Centurylink deal still contested in California, still an insider game

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CenturyLink’s purchase of Level 3 Communications faces opposition in California, despite a squishy settlement reached with three of the four organisations that objected to the deal. The fourth organisation – the California Emerging Technology Fund (CEFT) – registered its formal rejection of the settlement in comments filed with the California Public Utilities Commission on Friday.

Because Level 3 is certified as a telephone company, the CPUC has to determine if the transfer is in the public interest – whether or not anyone protests. But pretty much anyone is allowed to jump in too – intervene in CPUC jargon – and if certain requirements are met, they can claim intervenor’s compensation for their troubles, whether or not anything genuinely useful comes of it.

CenturyLink and the three groups who settled – TURN, the Greenlining Institute and the CPUC’s office of ratepayer advocates – are pushing the CPUC to short circuit the full review process and accept the agreement they reached between themselves as a substitute. The pressure is on because CenturyLink and Level 3 have a self-imposed deadline of 30 September 2017 to close the transaction. If the review follows typical CPUC timelines a decision might not come until sometime next year, which is a result CenturyLink is anxious to avoid.

Absent its own settlement, CETF is pushing for a full review, and in the process turning up the pressure on CenturyLink. It would be unusual for the CPUC to forgo an independent inquiry if effective opposition remains. In its filing on Friday, CETF correctly points out that the settlement agreed by the other three objectors has nothing of real value it it – all CenturyLink is obliged to do is aspire to invest $323 million in its operations in California. It takes the position that the deal poses grave dangers to Californian broadband but, still, nothing that a few hundred million dollars won’t fix, if its spent with proper supervision.

Wrong.

Whether CenturyLink spends its money its own way or spreads some of it around in the ways suggested by CETF, the result will still be the end of what open competition remains on many of California’s key fiber routes. The best way to fix a problem is to not cause it in the first place. The CPUC needs to make its own decision based on a complete and disinterested review. It should not subcontract the job out to organisations with more narrow interests, however well intentioned they might be.

Be glad the FCC lost its muni broadband bulldozer

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Municipal broadband dodged a bullet when a U.S. appeals court ruled that the Federal Communications Commission can’t tell states that they have to allow cities to build networks and offer service. It seemed like a good idea to many muni advocates at the time (although not me, I’ll immodestly point out) because of all the warm and fuzzy love that the Obama administration was bestowing on the concept.

Had that preemption withstood court challenges, muni broadband would be at the mercy of the current FCC majority, which includes Michael O’Rielly, who recently offered his thoughts to a group of state legislators. After warming up with some rants about socialism and the collapse of the Venezuelan economy, he riffed on muni broadband systems…

What I am unwilling to do and will never support is allowing government-sponsored networks to use their unfair advantages to offer broadband services. Doing so would be the quickest way to destroy the private broadband market and reassure creation of a market monopoly position by these networks. In addition, in instances where they have been attempted, the success rate is highly suspect. Clearly, building and operating a broadband network is the opposite of easy.

The fact that some states in our nation have enacted protections prior to allowing localities to pursue government-sponsored networks should be celebrated, not criticized or attacked. Upon close examination, the protections are, in fact, quite reasonable. They tend to include requirements that potential networks conduct a right-of-first refusal process to see if the private sector is capable and interested in offering service, perform referendums of the local people to determine whether there is a desire to put taxpayer monies at risk, limit the use of cross-subsidies and government advantages to rights-of-way, and present business plans before becoming operational. Far from being radical, these are common sense requirements.

Fortunately, the FCC’s abortive preemption of muni broadband ended up reaffirming state authority over what cities and counties do, including whether or not they can build and operate networks. The flip side of the argument – that maybe the FCC has the power to ban, rather than require, muni broadband – hasn’t been tested. So don’t rest easy. But be glad the courts didn’t agree that the FCC has unmistakably clear authority over what cities can and can’t do with broadband.

Microsoft discovers Google’s business model in spectral gaps

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Me too.

Microsoft’s TV white space broadband initiative is many things – a worthy effort to expand Internet access, a way of squeezing more useable bandwidth out of finite radio spectrum, a call to action for rural economic development and, as willingly acknowledged, a business opportunity.

It is also a foray into the market economics of free software. White space is the gaps between active television channels, which vary according to where you are in relation to whatever TV stations might be around. The proposed solution to this spectrum management problem is active management via databases run by private companies. Like Microsoft.

Or like Google. Which opened up its database to all comers four years ago. Microsoft’s answer, which is wrapped in a well articulated but completely ordinary white paper about rural broadband access, is to offer up its intellectual property in a similar manner…

Our Rural Airband Technology Program will make our U.S. patents available under a royalty-free license to all comers, including to our competitors, for any work they undertake to stimulate broadband access through TV white spaces. These patents help tackle common problems associated with TV white spaces in a variety of ways…

Microsoft’s database-driven TV white spaces technology has continuously been improved through the use of machine learning that populates, maintains, and improves the content of the database, and cloud-based analytics to respond to database queries that, for example, leverages prior spectrum assignments for particular devices.

Google went from a Silicon Valley garage start up to being (at times) the world’s most valuable company by amassing vast quantities of data, giving away software that can make efficient use of it and then making gigabucks as the resulting traffic passed through – and made detours into – its servers.

In that context, its open access white space venture was nothing remarkable. And from that perspective, neither is Microsoft’s. Except that, well, it’s Microsoft. Welcome to club.

Cable industry snags a side deal in California legislature’s wireless giveaway

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Another present was placed under the senate bill 649 Christmas tree this week. Language was added that would make it crystal clear that local governments in California can’t require cable companies to pay any fees or obtain any permits, beyond what’s allowed by state law, including particularly the digital infrastructure and video competition act (DIVCA) and SB 649.

It will probably have a relatively minor impact, assuming it’s not interpreted to ban routine construction approvals – building and encroachment permits, for example – which seems unlikely. The major effect will be to definitively squash a few, ongoing local attempts to get around existing restrictions on cable service fees.

According to the bill’s preamble…

This bill would prohibit a city or county from requiring a provider of video service or cable service to obtain any authorization or permit not described above to provide any communications service that is provided by a holder of a state franchise pursuant to [DIVCA]. The bill would prohibit a city or county from requiring the holder of a state franchise to pay any tax, fee, assessment, or other charge not authorized by [DIVCA], this bill, or other state laws.

This new perk for cable companies doesn’t have much, if anything, to do with the core purpose of SB 649, which is aimed at giving wireless companies on-demand access to light poles and other vertical assets owned by cities and counties at below market rates. But now Charter, Comcast and the rest don’t have to feel left out. Their lobbying front organisation in Sacramento – the California Cable and Telecommunications Association – had been raising vague objections to the bill. On the face of it, this small gift seems to a way to make sure they don’t feel left out of a massive giveaway to their colleagues in the wireless end of the business.

In reality, though, the cable industry will see direct benefits from SB 649’s wireless access provisions. Comcast is already rolling out wireless Internet of Things services and, along with Charter, are sniffing around other corners of the industry.

SB 649 has had an easy ride through the senate and, so far, the assembly. The next stop will be the assembly appropriations committee, which will likely put it on hold, until its ultimate fate is decided by legislative leaders in the final days of the legislature’s current session.

CPUC support for broadband common carrier rules stops short of the best reason

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The California Public Utilities Commission made the Monday deadline for commenting on the Trump administration’s move to scrap common carrier rules for broadband service. The filing more or less followed along with a rough draft approved by commissioners last week, and argues that reversing course would strengthen incumbent monopolies…

[Broadband service] providers must receive nondiscriminatory access to utility support structures, including poles and conduits, at just and reasonable rates, terms and conditions. Last year, the CPUC conducted a comprehensive review of the California telecommunications market, and analyzed the state of competition in various state sub-markets. The CPUC found that competitive bottlenecks and barriers to entry in the telecommunications network limit new network entrants and may raise prices for some telecommunications services above efficiently competitive levels. One particular bottleneck is access to utility poles, where the CPUC found that its safety mandate intersects, and must be reconciled with, its goal of a competitive market.

The CPUC comments also extoll other benefits of broadband’s common carrier status, including…

Which is all good as far as it goes. But the CPUC comments miss the fundamental reason broadband should be treated as a common carrier service: because it is.

The lack of competitive alternatives, as the CPUC correctly emphasises, is key. That’s only one of the elements in the mix, though.

The monopoly control wielded by what are effectively content companies with a telecoms sideline combined with the technical ability to analyse and shape user traffic in real time is unprecedented. Yet it would be instantly recognisable to the medieval jurists who conceived the principles of common carrier doctrine. Second order benefits are a fine thing, but broadband’s common carrier status is a first order necessity.

California lawmakers revive Internet privacy rules dumped by Trump administration

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California is stepping into the privacy vacuum created by federal policy makers when they scrapped consumer protection rules adopted last year. Assembly bill 375 was approved by the senate’s energy, utilities and communications committee yesterday. It would put sharp restrictions on what Internet service providers can do with their customers’ information…

An Internet service provider may use, disclose, sell, or permit access to customer personal information if the customer gives the Internet service provider prior opt-in consent, which may be revoked by the customer at any time. The mechanism for requesting and revoking consent under this subdivision shall be clear and conspicuous…not misleading, in the language primarily used to conduct business with the customer, and made available to the customer at no additional cost. The mechanism shall also be persistently available on or through the Internet service provider’s Internet Web site, or mobile application if it provides one for account management purposes.

The bill is supported by consumer groups and carried by assemblyman Ed Chau (D – Monterey Park). The opposition was led by the California cable industry’s lobbying front, the California Cable and Telecommunications Association, with AT&T, Frontier, Comcast and Charter singing back up.

That wasn’t enough to stall it. Internet privacy is one of the battle line issues between California democrats and the Trump administration, as several senators made clear. It’s become a high profile one too, judging by the TV news cameras in the room.

Committee chair Ben Hueso (D – San Diego) set the tone at the beginning of the hearing, with a rambling discourse on the essential nature of telecommunications services and the importance of privacy, including detours into the evils of communism and the role of Russian hackers in the last election. Although the telecoms industry lobbyists claimed they should be treated like any other Internet business, committee members pointed to the lack of choice consumers have when buying broadband service and argued for even tighter privacy rules.

In the end, they approved it, albeit with scant support from republicans. AB 375 now moves to the senate judiciary committee and from there, it seems likely, on to a full floor vote.

Hostile takeover of California broadband subsidies on ice, for now

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The attempt by telephone and cable companies to hijack the California Advanced Services Fund – the state’s primary broadband infrastructure subsidy program – is derailed, for at least a few weeks and probably forever. Keeping in mind that forever in Sacramento’s dictionary means until the next legislative session, which begins in January.

Assembly bill 1665 was pulled off of this morning’s agenda in the senate’s energy, utilities and communications committee, which means that it can’t be considered again (in the normal course of business) until lawmakers return from their summer break on 21 August 2017. After that, there’s nothing preventing the committee from taking it up, but it would be unusual. With only three weeks left in the session at that point, legislative triage begins to kick in. If it looks too badly damaged to save or there’s no appetite for doing so, it’ll be allowed to die peacefully.

No guarantees, though. The bill was amended last week to make it an “urgency” measure, which is a parliamentary maneuver that allows it to dodge most of the deadlines that the legislature sets for itself. Otherwise, it would already be in the dead file due to a similar delay last week. The chairman of the committee, senator Ben Hueso, has been an extremely good friend to telecoms industry lobbyists so far this year and could go to bat for them again. Even if it means going outside the boundaries of the normal course of business.

Telecoms companies and their lobbyists have higher priorities this year, including getting unfettered access to publicly owned poles and stopping an attempt to put the Internet privacy rules they convinced the federal government to kill into California law. So it’s more likely than not that AB 1665 will lie in its coffin until next year, when the bill’s backers will decide if its worth resurrecting. But it’s not certain. And certainly not a safe assumption.

Cracks in Frontier’s business model widen

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Competition and a botched takeover of Verizon wireline systems in California, Texas and Florida are pushing Frontier Communications deeper into the red, as its customers cancel service. According to an article in the Wall Street Journal, via Morningstar.com, company executives have backed away from predications that falling subscriber revenue would soon be on the way up…

Revenue has instead declined companywide for the past year. Frontier’s 2016 loss widened to $373 million from $196 million a year earlier. The company plans to devote at least $1 billion this year on capital spending to keep its network humming.

“Cable companies are beating the pants off Frontier,” said Jonathan Chaplin, an analyst for New Street Research, noting that companies like Charter Communications Inc. have invested more heavily in marketing, network equipment and customer service in the past three years.

The stiffened competition came just as Frontier faced pressure to cut costs, partly so it could pay for the networks it bought. The result was a series of network failures and complaints about customer service.

Frontier’s share price has been in free fall, dropping 69% this year according to the article. It went so low that the company had to do a reverse split, giving shareholders 1 share for every 15 they previously owned, to keep the share price from dropping below the $1 mark and risking being kicked off of the NASDAQ exchange.

Bankruptcy doesn’t appear to be an immediate threat, although the article pointedly notes that two other companies that bought systems from Verizon – FairPoint Communications and Hawaiian Telcom – did file for Chapter 11 protection. The longer term outlook is more uncertain. Frontier has $17 billion in debt and has to make a $2.4 billion payment in three years. To do that, it’ll have to look to the bond market for refinancing.

If it doesn’t start gaining subscribers, it won’t “demonstrate sustainability to the bond market” and could hit a brick wall. That’s something to keep in mind as Frontier scrambles after California broadband subsidy money and tries to fend off competition with promises of future upgrades.

AT&T, Frontier want right of the first night in rural California

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One of the perks that telco and cable lobbyists slipped into a broadband infrastructure subsidy bill pending in the California senate is the right to take the first look at proposed projects in unserved rural areas, so they can decide whether or not they want to be the ones to consummate the deal. In medieval times (or at least in the movie Braveheart) something very similar was called jus primae noctis, the right of the first night, where a feudal lord claimed the privilege of taking a newly wedded bride to bed.

Whether a student of history or a Mel Gibson fan, Michael Ort, the CEO of Inyo Networks made the connection to the privileged status granted AT&T and Frontier Communications by assembly bill 1665, in a letter withdrawing his support for it

The “Right of First Refusal” is AB1665’s version of the ancient practice of jus primae noctis. In this case, it is not the betrothed who is violated, but any of California’s underserved communities. The proposed legislature would grant incumbent providers the ability to select which markets they want to keep potential competitors out. Does it really make sense that dominant players can secretly dictate what markets they can hold under their control by claiming they will commit public funds to – which they alone have access – to a future market when another company publicly seeks funds? And this is not once, but in AB1665, it becomes a “rolling” practice just in case they don’t get it right the first round. Even jus primae noctis was not that embolden.

Inyo Networks and Praxis Associates, its corporate sibling, completed Digital 395, a 500 mile open access fiber network along the eastern side of the Sierra Nevada, and are poised to do the same on the northern coast. AB 1665 would lock out this kind of high speed, independent fiber project and effectively give $300 million directly to Frontier and AT&T for little more than maintenance work on systems with low speed, 1990s style technology.

Systems that are as inadequate and inappropriate to the standards of the twenty first century as jus primae noctis.

PG&E’s bid to be a fiber company gets a long review

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PG&E will have to explain how it manages requests from telecoms companies to hang cable and other equipment on its utility poles, as the California Public Utilities Commission reviews its application to become a fully certified, commercial fiber network operator. After a meeting with PG&E and the companies and organisations that have raised objections to PG&E’s move, the administrative law judge, Jessica Hecht, and the commissioner, Liane Randolph, handling the review laid out a year-long review schedule that identifies the issues that will be addressed.

Among them is guarding against the possibility that PG&E will use its control of utility poles to put competing telecoms companies at a disadvantage. PG&E is being required to disclose…

  • Internal policies and procedures for reservation of space in and on PG&E support structures, and include forecasts for future reservation needs, if any, to accommodate its anticipated telecommunications services.
  • Statistics showing the mean and median times PG&E currently takes to respond to requests for access to its support structures, and for completing any rearrangements required to accommodate other attachers’ attachments.

Other concerns include how PG&E will split the money it makes from its planned fiber business. Some of the objectors want most of it to be funnelled back to electric customers, presumably in the form of lower rates, while PG&E is proposing a 50/50 split of fiber profits. Several of the topics under review have to do with how PG&E will keep a relatively unregulated telecoms unit separate from its highly regulated energy business, including maintaining security and safety standards, and avoiding cross-subsidies between two very different kinds of enterprises.

In general, PG&E will have to provide a lot of details about its fiber business and operations plans to the CPUC, although some of that information will likely be kept confidential.