Unserved and Underserved Areas Used Alternative Approaches and Considered Various Factors to Deploy Broadband

		Alternative Ownership and Financing Approaches

Project sponsors we spoke with pursued various approaches for financing  and deploying broadband in unserved and underserved areas that  differed from more traditional commercial project models, such as those  often built by incumbent providers in more urban areas. In particular,  types of project sponsors included (1) municipalities, (2) non-traditional  private providers, (3) a consortiums of sponsors in a region, and (4)  cooperatives. Non-Traditional Private Providers

Private networks are eligible to receive federal funding but not all private  networks discussed in this report received federal funding. Factors Considered

In making broadband deployment decisions, project sponsors told us they  considered various factors related to their ability to fund successful  projects, including the (1) likelihood of near-term service upgrades by  incumbent broadband service providers; (2) potential demand for new  service; (3) potential broadband technologies; and (4) existing  infrastructure and potential local assistance for providers. Stakeholders Cited Economic, Legal, and Policy Issues in Deploying Broadband in Unserved and Underserved Areas

		Economic

Stakeholders we contacted, including project sponsors, broadband  providers, and industry experts, told us that broadband deployment  projects in unserved and underserved areas face challenging economic  issues. As noted above, remote areas generally have high costs to deploy  broadband due to the expense of deploying technologies over long  distances and potentially difficult terrain to often relatively few potential  subscribers. Legal

Project sponsors and industry experts we contacted told us that some  states have laws that limit or ban companies that are not  telecommunications companies from deploying broadband, on the basis  that it creates unfair competition. For example, in Vidalia, Louisiana,  an official told us that state laws bar any municipality from deploying  broadband directly to consumers, so the city is planning to build and own  a new fiber-optic network, but will not offer retail service in order to  comply with the law and avoid competing with incumbent cable and  telephone companies. FCC Has Undertaken Various Efforts to Foster Broadband Deployment in Unserved Areas

As one of its primary goals, FCC has several efforts under way to  increase broadband deployment, efforts that help to address the  economic and policy issues raised by stakeholders. In particular, FCC  established the Connect America Fund in the November 2011 USF  Transformation Order to provide funds for voice and broadband capable  networks in areas where there is no private business case to provide  broadband—one of the key challenges to deploying broadband. 30, 2014 Technology Transition Order, FCC adopted an experiment in  which it intends to solicit proposals from non-traditional providers,  including utilities and municipalities, to deploy wireline or wireless  technologies in rural, high-cost areas.receive Connect America Funds for projects in high-cost areas and must  meet requirements similar to those of ETCs including providing service to  all those in a designated service area, reduced rates for voice service  plans for low-income populations, and the ability to operate during  emergency situations. In addition, FCC has stated that it will collect information  on viable business models that could support the deployment of fiber- optic or other next-generation wired technology in rural areas, despite the  challenges in doing so. FCC plans to also gather information on the  conditions under which consumers would prefer next-generation wireless  services instead of wireline services. Agency Comments

We provided a draft of this report to FCC for its review and comment. FCC provided technical comments, which we incorporated into the report  as appropriate. Appendix I: Objectives, Scope, and Methodology

This report provides information on (1) what is known about the  alternative approaches unserved and underserved areas have used, or  attempted to use, and some factors considered in broadband deployment  decisions; (2) stakeholders’ views on broadband deployment issues in  unserved and underserved areas; and (3) efforts FCC has undertaken to  foster broadband deployment in unserved areas. While there may be valuable  lessons in the examples profiled in our case studies, their limited number  does not allow us to generalize findings to the broader universe of all  entities seeking to deploy broadband networks. We also interviewed industry  experts, incumbent providers, project sponsors, and stakeholders.
Why GAO Did This Study

Broadband service provides users with many opportunities to improve communications and broadband deployment is particularly critical in rural areas to provide advanced communications to remote users and communities. In 2010, FCC estimated that 7 million U.S. housing units—about 5 percent of the nation's housing units—did not have access to wireline broadband service, mostly in rural areas. Some municipalities, cooperatives, and non-traditional private providers are exploring ways to sponsor and fund broadband projects in unserved and underserved areas.
GAO was asked to provide information on options for broadband deployment in unserved and underserved areas. This report examines (1) what is known about the alternative approaches unserved and underserved areas have used to deploy broadband and some factors considered in deployment decisions; (2) stakeholders' views on broadband deployment in unserved and underserved areas; and (3) efforts FCC has undertaken to foster broadband deployment in unserved areas. GAO reviewed relevant documents and interviewed FCC officials, representatives from industry, and incumbent providers. GAO also conducted an in-depth review of 21 geographically dispersed broadband projects selected to include various sponsor types, such as municipalities, non-traditional private providers, and cooperatives, and various ownership and financing approaches. GAO provided FCC with a draft of this report for comment. In response, FCC provided technical comments, which have been incorporated as appropriate.

What GAO Found

The unserved and underserved areas that GAO reviewed used alternative approaches and considered various factors to deploy broadband. Broadband project sponsors in those areas included municipalities, non-traditional private providers, consortiums of sponsors in a region, and cooperatives. In making broadband deployment decisions, project sponsors said they considered diverse factors related to their ability to fund successful projects, such as the (1) likelihood of near-term service upgrades by incumbent providers, (2) potential demand for new services, (3) potential broadband technologies, and (4) existing infrastructure and potential local assistance available to providers. For financing approaches, some project sponsors used local private and public funds while others leveraged federal funds. In addition, project sponsors used a variety of ownership structures that ranged from public ownership to local private investors.
Stakeholders and project sponsors GAO contacted cited economic, legal, and policy concerns in deploying broadband in unserved and underserved areas. For example, regarding funding, stakeholders said that remote areas generally face high broadband deployment costs due to the expense of deploying technologies over long distances or difficult terrain and that often the return on investment is low since there are relatively few potential subscribers in those areas. Project sponsors and industry experts noted legal concerns, including concerns with laws in some states that limit or ban companies that are not telecommunications companies from deploying broadband due to concerns about unfair competition. For example, in Louisiana, a city official GAO contacted said state laws bar any municipality from deploying broadband directly to consumers, so the city is planning to build and own a fiber-optic network, but to comply with the state law, will not offer retail service. Stakeholders also noted several policy concerns, including concerns over the accuracy of federal broadband-mapping efforts and whether the Federal Communications Commission's (FCC) broadband-speed benchmark is set high enough. While there may be valuable lessons in the examples profiled in our case studies, their limited number does not allow us to generalize findings to the broader universe of all entities seeking to deploy broadband networks.
FCC has several efforts under way to increase broadband deployment in unserved areas, efforts that help address the economic and policy concerns raised by stakeholders. FCC established the Connect America Fund in November 2011 to support voice and broadband access in areas where no private business case exists to provide broadband—one of the key challenges these areas face in deploying broadband. Additionally, in January 2014, FCC adopted an order in which it stated that it will solicit proposals from non-traditional providers, including utilities and municipalities, to deploy broadband technologies in rural, high-cost areas. Through this effort, FCC plans to explore broadband policy issues and gather information on viable business models for deploying fiber-optic or next-generation wired technology in rural areas. FCC plans to also gather information on the conditions under which rural consumers would prefer next-generation wireless services over wireline.