AT&T, Frontier, others accept $1.5B in CAF-II funding despite FCC's changing broadband definition

Ten vendors have accepted a total of $1.5 billion in funding for the second phase of the Connect America Fund (CAF-II), an FCC reform initiative that promises to bring broadband to an estimated 23 million Americans in rural uncovered areas as the service has been deemed a necessity in today's technology environment.

Below is a chart depicting the funding each provider accepted, along with the amount of subscribers each is expected to cover.

CAF-II funding and population. Click here for a larger version of the funding graph, and here for a larger version of the population graph.

In 2013, five companies accepted a total of $255 million in funding from the first CAF round, resulting in more than 500,000 rural fiber locations expected to be reached by 2020. While Verizon opted out of the previous round of funding, AT&T, CenturyLink, FairPoint, Frontier and Windstream accepted the funding.

In the two years since the initial grant awards, requirements for the second buildout's implementation have been altered from 4/1 Mbps speeds to 10/1 Mbps, however. This has raised concern as the FCC earlier this year also changed the earmark for what constitutes broadband.

"When 80 percent of Americans can access 25/3 [Mbps], that's a standard. We have a problem that 20 percent can't. We have a responsibility to that 20 percent," FCC Chairman Tom Wheeler said.

That updated definition puts both second- and first-round CAF work requirements outside the realm of the definition of broadband, which one analyst said somewhat negates the commission's initial goal to bring the broadband internet service to rural and underserved communities.

"The program funds quote-unquote 'broadband' below the levels that the FCC now deems 'broadband," said Roger Entner, founder and lead analyst at Recon Analytics. "The FCC evolved quite rapidly and then rules were left behind. So do we change the definition of broadband or treat rural Americans as second-class citizens?"

The change in definition confounded Commissioner Ajit Pai as well, who blasted the FCC's decision in a dissenting statement that called the change "incoherent." "Why are we spending over $10 billion to deploy something that isn't broadband? Don't those in rural America deserve broadband access?" he said.

Regardless of semantics, the project is expected to move forward to completion, though the current changes have already raised questions about what requirements future funding rounds will include, as well as concerns that changing definitions could leave carriers in the midst of pricey buildouts without the crutch of the FCC's financial aid to lean on. Entner, however, called that situation unlikely.

"I think what everybody fears is that the regulation gets amended and the providers that followed the funding rules are stuck building out on their own dime," he said. "But that's not going to happen."

On the contrary, Entner is optimistic that the Connect America Fund will act as an amplifier for broadband access buildouts across the U.S.

"I would look at CAF funding as a multiplier or extension funding to broadband rather than the sole funding source," he said. "It lessens the financial impact [for carriers] and makes funding decisions feasible."

He said with expansive fiber networks laid out thanks to the FCC's financial assistance, ISPs will be in a better position to use their own capital to further extend the project post-CAF final phases.

Still, fiber-to-the-home buildouts are pricey and, while most providers are focusing on fiber first in the interest of extending their own networks, some rural areas simply don't make sense to be hooked up via fiber. Instead, those areas will be serviced with DSL, which will allow for coverage over a longer distance.

"Is faster internet better than slower internet?" Entner asked. "Yes, come on. But if the FCC raises requirements, less people will be covered. So would you give more people slow internet or [do] what you'd like to do with fewer people? No one is going to intentionally slow down or handicap people in rural areas."

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AT&T, Frontier, others accept $1.5B in CAF-II funding despite FCC's changing broadband definition