FCC Expands CAF Definition of Broadband Subsidy-Eligible Areas

The FCC will try again to hand out rural broadband subsidies, this time expanding the areas where it can be used while putting conditions on that expanded build-out, a challenge system for areas identified as unserved, and allowing applicants to get more than they qualify for if, as was the case the first time around, there is money left over.

The FCC Wednesday announced that it is releasing a second tranche of monies -- up to $485 million -- in Phase I of its Connect America Fund investments to support rural fixed broadband buildouts in unserved areas. It is also expanding its definition of unserved area from those without dial-up speeds (768 downstream/200 Kbps upstream) to some areas lacking up to the FCC's definition of high-speed access (at least 3 Mbps downstream and 768 Mbps upstream).

The FCC last fall proposed expanding eligibility for Phase I to get more of the money used (http://www.broadcastingcable.com/article/490490-FCC_Proposes_Expanding_D...).

Most of the first round of Phase I funding ($185 million out of $300 million) was not used -- AT&T and Verizon, for example, did not apply citing the build-out conditions for the projects. The newest round of funding maintains those requirements.

"We applaud the FCC for making these funds available for greater deployment of broadband," said Verizon. "We will make a decision on seeking funds after a careful analysis." AT&T had not returned a request for comment at press time.

There will also be a challenge system to the eligibility of areas identified as unserved by high-speed broadband in the National Broadband Map. Both the National Cable & Telecommunications Association and the American Cable Association said such a system was crucial when arguing for changes to Phase II of the fund (not to be confused with the just-announced second tranche of Phase I).

The first phase of the fund is transitional support as the FCC moves from the old high-cost support mechanisms for price cap carriers to the Connect America Phase II mechanism, in which the FCC will offer $1.8 billion annually to subsidize broadband build-outs in price cap territories via a combination of cost modeling and competitive bidding. It is part of the FCC's larger reform of the Universal Service Fund.

Cable operators have long complained that there are inaccuracies in the map that could allow, and have allowed, for overbuilding of existing service. NCTA had no comment on the FCC action Wednesday to extend Phase I.

The American Cable Association, which was critical of the first phase, was not particularly happy with this go-round, either.

"Last year's Phase I program was a blunt instrument, designed to jump start broadband in the most unserved areas but without determining the precise amount of funding needed to serve each eligible location," said ACA President Matt Polka. "This shortcoming, while significant, could be tolerated because Phase I was portrayed as a one-time program with a limited budget. But now, with this new order, the FCC has given another year of life to this troubled program. The program's new version suffers from the same problem as last year's, but made worse in that it is now less focused on serving the most unserved areas and funded at a significantly higher level. The FCC should have struck a better deal for consumers and competitors."

In this new tranche of Phase I funding, the FCC states that those who do apply for money (the new $300 million) may be able to get more than they qualify for if all of it is not used up, including tapping into the $185 million not applied for in the first tranche. "To the extent other carriers decline to accept Phase I incremental support, any remaining funds will be redistributed to carriers that are willing to commit to additional deployment if they receive funding above their initial allocations."

The FCC said it would continue to focus on areas that lack even dial-up speeds, and would put conditions on those seeking to serve areas that already have some service up to the 3 Mbps/768 threshhold.

One condition is that no carrier can use CAF funds to build out an area with some service unless it also is accepting funds to build out areas with no service, or at least areas it can build out economically at the $775 per location benchmark. The FCC also says that they will only get $550 per location to build out where there is already some service. "Less fiber should be needed to upgrade the locations with some form of Internet access, as they are likely to be closer to the central office or remote terminal."

The FCC will also will limit support to areas that have already gotten broadband buildout subsidies under the Broadband Initiatives Program (BIP) or the Broadband Technology Opportunities Program (BTOP), so long as those other projects meet the speed requirement (they will eventually be providing speeds of at least 3 Mbps/768 kbps).

Carriers that did accept money in Phase I included Frontier Communications, which took $71.9 million, and CenturyLink, which took $35 million from the fund to deploy service to 45,000 homes. The company was actually eligible for $90 million, but said restrictions on the funds made further deployment "uneconomical."

Centurylink said Wednesday it was evaluating how much of the new funding it would be able to accept and where it would be deployed. Ditto for Frontier. "[We] will be studying today's Order very closely to analyze how we can build on our partnership with the FCC to expand the reach and impact of this transformative technology," said the company.

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.