FCC’s CAF Promises More Rural Broadband

The Federal Communications Commission’s (FCC’s) “Connect America Fund (CAF),” recently created as part of “once-in-a-generation reform” of the Universal Service Fund (USF), finally has been launched, aiming to “cut waste and imposed strict fiscal responsibility standards on the fund, preventing it from growing beyond its current size” and to “extend high-speed Internet to up to 400,000 previously unserved homes, business and anchor institutions in rural America.” ?

This is the first phase of funding from the CAF (CAF Phase 1). Carriers now have 90 days to accept the funding as well as the aggressive buildout requirements that must begin in the coming months, the FCC says.

“The commission expects that carriers will likely supplement the CAF funding with private investment,” it adds. “While carriers are not required to participate, hundreds of thousands of Americans will gain access to broadband even if carriers only accept a portion of the money.”

In a statement, FCC Chairman Julius Genachowski, commented, “We continue our work to unleash the benefits of broadband for all Americans, regardless of where they live and consistent with fiscal responsibility. By cutting waste, we are saving hundreds of millions of dollars – and those savings will now provide an immediate boost to broadband deployment in unserved areas. All Americans will benefit while our nation’s global competitiveness is strengthened.”

In addition, the FCC has implemented additional reforms it says will make better use of existing funding to increase support for broadband for more than 2 million rural lines across the country.?

The background: According to FCC documents, these reforms “improve fairness and incentives for efficient operations in a specific type of universal service support called High Cost Loop Support, or HCLS.  

In order to help make service affordable for consumers, HCLS provides close to $800 million annually to help offset high capital and operating expenses faced by many small rural providers. However, HCLS lacked benchmarks for judging whether subsidies were warranted, while fully subsidizing high expense levels and punishing efficient operations. Today’s reforms impose reasonable limits on subsidized expenses by comparing spending among similarly situated companies and setting benchmarks.”?

The net effect? Approximately 500 carriers serving more than 2 million lines across the country will get more funding for broadband, and some 100 carriers that have unusually high expenses will have to take steps to bring their operations more in line with their peers, the agency says.?

(Editor’s note: For NCTA’s take on current USF reform, click here.)