Unexpected U-turn as FCC lets New York manage broadband subsidy money

The new federalism.

Who would have thought that the Federal Communications Commission’s first significant decision of the Trump era would be to take money originally designated for its no-incumbent-left-behind broadband subsidy program – Connect America Fund 2 (CAF-2) – and use it to top up reasonably competitive state grants, with the state calling the shots?

But that’s exactly what happened.

In 2015, Verizon turned down the CAF-2 money on offer in its wireline territory, except for the systems that it was selling to Frontier Communications, which did want it. The FCC is working on a competitive bidding process for the census blocks rejected by Verizon and others, but the State of New York asked for an exception to made, so the subsidies could go into the New NY Broadband Program instead.

On Friday, the FCC said yes.

The $170 million that would have gone to Verizon will go to winning applicants for New York’s broadband infrastructure subsidy program. The federal money will be given as a one to one match for state subsidies awarded in CAF-2 eligible census blocks, but only up to the maximum amount that the FCC originally designated for those blocks.

The FCC’s order says New York can get the job done faster than it can…

We find that New York is uniquely situated to quickly and efficiently further our goal of broadband deployment. New York has committed a significant amount of its own support—at least $200 million—to…its broadband program that is designed to be compatible with and achieve the goals of Connect America Phase II. Moreover, New York is poised to quickly implement the next phase of its program in a matter of months so that deployment of broadband of speeds that meet or exceed the Commission’s baseline requirements for Connect America can be achieved while the Commission is in the process of finalizing and implementing the Connect America Phase II auction.

Virtually all the CAF-2 money that the FCC offered in California was accepted (CenturyLink turned down $300,000 to serve 45 homes in Modoc County), so the New York decision can’t be cloned here. But the FCC has shown a new willingness to work with effective state broadband programs, rather than at cross purposes. These are interesting times.