Universal Service broadband buildout likely favors wireless

[Commentary] The Broadband Availability Gap, a Federal Communications Commission study, looks at the cost of bringing 4 Mb/s service to the 7 million U.S. homes that currently do not have broadband available to them. What they found was that 90% of those homes could be served most cost-effectively using broadband wireless at 700 MHz. The remainder, primarily in mountainous areas, could be most cost-effectively served using DSL.

If the FCC moves ahead as it hopes to on Universal Service and if its cost study is accurate, it raises a lot of questions and issues for rural carriers:

1) 700 MHz spectrum holders. If broadband carriers are chosen based on who offers to deliver 4 Mb/s to unserved areas most economically and if the FCC's cost study is accurate, it suggests that rural carriers with 700 MHz spectrum are in the best position to be chosen.

2) Other rural carriers. All of this suggests that carriers that don't have 700 MHz spectrum would want to look closely at leasing some before they put in any bids on unserved areas.

3) Price cap carriers. The FCC has also noted that two-thirds of the 7 million homes that can't get broadband are in areas where the incumbent is not a rate-of-return carrier. Considering that the wireless units of price cap carriers AT&T and Verizon already have a lot of 700 MHz spectrum, they could also be well-positioned to receive Universal Service funding for the proposed broadband buildout.

4) Areas that already have broadband. The report suggests that some unserved rural areas will require some level of broadband Universal Service Fund support on an ongoing basis, so one would expect that some of the carriers that have already deployed broadband also might continue to be supported. But how will that determination be made? And will support somehow be scaled back if a carrier already offers service at rates above 4 Mb/s by using some sort of 4 Mb/s base case?