Shutdown an Unexpected Boon for Rural Broadband Providers?
The government shutdown did not disrupt Connect America Funding (CAF II), although the possibility of postponed payments via a different federal branch could benefit potential recipients that are less accustomed to applying for grants and low-cost loans.
Although most federal operations were suspended after Jan. 3, the Universal Services Administration Co. (USAC) that oversees CAF II was fully operational and funding to service providers already awarded was not disrupted, Gary Bolton, vice president of global marketing at ADTRAN, said in an interview with Broadband World News. That included the annual $1.67 billion in CAF II funding to price cap carriers over six years, the annual $1.5 billion CAF II funding to rate of return carriers over a decade and last fall, and the Federal Communications Commission's award of $1.5 billion over 10 years to 103 bidders for the CAF II auction, he added.
"The FCC has not yet acted on the long-form applicants submitted by the winners of the CAF II auction, so the shutdown may delay the initial payments under that program," said Bolton. "However, we did not see a slowdown on the availability of the CAF funding, nor do we see any slowdown on these CAF projects."
Gift of time?
"These guys are in the early stages, they're just fact-finding," said Bolton. "A little bit of delay and pushing out those deadlines, that might actually serve them well. It gives them a little bit more time to get their applications ready."
In part, that's due to the complexities of local laws governing what coops can and cannot do regarding broadband services. Some states are acting quickly to empower utilities to deliver high-speed, fiber-based broadband to their coop members, whereas others continue to ban this activity, said Bolton.
For example, soon after Governor Bill Haslam (R) changed Tennessee law to allow non-profit utilities to provide broadband to members, seven of the state's 22 electric coops almost immediately began fiber-to-the-home services. Coops will do everything traditional providers do, from wholesaling to triple-play but also partner on initiatives. In states like Vermont and North Carolina -- or even specific communities within states -- municipalities and utilities are barred from receiving taxpayer monies for broadband infrastructure or services. (See Should Utilities Foot Fiber Bill in Vermont?)
The trend is beginning to tip in favor of coops and municipalities. ADTRAN, Calix and others in this space work with a growing number of these providers, a movement both vendors continue to invest in with education and other resources. Just today, for example, Calix shared news about the success of its customer, Farmers Telecommunications Cooperative. (See Coop Cuts Time-to-Market 86% With Calix and ADTRAN Plows Resources Into Serving Rural Coops.)
"Now some of the local or state laws are coming in the right direction and allowing these communities that are served by coops -- areas where no one is looking to provide broadband, so if they don't do it, no one's going to do it -- to deliver broadband," said ADTRAN's Bolton. "While they don't want necessarily to be in that business, they do want to serve their communities… and their communities want Internet connectivity."
State laws could prevent taxpayers from subsidizing broadband via the electric coop, encouraging the power company to create a separate subsidiary for connectivity. Mississippi recently made it easier for electric coops to offer broadband services, Bolton said, and Georgia is in the process of simplifying that step.
"There's a bill teed up now in Georgia that could make it easier. I think we'll see a lot of momentum where state legislators across the country will make it easier for rural utilities to offer broadband," he said. "It is very challenging because you want to do what's right for the community because it is very critical for them to have broadband [but] you don't want to have unfair subsidies. These communities realize they're going to be left behind without broadband. The take rate in these rural communities is 60%. In urban areas, it's 40%."
Deployments, however, are much more expensive -- especially when using fiber which may run seven, 10 or 20-plus miles between customers.
USDA may have delay?
To receive funds, projects must serve communities with fewer than 20,000 people who currently have no broadband service or where existing service is less than 10 Mbit/s down, 1 Mbit/s up. Solutions must deliver at speeds of at least 25 Mbit/s down, 3 Mbit/s up, with priority given to those providing higher-speed connections to rural homes, businesses and farms, USDA said.
"USDA seeks to stretch these funds as far as possible by leveraging existing networks and systems without overbuilding existing services greater than 10/1 Mbit/s," according to the agency. "Evaluation criteria include connecting agricultural production and marketing, e-Commerce, healthcare and education facilities. Previous research by USDA has demonstrated that high-capacity broadband is critical to all aspects of rural prosperity, including the ability to grow and attract businesses, retain and develop talent, and maintain rural quality of life."
— Alison Diana, Editor, Broadband World News. Follow us on Twitter or @alisoncdiana.
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