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Connecting Rural America

The FCC's Connect America Fund aims to bring broadband access to rural areas, but is it more damaging to broadband rollout than helpful?

Though it’s tough to believe, not all homes in the U.S. had telephone service until the mid-1990s. It was in 1997 that the Universal Service Fund (USF) was created to support landline expansion because, at the time, access to this service was considered imperative for involvement in society.

Fifteen years later, the U.S. is in the same situation, but the service is broadband.

For years, extending broadband connectivity to rural areas has been an issue — relatively low population density, topography, greater geographical distances and cost have all been barriers to implementation.

But broadband connectivity is no longer considered a luxury — it’s necessary for full participation in our economy and society, said FCC Chairman Julius Genachowski last October, when the FCC unanimously voted to reform and modernize the USF.

This reform is aimed at helping connect every American to high-speed Internet by the end of the decade, just as the fund did for telephone service in the 20th century, according to the FCC. The next step in the process came on April 25, when the FCC officially launched the new Connect America Fund (CAF), a reform that will be dole out $300 million to both large and small telephone companies that agree by July 24 to “strict accountability measures and buildout requirements," wrote Sharon Gillett, chief of the FCC’s Wireline Competition Bureau on the official FCC blog.

Using CAF funds along with their own private funds, it is hoped that the telecoms will help deliver broadband to more than 18 million rural Americans with broadband by 2020, according to the FCC. But some governments aren’t so sure it’s this simple. “The Connect America Fund is part of a larger FCC order,” says Chris Nelson, commissioner of the South Dakota Public Utilities Commission. “And as it stands today, it looks like the whole of that order may well be more damaging to broadband rollout in rural South Dakota than helpful to it.”

And that’s the general sentiment nationwide.   

In this first phase, telephone companies with networks on the ground — and that are subject to state carrier of last resort requirements, which means the carrier commits or is required by law to provide service to any customer in a service area that requests it -- will get “right of first refusal” for CAF funding, according to an FCC spokesman. This means these incumbent telephone providers get first dibs on the funding. It’s not as simple, however, as these telephone companies choosing which areas of what states they want to build out their broadband services, according to the FCC. “They will be required to make statewide commitments and not ‘cherry pick’ the easiest-to-serve territories,” says FCC Spokesman Mark Wigfield.

What it does mean, however, is that smaller companies that don’t receive USF funding but have independently worked to bridge the divide aren’t eligible for CAF funding to build further, says Benjamin Lennett, policy director at the New America Foundation’s Open Technology Institute.

The locations that already have service from non-subsidized companies aren’t eligible for CAF funding either, which is a good thing, says Steve Morris, vice president and associate general counsel for the National Cable and Telecommunications Association (NCTA). “One of the things we’ve been pretty vocal about in the FCC’s reform effort is it doesn’t make sense to have government subsidies going to places where the private sector has already built broadband networks,” he says.

But the fact that phase-one monies are dedicated solely to large, incumbent telephone companies isn’t necessarily the right approach, say both Morris and Lennett. “From our perspective, continuing to give billions of dollars particularly to large telephone companies that have sort of neglected to provide broadband service in rural areas … over their existing telephone infrastructure is really a waste of consumers’ money,” Lennett says. “There are much better approaches than relying on these large companies to serve these rural communities.”

In South Dakota, there are classic examples of the rural-rural divide — where on one side of a rural gravel road, there’s fiber optic to the home, and literally on the other side of that gravel road, there is no broadband whatsoever — “and no possibility to get it,” Nelson says, “because it’s in a different service area.”

In Maine, former Gov. Angus King, says there’s a problem that “better use” of the Connect America Fund could fix. Despite having just completed a super high-speed fiber-optic corridor that links all areas of the state, tens of thousands of citizens and businesses are still part of the "last mile" problem — the lack of a link between the new main line and their homes and businesses, wrote King, an independent candidate for the U.S. Senate, in the state’s Portland Press Herald. “It’s like an interstate that goes all around the state,” he says, “but it’s like an interstate without feeder roads.”

But the problem is actually bigger than that, says Stephanie Dunn, a technology consultant on King’s campaign. “It’s not even necessarily a rural issue; we’ve gotten comments from people in Augusta saying, ‘I don’t have high-speed Internet here.’” People in certain parts of Maine, Dunn says, still solely use libraries and Internet cafes for high-speed connectivity.

How could CAF be better used? King says by looking toward more fiber-to-the-home (FTTH) /fiber-to-the-premises (FTTP) versus focusing on DSL. “I’m afraid DSL just isn’t going to be the answer in the long run,” he says, because in FTTH, once the wire is out to the houses, there’s unlimited capacity. “It’s more expensive in the short run, but in the long run, it’s more capacity and more reliable, and that’s really where we need to be focusing,” King says. “I think we need to be careful in the expenditure of these funds that we’re not buying old technology.”

And the FCC is seeking feedback as far as the technology that should be used. "The question includes the important threshold matters of whether the model should presume green-field or brown-field deployment and whether the model should estimate costs of FTTP or DSL (including fiber-to-the-node) technology," the commission wrote in a public notice.

This Thursday, King’s campaign is holding a live, streaming Tech Town Hall, during which he’ll discuss the Connect America Fund as it pertains not only to Maine residents, but rural residents nationwide.

About 1,500 miles to the west in Minnesota, small phone companies that have aggressively built out fiber-optic networks and expanded their high-speed Internet access worry that the shift from USF to CAF may force them to slow these expansions, according to Minnesota Public Radio. And other small towns — like Bristol, Va.; Kutztown, Pa.; and Powell, Wyo. — all have community fiber networks that are ineligible for CAF support.

Another problem with CAF’s requirements is the definition of “high-speed.” For telcos to get funding, they must provide a certain level of broadband performance — in addition to providing voice service, Lennett says, they must provide broadband speeds of 4 megabits-per-second (mbps) download speed and 1 mbps upload speed. “Whether that’s necessarily sufficient going forward for many rural communities is really an open question,” he says, adding that the standard in most urban areas is 15 to 20 mbps on cable networks. “You know the amount of bandwidth and capacity that applications keep chewing up is increasing, and we’re talking about 4 down and 1 up in rural areas as our floor? I’m not sure that’s comparable service.” 

One of the keys with USF was not only offering service at reasonably comparable prices, he says, but also offering comparable levels of service. “With this setup, we’re going to create really disparate levels of service in many rural areas compared to what you’d see in an urban area,” Lennett says.

After the July 24 deadline — in areas where incumbents decline to make this commitment — local exchange carriers, including cable, wireless and satellite companies, will have opportunities to compete for CAF funding, the FCC says, as part of a “reverse auction.” 

In South Dakota, Nelson says these may not bridge the divide either. “We’re getting some indications that the companies simply may not be interested in doing that,” he says. “Our hope, and really I think the whole goal of the Connect America Fund, was to provide these financial incentives to allow companies to bid into serving these unserved areas. But at this point, at least one company flat out told us, ‘We’re not going to do it,’ which bothers us. I hope that’s not a trend.”

Former deputy associate director of the Office of Management and Budget
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