Alan Weissberger Regulatory

Top US Telcos Reject Broadband Connect America Funding

Ten of the nation’s largest carriers were invited to participate in the Connect America Funding program, offered by the Federal Communications Commission.  The fund would pay carriers $775 per broadband line deployed to an unserved home within its territory up to a specific dollar level (which varies from one carrier to another).  Seven of the 10 carriers were offered allotments exceeding $1 million.As much as $185 million or more of the $300 million offered to the carriers in the first phase of the Connect America Fund program will not be accepted.  Just under $80 million of that amount was rejected outright, with carriers agreeing to accept an additional $106.3 million only if certain waivers are granted.

Verizon Communications and AT&T have declined their shares of the Connect America Fund, while regional carrier Windstream said it would accept only a sliver — $653,000 — of the $60.4 million it was eligible for under the plan’s Phase One.

“The rules cap support for broadband deployment to $775 per unserved location, an amount that is insufficient to make deployment economic in a truly high-cost area,” Windstream said in a recent FCC filing.

The FCC released a map showing where the $115 million in FCC Universal Service Fund/Connect America Fund broadband funding was going in phase one of its migration of phone subsidies to fund rural broadband rollouts, with Wisconsin receiving the most of any states with over $38 million.  The funds have to be used to build out broadband to unserved areas within three years.

“As our new map demonstrates, millions of Americans still live, work, and travel in rural areas where access to high-speed Internet does not exist,” said FCC chairman Julius Genachowski in a statement. “Through the FCC’s Connect America Fund initiatives, we’re helping complete our nation’s broadband infrastructure, which will lead to job creation, economic growth, and innovation in the 21st century. The map is the latest example of how the agency can use mapping technology to spur innovation and to develop new products for the public.”

Comment & Analysis:

Even with the Connect America fund incentive, the two behemoth U.S. carriers are not interested in providing broadband to unserved areas.  The likely reason is that the potential broadband subscribers live in sparsely populated areas, which would result in very high broadband buildout costs relative to projected monthly revenues.  It shows that the profit motive is much more important than leveling the digital divide for so many folks that live in rural areas in the U.S.



Author Alan Weissberger

By Alan Weissberger

Alan Weissberger is a renowned researcher in the telecommunications field. Having consulted for telcos, equipment manufacturers, semiconductor companies, large end users, venture capitalists and market research firms, we are fortunate to have his critical eye examining new technologies.

2 replies on “Top US Telcos Reject Broadband Connect America Funding”

Thanks Alan for highlighting this important issue. It will be interesting to see where the CAF funding goes and how it affects rural America. There still is a great deal of rural America that is underserved and even those areas that are served today still need to evolve to meet tomorrow’s needs. As reference in this post, the smaller telcos are equally concerned about where CAF is going:

It will be interesting to see whether CAF can evolve with customer demand. Ultimately, just like copper was installed to most everywhere in America, the bandwidth provided by fiber to the home will also be a must-have.

Ironically, the case for Fiber to the Home is probably easier to make due to the long-loop lengths of rural America, compared to the relatively short loops in urban areas where multi-level/phase modulation schemes (e.g. DOCSIS) can be used to provide fiber-like speeds.

Ken, Thanks for your comment and including the FCC map. Very interesting that so many states are receiving Connect America phase 1 support, while the 2 U.S. telco behemoths- AT&T and Verizon- have declined to particpate in the program, despite $ incentives!

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