Is there is a way to take the worst broadband subsidy program ever and make it worse? The FCC just answered that question by extending the CAF II program for a seventh year.

The CAF II program paid the large price-cap telcos to supposedly upgrade rural broadband to speeds of at least 10/1 Mbps. Over $11 billion was paid out over six years starting in 2015 and completing this year. This money went to the big telcos like AT&T, CenturyLink, Frontier, Windstream, Consolidated, and a few others. Buried in the original awards was a provision that the carriers could elect to extend payments for a seventh year – and of course, they are doing so.

Why do I call this subsidy plan a failure? Even in 2015, it was ludicrous to spend money to build 10/1 Mbps broadband. 2015 is the same year that the FCC increased the definition of broadband to 25/3 Mbps and so the FCC was investing in new Internet infrastructure in 2015 that didn’t qualify as broadband at the time of the award of funding. Worse, the FCC gave the big telcos six years to complete the construction of the upgraded 10/1 Mbps architecture – which is this year. The FCC is still paying money in 2020 to upgrade rural customers to speeds of 10/1 Mbps.

But that’s not the worst of it because it doesn’t look like a lot of the upgrades were ever done. Our company helps rural counties assess the condition of broadband, and it’s rare in many rural places that were covered by CAF II to find even a single customer getting broadband speeds of at least 10/1 Mbps. We’ve done speed tests in counties this year where the average download speeds are 4 to 5 Mbps, with a significant number of customers getting speeds under 1 Mbps. The big telcos have been cheerily reporting progress to the FCC on implementing CAF II, but in the real world, it’s hard to find any evidence that many upgrades have been made.

I have seen the DSL in rural county seats get faster, and I suppose this was done with CAF II money – even though the funding was supposed to be used for rural customers. When DSL is upgraded in a county seat, the only rural customers that see any benefit have to be within a mile or so from the town.

To improve rural DSL to 10/1 Mbps requires building a significant amount of rural fiber so that customers are within four or five miles of a fiber node equipped with DSL gear. We’ve driven whole counties looking for evidence of such upgrades and have rarely found the needed new fiber construction or electronics huts. There is no need to take my word for this – states like Georgia and Minnesota have created broadband maps that are showing no evidence for most of the CAF II upgrades.

And now the FCC is going to pay a seventh year of funding to these same telcos – only this time the companies don’t have to spend the seventh year funds to improve broadband. Instead this money is seen as ‘support’ to the telcos. This is a straight giveaway that means $503 million for CenturyLink, $427 million for AT&T, and $313 million for Frontier – straight to the bottom line. This is the most blatant handout of federal broadband funds I’ve ever seen – because these funds won’t improve broadband for any rural customer. This will just help AT&T make its dividend payments and help ease Frontier coming out of bankruptcy. 

The original plan in 20i5 included the provision for the seventh year of payout – but the FCC could have changed that rule at any time in the last six years. This is over a billion dollars being wasted  that could instead be added to the RDOF fund to build rural fiber or put into some other worthwhile broadband grant fund. The FCC would benefit rural communities more if they just walked around handing out this cash to rural folks during the pandemic.

This FCC has been pro-big carrier from the start – but adding a seventh year of CAF II is hard to see as anything other than federal waste being done openly. The companies getting this money didn’t meet the obligations of the original CAF II funding and are now perversely getting rewarded for their failure. This kind of waste makes me ill when I do the math and realize that this money could instead be used to build fiber for everybody living in the poorest 40 counties in the country. I guess it’s more important to ‘support’ AT&T instead of rural households with no broadband.