FCC denies appeal on grants for embattled LTD Broadband, proposes $22 million penalty

The Federal Communications Commission has upheld a decision to block LTD Broadband from using any part of $1.3 billion in federal grants to subsidize the construction of high-speed internet infrastructure, including a major proposed buildout in Minnesota.

The FCC this week denied an appeal from LTD and proposed a nearly $22 million penalty for the embattled telecom company. The agency and many critics in Minnesota say the company is unlikely to deliver on its promises to serve rural areas lacking adequate broadband after winning a grant contest in 2020.

Corey Hauer, CEO of Nevada-based LTD, told the Star Tribune the company is "disappointed in the two FCC decisions and are evaluating our options, including taking the FCC to court."

"We think we have a good case," he said.

Hauer said LTD has 20,000 customers and is continuing to quickly build fiber-optic cable to people's homes and high-speed wireless coverage in small towns and rural areas with or without government subsidies.

LTD was the biggest winner in a $9.2 billion federal grant round held through the Rural Digital Opportunity Fund (RDOF) in 2020. Telecom providers bid in a "reverse auction" on who could build infrastructure in rural areas with the lowest amount of subsidy.

But in August 2022, the FCC revoked the huge grant award after LTD submitted more detailed plans and the feds scrutinized the company's finances more closely.

The initial bids included $311 million for Minnesota projects meant to serve 102,000 locations, like homes or businesses. It was an enormous and unprecedented amount of cash for one company to subsidize broadband infrastructure in the state.

The grant quickly raised eyebrows in the telecom industry because LTD was a small company that specialized, especially at the time, in a wireless technology for broadband rather than the fiber-optic cable it would need to build under the FCC program.

Skeptics, including telecom trade groups and the Minnesota Attorney General's Office, have worried LTD would leave rural Minnesotans in the lurch while simultaneously blocking other providers from building infrastructure with government subsidies. Hauer has maintained he is simply ahead of disgruntled competitors in cheap broadband deployment.

Several states have prevented LTD from using RDOF money, including South Dakota. Minnesota regulators have also been weighing such a move. In November, the state Public Utilities Commission suspended a crucial certification for LTD Broadband while it continued an investigation into the company.

In its written decisions this week, the FCC said LTD's application for the money had failed to meet certain qualifications, made unrealistic cost assumptions, did not make sufficient plans to deploy such a huge amount of fiber and lacked an understanding of how significantly the small company would need to grow in order to use the grant money properly.

The FCC also proposed a much smaller penalty for another telecom company.

"By defaulting on their bids, these applicants hindered the disbursement of funds that could have otherwise been expended for the advancement of broadband access across primarily rural areas in the United States," says an order signed by FCC Secretary Marlene Dortch.

Separately, the FCC also said Hauer created a similar company named GigFire potentially to evade liability for LTD's actions. The agency hasn't imposed the penalty yet, but can do so after LTD has a chance to respond.