Hawaiian Telcom officials told the Federal Communications Commission last month that the company needs a larger subsidy than what the agency is proposing to underwrite the cost of providing broadband service to rural areas in Hawaii.

The FCC is providing ratepayer funds to Hawaiian Telcom and other telecommunications companies as part of its new "Connect America" program designed to extend the reach of high-speed Internet into underserved areas of the country.

Hawaiian Telcom already has received about $1.42 million to provide broadband service to 1,836 homes in rural areas under the program launched last year, according to the FCC.

Hawaiian Telcom was one of eight telecommunications companies nationwide that signed up to receive a fixed amount of $775 per customer in Phase I of the Connect America program. The FCC disbursed $500 million through the Connect America program in 2012 and 2013. The FCC said it plans to spend $1.8 billion a year over five years in Phase II of the program.

As the program enters Phase II, the FCC will adopt a location-specific funding formula called the Connect America Cost Model (CACM) which will include adjustments to "reflect the unique circumstances and operating conditions in the non­contiguous areas of the United States," according to the agency. The non­contiguous areas receiving special dispensation are Hawaii, Alaska, Guam, Puerto Rico and the U.S. Virgin Islands.

Hawaiian Telcom officials said the latest draft of the CACM does not address the full range of unique circumstances that increase the cost of installing fiber-optic cable in Hawaii, such as deep ocean channels between the islands, volcanic soil, a higher-than-average percentage of utilities placed underground, and high costs associated with shipping and inventory requirements.

"Many of the state’s rural communities are quite isolated from each other, as well as from Hono­lulu, due to active volcanoes, steep mountain ranges, gorges, rain forests and deep-water ocean channels many miles wide. Therefore, it is critical that the CACM reflect the higher costs of these non­contiguous areas," Steven Golden, Hawaiian Telcom’s vice president for external affairs, wrote in a Sept. 11 letter to the FCC.

The FCC estimates that 17.7 percent of Hawaii’s rural population, or about 6,800 households, don’t have broadband service. By comparison, only 1.5 percent of all households in Hawaii don’t have broadband service, according to the FCC. Both rates are better than the U.S. as a whole, where 23.7 percent of the rural population and 6 percent of the population as a whole lacked access to broadband.

The Connect America program was created as part of the FCC’s restructuring of the Universal Service Fund, which is used to subsidize telephone voice service to rural areas. The overhaul shifted the FCC’s emphasis away from subsidizing voice service to increasing broadband penetration. Both the Connect America fund and the Universal Service Fund are paid for by consumers by a fee on their telephone bills.

The state Department of Commerce and Consumer Affairs submitted comments to the FCC supporting Hawaiian Telcom’s position.

"To ensure that 21st-century broadband service is universally available, and to avoid formalizing existing discrepancies between contiguous and non­contiguous areas, DCCA urges the Commission to apply the suggestions of (Hawaiian Telcom) and other commentors to produce a CACM that can truly fulfill the promise of universal service program for those areas that need it most," the DCCA commented.