Broadband Cable Association of Pennsylvania

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July 26, 2012

The Federal Communications Commission said Wednesday it'll spend $115 million to subsidize broadband Internet providers in an effort to encourage extension of their services to rural parts of the U.S. The companies that accepted the subsidies from the first phase of the "Connect America Fund" - $775 per household connected - also will be required to independently invest in the network infrastructure that will bring high-speed Internet to about 7 million customers in the next six years.

The infrastructure work must be completed within three years. About 400,000 residents in 37 states will gain access upon completion, the FCC estimates. "This is a big deal for rural America," says FCC Chairman Julius Genachowski, in an interview, adding that the FCC's goal is to ultimately connect by 2020 all 19 million Americans in rural areas that lack access to broadband Internet. "Your chances of getting a job is lower if you don't have broadband. Job postings have moved online." To be eligible for the subsidy, which is funded by "Universal Connectivity" fees charged to phone customers, Internet providers agree to follow oversight procedures, including reports on how the money was spent.

The program's critics question its scope and reach, but the FCC says subsidies are needed to nudge Internet providers to serve rural areas that lack customers. "In rural areas, where there's low population density, the economics just don't work," Genachowski says. The FCC didn't disclose how much broadband providers will invest, but says in a statement that it could be in "tens of millions of dollars." "They have skin in the game," Genachowski says.

Frontier Communications, a telecommunications company based in Stamford, Conn., will receive the largest amount from the fund after agreeing to extend broadband service to about 200,000 customers in 16 states. CenturyLink, based in Monroe, La., will expand service in 22 states, the FCC says. The FCC launched the Connect America Fund last year when it made changes to the Universal Service Fund, which was established to deliver telephone connections to rural towns. A program in the Universal Service Fund - the High Cost program - called for funding telephone companies to ensure that consumers in all regions have access telecommunication services that are comparable to those in urban areas. The industry has lobbied for years to broaden it to include broadband Internet.

Last year, the FCC agreed to transfer the money from the High Cost program to the Connect America Fund, which will have a budget of $4.5 billion a year. "This is a bit of an experiment. We don't know how it'll play out and whether it'll pay off. But it's a good thing to try to make some effort to reach the unserved," says Michael Romano, senior vice president of policy for the National Telecommunications Cooperative Association, which represents small telecommunications companies that weren't eligible for the Connect America Fund.

While the recipient companies accepted $115 million, the FCC initially offered $300 million. That some Internet providers refused the subsidy, Romano says, indicates the $775-per-household limit may be too small. "It's probably too low for a lot of areas," he says. While small towns may benefit from the program, customers in rural countryside may be too remote for continual service from Internet providers, he says, calling for the fund to be open to companies of all sizes. USA Today


A leading cable television association has slammed a Federal Communications Commission ruling this week that industry giant Comcast Corp. had discriminated against the small independent Tennis Channel. The National Cable & Telecommunications Assn., and a second, nonprofit organization, described the FCC decision as an example of unnecessary government intrusion.

"Yesterday's regrettable decision takes us down a dangerous and unnecessary regulatory path," the NCTA said in a statement. "For the first time, the full Commission has intervened to rewrite a private, arms-length contract and dictate the terms and conditions of carriage for a particular programming network." The Free State Foundation, which describes itself as a nonprofit, free market-oriented think tank, alleged in a separate statement that the FCC "continues to engage in regulatory overreach."

In a 3-2 vote along party lines, the FCC on Tuesday ordered Comcast to provide the Santa Monica based Tennis Channel with the same level of distribution as Comcast does for its two sports networks the Golf Channel and NBC Sports Network. The ruling effectively requires the Philadelphia-based cable giant to add the Tennis Channel to about 18 million homes that receive Comcast cable service, and pay the sports channel millions of dollars more a year for its programming. Currently, the Tennis Channel is available in 34 million homes nationwide, including fewer than 3 million homes with Comcast service.

The decision marked the first time that a major cable operator has been found in violation of federal anti-discrimination program carriage rules that were established in 1993. FCC Chairman Julius Genachowski and the other two Democrats on the panel - Mignon Clyburn and Jessica Rosenworcel - voted to uphold the decision of an administrative judge, who determined that Comcast had discriminated. Two Republican commissioners, Robert M. McDowell and Ajit Pai, dissented. Tennis Channel chairman and chief executive Ken Solomon is a co-chairman of a fundraising committee for President Obama.

The NCTA chafed at the FCC decision, noting that the Tennis Channel entered into an agreement several years ago that allowed Comcast to place the Tennis Channel on a more exclusive sports tier, which limited the channel's reach. "The government has now abrogated that contract, midterm, by finding that Comcast 'discriminated' against the Tennis Channel by not carrying it on a more widely purchased tier that carries two Comcast-affiliated channels that also happen to carry sports programming," the NCTA said. "In today's highly competitive marketplace, it is difficult to see how the government can justify this content-based trampling on the right of free speech and the freedom of contract." Los Angeles Times

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