Doug Dawson reports…

CenturyLink told the FCC recently that it is defaulting on 41,000 RDOF locations spread across eight states and 153 Census block groups. That’s a big portion of the 77,000 locations that the company won in the RDOF reverse auction. CenturyLink originally was awarded $262.3 million in subsidies, spread over ten years.

There are a number of consequences of this default. First, this has now happened after states made BEAD maps and allocation. That makes it likely that nobody will be bringing improved broadband to the default areas. If the defaults had happened earlier, these areas could have been rolled into the BEAD process.

CenturyLink should expect a significant fine. In 2024, the FCC fined two companies that defaulted on RDOF. Etheric Communications was fined $732,000 for defaulting on 244 locations. GigFire (LTD Broadband) was fined $21.7 million for defaulting on 7,238 locations. Mercury Broadband was fined $14.2 million in a separate FCC decision and is also expected to return all RDOF funding for the defaulted areas.

If CenturyLink is fined at the same level or around $3,000 per location as the recent defaults, the fine will be $123 million. Additionally, roughly half of the RDOF funding has flowed to auction winners, meaning CenturyLink would have to return approximately $65 million of RDOF subsidy to the FCC.

The CenturyLink default defies the usual explanation of RDOF defaults. Many other defaults have been blamed on the FCC’s auction rules that didn’t pre-qualify companies before entering the auction. That resulted in companies winning RDOF that had weak balance sheets or insufficient financial backing.

But any pre-qualifying process would have easily allowed CenturyLink to enter the RDOF auction. CenturyLink is now obviously in financial distress and has decided that fines are less expensive than completing the required construction.