Setting the Bar for Public Funding: Aiming Higher with the Connect America Fund
by Carol Mattey
The Federal Communications Commission concluded in a recent report that broadband is being deployed to all Americans in a reasonable and timely fashion, but there’s more work to be done. On the latter point, there’s widespread agreement.
The report is a snapshot in time, not a comprehensive roadmap of the future. As of the end of 2016, 24 million Americans lacked access to fixed terrestrial broadband meeting the FCC’s definition for purposes of its annual assessment, 25 Mbps downstream/3 Mbps upstream. And 10 million rural Americans didn’t even have access to slower 10 Mbps downstream/1 Mbps upstream service, which currently is the FCC’s minimum for public funding.
Meanwhile, members of Congress have introduced numerous bills intended to advance broadband deployment. And the Trump Administration has finally announced its long-awaited proposal to improve America’s infrastructure, which would include rural broadband. Many are concerned, however, about the lack of funding dedicated specifically to broadband.
I’ll leave it to others to handicap the prospects of congressional action on measures that would materially improve rural broadband deployment. Instead, I’ll focus here on how to improve the biggest tool to closing the digital divide in the FCC’s toolbox: the Connect America Fund.
For decades, the FCC provided billions of dollars annually in subsidies to ensure universal phone service. In 2011, the FCC reformed that program with the express goal of ensuring universal access to broadband in high-cost, rural areas. But unless the FCC sets the bar higher for future federal funding, the gap between urban and rural America is likely to widen.
The Connect America Fund is complicated. Nearly $4 billion in annual funding today goes to incumbent telecommunications carriers, but the FCC plans to hold auctions in the future to award some of that money on a competitive basis in some areas. Different requirements exist, depending on who’s getting the money. Over the years, the minimum acceptable speed for CAF recipients has increased – from 4 Mbps to 10 Mbps, and in some instances, even higher. The funding can be used only in certain census blocks in the country, even though there may be unserved consumers in other places where funding is not available.
Back in 2011, the FCC adopted a performance goal for the Connect America Fund of ensuring universal access to fixed broadband and concluded it would measure progress towards this outcome based on the number of newly served locations – but it did not articulate any concrete vision for when this universal service goal might be achieved.
Now, many (but not all) CAF recipients are required to extend broadband to some number of unserved customers by various dates ranging from 2019 to 2026. In time, it will be easier for consumers to connect to the internet, but it’s not happening overnight.
I believe it’s time to scrutinize what we are accomplishing with the Connect America Fund at the macro level, to make sure we aren’t aiming too low.
It’s hard to figure out, because the FCC hasn’t published a consolidated national summary of what will be the net result of the various components of the Connect America Fund that have been implemented thus far.
Big picture, if all the companies currently required to deploy broadband meet their obligations, about 70,000 consumers will gain access to 25 Mbps or better broadband by 2020, and an additional 750,000 consumers or so will newly gain access to 25 Mbps or better by 2026. That’s only 820,000 in total that will newly gain service meeting the FCC’s definition of broadband.
Meanwhile, other CAF recipients must offer 10 Mbps service to about 7.3 million consumers by 2020, and another group of CAF companies must newly offer this service to 765,000 consumers by 2026. And some consumers in CAF-eligible areas won’t even have 10 Mbps service by 2026, because their service provider is not legally required to meet this minimum for all customers.
Looking ahead, about 95,000 consumers in CAF-eligible areas in New York State can expect new service options meeting or exceeding the FCC’s definition of broadband as a result of the combination of federal and state funding provided through the New NY Broadband program. While New York has not published the specific details for CAF-eligible areas, those consumers will receive either 100 Mbps or 25 Mbps broadband service.
And the fate of up to nearly 2 million consumers will be determined in the FCC’s upcoming Phase II auction, which is open to both incumbents and competitors. This summer, companies both large and small, using a variety of technologies, will bid for support for varying tiers of service, ranging from 10 Mbps up to 1 Gigabit, in certain areas of the country. There’s no assurance that there will be competitive bids for all eligible areas, but we’ve already seen indications of competitive interest in some areas.
So is this good enough, or can we do better?
If we’ve learned anything in the last eight years, it’s that the world is rapidly changing. We need to aim higher, because by the time we get there, the rest of the world will be even farther along. We shouldn’t be satisfied if the net result of billions of dollars of expenditures is that 8 million or more consumers in CAF-eligible areas are assured access to only 10 Mbps fixed broadband at some future date – that’s markedly lower than what is widely available in urban areas today.
I’m not advocating that we change the rules of the road for the companies that agreed to meet binding deployment obligations by 2020 or 2026 in exchange for specified amounts of funding. Nor am I suggesting that the FCC change the rules for its upcoming Phase II auction. But it’s not too early to start thinking about where we want to be ten years from now, and beyond. What needs to happen to make universal service truly universal?
After the Phase II auction, it’s time to set a new minimum for future public investment: 25/3 Mbps or better. And recipients of funding should be building networks that can be upgraded to meet future demand.
At most, 10 Mbps fixed broadband service should be allowed for only the last one percent of the country, at most 3 million Americans or so, who live in the most expensive areas to serve. It shouldn’t be the end game for the Connect America Fund.
In 2011, the FCC said all Americans “should have access to affordable modern networks capable of supporting the necessary applications that empower them to learn, work, create and innovate.”
Let’s fulfill that promise.