July 2016

Although Verizon to date has declined to accept funding through the Connect America Fund (CAF) program to bring broadband to unserved parts of its local service territory, the company may be having a change of heart. Comments filed by Verizon with the Federal Communications Commission suggest the carrier may be interested in bidding in the CAF reverse auction, which will award funding for areas where an incumbent price cap carrier declined funding. Although the FCC is hoping to fund some CAF deployments at gigabit speeds, Verizon cites some sobering data suggesting that should be a relatively limited option. Verizon notes that as many as 750,000 locations could be eligible for the CAF reverse auction. Of those, about 450,000 are in high-cost areas of price cap territories where the incumbent declined funding. The other 300,000 are “extremely high cost” locations scattered across all price cap territories.

According to Verizon, the FCC cost model shows that subsidies of well over $600 million per year would be required to bring broadband to all 750,000 locations, but the budget for the CAF reverse auction is only $215 million annually. With this in mind, Verizon CAF auction ideas include prioritizing bids for baseline service above those for above-baseline and gigabit service in order to “maximize the number of homes and businesses that obtain at least the baseline level of broadband from the auction.” In some cases, high-latency options such as satellite broadband may be less costly to deliver than lower-latency terrestrial wired or wireless options. But Verizon stops short of asking the FCC to stretch funding by prioritizing high-latency services. Instead, the carrier argues that all terrestrial options should be prioritized over high-latency options. “End users in competitive bidding-supported areas should not be relegated to lesser services,” Verizon argues.