FCC LAUNCHES ‘CONNECT AMERICA FUND’: HUNDREDS OF THOUSANDS OF AMERICANS IN RURAL COMMUNITIES WILL HAVE ACCESS TO HIGH-SPEED INTERNET FOR THE FIRST TIME

FOR IMMEDIATE RELEASE: NEWS MEDIA CONTACT:
April 25, 2012 Mark Wigfield, 202-418-0253
Email: mark.wigfield@fcc.gov

$300 Million in Savings From Universal Service Fund Reforms Targeted to Quickly Deliver Broadband to Up to 400,000 Unserved Homes & Businesses; Creating Jobs, Expanding Economic Opportunity & Spurring Innovation

Washington, D.C. – The Federal Communications Commission today officially launched the new
‘Connect America Fund’ (CAF), which was recently created as part of once-in-a-generation reform of the Universal Service Fund (USF). Last October, the Commission unanimously voted to reform and
modernize USF to help connect every American to high-speed Internet by the end of the decade, just as
the Fund did for telephone service in the 20th century. These reforms cut waste and imposed strict fiscal
responsibility standards on the Fund, preventing it from growing beyond its current size. Now, up to $300 million in savings from these and prior reforms will be targeted to quickly extend high-speed Internet to up to 400,000 previously unserved homes, business and anchor institutions in rural America.

This is the first phase of funding from the CAF (CAF Phase 1). Carriers have 90 days to accept the
funding, as well as the aggressive buildout requirements that must begin in the coming months.  The
Commission expects that carriers will likely supplement the CAF funding with private investment.  While
carriers are not required to participate, hundreds of thousands of Americans will gain access to broadband even if carriers only accept a portion of the money.

In addition, the FCC today implemented additional reforms that will make more effective use of existing
funding to increase support for broadband for over 2 million rural lines across the country.  As with CAF
Phase 1 this funding was made available through reforms that improve fiscal responsibility and
accountability, and target funding more accurately and effectively.

These reforms improve fairness and incentives for efficient operations in a specific type of universal
service support called High Cost Loop Support, or HCLS.  In order to help make service affordable for
consumers, HCLS provides close to $800 million annually to help offset high capital and operating
expenses faced by many small rural providers.  However, HCLS lacked benchmarks for judging whether
subsidies were warranted, while fully subsidizing high expense levels and punishing efficient operations.
Today’s reforms impose reasonable limits on subsidized expenses by comparing spending among
similarly situated companies and setting benchmarks.

The net effect: more funding is freed for hundreds of small rural carriers, which in turn helps to connect
millions more Americans. Approximately 500 carriers serving over 2 million lines across the country will
get more funding for broadband.  About 100 carriers that have unusually high expenses will have to take
steps to bring their operations more in line with their peers.  Originally proposed last October, the benchmark methodology was improved with extensive input from carriers and impartial peer review.  Changes will be phased in over time, and a rigorous but fair waiver process will ensure that consumers do not lose service.

For more information and official documents, visit http://www.fcc.gov/encyclopedia/connecting-america.
Wireline Competition Bureau Staff Contact:  Joseph Cavender (CAF Phase 1) and Katie King
(HCLS) at 202-418-7400
-FCCNews about the Federal Communications Commission can also be found
on the Commission’s web site www.fcc.gov.

FCC