verizon+at&t rural broadbandWe were the first to report yesterday that both AT&T and Verizon have declined funds from phase I of the Connect America Fund. Phase I is an initial $300 million ‘shot in the arm’ to bring broadband to unserved households in rural markets. Several carriers are moving forward with phase I, including Frontier, CenturyLink, and FairPoint. We now move on to phase II, which is a more complicated attempt to target unserved and underserved markets with some sort of broadband strategy. I’ll save you the gory details regarding implementation of phase II.

It’s also interesting to note that both Verizon and AT&T are hemorrhaging DSL customers in their rural markets, with AT&T losing several hundred thousand DSL subscribers in 2Q 2012 alone. Verizon had similar results, albeit not as dramatic as AT&T’s. Some analysts suggest these continuing DSL losses illustrate that Verizon and AT&T have no interest in serving wireline broadband customers who reside outside of their FiOS or U-verse markets. By turning down millions in potential CAF funding, this lack of interest is highlighted even more, these cynics argue.

So if both AT&T and Verizon have no interest in these markets, is there an opportunity for other service providers who do? These markets represent potentially millions of underserved and unserved broadband customers, presenting a growth opportunity for carriers who do have an interest in serving them. Some independent service providers are already there, including the hundreds, maybe thousands, of wireless Internet service providers (WISPs). But as it relates to CAF funding, pure play WISPs are on the outside looking in, since for the most part, they aren’t qualified eligible telecommunications carriers (ETCs).

More traditional rural telco carriers do have ETC status and could potentially qualify for forthcoming iterations of CAF funding for any unserved AT&T or Verizon customers that those carriers choose not to serve. These rural carriers are on a hunt for new revenue, as traditional voice revenues continue their decline. Will AT&T and Verizon’s perceived quest to exit these markets provide growth opportunities for the rural telco and WISP communities?

There are many details to consider, not the least of which is the complicated CAF process, which may include reverse auctions for some of these territories. But in a world where incremental revenue rules, all options need to be explored.

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