Now or never: California broadband subsidies will end without fast action


It’s not just the lakes that are drying up.

No more money will be flowing into the California Advanced Services Fund to pay for broadband infrastructure subsidies. The program has hit the limit set by the California legislature, and the tax that funds it will no longer be collected.

By this time next year, if not sooner, the infrastructure kitty will likely be spent down to zero. If more money is ever going to be added, it’ll have to happen soon. When CASF runs out of money, it’ll go into a bureaucratic deep freeze: paperwork will be processed for existing projects, but any forward looking activities will end. Thawing it out will take years. The last time CASF was fully rebooted was in 2010, and the first grant applications weren’t accepted until more than two years later.

Troublesome though it may be, that’s not the big problem. At this point, the tax that funds CASF has merely lapsed. Restarting it will be difficult enough, given the increasingly aggressive lobbying against it by AT&T and the cable industry’s political front organisation, the California Cable and Telecommunications Association. But it would still be just a restart.

If we get into 2018 with no renewal, CASF will be a different and perhaps unmanageable political animal. The tax that funds it will have faded far enough into memory that reinstatement will be perceived as imposing a new tax, rather than taking an existing one off an unintentional hiatus.

Even if democrats win a two-thirds supermajority in the California legislature in November and gain the ability to approve taxes and budgets without republican concurrence, it’ll be a steep, uphill fight. Broadband infrastructure is not at the top of wish lists at the state capitol. There is a multitude of interest groups with far more photogenic and heart rendering causes, and with the political muscle to push to the head of the line. A new broadband tax – that’s how it’ll be spun – will please few voters and upset corporate lobbyists, who can wipe away their tears with fistfuls of campaign cash.

It would be a crying shame.

California’s broadband competition outlook dims as telcos head for the exit


The market for high speed, residential broadband service is not competitive in California, and the problem might be getting worse rather than better. That’s one of the conclusions of a draft decision prepared by an administrative law judge for consideration by the California Public Utilities Commission.

Although a typical household might have access to more than one kind of service, most have no choice – or no availability – when it comes to getting Internet access at 25 Mbps download and 3 Mbps upload speeds. That’s the level that the Federal Communications Commission considers the minimum necessary to enjoy the full benefit of the online opportunities and services that are available today.

According to the draft decision…

From the perspective of the average California end-user, the threshold choice is between three different types of last-mile channels to connect to the larger network: the legacy telephone carrier’s wire (copper or fiber); coaxial cable from a cable provider; and a wireless transmission path (or paths) to a cellular antenna (radio frequency or spectrum). For roughly half or more of California customers, the choice for residential high-speed broadband at 25/3 Mbps benchmark narrows to one provider or none at all.

It’s a problem that seems likely to get worse, rather than better, because traditional phone companies, like AT&T, seem to be walking away from the table…

Indeed, there is some reason to question whether the traditional telephone utilities are leaving the high-speed, residential broadband market to the cable companies. Verizon first halted the development of its fiber (FIOS) plant, and then sold its entire California local wireline network to Frontier. We also observe the increasing market share of the cable carriers.

The draft makes a direct connection between competition and better service – where Google Fiber has entered the market, incumbents have upped their game, for example. And there’s an equally clear divide between lucrative urban areas, which maintain a higher level of both competition and service, and not so rich rural areas, which do not.

The draft is light on remedies – mostly, it calls for better data collection and analysis – but if adopted it would lay the groundwork for more aggressive intervention by the CPUC in the future, including pro-competitive policies such as making middle mile connectivity and last mile poles and conduit accessible to new providers on an open and transparent basis.

Proposed decision analyzing the california telecommunications market and directing staff to continue data gathering, monitoring and reporting on the market

CPUC considers manifesto for broadband regulation


Not this Karl.

California doesn’t have a competitive market for broadband service, and the distinction between it and phone service is essentially irrelevant. With all due regard for the danger of trying to boil down 168 pages into 20 words, that’s the bottom line of a proposed decision by a California Public Utilities Commission administrative law judge.

ALJ Karl Bemesderfer was given the job of sifting through mounds of data, testimony and arguments submitted in the course of a CPUC investigation into whether there’s sufficient competition among telecommunications companies in California. His draft decision, which has to be approved by commissioners before it has any effect, was posted yesterday. Key conclusions include…

  • The residential, high-speed broadband market in all of California’s geographic markets is highly concentrated.
  • No census block in California is served by a mobile carrier that consistently achieves high-speed broadband speeds.
  • Although there are varying estimates, roughly half (or more) of California households have access to only one (or no) wireline broadband provider at speeds of 25 Mbps down and 3 Mbps up…
  • Competitors’ access to the built network infrastructure is a critical aspect of the competitive landscape for telecommunications services.

Highly concentrated is a term of art that means, in this case, that even though broadband in California isn’t technically a monopoly, the power to set prices and determine service levels in concentrated in few enough hands to thwart market forces and allow carriers – telephone, cable, mobile and fixed wireless companies – to extract rents, i.e. profits that a genuinely competitive environment wouldn’t otherwise allow.

The remedies Bemesderfer proposes “are limited to those for which we presently have clear and unambiguous legal authority”. If commissioners agree, broadband companies would have to provide detailed information regarding both last mile and, critically, middle mile services, and staff would have to supplement it with independent research and analysis.

If commissioners agree.

A vote could come as soon as 1 December 2016, or it could be bumped off into next year, when the make up of the commission might be different – two commissioners, Mike Florio and Catherine Sandoval, who tend to take a harder line regarding broadband regulation, are coming to the end of their terms and governor Jerry Brown has not announced whether or not they’ll be reappointed.

Proposed decision analyzing the california telecommunications market and directing staff to continue data gathering, monitoring and reporting on the market

Pro tip: read the whole document. There’s a lot worth learning in it.

Frontier complaints drop as it fixes California FTTH problems


Hundreds of fiber-to-the-home customers crashed and burned when Frontier Communications took over ownership of Verizon’s wireline networks in California last April. Phone, Internet and television service was disrupted, apparently because the customer data Frontier received from Verizon was faulty. The problems were compounded by a temporary call center that was drafted in to help Frontier get through the transition period.

The company’s position is they’re in business as usual mode now, and preliminary data from the California Public Utilities Commission appear to back it up.

The CPUC met in Long Beach last week, ground zero of Frontier’s meltdown. Of the 30 or so members of the public who signed up to speak at the meeting, only one man used his time to lambaste Frontier. That’s one indicator that things are getting better – more people made the trip to Sacramento last May to complain to legislators, when the troubles were at a peak.

The available stats also show marked improvement. More than 500 people filed complaints about Frontier with the commission in April, and more than 600 in May. By June, that number was down to a quarter of that level and it continued to drop in July and August. In September, only 62 complaints were received, which does look like business as usual – Frontier expects to handle 50,000 service issues in a normal month, according to regional president Melinda White, speaking to lawmakers in May.

The flood of problems was concentrated on the FTTH systems that Frontier acquired from Verizon, and “there was no similar widespread service disruptions for the rest of the service territory using traditional voice service over copper lines during this transition period”, communications division director Michael Amato told commissioners. The communities hardest hit were Camarillo and Santa Monica, and a cluster of cities around Long Beach, including Lakewood and Huntington Beach.

Last call for California broadband infrastructure subsidies


Drink up time.

The California Public Utilities Commission scrapped the tax that pays for the California Advanced Services Fund (CASF). The California legislature limited CASF to a total of $315 million, most of which goes to pay for broadband infrastructure projects. It’ll reach that limit by the end of next month, so the CPUC voted on Thursday to halt collection of the CASF surcharge – about half a percent – on telephone bills in California, effective 1 December 2016.

There’s still money in the kitty for infrastructure projects. How much depends on how much will be eaten up by the CPUC’s administrative overhead in the years ahead, and that’s difficult to predict. My original estimate was $10 million, but that number could go higher as time goes on. Assuming, though, that $10 million is still a good guess, then there’s about $119 million left. Coincidentally, there’s about $119 million in construction grant requests pending against that.

Not all of those will be funded. There are two competing projects proposed for the Phelan area in San Bernardino County. The price tags on those have been refigured – instead of one at $21 million and another at $48 million, both hover around $22 million, so regardless of which one is approved, about the same amount will go back into play.

That means there’s at least $20 million available right now that could be claimed by new proposals. If any of the other ten broadband infrastructure projects under consideration are denied, that number will go up. Since most of those are in the seven or even eight figure range, it could go up significantly.

The CASF program doesn’t run on a first come, first served basis, and a project proposed now could, in theory, be approved ahead of one submitted long ago. The window for new broadband infrastructure in under and unserved areas – those where either no Internet access is available at 6 Mbps download and 1.5 Mbps upload speeds or there’s no service at all – is still open. For at least a little while longer.

Patent trolls come in two sizes, FTC says


Watch out for the little one.

It’s the small patent trolls, the kind cultivated by the predatory bar, that cause the most problems for entrepreneurs and other small businesses. Not problems with million dollar price tags or even vaguely legitimate claims. Just the most problems.

That’s the conclusion of a study by the Federal Trade Commission that looked at what it politely calls “patent assertion entities” (PAEs) and what anyone else – at least anyone who’s actually tried to create something – calls patent trolls. The FTC thinks it’s unhelpful to characterise them as trolls but, hey, they’re paid to be bureaucratically correct.

According to the FTC, there are two flavors of trolls, I’m sorry, patent assertion entities: portfolio PAEs and litigation PAEs. Both prey disproportionately on the tech sector. The portfolio trolls are the big boys. They have massive files full of marginal but arguably enforceable patents, and might well include among their investors honest businesses, like manufacturers, that are trying to manage risks. Okay, maybe trying to take a bite out of competitors too. They’re picking on kids their own size: mutually assured destruction might not be the most morally palatable strategy but it got us through the Cold War without the U.S. and the Soviet Union nuking humanity back to the stone age. It sucks, but it works.

Litigation PAEs, on the other hand, don’t generate as much money – only 20% or so of the $3.2 billion identified by the study (although that’s still a lot of money) – but they wreak the most havoc, going after bushels of small fry who can’t afford to fight…

The licenses typically yielded total royalties of less than $300,000. According to one estimate, $300,000 approximates the lower bound of early-stage litigation costs of defending a patent infringement suit. Given the relatively low dollar amounts of the licenses, the behavior of Litigation PAEs is consistent with nuisance litigation.

These mosquitoes of the digital age fly quickly, shuffling handfuls of patents between shell corporations and dodging attorney fee judgements as they buzz away in search of their next victim. The FTC has measured recommendations for congress and the federal courts to consider – all a good start, but control is a half measure. Eradication is the answer.

Patent Assertion Entity Activity: an FTC Study

Google finds dropping cable off a boat is easier and faster than digging up streets


Google might be defaulting, excuse me, pivoting to wireless broadband technology in last mile broadband markets, but it appears to be moving full speed ahead with laying underseas fiber to connect continents. And Facebook is sailing right alongside.

Google, Facebook, TE Connectivity – the former Tyco Electronics – and Pacific Light Data Communication, a Hong Kong-based start up, are partnering to build a submarine cable between Los Angeles and Hong Kong, with a completion target of summer 2018. According to a Google blog post

The Pacific Light Cable Network will have 12,800 km of fiber and an estimated cable capacity of 120 Tbps, making it the highest-capacity trans-Pacific route, a record currently held by another Google-backed cable system, FASTER. In other words, PLCN will provide enough capacity for Hong Kong to have 80 million concurrent HD video conference calls with Los Angeles.

FASTER – a collaboration between Google and a consortium of Asian telecoms companies – went online this summer, linking Oregon to Japan. Google is getting 10 terabits per second of capacity – one-sixth of the total – on that cable. And it has ownership stakes in four other submarine cable projects.

Facebook has also wet its feet in the trans-oceanic fiber game, joining Microsoft and Telefonica as investors in a planned route between Virginia and Spain. That’s scheduled to come online next year.

It’s not a business venture as such for either Google or Facebook. Instead, it’s the kind of classic make versus buy choice that’s leading both companies down the path toward greater vertical integration.

Shifting spectrum from TV to mobile broadband still looks expensive


Broadcasters have reduced their selling price by $32 billion in the second round of the Federal Communications Commission’s incentive auction, which ended yesterday. Even so, there’s still a big gap between that and what mobile broadband carriers were willing to pay in the first round.

The auction is aimed at moving legacy TV stations off of prime UHF real estate so mobile broadband companies can use the bandwidth instead.

The second, reverse round of the auction began last month, with 90 MHz of prime mobile broadband spectrum on the line (and another 24 MHz for unlicensed uses and guard band duty). TV station owners bid their selling price for that spectrum down from the $88 billion they wanted for 100 MHz in the first round to the current $56 billion ask for 90 MHz.

The problem is that mobile companies only bid $23 billion to buy 100 MHz the last time around. Looked at one way, broadcasters met mobile carriers more or less halfway: the $66 billion gap is now $32 billion and change. If mobile companies were holding back to a significant degree the first time, they might be willing to pay more this time. On the other hand, $23 billion might be the max given their expected return on the investment and chopping out 10% of the available spectrum could mean they’re not interested in paying as much as in the previous round.

It gets more complicated. It’s not enough to just match the selling and buying prices. Congress is expecting the FCC to raise extra money to pay for digital upgrades to public safety networks.

Although there’s always been the hope of a fast and lucrative finish to the incentive auction, the base assumption has been that several rounds will be needed. The FCC will launch the second half of the second round – the forward, buyer’s auction – next week.

Broadband projects queued up for Monterey startups


Independent projects are driving broadband infrastructure upgrades on California’s central coast. Maybe not as universally or as quickly as local entrepreneurs would like, but it’s happening. That was my message on Tuesday evening to the the [Startup Monterey Bay Tech Meetup]( in Seaside.

I was asked to give [an update on broadband development in the region]( Those efforts center on the [Central Coast Broadband Consortium]( (CCBC), an ad hoc group of local companies, agencies and other organisations in Monterey, San Benito and Santa Cruz counties that essentially have one thing in common: an interest in getting better, cheaper and more reliable broadband service in the region. Some of the work it does – primarily analytical and policy work – is funded by [a broadband consortia grant from the California Public Utilities Commission](

Most of the region has substandard broadband service, earning a “D” grade or worse on a scale developed for the East Bay Broadband Consortium. More affluent and/or urbanised areas rate average, “C” grades, but in poorer and/or rural areas, consumers and businesses alike often struggle to get service that meets the CPUC’s minimum standard for Internet access: 6 Mbps up and 1.5 Mbps down.

The good news is that change is coming. A 91-mile open access fiber route between Santa Cruz and Soledad is nearing completion. Built and operated by Sunesys, funded by the CPUC and spearheaded by U.C. Santa Cruz, that line will provide low cost, high capacity backhaul to broadband projects along the entire route: municipal systems in Santa Cruz, Watsonville and Salinas, an FTTH system in north Monterey County and, it seems likely, Charter Communications’ CPUC-mandated digital upgrade of redlined, analog-only communities in the Salinas Valley.

Broadband by itself will not produce new ventures or jobs. It’s up to the region’s entrepreneurs, like those who were at Tuesday’s Monterey Bay tech meetup, to build companies on top of that basic infrastructure. But at least there’s now a fighting chance that it’ll be there for them when they need it.

Mobile carriers losing the data upgrade race to Californian demand


You can get more bits per second from mobile broadband carriers in California, but your odds of getting those faster speeds at any given moment are dropping. That’s what the California Public Utilities Commission’s mobile field testing result are showing. You can read the excellent blog post by commission staffer Rob Osborne here. He shows that mobile broadband speeds are increasing, but sums it up diplomatically: “it’s hard to say, but it appears the likelihood of getting the average speed at a particular location is lower than before”.

The CPUC has been running a regular series of Internet speed tests at more than a thousand specific locations for several years now. Over that time, mobile companies have upgraded their infrastructure and are capable of delivering fast, sometimes really fast, service. But judging from the latest results, either Californians are increasing their consumption of mobile data at an even faster rate, or the consistency of the new technology being deployed is dropping, or both.

Between the tests conducted a year ago and the latest round done this past spring, Verizon’s average speed in California – the highest of the four major carriers – increased from about 14 Mbps to just over 16 Mbps. Sprint stayed even at about 8 Mbps, T-Mobile went from 12 Mbps to 13 Mbps, and AT&T increased from 12 Mbps to just under 14 Mbps.

On the other hand, you have less of a chance of actually getting that kind of performance at any given moment. Rob does a good job of explaining the math and the methodology, but the bottom line is that the speeds you can expect to experience, as opposed to overall average speeds, are dropping: from 4 Mbps to just over 2 Mbps for Verizon, more or less the same range but a bit lower for AT&T and an even steeper drop to 1 Mbps for T-Mobile. Sprint only dropped a little, but its expected speeds are in the sub-2 Mbps range.

Mobile carriers are investing in more and better infrastructure, but judging from the CPUC’s measurements, not quickly enough to keep pace with Californians.