Can “Slapping ‘New and Improved’ on CAF” Close the Digital Divide?

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Monday, April 22, 2019

Weekly Digest

Can “Slapping ‘New and Improved’ on CAF” Close the Digital Divide?

 You’re reading the Benton Foundation’s Weekly Digest, a recap of the biggest (or most overlooked) telecommunications stories of the week. The digest is delivered via e-mail each Friday (usually).

Round-Up for the Week of April 15-22, 2019

Robbie McBeath

On April 12, 2019, Federal Communications Commission Chairman Ajit Pai joined President Donald Trump at the White House for an announcement about action to “ensure that America wins the race to 5G.” In addition to promoting fifth generation wireless technology, Chairman Pai announced a new $20 billion Rural Digital Opportunity Fund at the FCC. That sounds like a huge step forward for expanding rural broadband -- so why was it tacked on to the 5G news? 5G is really a fiber network with antennas at the end. Because of this, we focus first on the part of the Administration’s announcement that could actually help fiber-based broadband reach rural America. Is Chairman Pai's proposal really a "new" opportunity to promote rural broadband or are we seeing 20 billion new lies from Pai? 

The Rural Digital Opportunity Fund

At the White House, flanked by cellular industry employees and ranchers in both tower climbing gear and cowboy hats, Chairman Pai outlined his new plan:

[T]o help build the infrastructure of the future, the FCC aims to create a new $20.4 billion Rural Digital Opportunity Fund at the FCC. This money will extend high-speed broadband to up to four million homes and small businesses in rural America. These next-generation networks will bring greater economic opportunity to America’s Heartland and will help support future 5G technologies.

An FCC fact sheet claims the $20.4 billion will be distributed in rural America over the next ten years. “It will provide funding through a reverse auction to service providers that will deploy infrastructure that will provide up to gigabit-speed broadband in parts of the country most in need of connectivity.” Chairman Pai claims, “The Rural Digital Opportunity Fund represents the FCC’s single biggest step yet to close the digital divide.”

President Trump and Chairman Pai at 5G event
President Trump (Left) and FCC Chairman Pai (Right)
at the White House

Details of the plan began to emerge in the days after the White House event. We learned that the funding would come from essentially extending and rebranding the FCC's Connect America Fund (CAF) program. 

The CAF program (also known as the Universal Service High-Cost Program) is part of the FCC’s Universal Service Fund -- a system of subsidies and fees intended to promote universal, affordable access to telecommunications services. All Universal Service Fund programs are paid for by Americans through fees on their phone bills.

CAF is the program aimed at connecting rural and remote areas that are expensive to reach. The Obama-era FCC created CAF to support broadband instead of just traditional voice phone service. CAF II currently makes around $2 billion in insubsidies available for telecommunications providers each year. CAF II is scheduled to end in 2020. 

The crux of Chairman Pai’s announcement is that he is proposing to extend CAF’s current $2 billion per year for another ten years. 

FCC spokesman Mark Wigfield said the Rural Digital Opportunity Fund would establish a minimum speed threshold of 25 megabits per second (Mbps) for downloads and 3 Mbps for uploads (25/3), as opposed to the current 10/1 Mbps. Wigfield also said the new program would be “technology neutral” and “open to all qualified providers,” but specifics about eligiblity will depend on an FCC rulemaking not yet launched.

The fund will distribute the money in a reverse auction, a type of competitive bidding process. If the resulting broadband deployment is similar to the previous program, it would end up providing wired broadband in some areas and fixed wireless in others.


Major news outlets generally carried the message from Chairman Pai and the White House unchallenged: The U.S. is winning, and will win, the race to 5G. And rural America will be helped by a $20 billion injection of funds for broadband. 

Many were pleased, like House Communications Subcommittee Ranking Member Bob Latta (R-OH) 

These announcements show how we are all working together to bring high-speed broadband to rural America and maintain U.S. leadership in 5G connectivity. I hope that continued efforts in Congress will complement this important work and that the majority will not impose utility-style regulations on 5G and the innovative technologies that it will support.

But others questioned the announcement. At a press conference following the FCC meeting on April 12, FCC Commissioner Jessica Rosenworcel said she is skeptical the fund will make much of a difference, given that the money is likely coming from an existing fund that is already doling out subsidies to rural broadband carriers.

"It looks to me like they are dressing up an old program in new Trump-era clothes and suggesting that somehow the problem will be solved," she said.

Deb Socia, executive director of Next Century Cities, characterized the proposal as “more of a rebranding than a new project,” although she was careful to note that details about it are still unclear. “I don't think it's significantly different,” she said. But the proposal was still welcomed. “We're always happy when more money can go into rural communities,” Socia added. “And we're really pleased to see them upping the speed.”

Harold Feld, senior vice president at Public Knowledge, said, “This is really just like slapping ‘new and improved!’ on the same package.” 

Feld also said repurposing USF funds as proposed could prove legally problematic because the FCC decided in the 2017 net neutrality repeal to re-reclassify broadband as a Title I information service rather than a Title II telecommunications service. “It is hard to see how you can do this given that broadband is a Title I information service and USF is restricted to Title II telecommunications.”

“Because Chairman Pai eliminated all sources of FCC authority over broadband in the ‘Restoring Internet Freedom Order’ in 2017, it is difficult to see how the Administration can do anything but modify the existing Obama-era programs,” he said

He added, “Chairman Pai and the Trump Administration have an unfortunate history of promising big things for rural broadband with great fanfare, but have either failed to deliver, or simply taken credit for programs developed by the Obama Administration. Hopefully, this will not be the case again.”

Others questioned the claim by Chairman Pai that the rural fund will help with 5G deployment.  “This really has nothing to do with 5G, which is designed to offer gigabit speeds,” telecom policy expert Blair Levin wrote. The minimum speed for service backed by the new fund will be 25 megabits per second, “which means that networks that offer speeds 40 times less than 5G does will be eligible for the funding.”

Next Steps

Presumably, the FCC will be issuing a Notice of Proposed Rulemaking (NPRM) which will provide details for the plan, like rule changes and clarification of underlying legal authority. For now, we must rely on word from President Trump and Chairman Pai. While $20 billion directed toward expanding rural broadband is certainly a positive step forward for reducing the digital divide, it remains to be seen exactly how this will come about. 

You can be sure we will be following along daily with all of the developments around this proposal. You can stay up to date by subscribing to Headlines

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Kevin Taglang
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By Robbie McBeath.