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GOVERNMENT SUPPORT AND SPECTRUM MATTERS

12 Months Ended

Dec. 31, 2024

GOVERNMENT SUPPORT AND SPECTRUM MATTERS

GOVERNMENT SUPPORT AND SPECTRUM MATTERS

9. GOVERNMENT SUPPORT AND SPECTRUM PROGRAMS

Universal Service Fund and Other Domestic Funding Programs

The Company recognizes revenue from several government funded programs including but not limited to, as follows:

●

The Company receives federal USF support under the Alaska Connect Fund (“ACF”). Beginning January 1, 2025, we expect to receive $25.6 million per year until December 31, 2028. Beginning in 2029 and continuing through 2034, the amount of ACF support will be determined by FCC staff taking into consideration broadband deployment funded through the Broadband Equity Access and Deployment Program. The ACF replaced the $19.7 million per year that we had received in Connect America Fund II support in Alaska;

●

As part of the Enhanced Alternative Connect America Model funding available to the Company’s operations in the western United States, we are estimated to receive approximately $109 million over the next 14 years, through 2038, with approximately $9 million annually through 2030 before a gradual step down to $6 million annually in 2038;

●

The Company receives $8.0 million per year in Connect America Fund II support in the rural southwest until July 2028;

●

The Company receives $5.5 million annually in the US Virgin Islands through December 31, 2025, subject to the requirement to enhance network resiliency and operations in those markets;

●

The Company were awarded $2.3 million annually in the western United States through December 31, 2031 as part of the Rural Digital Opportunity Fund Phase I (“RDOF”) auction. In exchange for this support, we committed to deploy voice and broadband service to areas covered by our remaining winning bids within six years and to provide service in those areas for ten years. In 2024, we transferred $1.3 million of the annual awards to other providers and returned $0.3 million of the annual awards to the FCC; and

●

The Company receives state USF support in Alaska, which for the fiscal year ended December 31, 2024 was approximately $2.5 million.

As of December 31, 2024, the Company was in compliance in all material respects with its requirements associated with such funding.

Additionally, the Company recognized revenue from the FCC’s Affordable Connectivity Program (“ACP”) and the Emergency Connectivity Fund (“ECF”) in 2024 that expired in the second quarter of 2024. During 2024, in conjunction with transferring and return of the RDOF awards, the Company recorded a loss of $2.5 million as a loss disposition of assets and transfers. The Company has a liability of $4.6 million accrued as of December 31, 2024 for the transactions. The transfer applications are pending regulatory approval.

Revenue recognized from the USF High Cost Program, including the CAF II, ACF, E-ACAM, and RDOF programs, is recognized as revenue from government grants. Revenue from other programs is recognized in accordance with ASC 606.

The Company recorded the amounts below as communication services revenue for the reported periods:


	Year ended
	December 31, 2024

	US Telecom		International Telecom		Total

High cost support	$	13,848	$	5,574	$	19,422
CAF II		26,984		—		26,984
RDOF		300		—		300
ECF		6,883		—		6,883
RHC		15,927		—		15,927
Other		11,967		477		12,444
Total	$	75,909	$	6,051	$	81,960


	Year ended
	December 31, 2023

	US Telecom		International Telecom		Total

High cost support	$	9,260	$	5,571	$	14,831
CAF II		27,260		—		27,260
RDOF		2,432		—		2,432
ECF		26,346		—		26,346
RHC		11,995		—		11,995
Other		23,478		1,250		24,728
Total	$	100,771	$	6,821	$	107,592


	Year ended
	December 31, 2022

	US Telecom		International Telecom		Total

High cost support	$	4,459	$	7,862	$	12,321
CAF II		27,264		—		27,264
RDOF		1,954		—		1,954
RHC		11,018		—		11,018
Other		15,638		52		15,690
Total	$	60,333	$	7,914	$	68,247

Construction Grants

The Company has also been awarded construction grants to build network connectivity for eligible communities. The funding of these grants, used to reimburse the Company for its construction costs, is generally distributed upon completion of a project. Completion deadlines begin in 2025 and once these projects are constructed, the Company is obligated to provide service to the participants. The Company expects to meet all requirements associated with these grants. A roll forward of the Company’s grant awards is below (in thousands).


	Amount
Grants awarded, December 31, 2023	$	100,149
New grants		52,093
Construction complete		(2,053)
Transferred grants		—
Grants awarded, December 31, 2024	$	150,189

In addition, the Company partners with tribal governments to obtain grants under various government grant programs including, but not limited to, the Tribal Broadband Connectivity Program ("TBCP") and the Rural Development Broadband ReConnect Program (“ReConnect”). These programs are administered by United States government agencies to deploy broadband connectivity in certain underserved areas. The Company was identified as a sub recipient of grants under these programs totaling $178.3 million as of December 31, 2024. Under these grants the Company expects to enter into agreements to construct and operate the networks for the grant recipient. Once construction is complete the Company will hold a long-term lease to operate the network. The operating agreement will require the Company to meet certain minimum service requirements. Through December 31, 2024, the Company has received and spent $19.7 million of funding under these programs on construction obligations. These amounts are recorded as operating cash flows in the Company’s statement of cash flows.

Replace and Remove Program

In July 2022, the Company was approved to participate in the Federal Communication Commission’s Secure and Trusted Communications Networks Reimbursement Program (the “Replace and Remove Program”), designed to reimburse providers of advanced communications services for reasonable costs incurred in the required removal, replacement, and disposal of communications equipment and services in their networks that has been deemed to pose a national security risk. Pursuant to the Replace and Remove Program, our eligible subsidiaries were initially allocated up to approximately $207 million to replace, remove and securely destroy such communications equipment and services in the Company’s networks in the western United States and in the US Virgin Islands, however, in December 2024 this program was fully funded for an increased allocation to the Company of approximately $517 million. The Replace and Remove Program requires each of the Company’s participating subsidiaries to complete the project no later than a specified deadline, which is currently in the third quarter of 2025.

A summary of the amounts spent and reimbursed under the Replace and Remove Program is below (in thousands):


	Capital		Operating		Total

Total spend, December 31, 2023	$	49,262	$	15,126	$	64,388
Amounts spent		91,687		12,320		104,007
Total spend, December 31, 2024	$	140,949	$	27,446	$	168,395

Total reimbursements, December 31, 2023	$	(12,773)	$	(4,354)	$	(17,127)
Reimbursements received		(90,767)		(22,827)		(113,594)
Total reimbursements, December 31, 2024	$	(103,540)	$	(27,181)	$	(130,721)

Amount pending reimbursement	$	37,409	$	265	$	37,674


	Capital		Operating		Total

Total spend, December 31, 2022	$	1,836	$	1,489	$	3,325
Amounts spent		47,426		13,637		61,063
Total spend, December 31, 2023	$	49,262	$	15,126	$	64,388

Total reimbursements, December 31, 2022	$	—	$	—	$	—
Reimbursements received		(12,773)		(4,354)		(17,127)
Total reimbursements, December 31, 2023	$	(12,773)	$	(4,354)	$	(17,127)

Amount pending reimbursement	$	36,489	$	10,772	$	47,261