Connect America Fund Threatens Rural States’ Telephone Subsidies

Aberdeen, South Dakota
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Jonathan Charnitski, Reporter,

WASHINGTON, November 29, 2010 – As the next phases of the National Broadband Plan draw near, states with significant rural area have expressed concern that they may lose funds vital to affordable telephone service.

The plan’s Chapter 8 outlines recommendations to provide affordable broadband internet access to all Americans. Part of that chapter recommends the creation of the Connect America Fund. The CAF would fund deployment of broadband to unserved and underserved populations, much as the Universal Service Fund provided the economic means to provide telephone service to all Americans.

While the USF provided the means to connect Americans to the telephone grid, it continues today to fund a handful of goals – among them, ensuring that telephone service in high-cost rural areas remains affordable. It is from the high-cost programs that the FCC has proposed diverting funds to the CAF, with the eventual goal of converting all high-cost USF programs to CAF programs.

Though the goal of the CAF is to connect all Americans to high-speed internet – which is capable of supporting high-quality telephonic service as well – states have expressed concerns about the way those funds will be managed. The most efficient use of funds would connect areas with the highest density of people first, which states say will leave rural areas wanting for both broadband access and affordable conventional telephone service in the near term.

“They want to see more dollars shifted toward those area where there is more bang for the buck,” says Otto Doll, chief information officer of South Dakota. That prioritization, he says, would draw funds away from providing affordable telephone service to many South Dakotans, while putting them toward the back of the line for broadband. Doll is quick to point out, however, that the details of the CAF rollout have not been solidified and at least for the time being, South Dakota’s concerns remain just that.

Jim Kohler, the deputy director of Enterprise Technology Services in the Alaska Department of Administration, has echoed Doll’s concerns. In Alaska, however, the hurdles to deployment are not only the expanse of land to be covered, but also the harshness of the terrain and climate.

“The cost of deploying broadband in Alaska to the extent sought by the National Broadband Plan keeps Alaska from receiving funds on a competitive basis,” says Kohler, referring to the distribution methodology as the “Lower 48 Model.”

For now, Kohler says that until more details are fleshed out, the concerns are just that. “The FCC has articulated it as a plan, but there aren’t the details of a plan,” says Kohler. “It’s more of a strategy.”

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About Mark Milliman

Mark Milliman is a Principal Consultant at Inphotonics Research driving the adoption and assisting local governments to plan, build, operate, and lease access open-access municipal broadband networks. Additionally, he works with entrepreneurs and venture capitalists to increase the value of their intellectual capital through the creation of strategic product plans and execution of innovative marketing strategies. With more than 22 years of experience in the telecommunications industry that began at AT&T Bell Laboratories, Mark has built fiber, cable, and wireless networks around the world to deliver voice, video, and data services. His thorough knowledge of all aspects of service delivery from content creation to the design, operation, and management of the network is utilized by carriers and equipment manufacturers. Mark conceived and developed one of the industry's first multi-service provisioning platform and is multiple patent holder. He is active in the IEEE as a senior member. Mark received his B.S. in Electrical Engineering from Iowa State University and M.S. in Electrical Engineering from Carnegie Mellon University.
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