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The existence of federal subsidies for rural broadband providers may have played a role in Frontier Communication’s acquisition of Verizon’s rural landline customers.
Frontier made the purchase May 13 and a day later said it would apply for broadband stimulus funding made available by the American Reinvestment and Recovery Act of 2009.
Unlike larger telecommunications companies that have been trying to shed customers in rural areas (where profit margins are said to be narrower), Frontier has been moving into rural in a big way.
“We will be the largest pure rural communications provider of voice, broadband and video services in the U.S.,” said Frontier’s chairman and CEO, Maggie Wilderotter in a press release about the deal with Verizon.
StimulatingBroadband.com reports that this “pure rural play” could give Frontier a competitive advantage if it helps the company tap government funding to provide broadband to customers who currently can’t get it. It’s not just that grants reduce the cost to build new networks. Rules in the USDA’s Rural Utilities Service funding program, for example, could limit the competition Frontier might face if it gets grants or loans from the agency.