Big Telcos Take CAF II Funding

USF-logoThe biggest telcos have claimed most of the available CAF II funding to extend broadband to rural areas that the FCC defines as unserved or underserved.

The money that has been accepted is as follows:

‘                                            Customers                  CAF II Funds

AT&T                                      1.1 M                           $427M

Cincinnati Bell                      7,084                            $2.2M

CenturyLink                           1.2M                           $506M

Consolidated Tel                 24,698                            $14M

Fairpoint                                105k                             $37M

Frontier                                  660k                           $283M

Hawaiian Tel                        11,081                           $4.4M

Micronesian Tel                  11,143                            $2.6M

Verizon                                   115k                             $49M

Windstream                           405k                           $175M

Total                                        3.6M                            $1.5B

This money will be paid out evenly over 6 years from the Connect America Fund which is part of the larger Universal Service Fund. This is the second round of such funding with smaller amounts given out a year ago.

While Verizon took $49 million they didn’t claim an additional $550 million of CAF funds that could have been used to upgrade 270,000 rural customers. This just further confirms that Verizon is not interested in extending the life of their rural copper by extending DSL. That has been clear for a decade as they have been selling off rural properties, mostly to Frontier.

The CAF II upgrades require the large telcos to upgrade broadband to a minimum of 10 Mbps download and 1 mbps upload. That is far below the current definition of broadband which is 25 Mbps download and 3 Mbps upload. This was obviously a huge political compromise because this allows the telcos to upgrade DSL in these areas rather than provide faster options.

For any areas that were not claimed by the large carriers, the FCC will hold a reverse auction sometime next spring. A reverse auction means that whoever asks for the least amount of money for a given service area will get the funding.

It’s a real shame that the FCC let the big telcos grab the money without challenge. There are many communities that were hoping to get this money to help pay to build fiber to these same customers. But instead, by giving the money for slow DSL, the FCC has probably precluded at least some of these communities from getting the funding to build fiber. This should have been an open auction from the beginning with anybody who wants the money able to bid on it. It’s obvious that the large telcos have very good lobbyists.

I am sure that households that have no broadband today are going to be happy to get this DSL. But it’s not necessarily coming quickly. The telcos have 2 years to spend 40% of the funding, 4 years to spend 60% of the funding and 6 years to spend it all. That means at least some of the covered areas aren’t going to see the upgrade for 6 years.

And in my opinion this is nothing more than a gigantic temporary band-aid. Where 10 Mbps is great compared to dial-up or cellular data in the rural areas, this is far slower than what urban areas can get, particularly when we look forward 6 years. These upgrades will be obsolete before they are even installed and households that get this speed bump still will not be able to use broadband in the same way as urban households.

It would be really ironic if at the end of the 6 years the FCC then allocated more Universal Service Funds to finally bring fiber to these same places. Sadly, at least some of these folks could have gotten fiber now if this had been done fairly.

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