Minnesota regulators suspend crucial designation for controversial LTD Broadband

State utility regulators on Thursday suspended a crucial certification for LTD Broadband, dealing a blow to the embattled telecom company and its hopes of unblocking $311 million in federal cash to build infrastructure for high-speed internet across rural Minnesota.

The decision came at an important juncture for LTD Broadband. The Federal Communications Commission could soon act on an appeal by the company after revoking a huge grant award in August 2022.

Corey Hauer, CEO of LTD, said the Minnesota Public Utilities Commission (PUC) "acted improperly" by suspending the company's certification without an "evidentiary hearing."

"The company is evaluating its options," Hauer said.

Hauer also said he believes there is "literally zero chance" the FCC will grant the appeal — and the money. But the company, he said, could challenge any decision in court.

At the time it suspended the grants, the FCC said LTD Broadband was not capable of building the fiber-optic cable networks it had promised. But even if the agency reverses course, the PUC decision would at least temporarily stop the telecom provider from using that grant money in Minnesota while state officials investigate whether to permanently bar LTD.

The unanimous vote by the five-member PUC stems from a request made by two trade associations representing telecom companies and nonprofit rural electric cooperatives. Those groups could benefit from state and federal subsidies in areas LTD planned to serve, but they were not alone in arguing the company wasn't up to the task.

The issue will now go before an administrative law judge, who will make a recommendation on whether the company's eligible telecommunications carrier (ETC) status should be revoked entirely by the PUC. That proceeding was paused when the FCC decided to reject LTD's grant awards.

John Tuma, a Republican PUC commissioner, said he wanted other broadband providers to be able to use subsidies where LTD was meant to serve without the possibility of LTD prevailing and blocking them midstream.

"Based on the record so far, that service [by LTD] may not be what they were promising," Tuma said.

In December 2020, LTD won more than $1.32 billion nationally through the Rural Digital Opportunity Fund (RDOF) to develop blazing-fast internet in rural areas, including more than $311 million in Minnesota. It was the most awarded to any company in a $9.2 billion grant round that year, both nationally and in Minnesota. That money was meant to serve 102,005 locations in Minnesota, like homes or businesses.

The outcome shocked many in the telecom industry because LTD — which is based in Nevada but has a large customer base in Minnesota — was relatively small and had little experience building the fiber-optic cable infrastructure required under the program.

LTD Broadband instead specialized in what's known as fixed wireless, a system by which internet is delivered from a signal placed high on a structure, like a water tower. And LTD would have had to grow its operations dramatically to build extensively in the 15 states it had won bids to serve.

The state Attorney General's Office and the Minnesota Department of Commerce had called on the PUC to suspend LTD's status as an ETC for the purpose of using money from the RDOF. The PUC decides if granting the designation to a company is in the public interest.

LTD was "unequal to the task of building out the vital infrastructure that the people of greater Minnesota need," wrote Assistant Attorney General Erin Conti in a letter to the PUC.

LTD has long maintained it can, in fact, deploy fiber in many hard-to-reach areas with federal subsidies. Hauer argues they are simply ahead of disgruntled competitors in cheap broadband deployment.

"The parties have gone through great efforts to besmirch LTD's capability," Hauer said during the PUC hearing. "We're deploying tens of thousands of fiber-to-the-home locations."

Still, skeptics say LTD's cost estimates are faulty and its technical capability is dubious. And there are plenty of skeptics.

Several states have rejected LTD from using RDOF money, including South Dakota. In October 2022, state officials estimated there were 291,000 locations without adequate broadband in Minnesota. The state's goal is for universal access to internet with download speeds of at least 100 megabits per second and upload speeds of at least 20 megabits per second by 2026.

The push for broadband subsidies has gained steam after the COVID-19 pandemic highlighted the importance of fast internet for remote work, school, medicine and business.

Separately from its regulatory issues, Hauer is facing a new lawsuit in Hennepin County District Court alleging he and the company have failed to pay a Tennessee broadband company $350,000 and have also not paid 25 months of rent worth $16,250. The lawsuit, brought by Fast Forward Broadband and Ken Gentry, says LTD Broadband changed the locks on the building it was renting from Gentry, blocking his access. Hauer said it was a contract dispute that will likely be settled out of court.