Today, the FCC formally offered the nation’s largest telephone companies, including AT&T, Verizon, Frontier, CenturyLink, FairPoint, and Windstream, $10 billion in subsidies to offer broadband service to over 4 million homes and businesses that are currently unserved. Today’s offer is a critical step in “Phase II” of the Connect America Fund, which will subsidize the construction of 10 Mbps down/1 Mbps up broadband networks in these areas over the next six years. These providers have until August 27, 2015 (120 days) to accept or reject the FCC’s offer on a state-by-state basis. If they reject these offers, the FCC will begin to award these subsidies to alternative providers through a competitive auction process.
As Connected Nation Policy Briefs have discussed, the FCC calculated the Connect America Fund Phase II subsidies using a network cost model. That model examines the topography and physical characteristics of each census block without adequate fixed broadband service. As a result, on per-location basis, the subsidy offers vary considerably by state and by provider. For example, in Ohio, the FCC has offered Frontier $22.9 million in subsidies per year for the next six years to upgrade service to 27,538 homes and businesses, an average of approximately $833 per location per year. In Michigan, though, the FCC is offering Frontier $21.7 million per year to upgrade networks serving 39,654 homes and businesses, an average of $548 per location per year.
The Connect America Fund Phase II process will have a significant impact on the broadband landscape in affected rural areas over the next decade. If a telephone company accepts the FCC’s subsidy offer, it will be required to offer broadband service at speeds of 10 Mbps down/1 Mbps up throughout the designated area at prices subject to urban benchmarks. In addition, all Connect America Fund recipients will have to offer broadband service to schools and libraries at rates, terms, and conditions that are reasonably comparable to offers in urban areas.
If the local telephone company declines the FCC’s offer, the FCC will offer the subsidy through an auction to other providers, such as local cable companies and wireless ISPs, to build voice and broadband networks that meet those same speed, price, and service requirements. Stated simply, the process that will play out over the next several months will quite literally affect the broadband landscape for millions of Americans in rural areas for years to come.
Watch this space for further updates and information on the FCC’s offer, including maps of potentially affected areas (which will be updated with the new information) and analyses of state-specific offers by provider.
For a complete list of FCC Connect America Fund Phase II subsidy offers by carrier and state, click here.