On August 10, the FCC issued a press release denying the long-form applications of Starlink and LTD Broadband in the RDOF reverse auction. This is big news because these are two of the biggest winners of the reverse auction. LTD Broadband was the largest winner of the auctions at $1.32 billion, while Starlink had claimed over $885 million in the auction.

The FCC press release quoted FCC chairman Jessica Rosenworcel asking why the FCC should subsidize Starlink since it’s a “still developing technology” that requires customers to pay for a $600 dish, even with the FCC subsidy. I have to imagine that the FCC was relying, at least partly, on Ookla speed tests that show that Starlink’s performance has worsened over time as more customers come onto the network. The speed tests also show that Starlink doesn’t meet the 20 Mbps upload speed that Starlink pledged to meet in the auction. We may not know the full reasoning behind the rejection unless the FCC follows this press release with a longer document.

The release says that the FCC rejected LTD Broadband because the agency deemed that the company was not capable of deploying a network of the scope, scale, and size required to satisfy the RDOF buildout requirements. This is not surprising since LTD is a small regional WISP in Minnesota that promised to build a fiber network that would cost many billions of dollars. LTD has already been having problems and had failed to win state approval for Eligible Telecommunications Carrier status in seven of the fifteen states where the company won the RDOF auction. There is also an open proceeding at the Minnesota Public Service Commission asking to revoke the existing ETC status.

These two cancellations of RDOF will have a significant ripple effect throughout the rest of the carrier world. The areas that were claimed in the RDOF auction have been off-limits for other federal grants like ReConnect. This ruling means that any areas that these two companies claimed can now be included in future federal grants.

The other issue caused by RDOF is that the awards were by Census block, resulting in award areas that have been described as swiss cheese. This meant that the RDOF awards were not contiguous but were often a scattering of Census blocks mixed in with areas that seemed to be identical but were mysteriously not included in RDOF—fully as a result of faulty FCC maps. This made it nearly impossible in some cases for other ISPs to seek grants for the areas not covered by RDOF since the areas are scattered.

I’m only speculating, but I suspect that the pending BEAD grants have a lot to do with the FCC decision. If the FCC had awarded the RDOF, then folks living in the Starlink areas would have been precluded from getting fiber or other broadband that is faster than Starlink. This was a particularly troublesome situation in my part of the world, where Starlink won the RDOF reverse auction in some of the western mountainous wooded counties in North Carolina. We now have a lot of evidence that Starlink struggles in heavily wooded areas.

The risk of awarding the RDOF to LTD Broadband is that the company would fail to execute on the fiber buildout. It wouldn’t be evident for a number of years if the buildout weren’t going to succeed, and by that time, all of the current state and federal broadband grants would be long gone. I think this rejection shows that the federal government is really hoping that the BEAD grants will bring broadband to all rural areas.

There are still a few other large RDOF winners that have not been awarded. These are companies that are proposing gigabit wireless capability. The FCC is obviously not yet ready to make the awards to these companies, but it’s also apparently not ready to reject them. The clock is ticking for these areas. ISPs and local governments need to know if these areas won’t get RDOF since it takes time to plan for the BEAD grants, so it’s important for the FCC to make or reject the remaining RDOF applications soon.