Connect America Fund Could Boost Five Carriers’ Annual Revenues by $717 Million by 2020

Phase II of the Connect America Fund, targeted to get underway soon, offers substantial “financial upside” for five of the nation’s largest price cap carriers, according to telecommunications financial analysts at Bernstein Research. In a research note, Bernstein analysts estimated that the five carriers -- AT&T, Verizon, CenturyLink, Frontier and Windstream -- could see revenues climb by more than $700 million annually ($717 million) by 2020 without major increases to their capex as a result of the CAF program.

Bernstein analysts expect CAF II to begin in a few weeks and to offer a total of about $1.7 billion annually through 2020 to the five carriers to bring broadband to areas of their local service territories where broadband isn’t available today or is available only at low speeds. Although carriers will no longer receive traditional Universal Service funding, they will collect more money than they did previously -- in most areas at least, the analysts said. The analysts’ revenue estimates assume carriers’ average monthly revenue per user is $50, the build-out takes five years and the carriers achieve 70 percent take rates over four years. The 70 percent take rate might seem high compared to what the carriers see in large metro areas but considering that each carrier will be the only broadband provider in an eligible territory, and considering that the nationwide broadband take rate is about 70 percent, that could be a reasonable number.