New York State Could Set New Rural Broadband Funding Model

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By Lydia Beyoud

New York state is looking to shake up how states fund rural broadband projects when major internet providers decline to build out into expensive, hard-to-reach areas.

The state has asked the Federal Communications Commission to allow it to combine $170.4 million in federal funds that were declined by Verizon Communications Inc. with a $500 million state program to foster rural broadband deployment. An order related to New York’s petition for an expedited waiver was circulated Dec. 15 within the five-member commission, an FCC spokesman confirmed to Bloomberg BNA Dec. 27.

It’s unclear whether the commission will finish voting on the order before Chairman Tom Wheeler leaves the agency Jan. 20. Verizon declined the federal money, made available through the Connect America Fund (CAF), to build out broadband networks in high-cost rural areas of New York.

In response to pressure from Republican lawmakers, Wheeler said in November that he wouldn’t take action on any significant matters during the remainder of his tenure at the FCC. But given the traditionally bipartisan nature of items related to the federal broadband subsidies through the Universal Service Fund, of which CAF is a part, Wheeler may expect the order to gain bipartisan support and not run afoul of his pledge.

Competing Timelines

The FCC plans to auction off the funds Verizon and other large telecom providers declined for rural broadband buildout in various states to smaller broadband providers on a nationwide basis, but that auction process is several years away. New York is hoping to move much faster. The state said the FCC could play a major role in helping bring services to the approximately 2.5 million New York households with limited or no access to high-speed broadband.

New York Gov. Andrew Cuomo (D) launched the “New NY Broadband Program” in 2015 with the goal of narrowing the state’s “digital divide” between rural and urban areas by 2018. The $500 million public-private partnership project would funnel state funds through an auction to internet providers that pledge to contribute matching funds toward broadband projects.

A grant of a waiver to the FCC’s rules governing the CAF auction process would help achieve both federal and state broadband connectivity goals and avoid duplicative infrastructure deployment, the state said in its FCC petition.

Key Backers

New York’s request has strong support in multiple corners. Incoming Senate Minority Leader Charles Schumer (D-NY) has been pushing for the FCC to grant the petition, a Schumer aide told Bloomberg BNA. Fellow New York Sen. Kirsten Gillibrand (D) also supports the petition.

Pennsylvania’s Public Utility Commission told the FCC it supports New York’s petition and hopes to do something similar with CAF funds declined by major broadband providers in its state.

Verizon, FairPoint Communications Inc., and several small New York telecom providers that might stand to benefit from the reallocated funds have also supported the petition.

However, New York’s plan is not without its critics. The American Cable Association (ACA), a trade group for small and mid-size cable providers, the Wireless Internet Service Providers Association (WISPA) and ViaSat, Inc., a satellite broadband provider, oppose the request. ACA said it supported the state’s connectivity goals but both it and WISPA said the petition fell short on procedural and legal grounds. ViaSat said it was concerned satellite providers wouldn’t be eligible to participate in the state program.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Keith Perine at kperine@bna.com

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