Vegas Company Promised Fast Internet. Rural America Waits…and Waits

The situation serves as a cautionary tale as the federal government rolls out yet another costly program—this one with a price tag of $42.5 billion—to deploy broadband to rural areas.

“It’s frustrating to see that there were dollars available and that every step wasn’t taken to secure them and get the investments made,” said

Brandy Wreath,

a senior public utilities official in Oklahoma, one of the states where the company promised to extend service with public funds but was later disqualified.

The 2020 broadband initiative by the Federal Communications Commission—the largest-ever single allocation of its kind—drew bids from more than 300 companies, including cable giant

Charter Communications Inc.

and the Starlink unit of

Elon Musk’s

Space Exploration Technologies Corp.

The top dollar winner was LTD Broadband LLC of Las Vegas, which won rights to $1.3 billion to extend fiber-optic cable to rural communities scattered over 15 states, in some cases beating out local competitors.

LTD has since missed deadlines to be certified by local regulators in six of the 15 states, prompting the FCC to block the company’s access to the broadband funds there. At least 275,000 people live in affected areas of those states, census and FCC data show.

LTD asked the FCC for more time to be certified, but the agency denied that request. LTD is appealing the FCC’s decision in four of the six states.

In nine other states, FCC officials are still reviewing LTD’s ability to do the job, even though the agency has authorized more than 300 other bidders to move forward.

Corey Hauer,

LTD’s chief executive officer, blamed the missed deadlines on bad advice and actions by an outside lawyer. He said LTD has begun building fiber networks even without the federal funds and expressed optimism that officials will reconsider.

“The government clearly wants to get fiber service in these areas, and so do we,” Mr. Hauer said. “Our history as a company has been building in rural areas, so we’re very familiar with the costs and the challenges.”

The FCC program, called the Rural Digital Opportunity Fund, was essentially a nationwide contest that picked the company offering the fastest service at the lowest price in each unserved spot.

LTD, which Mr. Hauer said currently has 197 employees, was the low bidder in areas with a combined population of at least 860,000. Getting the $1.3 billion was contingent on the company demonstrating it had certifications from state telecom regulators, as well as the financial and technical wherewithal to complete the work.

LTD was required to show the FCC its “eligible telecommunications carrier” certifications by June 7, 2021. The company petitioned the FCC for more time in eight of 15 states.

Mr. Hauer said the company, acting on the advice of outside counsel, intentionally held off submitting some of the applications because it expected them to be opposed by competing internet providers and wanted to minimize the time opponents had to mount an attack.

The FCC denied LTD’s petition in six of those eight states where it sought more time—California, Nebraska, North Dakota, Oklahoma, Iowa, and Kansas. It said LTD hadn’t offered a compelling reason to waive a deadline established “to expedite the provision of needed broadband service to these rural communities.”

The six states subsequently didn’t certify LTD. Several cited errors and missteps by the company that heightened their concerns about its ability to execute a huge project.

The California Public Service Commission said LTD had filed its application days before the June deadline—and not in April, as LTD had said in its deadline-extension request to the FCC.

When state officials asked LTD about the discrepancy, a company representative sent back an application receipt dated April 26, a date which had been altered, according to a declaration to the FCC signed later by

Kristopher Twomey,

an outside lawyer for LTD.

In emails and an interview, Mr. Twomey acknowledged signing the declaration. He said he never intended the altered receipt to be sent to regulators. He said he created it to record the date he mailed LTD’s paperwork, before realizing in June that the state wasn’t accepting mail applications.

“I deny that I have ever intentionally misled a federal or state regulator,” he said, adding that LTD’s failed applications were the result of decisions by state and federal officials, not his actions.

LTD says it is no longer working with Mr. Twomey, which he didn’t dispute.

Separately in Oklahoma, LTD applied for certification on June 7—the same day as the FCC deadline. In Iowa, where LTD has existing customers, state officials said the company hadn’t been filing annual compliance reports. In Nebraska, the company was late paying required state fees, officials said.

And on May 3 of this year, the FCC proposed fining LTD $100,000, saying the company’s investment agent had talked with another auction bidder in violation of a post-auction “quiet period,” according to a public FCC notice.

LTD contested the fine in a filing with the FCC, saying the communications didn’t influence the auction outcome or violate FCC rules. It is also appealing the state rejections of its telecom certifications, except in Oklahoma and Kansas. California officials recently denied the company’s appeal.

The company’s legal filings say the FCC’s decision not to extend the certification deadline was premature and prejudiced state regulators. Several states, in turn, held LTD to an unfairly high legal standard for a routine application, the company says. Mr. Hauer called some of the state rejections “a death sentence for a parking ticket.”

LTD’s winning bids had the effect of denying funding to competing internet providers, who in turn have been lobbying officials to reject LTD’s plans.

Nebraska-based Pinpoint Communications Inc. joined other local internet providers in raising questions with state officials about LTD’s qualifications. Pinpoint President

Tom Shoemaker

said that LTD’s bid was below what he viewed as economically feasible.

In southeastern Oklahoma, LTD underbid Windstream Holdings Inc., one of the largest U.S. rural broadband providers, even in areas where Windstream—but not LTD—had existing customers. LTD’s bids also promised to connect homes with superfast fiber-optic cable, even though its existing business focused on providing wireless internet service via radio towers.

Windstream CEO

Tony Thomas,

in an interview, likened the auction to “a wildcatter situation where anyone can enter.”

FCC officials said they designed the auction to maximize upfront participation.

“You want an open process so that new entrants can come in and compete,” said FCC Commissioner

Brendan Carr,

who was part of the Republican FCC majority that enacted rules for the auction.

Mr. Carr and

Jessica Rosenworcel,

the FCC’s new Democratic chairwoman, both said they would support reviewing the front-end requirements for future broadband programs.

LTD is now undergoing post-auction vetting, a process Ms. Rosenworcel said is used to “weed out nonqualified bidders.”

The next round of federal broadband funds will be managed not by the FCC, but by states and the U.S. Commerce Department, who are jointly empowered to choose projects that will receive $42.5 billion for broadband deployment program in last year’s infrastructure bill.

Sen.

Mark Warner

(D., Va.), who helped write the legislation, said it “would be hard to do worse” than the FCC’s efforts.

“The chances of some kind of flimflam group coming in—I think that problem is diminished when you’ve got now localities and states having skin in the game,” he said.

Mr. Hauer said LTD will vie for those funds as well. In an interview immediately after the FCC’s auction results were announced, he dismissed questions about the company’s qualifications.

“We intend to put up,“ he said. ”Our results are going to speak for themselves.”

Write to Ryan Tracy at [email protected] and Anthony DeBarros at [email protected]

The situation serves as a cautionary tale as the federal government rolls out yet another costly program—this one with a price tag of $42.5 billion—to deploy broadband to rural areas.

“It’s frustrating to see that there were dollars available and that every step wasn’t taken to secure them and get the investments made,” said

Brandy Wreath,

a senior public utilities official in Oklahoma, one of the states where the company promised to extend service with public funds but was later disqualified.

The 2020 broadband initiative by the Federal Communications Commission—the largest-ever single allocation of its kind—drew bids from more than 300 companies, including cable giant

Charter Communications Inc.

and the Starlink unit of

Elon Musk’s

Space Exploration Technologies Corp.

The top dollar winner was LTD Broadband LLC of Las Vegas, which won rights to $1.3 billion to extend fiber-optic cable to rural communities scattered over 15 states, in some cases beating out local competitors.

LTD has since missed deadlines to be certified by local regulators in six of the 15 states, prompting the FCC to block the company’s access to the broadband funds there. At least 275,000 people live in affected areas of those states, census and FCC data show.

LTD asked the FCC for more time to be certified, but the agency denied that request. LTD is appealing the FCC’s decision in four of the six states.

In nine other states, FCC officials are still reviewing LTD’s ability to do the job, even though the agency has authorized more than 300 other bidders to move forward.

Corey Hauer,

LTD’s chief executive officer, blamed the missed deadlines on bad advice and actions by an outside lawyer. He said LTD has begun building fiber networks even without the federal funds and expressed optimism that officials will reconsider.

“The government clearly wants to get fiber service in these areas, and so do we,” Mr. Hauer said. “Our history as a company has been building in rural areas, so we’re very familiar with the costs and the challenges.”

The FCC program, called the Rural Digital Opportunity Fund, was essentially a nationwide contest that picked the company offering the fastest service at the lowest price in each unserved spot.

LTD, which Mr. Hauer said currently has 197 employees, was the low bidder in areas with a combined population of at least 860,000. Getting the $1.3 billion was contingent on the company demonstrating it had certifications from state telecom regulators, as well as the financial and technical wherewithal to complete the work.

LTD was required to show the FCC its “eligible telecommunications carrier” certifications by June 7, 2021. The company petitioned the FCC for more time in eight of 15 states.

Mr. Hauer said the company, acting on the advice of outside counsel, intentionally held off submitting some of the applications because it expected them to be opposed by competing internet providers and wanted to minimize the time opponents had to mount an attack.

The FCC denied LTD’s petition in six of those eight states where it sought more time—California, Nebraska, North Dakota, Oklahoma, Iowa, and Kansas. It said LTD hadn’t offered a compelling reason to waive a deadline established “to expedite the provision of needed broadband service to these rural communities.”

The six states subsequently didn’t certify LTD. Several cited errors and missteps by the company that heightened their concerns about its ability to execute a huge project.

The California Public Service Commission said LTD had filed its application days before the June deadline—and not in April, as LTD had said in its deadline-extension request to the FCC.

When state officials asked LTD about the discrepancy, a company representative sent back an application receipt dated April 26, a date which had been altered, according to a declaration to the FCC signed later by

Kristopher Twomey,

an outside lawyer for LTD.

In emails and an interview, Mr. Twomey acknowledged signing the declaration. He said he never intended the altered receipt to be sent to regulators. He said he created it to record the date he mailed LTD’s paperwork, before realizing in June that the state wasn’t accepting mail applications.

“I deny that I have ever intentionally misled a federal or state regulator,” he said, adding that LTD’s failed applications were the result of decisions by state and federal officials, not his actions.

LTD says it is no longer working with Mr. Twomey, which he didn’t dispute.

Separately in Oklahoma, LTD applied for certification on June 7—the same day as the FCC deadline. In Iowa, where LTD has existing customers, state officials said the company hadn’t been filing annual compliance reports. In Nebraska, the company was late paying required state fees, officials said.

And on May 3 of this year, the FCC proposed fining LTD $100,000, saying the company’s investment agent had talked with another auction bidder in violation of a post-auction “quiet period,” according to a public FCC notice.

LTD contested the fine in a filing with the FCC, saying the communications didn’t influence the auction outcome or violate FCC rules. It is also appealing the state rejections of its telecom certifications, except in Oklahoma and Kansas. California officials recently denied the company’s appeal.

The company’s legal filings say the FCC’s decision not to extend the certification deadline was premature and prejudiced state regulators. Several states, in turn, held LTD to an unfairly high legal standard for a routine application, the company says. Mr. Hauer called some of the state rejections “a death sentence for a parking ticket.”

LTD’s winning bids had the effect of denying funding to competing internet providers, who in turn have been lobbying officials to reject LTD’s plans.

Nebraska-based Pinpoint Communications Inc. joined other local internet providers in raising questions with state officials about LTD’s qualifications. Pinpoint President

Tom Shoemaker

said that LTD’s bid was below what he viewed as economically feasible.

In southeastern Oklahoma, LTD underbid Windstream Holdings Inc., one of the largest U.S. rural broadband providers, even in areas where Windstream—but not LTD—had existing customers. LTD’s bids also promised to connect homes with superfast fiber-optic cable, even though its existing business focused on providing wireless internet service via radio towers.

Windstream CEO

Tony Thomas,

in an interview, likened the auction to “a wildcatter situation where anyone can enter.”

FCC officials said they designed the auction to maximize upfront participation.

“You want an open process so that new entrants can come in and compete,” said FCC Commissioner

Brendan Carr,

who was part of the Republican FCC majority that enacted rules for the auction.

Mr. Carr and

Jessica Rosenworcel,

the FCC’s new Democratic chairwoman, both said they would support reviewing the front-end requirements for future broadband programs.

LTD is now undergoing post-auction vetting, a process Ms. Rosenworcel said is used to “weed out nonqualified bidders.”

The next round of federal broadband funds will be managed not by the FCC, but by states and the U.S. Commerce Department, who are jointly empowered to choose projects that will receive $42.5 billion for broadband deployment program in last year’s infrastructure bill.

Sen.

Mark Warner

(D., Va.), who helped write the legislation, said it “would be hard to do worse” than the FCC’s efforts.

“The chances of some kind of flimflam group coming in—I think that problem is diminished when you’ve got now localities and states having skin in the game,” he said.

Mr. Hauer said LTD will vie for those funds as well. In an interview immediately after the FCC’s auction results were announced, he dismissed questions about the company’s qualifications.

“We intend to put up,“ he said. ”Our results are going to speak for themselves.”

Write to Ryan Tracy at [email protected] and Anthony DeBarros at [email protected]