What is the FCC's High Cost Program?

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The FCC's high cost program is a federal program that provides funding to defray the cost of operating and extending both fixed and mobile broadband networks to serve consumers and small businesses in rural, high-cost areas in the United States. There are several different programs under the overall umbrella of the high cost program. Unlike several other FCC universal service programs, funding is provided on a recurring, monthly basis without an annual application process. 

 

The Connect America Fund (CAF) was created by the Federal Communications Commission (FCC) in 2011 to fulfill the statutory mandate that everyone in the United States should have access to communications service that is reasonably comparable to what’s available in urban areas. The FCC offered funding to the largest telecom companies for a six-year period (2015-2020) to extend 10/1 Mbps broadband to a specified number of locations, and then subsequently held the CAF Phase II auction, open to competitive providers, in 2018 for those areas declined by the largest carriers.

 

The Connect America Fund also provides support to another group of incumbent local telephone companies, which are smaller cooperatives and independent companies. These companies are subject to varying service obligations for fixed broadband:  10/1 Mbps and/or 25/3 Mbps to a specified number of residential and small business locations.

 

In 2020, the FCC created a $20.4 billion Rural Digital Opportunity Fund (RDOF), funding to be provided on a competitive basis over 10 years, focusing on areas of the country lacking 25/3 Mbps broadband service.

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The high cost program  is the largest of the FCC’s four universal service programs, providing roughly $5 billion in annual funding to eligible recipients. Funding can be used both for new capital investment and recurring operating expenses. 

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Who’s Eligible to Receive CAF/RDOF Funding?

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Under federal law, only “eligible telecommunications carriers” (ETCs) may receive CAF or RDOF funding.  ETCs are designated by state public utility commissions, or in some instances, by the FCC.

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All incumbent telephone companies are ETCs. Other entities such as competitive carriers, mobile wireless carriers, wireless internet service providers, cable operators, electric utilities, local government entities, and satellite companies are eligible to become ETCs, and receive CAF or RDOF funding, if they are willing to offer voice and broadband meeting the FCC’s standards and meet other requirements.

 

What Funding Is Available Now?

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In late 2020, the FCC held a competitive auction for RDOF Phase I funding, with winning bids totaling $9.2 billion to serve over 5.2 million locations. Subsequently, 417 entities filed applications to be authorized to receive funding for their winning bids. The FCC is currently reviewing those applications. 

 

In July 2021, the FCC announced it was ready to authorize $311 million in RDOF Phase I winning bids.  Six Mattey Consulting clients were in the first group to be authorized, representing over $100 million in funding.  

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What is the Future of the FCC's Universal Service Program?

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The  FCC has made closing the digital divide one of its highest priorities. The FCC's universal service programs are a key tool to achieving that objective. FCC funding helps the private sector to have a viable business case in less densely populated rural areas where customer revenues are insufficient to cover the costs of building and operating a network. The job of getting broadband to all Americans is far from complete, with the FCC's funding programs playing a critical role for the next decade and beyond. 

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