Special Report—From AT&T to Cincinnati Bell: Which carriers received the most rural broadband funding in 2017?

The second phase of the FCC’s Connect America Fund (CAF-II) is in full swing and service providers are taking their funding allocations to extend services too hard to reach rural areas of their service territories.

In 2013, the FCC created the Connect America Fund as part of a realignment of the regulator’s Universal Service Fund and Intercarrier Compensation systems to accelerate broadband buildout to the approximately 23 million users in the United States. Building on the success of the CAF program, the FCC will hold its $2 billion Connect America Fund Phase II auction this July with the aim of expanding wireline and wireless broadband in unserved rural areas of the country.

We thought it would be a good time to see the progress these service providers have made with their CAF-II funding allocations.

In this report we consider two main factors:

Funding amount: How much did each of these service providers accept in federal funding? Each service provider accepted a specific amount of funding based on the way the FCC structured how they could spend service in each state.

States served: The second factor was how many states are each service provider going to address with the CAF-II funding. Since each provider has varying territories, the amount of states they serve vary to their footprint size.

We’re ranking each one of these deals with the accompanying summary and chart below by the amount of funding each provider is receiving and the amount of states they will address.

We also highlight the fact that some of these service providers, like Frontier and Consolidated, purchased a few providers, which alters the amount of total funding these providers are receiving.

So, which U.S.-based providers got the most amount of federal rural broadband funding in 2017?

1. AT&T leverages wireless, wireline mix: Coming in at number one is AT&T. AT&T joined fellow Tier-1 telco CenturyLink, Consolidated Communications and others in accepting $427 million annually in CAF-II program funding, allowing it reach 2.2 million rural locations in 18 of the 21 states in its operating territory with broadband services. In making its decision to accept the funding in 2015, AT&T said it "carefully analyzed a number of factors including the regulatory obligations associated with accepting the funds and whether the funding makes deployment economically feasible (including by using our advanced fixed wireless technology)."

Besides expanding wireline broadband access, the service provider continued to expand fixed wireless across multiple rural territories. Since initially launching the broadband wireless service for rural customers in Georgia in April 2017, AT&T has made the service available across 160,000 locations in 18 states.

2. CenturyLink surpasses 10/1 Mbps limits, eyes broadband wireless: CenturyLink (NYSE: CTL) is accepting $500 million in CAF-II funding, enabling it deliver broadband services to about 1.2 million rural households and businesses in 33 states over the next six years. The service provider accepted 33 CAF-II statewide offers to deliver Internet speeds of at least 10/1 Mbps to locations in FCC-designated, high-cost census blocks.

CenturyLink has inched closer to meeting its FCC CAF-II program commitments, reaching over 600,000 rural homes and businesses with 10/1 Mbps broadband over the past two years. Interestingly, CenturyLink revealed that about 70% of the homes in the target areas have speeds of 20 Mbps or higher. The service provider is on track to have enabled 60% of its CAF commitments by the end of 2018. At the same time, the service provider is eyeing the use of 3.5 GHz spectrum to extend services in areas it can’t make a business case for wireline service.

3. Frontier strengthens rural roots: In 2015, 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 that it could not economically reach before. Already, Frontier is making progress, reporting that it now provides broadband to more than 331,000 and small businesses in its CAF-eligible areas—and the company has improved speeds to nearly 875,000 additional homes and businesses. 

The service provider also was the recipient of CAF-II funding set aside by Verizon when it purchased the telco’s assets in California, Texas and Florida. In California, the service provider is using $32 million in CAF-II funding annually over the next six years for broadband deployment in Verizon high-cost service areas. During this six-year period, Frontier forecasts that CAF-II funding could enable it to bring 10/1 Mbps broadband service to nearly 77,000 rural locations within this territory. Likewise, in Texas, Frontier accepted $16.5 million in CAF-II funding. This would allow the telco to bring broadband services to nearly 37,000 locations in high-cost areas.

4. Windstream enhances speed profiles: Windstream accepted $175 million of CAF-II funding, 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.

5. Verizon does an about face in New York: As the lone holdout in the CAF-II race, Verizon recently broke free and is making a $106.6 million investment leveraging in state and federal funds to bring broadband to unserved parts of rural New York. Most of the funding—$70.7 million—will come from the new NY Broadband Program, with an additional $36 million coming from a mix of its own investment and CAF-II funds toward the project. Through this investment Verizon will bring service to more than 15,500 rural locations. This certainly is a change of heart for Verizon as the telco initially turned down $144 million total per year for six years in CAF-II funding to expand broadband in the rural areas it serves.

However, the service provider has not revealed what medium it would use to address rural customers in New York State other than to say it would work with its main fiber supplier Corning and other vendors. In April, Verizon announced a three-year minimum purchase agreement with Corning where Verizon will purchase up to 20 million kilometers (12.4 million miles) of optical fiber each year from 2018 through 2020, with a minimum purchase commitment of $1.05 billion.

6. Consolidated boosts rural presence with FairPoint buy: Consolidated accepted $14 million in annual CAF-II support to deploy broadband to approximately 24,700 rural locations across seven states. In the locations it accepted funds, Consolidated said it will construct and operate a network to offer broadband service speeds of at least 10/1 Mbps. But by acquiring FairPoint, Consolidated gained another $37.4 million in CAF-II funding. FairPoint, which accepted these funds in 2015, can bring broadband services to nearly 105,000 rural locations in 14 states.

7. TDS Telecom takes on A-CAM: TDS Telecom has elected to accept about $75.1 million a year for the next 10 years from the FCC’s Alternative Connect America Cost Model (A-CAM) to expand rural broadband availability. The telco, which participated in the Broadband Stimulus program developed by former FCC Chairman Julius Genachowski, will use the funds to expand and improve broadband services to nearly 160,000 homes in 25 states over that time frame. Depending on location and the availability of facilities, TDS said most rural area customers eligible for CAF funding will receive guaranteed broadband speeds of 25/3 Mbps. Under the agreement, most of the remaining customers will receive speeds of 10/1 Mbps.

8.Hawaiian Telcom extends rural focus: Hawaiian Telcom, which is now being acquired by Cincinnati Bell, agreed to take $26 million in the CAF-II funding to extend 10/1 Mbps capable broadband service to over 11,000 unserved rural locations. Focusing on neighbor islands in Hawaii, the telco is now working on a deployment timeline for the six-year period, beginning in 2015 through 2020. It is possible that when its new parent Cincinnati Bell takes over the company, the service provider could dedicate more attention to Hawaiian Telcom’s rural efforts.Cincinnati Bell has agreed to invest $20 million to improve and build out Hawaiian Telcom’s next-gen fiber network statewide within four years of the close of the merger, to gain Hawaii’s Department of Commerce and Consumer Affairs’ Cable Television Division conditional approval of the deal.

9. Cincinnati Bell shores up Kentucky, Ohio rural markets: Cincinnati Bell may have taken a smaller amount than its peers, but the service provider’s acceptance of $2.2 million in annual CAF-II support shows it cares about the rural markets it serves. The service provider accepted over $2.2 million in CAF-II funding to support 14,000 rural consumers in Kentucky and Ohio. The Connect America Fund support will enable Cincinnati Bell to deliver broadband at speeds of at least 10 Mbps for downloads and 1 Mbps uploads to over 7,000 homes and businesses in its rural service areas where the cost of broadband deployment might otherwise be prohibitive.

The following chart lays out the top nine service providers that accepted federal funding and how many locations they will serve. 

*additional funds from Verizon CTF purchase
**includes funds from NY State Broadband Fund, CAF-II, and its own investment
***leveraging the FCC’s A-CAM program
****gained $37.4 in funding from FairPoint acquisition