Could $500M Close Rural Broadband Divide?

Federal Communications Commission Chairman Ajit Pai this week proposed $500 million in additional funding to deploy broadband across rural regions of the US, an amount more than double the shortfall in one popular federal program.

The order would consist of about $180 million for the current funding year for smaller rate-of-return (ROR) providers that get financial support from legacy programs such as Universal Service Funds (USF) and up to $360 million over the next decade to ROR carriers funded via A-CAM (Alternative Connect America Cost Model), which is part of the Connect America Program. In June 2017, USF funding suffered a shortfall of about $200 million after more providers than expected signed on.

A-CAM participants signed on to deliver broadband to 631,000 locations in 43 states, the FCC said. That included high-speed deployments, such as Great Plains Communications of Nebraska's 100Gbit/s fiber backbone.

The proposal is good news for some providers, but doesn't seem to address large operators with rural aspirations. Nor does it deal with the FCC's rumored plan to lower the definition of "broadband" to include cellular speeds, a strategy that would do the most damage to rural customers by immediately making some regions ineligible for USF, A-CAM and other funds -- without changing their broadband speeds or accessibility at all. (See Trump's Rural Broadband Picture Cloudy and FCC to Shrink Digital Divide – Without Expanding Broadband.)

Cooperatives and smaller rural providers would benefit not only from more dollars, but also from more predictable funding, said Pai in a release.

"Closing the digital divide is the FCC's top priority. A key way to reach this goal in rural America is updating the FCC's high-cost universal service program to encourage cooperatives and other small, rural carriers to build more online infrastructure," Pai said. "We need more deployment in sparsely populated rural areas if we're going to extend digital opportunity to all Americans. But I've heard from community leaders, Congress, and carriers that insufficient, unpredictable funding has kept them from reaching this goal."

More stringent rules to prevent abuse will be attached to the monies, according to Pai's order. And the program includes reforms to enhance efficiency, as well as specific guidelines to improve access for Tribal lands, the release said.

Funding conundrum
In mid-2017, the average reduction in USF support for small broadband providers reached 12.3%, according to a survey of about 200 NTCA members. That generated a cut of approximately $173 million between July 2017 and July 2018, funding that would have recovered costs these small providers incurred delivering broadband networks and services to rural customers, NTCA - The Rural Broadband Association said in a release.

The results were chilling. With the USF cuts in place, NTCA members (which include many of the nation's rural providers, municipalities and co-ops, and has a political action committee and related administrative fund lobbying on rural broadband's behalf in D.C.), predicted a devastating effect on their business and rural customers. If the FCC accepts Pai's recommendation, it's pretty safe to speculate the scenario quickly shifts. Results of last year's USF cuts included:

• Up to $300 million in delayed or canceled broadband investments

• About a quarter fewer customers than previously expected would receive broadband speeds of 10 Mbit/s to 25 Mbit/s

• Up to 275,000 rural customers would remain locked in at slow speeds

• Even at current slower rates, providers would have to charge rural customers an average of $126 per month, about double the rate of urban customers for much faster broadband speeds

Additional funds will negate many of these predictions. New efficiencies should drive down costs, liberating extra dollars for providers. As long as the broadband definition is not watered down, more money can only mean positive news for providers and their expanding base of broadband subscribers out in the beautiful US countryside.

Related posts:

• Frontier Reduces Digital Divide
• US Needs Accurate Broadband Map
• Democrats Push a 'Better Broadband Deal'

— Alison Diana, Editor, Broadband World News. Follow us on Twitter or @alisoncdiana.