The Federal Communications Commission is planning to raise the rural broadband standard from 10Mbps to 25Mbps in a move that would require faster Internet speeds in certain government-subsidized networks.

The FCC's Connect America Fund (CAF) distributes more than $1.5 billion a year to AT&T, CenturyLink, and other carriers to bring broadband to sparsely populated areas. Carriers that use CAF money to build networks must provide speeds of at least 10Mbps for downloads and 1Mbps for uploads. The minimum speed requirement was last raised in December 2014.

Today, FCC Chairman Ajit Pai said he's proposing raising that standard from 10Mbps/1Mbps to 25Mbps/3Mbps. "[W]'re recognizing that rural Americans need and deserve high-quality services by increasing the target speeds for subsidized deployments from 10/1 Mbps to 25/3 Mbps," Pai wrote in a blog post that describes agenda items for the FCC's December 12 meeting.

"[T]he program should support high-quality services; rural Americans deserve services that are comparable to those in urban areas," Pai also wrote.

CAF (also known as the "high-cost program") is part of the Universal Service Fund, which is paid for by Americans through fees on their phone bills.

The new 25Mbps/3Mbps standard will apply to future projects but won't necessarily apply to broadband projects that are already receiving funding. For ongoing projects, the FCC will use incentives to try to raise speeds. More money will be offered to carriers that agree to upgrade speeds to 25Mbps/3Mbps, a senior FCC official said in a conference call with reporters.

FCC will offer “guaranteed revenue stream”

Pai also said that carriers accepting CAF money will have the option of receiving a guaranteed revenue stream for 10 years. Pai wrote:

First, we're working to promote efficiency by moving away from simply telling rate-of-return carriers what their allowable costs and return on investment will be and toward setting broad goals for deployment and rewarding companies for being efficient in meeting those goals (what's called an "incentive-based" model). Specifically, we're offering rate-of-return carriers another opportunity to opt in to model-based support, which would give them a guaranteed revenue stream for a decade in exchange for meeting specified buildout requirements. Second, we're ensuring support is sufficient by offering additional funding to carriers that currently receive model-based support and who agree to meet increased buildout requirements. We're also increasing funding for carriers who do not receive model-based support... we're [also] making the program more predictable by setting a new long-term budget for rate-of-return carriers who choose not to opt in to model-based support and ending arbitrary funding cuts.

To provide the guaranteed revenue stream, Pai's proposal would reverse scheduled budget cuts and adjust the program budget in future years, an FCC official said.

Pai said his proposals will "stretch taxpayer dollars as far as possible" and make sure that subsidies are "sufficient to build out networks; after all, these are areas where the business case for private investment is lacking." FCC subsidies should also be more predictable than in previous years, because "building networks is a serious long-term proposition, not a one-time whim," Pai wrote.

When Democrat Tom Wheeler was FCC chair, Pai supported the commission's 2014 decision to raise the speed benchmark from 4Mbps/1Mbps to 10Mbps/1Mbps but said that the FCC should have also provided carriers with more years of funding to account for the upgrade.

Pai opposed Wheeler's 2015 decision to raise a nationwide broadband standard to 25Mbps/3Mbps. Pai said at the time that 25/3Mbps was too high and criticized the Wheeler-led majority for using different standards, namely the 25Mbps/3Mbps standard for judging nationwide broadband deployment progress and the lower standard in rural projects subsidized by the government. As chair, Pai in 2017 floated a proposal that would lower broadband standards, but he changed course after a backlash.

Despite Pai's claim that repealing net neutrality rules and other regulations will spur broadband deployment, Charter and Verizon both said this year that they're reducing capital expenditures. Broadband lobby groups USTelecom and NTCA recently argued that Internet service is similar to utilities such as electricity and gas distribution. The lobby groups also said that the government should provide more money to private companies to close the rural broadband gap. They complained that "US broadband infrastructure has been financed largely by the private sector without assurance that such costs can be recovered through increased consumer rates."