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FCC rejects internet funding in Minnesota, nation, for embattled LTD Broadband

“We cannot afford to subsidize ventures that are not delivering the promised speeds or are not likely to meet program requirements,” FCC Chairwoman Jessica Rosenworcel said in a news release.

The FCC’s grant program promised $9.2 billion in 2020 to help rural areas access high-speed internet.
The FCC’s grant program promised $9.2 billion in 2020 to help rural areas access high-speed internet.
MinnPost photo by Corey Anderson

The Federal Communications Commission on Wednesday blocked LTD Broadband from using federal grants to build high-speed internet infrastructure in Minnesota and across the country, saying the embattled company was not capable of delivering on its promises.

“We must put scarce universal service dollars to their best possible use as we move into a digital future that demands ever more powerful and faster networks,” FCC Chairwoman Jessica Rosenworcel said in a news release. “We cannot afford to subsidize ventures that are not delivering the promised speeds or are not likely to meet program requirements.”

The decision is a stunning reversal for Nevada-based LTD Broadband, a relatively small company with Minnesota ties, that shocked many in the industry by winning a massive $1.32 billion nationally and more than $311 million in Minnesota to develop blazing fast internet in rural areas through the FCC’s Rural Digital Opportunity Fund. 

In an email to MinnPost, Corey Hauer, the CEO of LTD, said company officials are “extremely disappointed in the FCC staff decision.”

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“I don’t believe the FCC fully appreciated the benefits LTD Broadband would bring to hundreds of thousands of rural Americans,” Hauer said. “We are continuing to review the letter and are evaluating our next steps.” 

FCC spokeswoman Anne Veigle said LTD can file a petition for reconsideration or an “application for review to appeal.”

The cash awarded to LTD was the most to any one company nationally — and in Minnesota — in the FCC’s $9.2 billion grant round in 2020. It represented an unprecedented amount of spending on rural broadband in Minnesota. Connecting all parts of Minnesota to high-speed internet has been a high priority of local Democrats and Republicans, especially after remote learning and education during the COVID-19 pandemic highlighted unequal access between rural and urban areas.

But LTD Broadband was criticized quickly by competitors and broadband advocates, who said they were too small and had little experience building the fiber-optic cable required to be built using the grant money. After the company initially won the cash, Hauer told MinnPost in December of 2020 they had about 100 employees, most of whom were in Minnesota. The company operated in six states, though it had won bids in 15 states. 

LTD has been around for about a decade but had primarily worked with a technology called fixed wireless, where homes get service from a signal placed high on a structure, like a water tower.

Local officials also complained that LTD’s award was delaying experienced competitors from deploying internet faster while the FCC and others weighed LTD’s abilities.

LTD initially won the cash through a “reverse auction.” In such a grant round, companies bid on who can deliver internet infrastructure to certain areas using the least amount of federal subsidy. LTD scored big, and its map of winning tracts in Minnesota included some of the hardest-to-serve areas. There was a six-year timeline for them to build most infrastructure once LTD got approved by the FCC, but the federal regulators needed to first approve a “long form” application from the company assessing their technical experience.

In the meantime, several states rejected LTD on their own, including South Dakota. Regulators there sided with a technical expert who testified LTD’s methodology to determine costs “bears no relationship to actual construction costs.” The Minnesota Public Utilities Commission in July launched its own investigation of LTD Broadband at the urging of the state’s Department of Commerce, Attorney General Keith Ellison and other broadband developers and advocates.

“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 decision.

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Hauer has maintained the complaints were all frivolous or incorrect, that LTD could grow quickly and had found a model of cheap broadband deployment that was outpacing its disgruntled competitors.  He compared himself to Elon Musk as an industry-disrupting innovator.

But the FCC pointed out LTD was unable to gain regulatory backing in many states.

“Although LTD was a relatively small fixed wireless provider before the auction, it was the largest winning bidder in the auction, submitting winning bids in 15 states,” the FCC said in its news release announcing it had rejected LTD’s long-form application. “Subsequently, it failed to timely receive eligible telecommunications carrier status in seven states, rendering it ineligible in those states for support.

“Ultimately, the FCC review concluded that LTD was not reasonably capable of deploying a network of the scope, scale, and size required by LTD’s extensive winning bids.”

Minnesota has been hesitant to offer grants in areas where LTD Broadband had been awarded money in an attempt to avoid using taxpayer money to subsidize broadband twice in the same area. But that appears to no longer be an issue, noted Steve Grove, commissioner of the state’s Department of Employment and Economic Development, which oversees state broadband grants.

In a statement, Grove said the FCC decision is “well-timed for Minnesota, in that to makes clear at the very early stages of DEED’s current broadband funding review process that they will not be making a final award … to LTD Broadband.”

“That helps us plan our dollars more accurately,” Grove said.

The FCC also rejected Starlink, the novel satellite internet company owned by Musk’s rocket company SpaceX. Starlink was awarded $8.4 million in Minnesota, a modest sum compared to LTD Broadband. But it won more than $885 million nationwide.  The FCC order says Starlink’s speeds have been declining lately and also deemed them unable to comply with FCC requirements.

“Starlink’s technology has real promise,” Rosenworcel said. “But the question before us was whether to publicly subsidize its still developing technology for consumer broadband — which requires that users purchase a $600 dish — with nearly $900 million in universal service funds until 2032.”

It’s not immediately clear what the FCC will do with the money it had pledged to Starlink and LTD. State regulators had said if they rejected LTD, the money would be distributed in further grants by the FCC nationally. But there would be no guarantee the same amount of cash would flow to Minnesota development.