9 May 2022
The controversial telecom company LTD Broadband has long been criticized by those who argue it can’t deliver high-speed internet to Minnesotans as promised using an unprecedented $311 million in grants from the federal government.
Now, those critics are trying again to block the small Nevada-based company from getting any of that federal money for work in Minnesota. On Friday, two trade groups representing telecom companies and rural electric cooperatives filed a petition with the Minnesota Public Utilities Commission that says LTD will waste taxpayer time and money in the company’s bid to serve more than 160,000 people.
“Public funding is essential to bring broadband to unserved and underserved areas of rural Minnesota,” says the filing submitted by the Minnesota Telecom Alliance and the Minnesota Rural Electric Association. “But public dollars are limited, making it essential that those who obtain public funding can be counted on to deliver broadband to those areas as intended. The record will show that LTD cannot.”
Corey Hauer, the CEO of LTD Broadband, described the petition as a nuisance given the PUC has already approved the company. He said LTD can grow rapidly to meet the challenge of deploying a massive network of fiber-optic cable, despite having little experience building fiber, and will disrupt the industry like Elon Musk did with SpaceX and Tesla.
“The truth LTD Broadband is exposing is that deploying rural fiber is easier, faster and cheaper than the party line touted by some of our rural … competitors,” Hauer said.
If the PUC sides with the coalition of telecom providers and electric cooperatives, it would be the latest in a string of defeats for LTD Broadband across the country — and another reversal for a company that shocked the broadband industry by winning $1.32 billion in subsidies in 15 states from one of the country’s largest efforts to bring high-speed internet to rural areas.
A surprise winner
The broadband grants are part of a Federal Communications Commission program known as the Rural Digital Opportunity Fund (RDOF), which distributes aid for developers to build internet infrastructure in areas where it would otherwise be too expensive for the industry to serve.
In 2020, the FCC held a “reverse auction” in 2020 to distribute $9.2 billion through RDOF. In a reverse auction, the winner is the lowest bidder, pledging to build infrastructure with the least amount of subsidy while offering broadband to customers that meets government standards.
LTD Broadband was the biggest winner. Nationally, the company won bids worth $1.32 billion, which was the most of any one company. The money was meant to fund infrastructure for service at 528,000 locations like houses and businesses across 15 states. In Minnesota, LTD won about $311 million of about $408 million in total for the state, by far the most of any developer and the largest single award for one company in any state in the country. That money was supposed to help LTD reach about 102,000 locations.
The $408 million represents an incredible amount of money for broadband. For context, when Minnesota lawmakers approved $70 million in 2021 from the American Rescue Plan for broadband infrastructure grants, it was the largest infusion of cash into the state’s Border to Border grant program since it began in 2014.
But the auction did not cause celebration, but it startled many in Minnesota’s broadband sector. One reason is because the 12-year-old LTD is small and would need a major expansion to use the RDOF money.
The company had about 100 employees in December of 2020, most of whom were in Minnesota. At the time of the RDOF announcement, the company operated in just six states, including in central and southern Minnesota. Last year, LTD told South Dakota regulators it served about 18,000 customers. The majority of the company’s customers are in Minnesota.
In winning the auction, the company would also be shifting away from its core business. LTD Broadband has long focused on internet technology called fixed wireless, where homes get service from a signal placed high on a structure, like a silo or a water tower.
That can be cheaper to build than fiber-optic cables, which require a physical connection to a house. But LTD in Minnesota and elsewhere would be obligated to build fiber and deliver blazing-fast speeds that fixed wireless hasn’t historically matched.
Competitors in Minnesota doubted the company had the expertise to pull it off, or the ability to build infrastructure economically at the price they bid. As a result, many broadband groups and developers said the RDOF would in fact only delay Minnesotans from getting high-speed internet, which they could offer sooner. Developers have six years after getting RDOF money to build most of the infrastructure.
LTD Broadband struggles in other states
Since the auction results, LTD has faced opposition and delays across the country.
The FCC has still not approved the company’s “long-form” application in Minnesota, which is meant to better determine a company’s viability. LTD Broadband is not the only developer with an application pending, though there are providers who have been approved for work in Minnesota.
In other states, LTD will not be able to build using RDOF money at all. LTD has defaulted on bids in Oklahoma and Kansas because it couldn’t get proper authorization from local officials by a 2021 federal deadline. The company is also asking the FCC to reconsider extensions denied by the feds in California, Iowa, Nebraska and North Dakota.
As a result, South Dakota’s Utilities Commission said in March that LTD Broadband now has uncontested winning bids to serve only 366,000 locations across nine states, a large reduction from the initial auction results.
One example of LTD potentially getting the boot is in Iowa. In 2021, the state’s utilities board denied the company an essential regulatory approval, blocking LTD from using RDOF money there. Iowa officials said the company had issues beyond missing deadlines, such as an inconsistent history of compliance with state regulations. LTD subsequently sued the board, however, in a case that is still pending.
Then, in 2022, the South Dakota regulators also denied LTD Broadband’s application to be an eligible telecommunications carrier, a designation required to build broadband in 7,841 locations in South Dakota under RDOF.
The South Dakota Public Utilities Commission’s March 21 order was particularly critical. While it said LTD theoretically met the basic bar to be considered an eligible carrier in the state, approving the company would not be in the public’s interest.
According to the South Dakota regulators, the company didn’t give any plans or data about how it would essentially start up a fiber construction company and undergo a huge company expansion; had not done basic legwork like produce engineering plans or obtain easements for crossing private, tribal and national forest land; and failed to show its cost estimates were accurate or even considered cost factors like soil and rock composition or dealt with supply chain issues.
The South Dakota commission also heard testimony from what it called a “highly respected licensed engineer” who has worked for hundreds of broadband providers. That consultant, Larry Thompson, said construction costs will be twice what LTD estimated and that the company’s methodology to determine those costs “bears no relationship to actual construction costs.”
“The Commission finds LTD’s previous business experience does not indicate it will be able to provide the scale of services planned, that is, growing from zero customers in 2010, to 18,000 customers in 2021, to bidding to serve 366,000 locations within the RDOF time frame,” the order says. “The Commission finds that Mr. Hauer, CEO of a fixed wireless company, has no experience building fiber to locations in very remote rural places.”
In an interview Sunday, Hauer said the company is still contesting the South Dakota ruling. And he argued they are successfully expanding and already building fiber in some RDOF areas — including in Minnesota — without the government subsidy. The company is up to more than 200 employees and has blamed some of its troubles on its own attorney.
Mostly, Hauer contends LTD is ahead of its competitors. While older, traditional broadband providers might not be able to build fiber at the costs he has promised, he says he can and will prove it to regulators in South Dakota and elsewhere. He won’t say how, though.
“We’d never tell you that,” he said. “I’m not going to enable competitors to get smarter at their game, they need to figure it out on their own.”
Asking PUC to reconsider
Minnesota’s PUC did already approve LTD Broadband as eligible to build in new areas using RDOF subsidies in June of 2021.
At the time, the state’s Department of Commerce and Minnesota’s Attorney General argued LTD had met basic requirements to be an eligible telecommunications carrier, such as offering certain services like a 911 emergency connection.
The Minnesota Telecom Alliance objected, but the commission wrote there was not enough evidence to disprove LTD’s certifications or to deny them status as an eligible carrier. The alliance includes more than 70 companies, such as Red River Communications, Lumen and CTC Technology.
Still, where Hauer sees parallels to Musk and Tesla beating a stale and uncreative auto industry, some telecom providers see a company that is not capable of meeting the gargantuan task ahead and is tying up funding.
The MTA and the state’s rural electric association have now asked the PUC to reconsider and reject LTD’s eligible telecommunications carrier status because more information has come to light that shows the company using RDOF money would not be in the public interest.
The state now has access to LTD Broadband’s “long form” application with the FCC, which it didn’t have when the PUC initially approved the company. The PUC also can see the South Dakota order, and the telecom alliance said it would provide its own evidence from engineers and other experts to challenge LTD’s assertions.
The petition relies heavily on the South Dakota case, and says LTD would be even less likely to complete its work in Minnesota since the company is expected to serve nearly 13 times as many locations. “Ultimately the record will show that LTD lacks the technical, managerial, and financial capability needed to perform its RDOF obligations in Minnesota,” the filing says.
The petition also says that the FCC’s first enforcement milestone isn’t until three years after funding begins. “By that time, replacement public funds may have become unavailable, leaving little if any funding sources to extend broadband services to the over 160,000 unserved Minnesotans encompassed by LTD’s bid,” says the petition.
The opponents of LTD Broadband are represented in part by former PUC Commissioner Dan Lipschultz, who left the five-member board in February of 2020. Brent Christensen, president and CEO of the telecom alliance, declined to comment on the filing, saying he had been advised by attorneys against speaking publicly about it.
Hauer said if the FCC has oversight over LTD, and if the feds do approve the company for work in Minnesota, there is no reason to doubt their ability.
“They are once again telling the Minnesota PUC that they got it wrong, and they (MTA and MREA) know better,” Hauer said. “The arrogance is astounding, but underlies their desperation to keep the truth under wraps.”