SD phone companies want to prevent newcomers from getting subsidies for underserved areas

PIERRE, SD (KELO) – South Dakota state government regulators on Wednesday opened a hearing into whether a Minnesota-based broadband and telephone company was eligible for a possible federal government grant which the company says it needs to provide services to some underserved parts of South Dakota.

LTD Broadband has applied to the South Dakota Public Utilities Commission for designation as an eligible telecommunications carrier. This status is required before the Federal Communications Commission can release money from its Rural Digital Opportunity Fund that has been provisionally allocated to the company.

LTD Broadband is not yet certified to operate in South Dakota, although it serves 259 customers. The company wants to use the federal grant, estimated at $ 46.6 million in total over 10 years, to serve more than 7,000 households and businesses in rural areas of Brookings, Butte, Clay, Codington, Corson, Custer, Deuel , Dewey, Hamlin, Hand, Jones, Lake, Lawrence, Lincoln, Lyman, Meade, Minnehaha, Pennington, Stanley, Todd, Union and Yankton counties.

State rule requires that a candidate for the eligibility designation provide service in a timely manner, remain functional in an emergency, meet consumer protection and quality of service standards, and demonstrate that service is in the public interest.

A commitment letter of credit of $ 4,658,845.38 for the company to the FCC is pending for work in South Dakota. However, LTD Broadband met stiff resistance from the South Dakota Telecommunication Association, which represents 18 rural operators.

This opposition manifested itself in the sometimes grueling back-and-forth between the association’s executive director and general counsel, Kara Semmler, and LTD owner and CEO Corey Hauer, on Wednesday.

Hauer admitted that he did not plan to have offices with daily staff in South Dakota. He already has customer service staff in South Dakota working from home, and he plans to recruit more.

Semmler, through a series of questions, showed that Hauer did not understand how the subsidized broadband expansion in South Dakota worked, and that Hauer did not know how many of South Dakota’s telecommunications providers were owned by co-ops. , tribal governments or corporations. LTD Broadband is based in Minnesota, where Hauer previously lived, but now resides in Las Vegas, Nevada.

Semmler said LTD was non-compliant in Iowa for failing to file a 2019 report, but Hauer said LTD served its first customer from Iowa in 2020. Hauer said the website of The Iowa Utility Board was not configured to accept an 18 cent payment LTD owed and agreed that the Iowa Board of Directors decided not to extend the company’s status to other blocks census. He said the Iowa decision will be appealed.

Semmler, who was previously an attorney for the South Dakota commission and later served on Gov. Kristi Noem’s staff, asked the commissioners to take judicial notice of what happened in Iowa. “This is a public record, and it is fair that I ask questions about it,” she argued. Commissioners Gary Hanson and Chris Nelson said they wanted to hear Hauer’s answers.

“Iowa didn’t give us an audience,” Hauer told them. He said one of the Iowa board members previously managed a rural Iowa carrier and recused himself, leaving the other two to speak out against LTD. Hauer called their decision petty. “They never did what they did at LTD,” he said. “I think they are very out of the norm in their actions.”

Commissioner Nelson showed Hauer a map where South Dakota Telecommunications has committed to building “fiber to the local” in 2021 or 2022. Nelson said that one third to one half of the census blocks LTD plans to serve would be built by those current telecoms in a year and a half.

“Does that make you reconsider how much of the state you really want to serve?” Nelson asked. Hauer agreed that LTD would have to pay a federal fine for opting out. “Perfection is the enemy of good in this case,” Hauer said. He added that it “makes me wonder” why South Dakota would make commitments independent of the RDOF federal grant. “We haven’t seen this in any other state,” Hauer said.

Nelson said LTD’s reputation in other states was not positive. Nelson said he called LTD a year ago, spent 40 minutes on the phone before asking someone to take his information and is still waiting for a callback. Hauer said that is not the current situation.

“When I look at the administrative rule, it doesn’t say anything about reputation. But – ”said Nelson. Hauer said the Iowa decision reflected rural telephone service providers who wanted the money for themselves. “They literally describe us as the devil,” Hauer said, adding that LTD is gaining business in other states: “Customers voted with their wallets.

Nelson asked if LTD would be interested in obtaining RDOF grant eligibility only for areas of South Dakota where existing providers do not have service expansion plans for the next several years. Hauer has stated that LTD is committed to fulfilling the RDOF obligation. “It’s kind of the elephant in my mind,” said Nelson.

As a SDTC witness, Semmler called Larry Thompson, Managing Director of Vantage Point Solutions, a Mitchell-based broadband service company. Thompson said Vantage Point has been involved in broadband plans for about half of South Dakota and has worked for clients in about 45 states.

Thompson estimated LTD’s construction costs for South Dakota at $ 91 million and predicted the company would lose $ 65 million in the first six years and possibly as much as $ 130 million. LTD declined to reveal its plan for South Dakota, arguing that finances are not criteria for the commission’s decision. “It just doesn’t make sense,” Thompson said of LTD’s approach.

The lawyer representing LTD, Jason Sutton of Sioux Falls, showed Thompson a document in a related file where LTD and the Telecommunications Association agreed that LTD had the legally required capacity to provide services in South Dakota. Semmler objected, arguing that Sutton was asking Thompson for a legal conclusion, and Sutton withdrew the question.

Thompson acknowledged that Vantage Point had been hired by some of the telecommunications companies that would compete in areas where LTD plans to build and that Vantage Point was an associate member of the association. Thompson said LTD would lose $ 6 billion in the 15 states where it received interim approval from the FCC. Thompson said it was correct that he had “no knowledge” of the overall LTD model.

Thompson stood by his statement that LTD would fail. “If they go ahead with their RDOF earnings, that’s okay,” said Thompson. He assumed it would happen within the first six years. As for Hauer’s claim that he has five sources of funding, Thompson said he “couldn’t find anyone who would fund what I’m seeing.”

“Nothing I heard today made me change my mind,” said Thompson.

Commissioner Nelson asked Thompson if the FCC was responsible for the decision. Thompson said FCC members likely had other factors in mind than what was best for South Dakota.

“What other factors? Nelson asked.

“Politics,” Thompson replied.

In rebuttal, Hauer said he believed the FCC was in a position to make a decision that was best for South Dakota. Hauer said he would like to be the contractor for a Vantage Point project. He said it was “not surprising” that hiring an outside contractor costs more than $ 20,000 per mile for laying fiber. He said LTD plans to hire its own workforce.

Thompson said laying fiber in the Black Hills costs $ 90,000 to $ 130,000 per mile. Nelson asked Thompson if there was a scenario that would only cost $ 10,000 per mile. Thompson said there were too many variables, calling it a “complicated process.”

Lawyers will file briefs after the hearing. The parties will then present closing arguments. “I would like to hear him argue,” said Commissioner Nelson.


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