The Connect America Fund Dilemma

USACI doubt that this is what the FCC had in mind, but they are creating an impediment to building new rural networks with the Connect America Fund. I know that sounds exactly the opposite of what they are intending, but consider the following.

The large telcos get first crack at taking the Connect America Funding in their service territories. Frontier and Fairpoint, for example, have already claimed this money for a lot of their rural service territory. The other large companies must elect this by the end of this month. In the places where they take the funding a large telco will get support for seven years to help pay for broadband upgrades in those areas.

Most of the places that are covered by the Connect America Fund have either abysmal broadband, or no broadband at all. Where they have any semblance of broadband there will be customers on very slow rural DSL, generally 1 Mbps or much slower down to speeds close to dial-up. Customers can also get satellite data or, which surprises me, many rural households are making do with their cellphone data and the associated tiny data caps.

The large telcos are almost universally going to use the Connect America Fund money to upgrade DSL. In order to do that they will have to extend fiber further into the rural areas and then place rural DSLAMs in cabinets that are closer to customers.

That sounds good on the surface and a lot of rural people are going to get faster Internet service. So where is the dilemma? The dilemma is two-fold. First, the incumbents have up to seven years to build all of the new infrastructure. Households at the far end of that timeline are going to view seven years as an interminable future date.

But the real dilemma comes in how this affects rural communities that are looking at their own broadband solutions. Most of the DSL built under the Connect America Fund is going to 10 Mbps or less download speeds, something that is not even broadband by the FCC’s definition. And not every customer in these areas will get that much speed – many of them are going to live at the ends of the new DSL routes and will still get very slow speeds.

The dilemma is that for areas without any broadband today, customers are going to find 10 Mbps to be wonderful. If your house has been living with dial-up or cellular data, then this is going to feel great, particularly since the usage will not be capped. You’ll be able to watch Netflix for the first time and partake in a lot of things you couldn’t do before on the Internet.

But it is not going to take too many years until those speeds feel as slow as dial-up feels today. And this is going to be the last upgrade these areas are ever going to get from the big telcos. And the copper is going to keep aging and the DSL will get worse and worse over time. So while most urban areas today already have download speeds far faster than 10 Mbps, these rural areas are going to be stuck at 10 Mbps while the rest of the world gets faster and faster every year. When other homes in the US have 100 Mbps or a gigabit connection, these rural areas are going to be stuck with something far slower. There will be many future applications that need the higher bandwidth, and so the rural areas will again be shut out from what everyone else has.

But the real killer is that when any area getting these funds is going to have a much harder justifying building a fiber network that is faster than the DSL. I’ve helped rural areas get fiber networks and those business plans often need 60% or more of the homes in an area to take service to work. By creating this bandaid approach the FCC’s program means that there will be be just enough people who are happy with this faster DSL that these areas will probably not be able to get the support needed for a community-based solution. While the FCC has good intentions, they are going to be damning a lot of US counties to having crappy DSL for decades to come using copper wires that are already ancient today. The Connect America Fund money should have been used only for building real broadband rather than letting the big telcos put a bandaid on an aging copper network. The FCC is going to feel good about bringing broadband to rural America, when in fact they will have damned large chunks of the country from getting real broadband. 

12 thoughts on “The Connect America Fund Dilemma

  1. Agreed. This program is particularly frustrating in cases where these areas border rural ILECs that specialize in this environment. The financial incentive and seven year implementation time would seem like a very important part of their business when the current recipients regard this amount of money and these markets as an annoying afterthought as evidenced by the decades of neglect to get them “qualified” as unserved.

  2. I live in one of the areas CenturyLink may or may not be opting to upgrade. Your article is exactly the scenario I’m afraid of. And yeah, with the minimum speed being 10 Mbps, you can count on CenturyLink to provide that bare minimum and nothing more.

    I hope they choose not to take the money for my state (I guess we’ll know tomorrow!). Let someone else come in and take over.

  3. So, the part of your concern about all this CAF money being spent to provide crappy DSL on a slow delivery schedule really resonates. But the part about this crappy DSL taking the wind out of the sails of FTTH is really grabbing me. It’s just too freaking expensive and non-economic to string up wires of any kind in rural areas, and there’s never going to be enough subsidy to get the job done in a satisfactory way. Now, maybe CAF should set a higher bar–25mbps minimum to 95% of addresses, two year delivery schedule–but still it’s not going to get the job done. Frankly, I’m kind of swayed by AT&T’s new model (shudder). Video by satellite, and fixed LTE for voice and data in rural areas (and here’s where I make a dangerous assumption that the low population densities in rural areas will allow fairly generous data caps, and that the FCC will ensure that that’s what AT&T provides).

    I could be totally wrong about the economics of rural fiber being unmanageable on a large scale. If so, rural fiber advocates would be well served to do a simple analysis that shows that the economics actually work with a non-crazy amount of subsidy. That would actually be a fun analysis to do, and shouldn’t be that hard at a sketch level.

    • The economics of scale for rural fiber varies widely by just how rural a place is. There are certainly places where the density is so low that fiber can never be justified. But the large telcos for the most part aren’t taking CAF funding for those places because they would have to string a lot of fiber to make DSL work in those areas.

      But there are a lot of places where rural fiber can be made to work. Just recently Sibley County Minnesota and some parts of neighboring counties created a cooperative for both the towns and the farms in a wide area. The towns didn’t have great broadband either and so the business plan was able to work with the combination of small towns and a lot of farms all added together. That’s the kind of solutions that rural places are looking for – bringing fiber to everyone.

      But if the Sibley County area had had a CAF upgrade to 10 Mbps DSL, that would probably have drained off just enough supporters that the project probably would not have gotten funded. The Sibley project needed to pre-sign customers who wanted fiber to prove they had sufficient demand, and they probably would not have gotten this project off the ground if some of the rural people were satisfied with the DSL.

      I know of dozens of rural communities now looking for solutions and for some of them this CAF money might be the change that makes it impossible for them to find a solution.

      And that’s where the problem lies. We know that the CAF DSL probably isn’t going to bring 10 Mbps to most customers and probably far less than that to the customers at the end of the new DSL chains. And even if it does, then in a few years that DSL is going to feel slow. And the copper will continue to age and the DSL cards will wear out and not be replaced and in ten or fifteen years these communities will be back to where they are today. But by that time the urban areas will be far far faster than today and these places will be at the far tail end of the digital divide.

      For such communities the CAF might be the kiss of death. That’s not what the FCC thinks they are doing, but that is the reality.

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