Verizon (NYSE: VZ) is not accepting funding of $144 million total per year for six years to expand broadband in the rural areas it serves from the second phase of the FCC's Connect America Fund (CAF-II), fueling new rumors that it's considering a sale of another large piece of its wireline asset portfolio.
According to a Broadband DSL Reports article, speculation has emerged that Verizon is in talks with an unnamed service provider to sell more of its wireline assets, with a deal that could be announced early next year.
Fellow telcos AT&T (NYSE: T) and CenturyLink (NYSE: CTL) opted to accept $472 million and $500 million respectively to extend broadband services in hard-to-reach rural parts of their territories.
News of Verizon refusing to accept the CAF-II funding should not be of any great surprise. Verizon was offered $19.7 million in 2012, but did not give a specific reason for turning down the FCC's CAF-I funding other than to say that the amount they were offered was "relatively small."
However, 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 a $17 million annual amount in Texas.
Verizon accepted the CAF-II funds, which will be set aside for Frontier when it completes its acquisition of Verizon's assets in these three states. While 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.
For its own part, Frontier 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.
The Communications Workers of America (CWA) union, which has been engaged in a contentious union contract negotiation process with Verizon, said that the telco is putting its rural customers at a disadvantage.
"Verizon's track record is clear," said Bob Master, assistant to the vice president of District One of the CWA, in a statement. "Even while raking in a billion dollars per month in profits, Verizon is turning its back on underserved communities by refusing federal subsidies to expand high-speed internet access."
No strike yet: Verizon, CWA, IBEW unions to continue negotiations as contract expires
AT&T takes $427M in CAF II funding, sets plan to bring wireline, wireless broadband to 18 states
Frontier acquires Verizon wireline assets in 3 states for $10.5B
Frontier takes $283M in Connect America Funding to bring broadband to 650,000 unserved sites