FairPoint Accepts $37.4 Million in CAF Broadband Subsidy, Covering 14 of 16 States
FairPoint Communications will accept $37.4 million of annual USF subsidies under Phase II of the FCC Connect America Fund (CAF II), a company release said Tuesday. The support for 2015-2020 will help FairPoint provide 10/1 Mbps broadband to about 105,000…
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homes and businesses with over 200,000 rural customers in 14 states, an FCC release said Wednesday. The Wireline Bureau in a Wednesday public notice authorized the CAF II distributions, the biggest chunks of which will go to upgrading high-cost networks bought from Verizon in three New England states: $13.3 million for Maine, $8.8 million for Vermont and $4.4 million for New Hampshire. "We are committing hundreds-of-millions of dollars in capital to build and upgrade infrastructure in our service territories to extend affordable broadband services to remote areas which will help businesses and residents alike stay connected to the world,” said CEO Paul Sunu in the company release. FairPoint was eligible for $38.2 million in 16 states but declined support for Colorado and Kansas. It said it would evaluate the competitive bidding process the FCC plans for areas where price-cap telcos decline CAF II money. FairPoint expects it will no longer receive $39.3 million in current high-cost "CAF frozen support" but will receive $7.4 million in transitional support. Wells Fargo analyst Jennifer Fritzsche said the transitional support will wind down in stages by 2018. "Like the other RLEC peers, we believe FRP will be able to use this CAF support to its advantage," she said in a note to investors. "While there is of course a [capital expenditure] element to this build, the additional revenue it receives from the buildout of these additional households should help it longer term. We view the recitation of the prior guide for both [free cash flow] and capex as a positive and continue to believe FRP has greater cost cutting opportunities which could further drive EBITDA higher." Price-cap telcos have until Aug. 27 to make their CAF II decisions, but some others have already make announcements: Frontier will accept its full $283.4 million (see 1506160039); Windstream will accept $174.9 million of the $178.8 million it's eligible for (see 1508050072); and CenturyLink expects to accept at least $300 million of the $514.3 million it's eligible for, though it's still reviewing whether to take support in 11 of its states (see 1508140052).