Big ISPs and Grants

AT&T CEO John Stankey was recently quoted as saying that the federal infrastructure legislation might draw the company into greatly expanding its fiber footprint. Stankey says the company’s goal might be expanded to reach 30 million fiber passings due to federal grant funding – up from an earlier 25 million goal.

It’s likely that the other big telcos and cable companies are thinking the same way. We already saw Charter grab over $1 billion from the RDOF program. Since RDOF award areas can often be described as a checkerboard or as swiss cheese, additional federal infrastructure grant money could help somebody like Charter fill in the holes in the RDOF grant areas.

It’s likely that companies like Frontier and Windstream will chase a lot of federal grant money if it’s made available. It’s a little less clear how Verizon and CenturyLink might react to huge amounts of federal grant funding.

Obviously, any ISP is free to chase grant funding if it comes available. But I must admit that it will make me nervous if the big ISPs grab huge amounts of funding.

The big telcos have an atrocious track record in rural America. One of the primary reasons that we have a rural infrastructure crisis is due to the giant telcos being bad stewards of rural networks. I can remember as far back as the early 90s when the big telcos began to neglect copper networks. For decades they put the absolute bare minimum amount of capital spending into rural networks while steadily reducing the rural technician workforce year after year.

The big ISPs could have chosen the same path as the smaller rural telcos. Most smaller telcos maintained and extended the useful life of the copper networks. Over the years, the smaller telcos extended fiber deeper into rural areas so that DSL speeds were increased to over 25/3 Mbps. When additional federal subsidies came along in the ACAM program, the small telcos already had built fiber deep into rural areas, which made them able to borrow the money to build fiber for customers.

The big telcos did just the opposite. They built rural fiber only in the rare cases when it was instantly profitable, such as reaching cell towers. When the CAF II program came along, rather than use the money to improve networks, the big telcos did the least possible with that funding, and in many cases, seemingly pocketed a lot of the subsidy.

It makes me angry to see the big telcos now talk about chasing big subsidies to build fiber in the same areas that they neglected for thirty or forty years. I don’t believe that the big ISPs will be good stewards of new rural fiber networks any more than they were of copper networks. I think it’s inevitable big ISPs will repeat history and slowly cut back on capital and technicians until rural fiber networks barely limp along. These companies are highly decentralized and operate in regions. In this business structure, it’s inevitable that local managers will seek to improve bonuses by trimming costs. It’s these little cost cuts, year after year, region after region, that results in a decimated maintenance workforce and budget. I find it impossible to believe that big telcos will treat new fiber networks any differently than they did copper networks. Big ISPs are never going to be comfortable working in markets where drive time between customers is high and where revenues are low.

I doubt that there is anybody who thinks that AT&T will make the same long-term effort to take care of rural networks as is done routinely by cooperatives. And yet, I can’t think of any way to stop these companies from grabbing the grant money if Congress passes the infrastructure legislation. Watching them take the funding will be like watching a slow, decades-long train wreck, as grant-funded fiber networks slowly deteriorate from lack of maintenance.

The only hope I can see is that the infrastructure spending might be distributed by the states. There are states that are fed up with the way that the big ISPs have treated the public and which might refuse to give them grant money. Unfortunately, there are equally as many states where the big ISPs have purchased the legislators by steady contributions over the years and where the grant money might go mostly to the big ISPs.

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