AT&T takes $427M in CAF II funding, sets plan to bring wireline, wireless broadband to 18 states

AT&T (NYSE: T) has joined fellow Tier 1 telco CenturyLink, Consolidated Communications and others in accepting $427 million annually in phase two of the FCC Connect America Fund (CAF-II) program, allowing it reach 2.2 million rural locations in 18 of the 21 states in its operating territory with broadband services.

In making its decision to accept the funding, AT&T said it "carefully analyzed a number of factors including the regulatory obligations associated with accepting the funds and whether the funding makes deployment economically feasible (including by using our advanced fixed wireless technology)."   

The service provider will meet the commitments of the CAF II program using a mix of traditional wireline and wireless technologies. In the case of wireless, AT&T will construct new wireless towers in previously unserved areas.

Jim Cicconi, senior executive VP for external and legislative affairs at AT&T, said in a letter to the FCC that "they will diligently pursue the necessary tower siting and permitting processes so that these new towers can be completed in a timely manner."

It declined the model-based support in Missouri, Nevada and Oklahoma. AT&T said in states where model-based support is greater than CAF I frozen support, it has elected to receive the lump sum payment in 2015.

At this point, the telco did not provide guidance on what percentage of customers would be served by wireless and wireline.

In 2013, AT&T accepted up to $100 million from the CAF Phase I to bring broadband to about 129,000 locations that did not have access to at least a 768/200 Kbps connection.

Separate from the CAF II program, AT&T has launched an aggressive plan to bring 1 Gbps FTTH service to an additional 11.2 million homes as one of the provisions of completing its acquisition of DirecTV.

This 11.17 million premises buildout goal is more than the initial plan it revealed last June to upgrade 2 million homes to the fiber-based Gigapower broadband service, while expanding overall broadband coverage overall to 13 million locations.

With today being the deadline for telcos to tell the FCC if they are going to accept funding or not, Verizon (NYSE: VZ) and Consolidated Communications also announced they accepted CAF II funding.

Verizon, which is in the process of selling off its wireline facilities to Frontier in California, Florida and Texas, said in an FCC filing that it conditionally accepted the CAF II offer of $32 million in California and $17 million annual amount in Texas.

Although Verizon and Frontier are still working to obtain necessary state and federal regulatory approvals to close the deal, the date to accept the CAF II funding is happening before Verizon and Frontier obtained all of these approvals. Verizon turned down CAF I funding when it was offered to them in 2013.

In an FCC filing, Verizon asked that the Universal Service Administrative Company ("USAC") defer all CAF payments until Verizon and Frontier close their transaction.  

"Upon written notification to the Bureau that the Transaction has closed, USAC would then pay Frontier the deferred CAF amounts," said Verizon. "In the event that the conditions of this acceptance are not satisfied, the parties request that upon receipt of written notice from Verizon that the conditions have not been satisfied, USAC will reinstate Verizon's Connect America Fund Phase I Frozen Universal Service support in California and Texas and resume payment to Verizon of these amounts."

Frontier itself accepted $283 million in annual CAF II support from the FCC that it says will enable it to build out broadband service to over 650,000 rural locations that it could not economically reach before.

Meanwhile, Consolidated accepted $14 million in annual CAF II support to deploy broadband to approximately 24,700 rural locations across seven states. In the locations it accepted funds, Consolidated said it will construct and operate a network to offer broadband service speeds of at least 10/1 Mbps.

For more:
- see AT&T's release
- see Consolidated's release
- and Verizon's filing (PDF)

Related articles:
AT&T: FCC's CAF-II should just support broadband services
FCC sets 10 Mbps as new rural broadband starting point
AT&T, Frontier, other telcos' rural broadband boosted by $255M in CAF-I grants

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