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December 07, 2015

Connect America Fund May Bring Millions to Major Telecoms

While the Connect America Fund may be controversial, it's certainly making some advances that are hard to pass up. Recent analysis from Telecompetitor brought new insight into the Connect America Fund: it should provide over $400 million in new revenues for telecommunications firms, thanks to the new construction the fund has enabled.

The Connect America Fund was designed to give telecom firms necessary resources to build out broadband networks, working toward the goal of connecting the United States with the minimum speeds for broadband: 10 Mbps download and 1 Mbps upload. Such an undertaking is expensive, and the time to profitability is prohibitively long. With better broadband connectivity being part of the national interest, though, the fund was established to ease the financial risk associated with construction.

The biggest winners are likely to be AT&T and CenturyLink, both of which could see annual revenue hikes between $134 million and $140 million, respectively. Those numbers rely on speculative assumptions, particularly that 50 percent of users in an area affected by the fund would take broadband service if offered. With the fund giving around $1.5 billion annually to seven of the largest carriers in exchange for clear construction commitments, many of the companies seem to be relying exclusively on the fund for new construction.

Further uses of the fund are set to follow, with a reverse auction set for those areas where some carriers declined funding, and a new set of parameters for those smaller carriers that mostly offer service in rural areas. While the exact impact of the fund is somewhat in doubt—CenturyLink cited the original figure of $20 a month per user, while Frontier and Windstream were slightly off—it's clear that it means a lot of construction and a lot of new paying customers.

Some might balk at the idea of handing over taxpayer money to private corporations to augment current systems and get in more paying customers, thinking of it as the government “picking winners and losers.” It's worth noting, though, that better broadband access is indeed in the national interest; more users online mean more online consumers, more online producers, and more people making money, which in turn can be taxed. This isn't a case of deciding who gets slices of a pie, this is about providing the ingredients to make more pies, which can be sliced up accordingly.

The idea of taxpayer money going directly to fund business revenue isn't welcome, but providing incentives to build out and get more people online is hard to pass up. We need better broadband access, no matter where we live, and the benefits are too varied and numerous to not be worth some investment.

Edited by Kyle Piscioniere

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