The 3 Impacts of the Rural Digital Opportunity Fund (RDOF) on Telecoms

In early 2020, the FCC launched the Rural Digital Opportunity Fund. This fund began with the ambitious goal of addressing the lack of adequate access to digital networks for those in rural America.

The plan involves an investment of $20.4 billion over ten years to finance high-speed broadband networks in rural areas that are unserved or underserved. The hope is that this injection of capital will expand broadband network infrastructure to those who have limited access, connecting millions of households.

The RDOF Phase I auction gave 180 bidders $9.2 billion over ten (10) years to provide broadband connection to 5.2 million locations across 49 states, as well as the Commonwealth of the Northern Mariana Islands.

A fund of this scale is bound to affect the industry as a whole. So here are three main impacts the RDOF will have on the telecommunications industry in rural areas.

1. There will be an increase in economic activity for telecommunications in rural areas.

Except for SpaceX, many of the top winners of phase I of the RDOF include rural telecommunications companies and organizations, such as the Rural Electric Cooperative Consortium, and Nextlink. The fact that money is being injected into these areas will boost telecommunications-related economic activity in rural communities. This includes purchasing infrastructure-related components, installation equipment, and the hiring of contractors.

In particular, this initiative will drive build-outs in areas where, previously, it didn’t make financial sense for the carrier. From a revenue generation and ROI perspective, deploying networks in rural areas with few potential customers, the cost per subscriber was prohibitive. The support from the FCC changes that.

2. There will be an increased focus on developing network infrastructure in rural areas.

Since the onset of the internet and digitizing America, rural areas have been underserved, and the RDOF was created by the FCC to directly address this challenge. With Phase I underway, and Phase II coming down the line, this will incentivize telecommunication firms and organizations to expand their focus from the exclusive and heavily populated urban environments to include rural areas.

In relation to densely populated urban communities, the fact that rural areas are underserved presents a chance to capture a large portion of this specific market. As the RDOF progresses, companies will be reminded, of the opportunity presented to them, and more firms will attempt to develop their business in rural areas.

3. Telecommunications is now closer to being a utility than ever before. 

For a while, there was a discussion around whether high-speed internet is a utility, like water or electricity. Now, with this move by the FCC, that argument seems to have come to a close.

Generally speaking, the primary objective of RDOF is to connect rural America. This includes everything from the ability to access TV streaming options, such as Netflix, work from home, and have access to remote education. In the days of the pandemic, the divide in connectivity between urban and rural areas has become painfully evident. This is exactly where the RDOF comes in.

With the RDOF, the FCC and the government’s signal is clear. High-speed internet is a necessity, not a luxury.