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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.