AT&T Accepts Almost $3 Billion in Broadband Subsidies

AT&T said Thursday it had accepted $428 million per year in the second tranche of Connect America Funding over six years ($2.6 billion), with an option for a seventh, which means potentially about $3 billion in funds to deliver broadband to more than 2.2 million people in high-cost areas in 18 states—it denied to take the money for which it was eligible in Missouri, Nevada and Oklahoma.

CenturyLink also accepted about $3 billion in funds over six years, the FCC said earlier Thursday. Together that is about two-thirds of the $9 billion in CAF II funds available over that time period.

“AT&T’s acceptance of close to one-half billion dollars annually from the Connect America Fund represents a huge investment in broadband for its rural customers,” said FCC chairman Tom Wheeler in a statement. “This is one of the largest amounts accepted by any company."

Carriers getting the money have to build out broadband to 40% of their funded locations by the end 2017, 60% by the end of 2018, 80% by the end of 2019, and 100% by the end of 2020.

Helping AT&T make the decision to take the funds, the telecom signaled, was that the FCC clarified that "(1) CAF Phase 1 recipients will not be subject to any later-adopted broadband measurement requirements; (2) recipients will be in compliance with the requirement that pricing and usage allowances be 'reasonably comparable' to urban areas, if they offer identical plans in such areas; (3) acceptance of funding will not trigger reporting requirements beyond the funded locations; and (4) obligations will end within three years."

The subsidy is part of the FCC's overall migration of advanced communications subsidies from phone to broadband service.

Phase 1 of the CAF program provided almost $800 million to deploy broadband to 1.6 million people previously unserved by broadband, according to the commission. Phase 2, a five-year plan, will spend almost $9 billion to continue that expansion, including upping the speed requirements for the subsidy from 4 Mbps to 10.

Incumbent (price cap) carriers—like AT&T—had a right of first refusal for CAF funds in high cost areas, but they must serve all high-cost areas they serve in a particular state. There will be a competitive bidding process among other telecom providers, including cable ops, if the incumbent declines the money.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.