FCC Finalizes Effort to Make Available $485M For Rural Broadband in USF Reform Effort

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By Paul Barbagallo  


The Federal Communications Commission will publish in the June 26 Federal Register an order approving the outlay of potentially $485 million for rural broadband expansion in the United States (Connect America Fund, FCC, No. WC Docket No. 10-90, 05/22/13).

Under the action, the FCC will provide $300 million for the second part of what is known as “Phase I” of the agency's Connect America Fund. If demand from telecommunications carriers exceeds that amount, the agency will then allocate $185 million left over from the first part of Phase I. Any remaining funds will then be set aside for a Phase II.

The order follows a series of historic decisions by the FCC to overhaul and expand the federal Universal Service Fund. In October 2011, the FCC voted to transform the Universal Service Fund's “high-cost” fund, which has historically been paid for by the nation's telephone customers and used to subsidize the cost of providing basic phone service in rural areas, into one that helps pay for broadband in those same areas. To replace the high-cost fund, the FCC created the Connect America Fund.

Despite the availability of new Connect America Fund money in 2012, however, incumbent phone companies operating under price-cap regulation accepted only $115 million of a total of $300 million available under Phase I, subject to a cap of $775 per household served. Most importantly, the nation's two largest phone companies, AT&T Inc. and Verizon Communications Inc. declined all funding that was offered.

As originally drafted, the rules had required that companies accepting Phase I monies deploy a broadband internet access service to one “unserved” location for each $775 they accept. Eligible locations were defined as those without access to “fixed, terrestrial broadband with a minimum speed of 768 kilobits per second downstream and 200 kbps upstream.”

Phase I Eligibility Expanded

In the order, the FCC expanded Phase I eligibility to any location currently unserved by internet service with speeds of 3 Mbps downstream and 768 kbps upstream (3 Mbps/768 kbps) or higher. The change was seen as necessary to increase participation.

“We do so in recognition that carriers evaluate the economics of extending fiber to an area on a project-by-project basis, with each project potentially containing some customers lacking 768 kbps/200 kbps, some lacking 1.5 Mbps/768 kbps, and others lacking 3 Mbps/768 kbps,” the FCC explained in the notice. “By providing some support for those locations that lack 1.5 Mbps/768 kbps or 3 Mbps/768 kbps, carriers should find it more economical to extend fiber closer to those locations that only have dial-up internet access. Thus, expanding eligibility to include locations with minimal non-dial-up Internet access, but without broadband, should also improve the economics of extending service to those customers who lack even 768 kbps/200 kbps Internet access. Moreover, upgrading the most distant locations to receive service meeting our 4 Mbps/1 Mbps standard should have the added benefit of providing many consumers currently lacking broadband with access to speeds in excess of our 4 Mbps/1 Mbps standard.”

At the same time, the FCC said it remains committed to prioritizing broadband-capable infrastructure to those areas that completely lack even a 768 kbps/200 kbps internet service.

The agency decided to place certain strictures on carriers that seek to avail themselves of the opportunity to count towards their deployment obligation locations in the expanded areas of availability. For starters, price cap carriers must accept support for a second round of Phase I under the rules governing the first round, to the extent they are able to do so, before they may avail themselves of the expanded eligibility of areas adopted in the notice. Specifically, a carrier may not accept funding for locations already served by internet access with speeds of 768 kbps/200 kbps unless the carrier has already accepted funding for all projects or routes including locations unserved by 768 kbps/200 kbps that can economically be built with $775 in Connect America funding for each location unserved by 768 kbps/200 kbps plus an equal amount of non-Connect America carrier capital expenditure funding, the commission said.

For the Federal Register notice, visit http://tinyurl.com/q5gla4e.


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