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Top US Telcos Succumb to Lure of FCC $$$

Two large US incumbents are breaking past behavior and accepting federal government money to build out broadband networks.

AT&T Inc. (NYSE: T) said Tuesday it will accept $100 million in Connect America Fund money from the Federal Communications Commission (FCC) to extend its U-Verse network. At the same time, CenturyLink Inc. (NYSE: CTL) indicated it is taking $54 million to extend its rural broadband footprint.

In 2012, CenturyLink took about one third of the CAF funds for which it was eligible. But AT&T and fellow incumbent Verizon Communications Inc. (NYSE: VZ) both turned down CAF money because of strict reporting requirements and limitations on how the funds could be spent, including a $774 per household ceiling.

Then in May 2013, the FCC loosened the rules a bit, agreeing not to subject CAF recipients to broadband measurement requirements it might adopt at a later date. The FCC also agreed to allow recipients to comply with federal rules by having pricing and usage allowances for rural areas that are "reasonably comparable" to those in more densely populated regions.

In addition, the FCC agreed to limit reporting requirements to the funded areas and end those obligations in three years after funding is received.

AT&T announced its decision to accept funds in a blog post in which it heaped praise on the FCC for the rules changes. It called the new CAF "a model of what universal service must be in the 21st century."

CenturyLink said it will combine the CAF money with its own funds to invest more than $18 million in delivering 4 Mbit/s Internet service to customers in 33 of the 37 states it serves.

— Carol Wilson, Editor-at-Large, Light Reading

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