Billions of dollars at stake this week for rural broadband upgrades

25 August 2015 by Steve Blum
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Ready for an upgrade?

AT&T and Verizon have until Thursday to claim billions of dollars in subsidies to upgrade broadband in rural areas of the U.S., including hundreds of millions to improve service in California.

The Federal Communications Commission gives operating subsidies to telephone companies that provide broadband service in rural and/or remote areas, as a part of its universal service mandate. In the current round – Phase 2 – of the Connect America Fund (CAF) program, the FCC is offering large telephone companies a right of first refusal to accept these funds, on a state by state basis.

Frontier has already accepted $6.1 million a year for six years – $36.6 million total – and, in return, will upgrade all of its subsidised service territory in California. It’s also said that if it gets regulatory approval quickly enough to buy Verizon’s wireline systems in California, Florida and Texas, it will claim those subsidies as well – $31 million in each of six years for a total of $186 million, just in California. Nationwide, including the systems it’s trying to unload, Verizon is eligible for $144 million a year, or $864 million total.

That’s chump change compared to what AT&T could pick up, though. The FCC is offering $494 million a year – call it $3 billion total – nationwide, and $60 million a year – $360 million total – just in California.

That’s a lot of money, and you’d think that AT&T and Verizon would grab it. But there’s a good chance they won’t, because as a practical matter it would mean upgrading all households in a given area to the 10 Mbps down/1 Mbps up speed standard that the FCC set for the CAF program, not just the ones eligible for subsidies. AT&T’s and Verizon’s decisions will tell us a lot about what they really intend to do with their decaying copper networks in rural California.