Diversity & Inclusion
Digital access / Economics / Internet

Pennsylvania’s struggling rural broadband is about to lose out on $140 million

The state's Public Utility Commission is making a last-ditch effort to capture federal funding that Verizon turned down.

Fiber. (Photo by Flickr user J.C. Burns, used under a Creative Commons license)

This story is part of Grow PA, a reported series on economic development across 10 Pennsylvania counties supported by the Chamber of Commerce for Greater Philadelphia. Sign up for our weekly curated email here.

The Pennsylvania Public Utility Commission (PUC) is trying to drum up last-minute public support for its petition asking the Federal Communications Commission to reconsider auctioning off $140 million in federal funds that the PUC says is earmarked for rural broadband in Pennsylvania.

With some 800,000 Pennsylvania residents lacking access to high-speed internet — 20 percent of those people in rural areas — the Keystone State might seem like an obvious choice for Connect America Fund money. The fund comes from the federal universal service fee that businesses and residents pay on their telephone bills, and subsidizes telecommunications companies’ new infrastructure and upgrade projects in underserved, mainly rural, communities.

Most of the internet providers in Pennsylvania accepted the CAF money when it was offered two years ago.

But Verizon, one of the largest internet providers in the country, declined the funding in Pennsylvania and 10 other states. This meant $23 million in annual federal funding that would have helped expand high-speed internet to more than 60,000 Pennsylvanians was lost.

Why Verizon declined the funding is not entirely clear.

“Verizon invests billions of dollars each year in its networks and we have supported efforts to keep the federal money in Pennsylvania that we declined,” the company said in an emailed statement. “We committed to a certain amount of Fios network build and since 2010 have focused on completing that work before looking at building fiber in new areas.”

Making matters worse, the FCC plans to auction off the declined money. Pennsylvania can participate in the auction, but so can other states.

“The window of opportunity is rapidly closing,” said PUC spokesman Nils Hagen-Frederiksen. He said the FCC is already laying the groundwork for the auction, expected to be held sometime in early 2018. “What they’re trying to do with the auction process is get the best bang for the buck, because there aren’t enough funds to go around.”

But the PUC via its joint petition with the Department of Community and Economic Development, wants to give the state a second crack at the funding. The petition seeks weighted consideration for Pennsylvania at the auction, if it can bring additional money in the form of grants or other resources for broadband projects.

“If we can bring additional money to the table, whether it’s additional state resources, whether it’s local or regional funding, if entities across the state who are concerned about this issue can come to the table, then factor that into the auction. Give us credit,” Hagen-Frederiksen said. “The money was originally earmarked for Pennsylvania. Just give us a little extra weighting if we can bring some dollars to the table.”

Other states that have petitioned for their share of the funding Verizon declined have been rejected by the FCC. Still, there’s a glimmer of hope that Pennsylvania’s petition could be successful. New York, another state where Verizon declined the CAF funds, petitioned and won a waiver for its share of the funding, which amounts to about $170 million.

But there’s an important distinction, Hagen-Frederiksen said: “New York had a half a billion dollars they brought to the table.”

Unlike its neighbor, Pennsylvania does not have a dedicated funding stream for rural broadband projects. The FCC was persuaded by New York’s $500 million broadband program, which presented significant “public interest benefits” for future projects, and agreed to release the funding.

“Collectively, residents and businesses in nearly every county face the prospect of losing federal financial support for high-speed internet deployment,” said PUC Commissioner David Sweet. “There are many situations where some will be left behind, based simply on the identity of the local company that provides them with telephone service.”

Hagen-Frederiksen pointed to Huntingdon County in the center of the state as an example of how sharp the divide between the haves and have-nots might become. Huntingdon County’s internet providers include Windstream, Frontier, Century Link and Verizon. Some $8 million in broadband investment funds will go to the non-Verizon customers, he said.

“The digital divide is not just county by county but neighborhood by neighborhood,” Hagen-Frederiksen said. “It’s not just money disappearing from rural counties in Pennsylvania, but parts of counties in rural Pennsylvania. It creates a divide within a divide.”

U.S. Sen. Bob Casey wrote a letter to the FCC urging it to support the PUC’s petition to modify the auction rules and give Pennsylvania special consideration for the declined money.

“I feel it would be unfair and contrary to the universal service goals of the FCC for this funding, originally designated for high-need locations in Pennsylvania, to be sent elsewhere purely based on the decision of a single carrier,” Casey wrote.

Hagen-Frederiksen acknowledged the irony of asking people who may have slow internet to submit comments to the FCC online, but he said time is short if people want their voices heard. Residents can submit comments via the PUC’s website until the auction is held.

Hagen-Frederiksen added that the PUC plans to continue to seek other options for additional funding support, while also thinking about what the future of broadband in Pennsylvania would look like should the CAF funding go to another state.

“But right now for us, from the PUC perspective, our fight and our priority is on at least making sure that $140 million stays here,” he said. “If it slips away, we’re that much further behind.”

[googlemaps https://www.google.com/maps/d/u/0/embed?mid=1fAjLwwFCWeFH3RWL0dxRnqZF5y4&w=300&h=150]

Series: Grow PA

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