New YorkThe state of New York, rather than the FCC, will award up to $170 million in broadband Connect America funding to network operators to help cover the cost of bringing broadband to areas of the state where broadband is not available today. The funding, originally rejected by Verizon, had been earmarked for a nationwide reverse auction conducted by the FCC.

But in a New York Connect America funding order adopted yesterday, the FCC complied with a request from New York to combine the funding with an additional $200 million that the state had made available for broadband in areas rejected by Verizon.

In making the move, the commission is taking “common sense fiscally responsible steps to coordinate funding between the federal Universal Service Fund and the state’s New NY Broadband Program, which aims to ensure that all New Yorkers have access to high-speed internet,” said the FCC’s new chairman Ajit Pai in a statement.

The New NY Broadband Program has a total budget of $500 million, but some of that already has been awarded for parts of the state that are not in Verizon’s local service territory.

New York Connect America Decision
Although New York is the only state that made a formal petition to the FCC, some other states have filed comments with the commission suggesting that they also would like to access funding rejected by Verizon and other price cap carriers.  A reading of the order adopted yesterday suggests the FCC is unlikely to make CAF funding available to many, if any, other states.

“We find that New York is uniquely situated to quickly and efficiently further our goal of broadband deployment,” the FCC wrote in the order.

A key consideration was that New York had set deadlines for broadband deployments to be completed – and if the CAF funding were to instead be awarded through the planned federal reverse auction, deployment timeframes would be considerably later.

The New York Connect America funding decision comes with substantial strings attached, however. Among others, conditions include:

  • In conducting a competitive bidding process to award funding, no location will be able to receive funding that exceeds the FCC-established CAF reserve price.
  • The amount of funding awarded to any location from the Connect America Fund must not exceed the amount of funding contributed by the state of New York.
  • Network operators also must contribute fund toward their projects (a condition previously established by the state of New York).
  • Although New York planned to favor fiber and hybrid fiber coax networks, the FCC required funding to be awarded on a technologically neutral basis. New York had more ambitious broadband speed goals than the CAF program had set. But network operators will still need to comply with CAF auction performance parameters, such as minimum data allotments and specific latency requirements.
  • Network operators receiving funding will have to meet CAF deployment obligations.
  • Those network operators also will have to obtain letters of credit meeting specific requirements set by the FCC.

Any census blocks that do not receive winning bids will be eligible for the nationwide remote areas fund auction if they would otherwise be eligible for that auction at the time the FCC finalizes eligible census blocks.

As expected, Verizon will have the opportunity to participate in the bidding process that the state of New York will be conducting in order to award funding. Because of the dual funding sources, the carrier has the potential to gain a higher subsidy than it would have received had it accepted the funding originally offered by the FCC.