AT&T, Verizon Reject FCC Funds To Close Digital Divide

To help close the digital divide, the Federal Communications Commission is offering phone companies millions of dollars to expand high-speed Internet service to rural Americans.

But the nation’s two largest phone companies -- AT&T and Verizon -- have told the FCC to keep the money.

Last week, AT&T and Verizon rejected subsidies from the “Connect America Fund," which pays for high-speed Internet deployment in rural areas. Currently, an estimated 19 million Americans have no access to broadband, an increasingly vital tool for job, health care and educational opportunities.

The FCC has set a goal of ensuring every American has high-speed Internet service by the end of the decade. To hit that target, the commission offered $300 million to phone companies to extend broadband to rural customers who currently don't have service. AT&T was offered $47.8 million. Verizon was offered $19.7 million.

Verizon spokesman Ed McFadden said the company declined the money “in order to focus resources and capital on our own wireline and wireless broadband deployment plans." AT&T said it turned down the funding because it had not decided on its strategy for bringing Internet to rural areas.

But one expert said AT&T and Verizon likely declined the funds for another reason: They did not think it was enough. Phone companies have avoided delivering broadband to rural areas because their profit margins are higher in cities. It would likely take a much larger government subsidy to change their minds, said Benjamin Lennett, a policy director at the New America Foundation, a nonprofit, nonpartisan public policy institute.

"It underscores how flawed it is to rely on private companies to serve these rural areas where their margins are not going to be that high," Lennett said.

AT&T and Verizon have shown declining interest in serving rural communities with wired Internet service.

Verizon has sold off much of its rural territory and said it has completed expansion of its high-speed wired Internet service, known as FiOS, leaving millions of rural customers with slower DSL service.

AT&T CEO Randall Stephenson said earlier this year the company's build-out of U-Verse, its high-speed service, “is now largely complete," and about 40 percent of its customers still receive slower Internet service, according to the industry blog

Instead of wiring rural communities, AT&T and Verizon have focused on delivering wireless service, which costs less to deploy and maintain, but is often slower and caps how many videos consumers can watch online.

Other companies have accepted the money. About $115 million in subsidies -- or less than half of what was offered -- will go to companies who will bring Internet service to nearly 400,000 people in 37 states, according to the FCC.

The money "is just the beginning of our efforts to unleash the benefits of broadband for millions of homes and small businesses in unserved rural communities across the U.S.," FCC Chairman Julius Genachoswki said in a statement.

Map: Here is the FCC's interactive map illustrating what areas will receive broadband through the Connect America Fund:

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