On March 5, the Federal Communications Commission's (FCC) Wireline Competition Bureau (WCB) issued a public notice seeking input on a recently submitted proposal to implement an "amnesty period" for internet service providers (ISPs) who may default on their deployment commitments under funding awards received through the FCC's Rural Digital Opportunity Fund (RDOF) or Connect America Fund (CAF) Auctions. The RDOF and CAF programs fund the deployment of high-speed broadband internet and voice service networks in areas that would otherwise be too costly to be adequately served by the market (typically, rural areas).

If adopted as proposed, the grant of amnesty would allow ISPs currently receiving RDOF or CAF funding to serve locations at a 100/20 Mbps speed that cannot or do not intend to meet their buildout commitments to relinquish all or part of their funded areas without facing the full extent of the default penalties applicable to RDOF and CAF recipients. If adopted those areas subject to default under the amnesty proposal could then potentially become eligible for funding under states' Broadband Equity, Access, and Deployment (BEAD) Programs. BEAD is a separate funding program focused on the construction of infrastructure to increase high-speed internet adoption, specifically in areas that are currently unserved or served at a speed under 100/20 Mbps.

Comments and reply comments in response to the public notice are due March 26 and April 9, respectively.

Proposal At Issue

The proposal that WCB may consider was articulated in a letter sent by 69 ISPs, trade associations, state and local officials, school districts, unions, and civil society organizations to the FCC on February 28. In that letter, the stakeholders requested the FCC adopt a one-month "amnesty period" for RDOF and certain CAF award recipients. Specifically, the letter asks the FCC to grant an emergency petition filed in 2023 by certain RDOF award recipients to allow recipients that "cannot or choose not to fulfill their obligations" to relinquish all or a portion of their awarded footprint funding with no or minimized default penalties. The letter also urges the FCC to consider increasing penalties for those award recipients that default on their RDOF or CAF obligations after the amnesty period ends.

BEAD Implications

In support of their proposal, the stakeholders highlight that various RDOF and CAF award recipients have not even started to build the networks needed to serve the locations for which they received funding, with some blaming the failure on "circumstances beyond their control, including skyrocketing costs," and others "simply [sitting] on the money, preferring to make interest on their awards rather than building networks." Many of these ISPs, the stakeholders claim, are in states with the greatest connectivity needs, and if nothing is done now to protect the locations these ISPs have been funded to serve, those locations could be "left out of Congress' bipartisan, once-in-a-lifetime investment to close the digital divide" because they would not otherwise be eligible under the BEAD Program.

As the stakeholders make clear, NTIA's BEAD requirements stipulate that states are to mark as ineligible for BEAD funding locations pledged broadband access via the RDOF or CAF programs. And, to date, states have implemented this requirement to varying degrees in their own BEAD program rules. For example, although California currently plans to allow BEAD applicants to use funding from other programs, including RDOF, as project matching funds, it also plans to remove from eligibility consideration those project areas where RDOF funding already covers all in-area locations. And Oregon plans to remove from the list of eligible locations those that will receive any funding from programs that take effect between the beginning of the state's challenge process and the end of the grant program (which included both federal Capital Projects Fund monies allotted to states during the COVID pandemic and RDOF subsidies). Washington will similarly identify existing federal enforceable commitments (including RDOF and CAF) and deduplicate those affected locations in the same way as California and Oregon.

Impacts of Proposed Amnesty

The amnesty may help avoid a lack of connectivity resulting from RDOF and CAF recipient defaults by allowing these locations to become eligible for BEAD funding. Moreover, the areas that are defaulted could end up fitting into other providers' existing BEAD plans, making it more likely that these locations will be served with at least 100/20 Mbps speeds.

However, by providing amnesty, the FCC could essentially reward providers who bid low and won RDOF or CAF funding to serve a designated area by reducing or eliminating the penalties they must pay, and further by potentially allowing that same provider to apply to serve the same or an overlapping area through the receipt of BEAD funding.

The proposal also could potentially dramatically increase the pool of locations in each state eligible for BEAD funding, meaning that each state's funds might not be able to go as far to connect every unserved and underserved household – or, at the very least, result in a smaller amount of funding being available on a per-eligible household basis.

Finally, there is the very real risk that any default amnesty allowances and subsequent new eligibility for BEAD funding would require the FCC and state broadband offices to coordinate further on state BEAD rules, which would further affect state resources and likely result in last-minute changes to states' eligibility challenge processes and NTIA's review and approval of states' BEAD proposals.

Next Steps

Regardless of how the FCC decides to act, potential BEAD applicants are now on notice that eligible locations – and the challenge process shortly to begin for all states – are subject to some uncertainty going forward. At minimum, applicants should continue to monitor the FCC and NTIA public notices for further developments, including the comments filed in response to the amnesty proposal. Applicants should also keep themselves aware of any reactions of the relevant state entities as they finalize and implement their BEAD rules and challenge processes and then award BEAD funds to successful applicants.