FCC Proposes Expanding Definition of 'Unserved' for Connect America, Phase I

Looking to get more of its $300 million allocation in the field and building out broadband
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The FCC is proposing changing the rules on its first phase
of the Connect America Fund to make it more attractive to the price cap telcos it
wants to build out broadband to hard-to-serve, primarily rural, areas.

The FCC, which is migrating phone subsidies in the Universal
Service Fund from telecom to broadband, announced in July that $115 million
would be invested by companies in 37 states. But that leaves most of the money --
$185 million -- in the first round of funding unallocated.

The first phase of the fund is transitional support as the
FCC moves from the old high-cost support mechanisms for price cap carriers to
the Connect America Phase II mechanism, in which the FCC will offer $1.8
billion annually to subsidize broadband build-outs in price cap territories via
a combination of cost modeling and competitive bidding.

The two largest potential recipients, AT&T and Verizon,
declined to accept the funding, deciding instead to build out on their own
timetable and without the restrictions the FCC put on the funding, which
included a three-year build-out deadline and a definition of unserved as
lacking a minimum speed of 768 Kbps downstream and 200 Kbps upstream. They also
had to specify where they would deploy and how much of their eligible funding
they would use.

Price cap carriers that did accept included Frontier
Communications, which took $71.9 million, and CenturyLink, which took $35
million from the fund to deploy service to 45,000 homes. The company was
actually eligible for $90 million, but said restrictions on the funds made
further deployment "uneconomical."

The FCC, which says it still wants to get the targeted areas
broadband as fast as possible, is proposing modifying those requirements,
including increasing the subsidized area by expanding the definition of
unserved to 4 Mbps downstream and 1 Mbps upstream, in line with the FCC's new
benchmark for high-speed broadband.

The commission would reopen phase I of the funding under the
new rules, and would waive the Dec. 15 deadline for announcing Phase I
allocations for 2013. The commission would also strengthen oversight of the
program.

The FCC puts its best face on that $115 million out of $300
million available track record for Phase I support. "Building on the
success of the first round of Phase I, we now seek comment on rule changes that
would provide further opportunities to advance our overarching goal to use
available funds to rapidly and efficiently deploy broadband networks throughout
America."

It is also proposing as an alternative to roll those funds
into Phase II.

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