Minnesota regulators to investigate embattled LTD Broadband

The embattled telecom company LTD Broadband has been stopped from building subsidized high-speed internet infrastructure in several states. Now, LTD might be in trouble in Minnesota.

The Minnesota Public Utilities Commission Thursday ordered an investigation of LTD to determine if they should block the small company from using a whopping $311 million in federal money for construction of broadband in Minnesota’s rural areas amid fierce criticism alleging LTD can’t deliver fiber internet as promised.

“We don’t want to get a situation where they claim they have ability to build out and they get out there and they can’t do it – scrambling for more assets and then all of the sudden it just collapses,” Commissioner John Tuma, a Republican, said in an interview following the PUC’s hearing.

The PUC voted to ask an administrative law judge to help determine if that’s a possibility. The decision is a reversal for the PUC, which expanded approval of LTD in June 2021 as an “eligible telecommunications carrier.” Revisiting a past order is very rare, Tuma said, because the PUC wants its decisions to “mean something.” But it was warranted in this case, he said.

The designation is necessary for the company to use federal broadband subsidies through a Federal Communications Commission grant program. At the time, Gov. Tim Walz’s administration and Attorney General Keith Ellison’s office said LTD had met basic requirements, and said the FCC would vet the company.

But a handful of states have rejected LTD from using federal money, including South Dakota, where regulators said expert testimony convinced them that the company was unprepared and pledging to build at unrealistically cheap costs.

The FCC’s grant program promised $9.2 billion in 2020 to help rural areas access high-speed internet. And LTD Broadband, a small Nevada-based company, won $1.32 billion in government grants to serve more than 528,000 locations across 15 states. The money was the largest share of any one provider nationally and included more than three-quarters of the $408 million awarded in Minnesota.

The FCC picked grant winners based on a “reverse auction,” where providers bid to see who can build infrastructure in certain areas with the lowest amount of federal subsidy.

LTD quickly attracted scrutiny after the auction. The company operated in six states and had about 100 employees, most of whom were in Minnesota. LTD also had little experience building the fiber-optic cable required by the FCC to deliver blazing fast speeds under the program. LTD traditionally builds fixed-wireless internet, which provides internet service from a signal placed high on a structure like a water tower.

In May, two trade groups representing telecom companies and rural electric cooperatives petitioned the PUC to reconsider its approval of LTD, saying the company will waste taxpayer time and money in its bid to serve more than 102,000 locations in Minnesota. Those critics say LTD failing, or even succeeding, would also block local governments and other telecom providers from building government subsidized fiber for years.

Some local governments like Chippewa County and nonprofits like the Institute for Local Self-Reliance also expressed concerns with LTD.

Corey Hauer, the company’s CEO, has told MinnPost it can expand rapidly and has simply figured out how to deploy fiber-optic cable easier, faster and cheaper than aggrieved competitors. Hauer characterized the regulatory filing as a nuisance.

On Thursday, Andrew Carlson, an attorney for LTD, told the PUC the company is in good standing in Minnesota. He said reopening its state credentials would set a dangerous precedent allowing critics to continually question their process and force investigations “anytime any other competitor has complaints or concerns or just competitive animus against” an eligible telecom provider. It could also jeopardize that FCC funding for Minnesota altogether, he said.

Katie Sieben, a Democrat who chairs the PUC, said she was concerned that if the commission were to reject LTD, the $311 million would roll into another FCC grant program and not necessarily be awarded again in Minnesota.

Kristin Berkland, an assistant attorney general, said there are significant questions that need answering by further investigation. “I don’t want Minnesota consumers to think they will get the benefit of $311.8 million dollars and then not actually see the benefit of that money,” Berkland said.

The PUC largely ruled against LTD, ordering what’s known as a contested case hearing before an administrative law judge to take a closer look at the capability of the company. The commission did not cancel LTD Broadband’s status, but it decided to consider whether it should and seek more information, following recommendations from the AG’s office, the Minnesota Department of Commerce and a state task force on broadband policy.

“It’s in the public interest to at least begin to consider and initiate a proceeding about whether we should revoke LTD Broadband’s expanded ETC (Eligible Telecommunications Carrier) designation,” Sieben said.