AT&T, Verizon pass on FCC's Connect America Fund phase 1 funding

AT&T (NYSE: T) and Verizon (NYSE: VZ) have decided they can take care of their own rural broadband customers on their own, and will not take advantage of phase one of the FCC's Connect America Funding (CAF) program.

Eligible service providers had until yesterday to decide whether or not to accept CAF funds to help them build out broadband services in hard-to-reach rural areas.

Although AT&T was offered $47.8 million from phase I of the FCC's program, the telco said in a letter sent to Telecompetitor that it is "optimistic" about expanding broadband services into its rural areas, "particularly as the technology continues to advance." It added that it would not take part in the FCC's program until it maps out what its own rural broadband strategy is.  

Among some of the technologies AT&T is considering to expand broadband in rural areas is IP DSLAMs. Following its failed attempt to acquire T-Mobile, a move that would have given it more wireless spectrum to serve these harder to reach areas, AT&T CEO Randall Stephenson said during a JPMorgan Chase & Co. call with investors in June that the telco would leverage IP DSLAMS to offer a higher speed DSL service.

Verizon, which was offered $19.7 million, did not give a specific reason for turning down the FCC's CAF funding other than to say that the amount they were offered was "relatively small."

Thus far, three other service providers announced they would accept a piece of the funding they are eligible for. FairPoint (Nasdaq: FRP) accepted $2 million of the $4.8 million it was allotted to expand broadband service in Vermont, CenturyLink (NYSE: CTL) took $35 million of the $90 million the FCC offered and Windstream (Nasdaq: WIN) accepted only $653,000 of the $60.4 million amount it was offered.

Last week, Frontier (Nasdaq: FTR) said it would take the entire $72 million grant it was offered, while Alaska Communications Systems (ACS) accepted the almost $4.2 million amount that they were allotted.

While the FCC's program is promising, CenturyLink and Windstream feel that the CAF I rules are somewhat restrictive.

Both CenturyLink and Windstream have applied for waivers, which, if granted, would give more funding to deploy broadband to additional areas.

In CenturyLink's case, the service provider said if its waiver goes through it would be able to reach an additional 60,000 homes in hard to reach areas that require more capital to build out network facilities to deliver service.

"One of the difficulties is that the FCC decided they'd support $775 per household," said Steve Davis, CenturyLink executive vice president for public policy and government in an interview with FierceTelecom. "Given that restriction there's only so many households in America that still even with significant company payment towards the cost of investment there's only so many houses you can get to for a cost even in that ballpark."

Davis added that "the FCC excluded a lot of areas where I and probably most consumers would consider not to be served by a meaningful broadband service."

Windstream, however, only accepted $653,000 of the $60.4 million it was offered, citing the limitations of the CAF I rules.

In an e-mail to FierceTelecom, Windstream said that it "has aggressively invested its own capital in its broadband network over the past 10 years, there are very few areas in its territory that can be served for $775 or less in government support, as required by the CAF-1 rules."

For more:
- Telecompetitor has this article

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