Minnesota utility regulators Thursday approved an investigation into revoking a key permit for LTD Broadband, the big winner of a federal auction to provide broadband to rural areas.
Minnesota PUC to investigate revoking broadband provider's permit
LTD Broadband won $311 million in federal subsidies to build out broadband in rural Minnesota. But competitors question its ability to do the job.
July 14, 2022 at 10:08PM
Revocation of LTD's telecommunications permit in Minnesota could result in the company — and the state — losing out on $311 million in federal broadband subsidies.
Trade groups for Minnesota telecom and rural electricity providers petitioned the Minnesota Public Utilities Commission (PUC) for the revocation investigation.
They say that since the PUC granted LTD the permit last year, several events have occurred in other states that call into question the company's ability to deliver on its commitments — a claim LTD denies.
"It's in the public interest to at least begin an investigation," said Katie Seiben, PUC chairwoman, at a meeting Thursday. The PUC voted unanimously to turn the matter over to a state administrative law judge, who will conduct a proceeding with expert witnesses.
LTD Broadband won $1.3 billion of $9.2 billion auctioned off in December 2020 for the Rural Digital Opportunity Fund. It was the biggest auction winner overall. In Minnesota, LTD snared 76% of all grant money awarded.
LTD is a relatively small broadband provider founded by an entrepreneur from southern Minnesota, Corey Hauer, and is now based in Las Vegas. The largest concentration of LTD's employees is in Minnesota.
LTD has yet to obtain the $1.3 billion because the Federal Communications Commission hasn't finished evaluating the company's long-form application, which includes detailed financial information.
The FCC requires winning bidders such as LTD to also offer telephone service. That means they must be designated as an eligible telecommunications carrier (ETC) by state regulators.
In June 2021, Minnesota's PUC granted LTD an expansion of its ETC status to cover the new federal grants. In May 2022, the Minnesota Telecom Alliance and the Minnesota Rural Electric Association asked the PUC to investigate revoking LTD's expanded ETC designation.
The trade groups pointed to LTD's trouble in South Dakota, where state regulators rejected its ETC permit this March, saying the company lacked technical and financial capabilities. LTD's federal grants there are now in jeopardy, as they are in other states.
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Regulators in California, Iowa and North Dakota also rejected permits for LTD, Dan Lipschultz, an attorney representing the trade groups, told the PUC Thursday.
"All of these decisions by other state commissions . . . give you a compelling cause to initiate an investigation and look more deeply into this," he said. Lipschultz was a PUC commissioner from 2014 to 2020.
The Telecom Alliance shared its objections last year with the PUC when LTD sought its expanded ETC designation, saying that LTD lacked the ability to build out a network.
The company already has started building out a fiber-optic network in Minnesota, even though it doesn't yet have the federal grant money, said Andrew Carlson, an attorney representing LTD.
"There is nothing about LTD's performance in Minnesota that has been called into question," he said.
The Minnesota Department of Commerce and the state attorney general's office both recommended that the PUC initiate the revocation investigation.
Sieben said she has some concern about whether LTD's grant money "would come back to Minnesota" if the PUC revokes the company's ETC status.
Kristin Berkland, an assistant Minnesota attorney general, said there is no guarantee it would come back to a Minnesota (broadband) provider.
But Berkland said it is just as dangerous for the $311 million to be rebid as it is for "commitments made for that money not being carried out."
Four counties — all of which would host LTD projects — and the Minnesota Association of Townships have supported a revocation investigation. In PUC filings, they also said they're concerned about LTD's ability to live up to its commitments.
Some — including LeSueur County — have noted that areas covered by LTD's federal grants in Minnesota haven't been eligible for a big pot of state broadband subsidies. The state rejected LeSueur County's bid for two broadband grants in early 2021 because they would've overlapped with LTD's federal awards.
"'We are getting blocked. (LTD's) efforts have blocked us' ... is what local government's are telling the PUC," Commissioner John Tuma said.
Carlson, LTD's attorney, rejected that notion, saying the company is "dedicated and focused on getting service to those areas as soon as it gets the funding to do so."
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