The FCC Hits Connect America Fund Phase II Out of the Park
Gary Bolton, Chair of TIA’s Broadband Convergence Working Group and Vice President of Global Marketing, ADTRAN
Just when you think Washington can’t get anything right, the agency hits a grand slam homerun. With the exception of Verizon, the price cap carriers accepted 95 percent of their Connect America Fund (CAF) Phase II allocations, which totals $9 billion over the next 6 years.This is a HUGE payday for rural America!
According to the FCC, 85 percent of the country unserved by broadband is in the territories served by FCC defined Tier 1 and Tier 2 Carriers or “price cap” carriers. As a result of the agency’s tireless efforts, these carriers have committed to build out broadband to nearly 7.3 million rural consumers in 45 states and one U.S. territory over the next 6 years.
The road to success for phase II of the Connect America Fund was long and bumpy for sure. The original transition from Universal Service Fund (USF) to the Connect America Fund (CAF) did not get off to a good start. The FCC CAF Order was release in November 2011 and the first phase failed miserably with 62 percent of those funds being left on the table due to issues with the acceptance rules and obligations. It took years for the FCC to address many of the issues that created a disincentive for carriers to take the funding. However, the agency’s hard work paid off in 2015 - the FCC’s Connect America Fund reforms created the right conditions for companies to now take $9 billion in funding.
A lot has happened since the original 2011 CAF Order was issued. Our world is literally moving at Internet speeds and those speeds are getting exponentially faster. So much so that the FCC has redefined broadband as 25Mbps/3Mbps - 6x faster download speeds than the CAF Phase I broadband buildout requirements.
As a result, the minimum speed requirements for CAF Phase II are now 10Mbps/1Mbps. While this comes up short from the new FCC definition, it does allow phase II funding to build networks for rural America that will be capable of upgrading to broadband speeds available in urban communities. To accommodate the higher minimum speeds, the FCC increased the terms of support from 5 years to 6 years, which significantly improved the carriers’ business case for funding acceptance.
Further, the FCC provided some additional flexibility that allows these carries to serve up to 95 percent of eligible locations rather than 100 percent. This rule change helps prevent the carriers from passing on an eligible rural area due to a few exceptionally challenging outlying households. TIA also advocated for a number of specific elements to the Connect America Fund reforms, which were largely incorporated into the FCC plan including:
- Maximum flexibility in the operation of the new fund, which is critical to reaching its maximum potential - especially considering the diverse characteristic of rural and hard to serve areas;
- Technology-neutral principles, particularly in the public interest obligations of providers; and
- Minimized reporting burdens on recipients in order to promote participation in the program.
We applaud the FCC’s efforts and diligence in continuing to work through the issues and concerns that has resulted in a wildly successful acceptance level by a wide range of carriers. This $9 billion of Federal investment in broadband will literally change the lives of rural America challenged by the digital divide. Furthermore, it will fuel further CapEx investment by all Service Providers and make a meaningful positive impact on our country’s global competitiveness. This is a grand slam homerun by any measure. Hat’s off to Chairman Wheeler and everyone at the FCC that contributed to this landmark achievement. TIA looks forward to continuing to work with the FCC on additional reforms.