators believe that their state shouldn't be penalized for making previous attempts to fix its broadband-deployment problem.

(Update: After objections from members of Congress, Pai reversed course and informed lawmakers in a letter on January 30 that he has removed "overly broad language" that excluded New York from Phase 1 of the fund, and that New York's eligibility "will be determined by the same neutral principles applicable to other states." However, Pai noted that the change "does not guarantee that any particular area will be eligible for support," and a provision that excludes census blocks with any access to 25Mbps/3Mbps service effectively shuts out 98.4 percent of residents in New York. This limit is described in the next section of this article.)

ISPs in each eligible area can apply for funding to support broadband networks offering at least 25Mbps download and 3Mbps upload speeds, or for higher tiers including 50Mbps/5Mbps, 100Mbps/20Mbps, and 1Gbps/500Mbps. ISPs are allowed to impose 250GB-per-month data caps on the 25Mbs/3Mbps and 50Mbps/5Mbps tiers, but must provide at least 2TB per month on the faster tiers.

Another limit, and bad broadband data

There's another limit in Phase 1 that was in the FCC's draft plan even before Pai added the provision blocking funding in areas with any "similar federal or state broadband subsidy programs." Specifically, Phase 1 will exclude any census block where a home Internet provider offers service with at least 25Mbps download and 3Mbps upload speeds—even if only some homes in the census block have access to that network.

Pai acknowledged in his statement at yesterday's meeting that some "partially served" areas will be ineligible for funding in Phase 1. "There are Americans living in areas where some but not all homes have service," and those areas will not get funding in Phase 1, Pai said.

Partially served areas will be eligible for funding in Phase 2, which Pai says won't happen until after the FCC fixes its broadband-mapping data. FCC broadband-access data is inaccurate, often underestimating the scope of the problem, and the commission voted in August to collect more precise data from ISPs going forward. Pai resisted calls from Democrats to delay Phase 1 until after more accurate data is available.

Rosenworcel said at yesterday's meeting:

With today's decision we commit the vast majority of universal service funds—$16 billion!—for the next ten years without first doing anything to improve our maps, survey service accurately, or fix the data disaster we have about the state of service today. That means if your home is marked as served by the FCC's maps today and it is not, then for the next decade you are on your own. Good luck. It means millions of Americans will slip deeper into the digital divide.

Pai said that Phase 2 could end up distributing more than $4.4 billion, if Phase 1 doesn't give out all of the allotted $16 billion. The FCC could also change the budget of Phase 2 "once we know precisely how large this part of the job is," Pai said.

Republican Commissioner Michael O'Rielly defended the decision to move ahead with Phase 1 before data collection is improved. "[B]y limiting Phase 1 eligibility to those census blocks that have no broadband whatsoever and targeting those consumers truly deserving of FCC assistance, our action should not in any way trigger or exacerbate the rightful concerns raised over our broadband mapping procedures," O'Rielly said.

The RDOF will replace the existing Connect America Fund. Both programs are paid for by Americans through fees imposed on phone bills.