Windstream has accepted $175 million of Phase II Connect America Funds (CAF-II), a move that will enable it to extend broadband services to nearly 400,000 rural households across 17 states.
The FCC's CAF program will provide ongoing funding to support and expand rural broadband networks for carriers like Windstream, with the ability to provide at least 10/1 Mbps.
Tony Thomas, president and CEO of Windstream, said in a release that the CAF-II funding will enable it "to continue service in many high-cost areas and to offer new service to many others" it could not make a business case to address before.
Thomas added that the telco has continued to make efforts to expand and improve broadband capabilities in the rural areas it serves through a mix of its own capital and universal service and stimulus funds.
One initiative it has been moving fast on is the deployment of VDSL2+. Although it won't release its earnings until Aug. 6, the telco previously stated that at the end of the first quarter of 2015 that it reached 200,000 customers in its ILEC territory with the new hybrid fiber/copper service.
At that time, the telco said its move to spin off its wireline assets into Communications Sales and Leasing (CS&L), a publicly traded Real Estate Investment Trust (REIT), could provide it with more opportunities to expand the VDSL2+ services into more markets.
With the CAF-II program, the FCC created a new cost model that incorporates state-by-state support levels. A telco like Windstream can accept the funding and related service obligations for its service area in each state. In the event a service provider declines an offer for a state, funding will be subject to a competitive process in which any eligible provider can bid to serve all or part of the area. Windstream has declined to take funds for New Mexico, for example.
Thomas said that although it remains committed to providing affordable broadband access services in New Mexico, the "statewide offer would not enable us to meet the program's obligations." The telco plans to participate in the upcoming bidding process to compete for broadband support in the state.
Windstream is the second provider to accept CAF-II funding. Fellow rural ILEC Frontier announced in June that it accepted $283 million annually in CAF II support from the FCC to deploy broadband to more than 650,000 high-cost rural locations throughout its current 28-state service area.
Other telcos like CenturyLink (NYSE: CTL) and FairPoint have not accepted any of the funds yet. FairPoint said during its second quarter earnings call that it is eligible to receive $38 million in CAF-II funds, but is still evaluating the program.
In 2013, Windstream joined CenturyLink, Frontier and FairPoint in accepting Phase I funding from the Connect America Fund (CAF). At that time it said it will take the $60.4 million in incremental CAF I funding. The telco also agreed to use $63.5 million above its initial allocation for a total of over $123.9 million. Using the CAF I funding, Windstream was able to deploy broadband based on the FCC's former 4 Mbps standard to 217,638 locations in its serving territories.
- see the release
Windstream reaches 200,000 users with VDSL2, sees further broadband growth opportunities
Frontier will use CAF II funding to expand broadband in acquired Verizon territories
Windstream accepts $60.4M in CAF I funds for rural broadband extension