GOVERNMENT SUPPORT AND SPECTRUM MATTERS

3 Months Ended

Mar. 31, 2026

GOVERNMENT SUPPORT AND SPECTRUM MATTERS

9. GOVERNMENT SUPPORT AND SPECTRUM MATTERS

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 Universal Service Fund (“USF”) support under the Alaska Connect Fund (“ACF”). Beginning January 1, 2025, the Company expects 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 the Federal Communications Commission (“FCC”) staff taking into consideration broadband deployment funded through the Broadband Equity Access and Deployment Program;

●

As part of the Enhanced Alternative Connect America Model (“E-ACAM”) funding available to the Company’s operations in the western US, the Company expects to receive approximately $9 million annually through 2029 before gradually increasing to $13 million annually in 2038. This funding is subject to a requirement to deploy voice and broadband service at speeds of 100/20 Mbps to all required locations by the end of the calendar 2038;

●

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

●

The Company received $5.5 million annually in the US Virgin Islands through December 31, 2025. In September 2025, the Company requested that the FCC extend such support for at least one additional year. As of the date of this Report, the FCC had not yet acted on this request and, as a result, the Company is currently not receiving this support. If the FCC grants the Company’s request, it may or may not extend the Company’s support on a retroactive basis from December 31, 2025; and

●

The Company receives state USF support in Alaska of approximately $2.5 million annually.

As of March 31, 2026, the Company was in compliance in all material respects with its requirements associated with such funding.

The company participates in the FCC’s Rural Health Care Universal Service Support Mechanism (“RHC Program”). During the three months ended March 31, 2026 and 2025, the Company received $6.3 million and $4.4 million, respectively, related to RHC Program funding.

Revenue recognized from the USF High Cost Program, including the CAF II, ACF, and E-ACAM 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 (in thousands):


	Three months ended
	March 31, 2026

	US Telecom		International Telecom		Total

High cost support	$	3,475	$	—	$	3,475
CAF II (including ACF)		8,268		—		8,268
RDOF		75		—		75
RHC		6,318		—		6,318
Other		1,442		3		1,445
Total	$	19,578	$	3	$	19,581


	Three months ended
	March 31, 2025

	US Telecom		International Telecom		Total

High cost support	$	3,115	$	1,312	$	4,427
CAF II (including ACF)		8,170		—		8,170
RDOF		75		—		75
RHC		4,363		—		4,363
Other		1,636		5		1,641
Total	$	17,359	$	1,317	$	18,676

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. 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. The Company is currently reviewing funding available under the BEAD grant program. A roll forward of the Company’s grant awards is below (in thousands).


	Amount
Grants awarded, December 31, 2025	$	98,826
New grants		2,041
Construction complete		—
Grants awarded, March 31, 2026	$	100,867

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 US government agencies to deploy broadband connectivity in certain underserved areas. The Company was identified as a sub recipient of grants under these programs totaling $239.0 million as of March 31, 2026. 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 March 31, 2026, the Company has received $37.7 million of

funding under these programs and spent $40.4 million 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 FCC’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, the Company’s 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 US and in the US Virgin Islands; however, in December 2024, this program was fully funded for an increased allocation to the Company of an aggregate amount 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 was recently extended through early November 2026.

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, 2025	$	194,897	$	38,799	$	233,696
Amounts spent		6,304		2,133		8,437
Amounts transferred		(9,030)		—		(9,030)
Total spend, March 31, 2026	$	192,171	$	40,932	$	233,103

Total reimbursements, December 31, 2025	$	(163,122)	$	(38,682)	$	(201,804)
Reimbursements received		(8,179)		(1,085)		(9,264)
Total reimbursements, March 31, 2026	$	(171,301)	$	(39,767)	$	(211,068)

Amount pending reimbursement	$	20,870	$	1,165	$	22,035


	Capital		Operating		Total

Total spend, December 31, 2024	$	140,949	$	27,446	$	168,395
Amounts spent		11,051		2,625		13,676
Total spend, March 31, 2025	$	152,000	$	30,071	$	182,071

Total reimbursements, December 31, 2024	$	(103,540)	$	(27,181)	$	(130,721)
Reimbursements received		(16,211)		(2,890)		(19,101)
Total reimbursements, March 31, 2025	$	(119,751)	$	(30,071)	$	(149,822)

Amount pending reimbursement	$	32,249	$	-	$	32,249

At March 31, 2026, $14.5 million of the capital expenditures spent under the Replace and Remove Program were accrued and unpaid. Amounts identified as capital are recorded as investing cash flows and amounts identified as operating are recorded as operating cash flows in the Company’s statement of cash flows. During the three months ended March 31, 2026, the Company determined that reimbursement was not probable for $9.0 million of capital expenditures incurred under the Replace and Remove Program. As a result, the Company transferred $7.0 million to assets held for sale and the remaining $2.0 million to fixed assets. Except for this $9.0 million, the Company expects to be reimbursed, within the next twelve months, for all amounts spent.