Governor hamstrings California’s broadband subsidy fund, pleases cable, telcos, unions

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With a stroke of Governor Brown’s pen, the cost of building independent broadband infrastructure using money from the California Advanced Services Fund has nearly doubled. Without comment, he signed assembly bill 2272 yesterday.

The new law, which takes effect in January, brings all CASF-subsidised broadband infrastructure projects under so-called prevailing wage rules, which impose union pay scales and work rules – often determined on a statewide basis – regardless of the typical construction costs and practices in a local area. It also specifically puts the massive paperwork burden of proving compliance on the shoulders of Internet service providers – under threat of criminal penalties. And it applies retroactively to existing projects as well as any approved in the future.

Up until this point, it was an open question as to whether a CASF subsidy triggers prevailing wage requirements. The California department of industrial relations had said it does in one particular case, but the appeals process has not yet run its course. As of the new year, though, there will be no doubt.


The door to better broadband closes for many.

AB 2272 is not just a benefit to its trade union sponsors. It’s also a huge gift to the big incumbent telephone and cable companies which bitterly fought the expansion of the CASF program that the governor approved last year. Under the new rules, independent ISPs – those that lack formal certification as regulated telephone companies – can apply for CASF grants and loans. Typically, independent ISPs have significantly lower overhead than big incumbents and often serve remote areas where the cost of living – and construction – is lower.

But not any more. Not if they take CASF money. As a practical matter, AB 2272 more or less doubles labor costs, which account for something like 80% of the total bill for broadband infrastructure projects. Because the rules apply to all the costs – those paid directly by ISPs as well as by CASF – a typical 60% subsidy effectively drops to less than 30%. And the cost of complying with often byzantine prevailing wage regulations – and the criminal risk of getting it wrong – makes CASF funding even less attractive.

It’s a win for construction and telecoms unions, and for AT&T and Comcast and the like – all reliable sources of campaign cash. For everyone else in California, AB 2272 is a huge loss: less competition in the broadband marketplace, leading to fewer jobs , higher monthly bills, and substandard service on decrepit infrastructure.

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Governor Brown signs community broadband bond financing bills into law

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Cities and other local agencies in California will be able to issue bonds to pay for building broadband infrastructure, thanks to two new laws approved by Governor Brown yesterday. Assembly bill 2292 and senate bill 628 expand the use of infrastructure financing districts (IFDs), on the one hand specifically allowing broadband to be included in old-style IFDs and creating a new kind, called enhanced infrastructure financing districts, on the other. In both cases, the bonds can be repaid by earmarking the incremental tax revenue that the project is expected to produce.

It’s more like a win and a half than two solid victories for community-financed broadband, though. SB 628 creates enhanced IFDs, which only require a single two-thirds majority vote by the electorate and have more flexible structures. It goes a long way toward replacing the old redevelopment agencies that the legislature (and the governor and the courts) killed in 2012. It will be a very useful tool for upgrading California’s ageing and overused water and transportation infrastructure, among other things. But it doesn’t specifically allow enhanced IFDs to issue bonds to build broadband facilities. Nor does it prevent it, particularly. So until someone actually tries to use it for, say, a fiber network, broadband will be in a grey area of the new law.

Not so with traditional IFDs, though. AB 2292, authored by San Leandro assemblyman Rob Bonta, specifically allows the use of bonds to build broadband infrastructure, and defines it as “communications network facilities that enable high-speed Internet access”.

Legally, the two don’t overlap, so Bonta’s bill doesn’t directly affect the new and improved system created by SB 628. But as far as it goes, it gives broadband the same critical infrastructure status as roads, sewers and aqueducts.

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Calfornia assemblyman gushes over Comcast and takes its cash

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Comcast is a model of modern corporate responsibility, according to assemblyman Adam Gray (D – Merced). In a letter he submitted to the FCC and cited by Comcast as a reason its mega-merger with Time-Warner and market swap with Charter should be approved, Gray showers his love on the company…

I am writing in support of the proposed transaction between Comcast and Time Warner Cable, because, while my constituents appreciate Comcast as a service provider, we are even more grateful to them for their investments in our community.

Comcast has boosted our local schools at seemingly every opportunity. It partners with schools in our area to give thousands of free books to students each year on Dr. Seuss’s birthday. It also sponsors a reading challenge for fifth graders that incentivizes teacher performance.

On its annual Comcast Cares Day, Comcast routinely chooses a local school as one of its project locations.

What could be better than a Comcast Cares Day to warm a legislator’s heart? Well, maybe $11,500 in Comcast campaign cash? No? Okay, how about $60,000?

That’s how much Gray has pocketed from California’s cable and telephone companies, and the cable industry’s Sacramento lobbying front, during the last election cycle and so far in this one, according to the Follow the Money website.

Gray has been a reliable ally. He’s also the author of assembly bill 2272, which was passed by the legislature and is now sitting on Governor Brown’s desk. If Brown signs it, it would just about double the cost of broadband infrastructure projects subsidised by the California Advanced Services Fund by imposing union wage rates and work rules. Which would effectively gut reforms passed last year that allowed independent ISPs to apply for CASF grants and loans. Reforms that were opposed by incumbents, particularly the cable lobby and Comcast.

There’s no way to point to a direct link. All you can do is look at the money Gray received and his efforts on behalf of Comcast, indeed all incumbents, and come to your own conclusions.

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Open Internet needs open discussion, says FCC commissioner

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No back room deals.

Get the net neutrality conversation out of Washington and into the light. That was the message last week from FCC commissioner Jessica Rosenworcel, speaking in Sacramento at a forum organised by congresswoman Doris Matsui.

The inference I got from Roseworcel’s prepared statement is that she 1. favors the classic definition of net neutrality – all data is treated equally, 2. thinks reclassifying Internet access and transport as a common carrier service (i.e. Title II, in Washington-speak) is a good idea, and 3. chairman Tom Wheeler’s no lobbyist left behind attitude will not result in good policy. See what you think

I believe the FCC must find a way to put open Internet policies back in place. We cannot have a two-tiered Internet with fast lanes that speed the traffic of the privileged and leave the rest of us lagging behind.

So as we look for a way forward, I am pleased that Chairman Wheeler has recently acknowledged that all options, including Title II, are on the table. As we proceed, we must also be mindful that more than 3.7 million people have written the agency to express their opinion. Openness and transparency matter too. It is good the FCC is hosting Internet roundtables back in Washington. But we should be open to more than discussion inside our building inside the Beltway. Because this is big — really big.

Rosenworcel has a history of independent thinking and voting and the smarts to make her points well. Her colleague on the democrat-appointed side of the commission, Mignon Clyburn, echoed some of the same sentiments at the Sacramento event, which, given the preference for no regulation on the republican side, means that Wheeler’s approach is finding little love for now.

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New Blackberry phone aimed at small share of small market

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The Blackberry Passport was unveiled this week. It would be a great product, if it ran the Android OS. It’s physically unique in a useful way. The phablet form factor makes it possible to do work on it, in the classic document-centric sense. The physical keyboard will suit some people better than virtual ones, even though the layout is less than intuitive. And it’s rugged, which makes it attractive to a wide range of users, particularly people who work on their feet or outside. So long as they have a big pocket to put it in.

Unfortunately, it runs Blackberry 10. Launching an oddball form factor into a big ecosystem will sometimes produce a hit product. Launching an oddball product into an oddball niche guarantees slow acceptance and low sales figures. Anyone who buys it has to be both comfortable with the size and other physical characteristics and with the Blackberry OS. Those are fractional markets, and when you multiply two fractions together you get an even smaller number.

Corporate IT managers may love it, but they have to respond to the BYOD desires of their internal customers. That leaves the government IT market, which taken on a world wide basis is probably big enough to keep it alive. But it won’t thrive.

Roll it out as an Android device and it’s both a platform for innovative apps for field work and ironic enough to be fashionable. With Blackberry 10, though, it’s the smart phone equivalent of a Ford Taurus with the government fleet trim package: bland, work-focused and designed to look like whoever bought it was primarily worried about not getting fired.

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Everyone’s picking on us, Comcast tells FCC

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Comcast has slammed back at critics of its proposed mega merger and market swap with Time-Warner and Charter. In a filing with the FCC, Comcast played the victim, claiming that companies and organisations that oppose the deal are just trying to feather their nests at its expense.

The California Emerging Technology Fund’s criticism of the Internet Essentials program in particular got under Comcast’s typically thin corporate skin. CETF submitted well-documented comments showing how the program – intended to provide affordable Internet service to low income families – is more sham than show. Comcast’s answer is to call CETF’s findings “overstated, unfounded and often self-serving”…

CETF and a few other petitioners criticize certain aspects of Internet Essentials and seek a laundry list of unnecessary and counterproductive conditions.114 Their claims are, first and foremost, irrelevant. Comcast has never claimed that Internet Essentials is the only choice for a broadband adoption program, or that there are no aspects of it that could be improved, as Comcast has consistently done.

Comcast says that the fact that 35,000 homes have taken advantage of Internet Essentials in California – a statistic, in fact, mentioned by CETF – proves they are wrong. That disingenuously ignores the other stat CETF cites: 313,000 Californian homes are eligible for the program, which has been running for more than 3 years.

In other words, Comcast can’t even sign up 1,000 homes a month in California and has barely reached a tenth of the potential market. As CETF shows, the reason isn’t lack of interest, it’s because Comcast makes it hard for people to sign up, but easy to churn out.

That 35,000 figure, by the way, is gross subscriber additions, not net gains. If you assume a typical churn rate of 20% – typical for more affluent homes, that is – Internet Essentials will stall out at something like 60,000 homes (within that particular universe), reaching less than a fifth of the Californians who need it. A higher churn rate – not unreasonable to assume for lower income households – will mean even fewer will benefit.

Allowing Comcast to control as much as 80% of the cable market in California will only spread the pain further.

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Is Google Fiber making a power (zone) play in Austin?

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Google has finally broken ground in Austin, Texas for its third fiber-to-the-home project. The announcement came in a blog post, complete with a couple of pictures that show guys boring a hole in the ground for conduit and doing something – it’s not clear what – with a power transformer on a utility pole.

Yes, the guy in the bucket truck is working in the power zone – the area of the the pole reserved for electrical distribution. Communications cables usually run lower, where less rigorously trained (and expensively paid) technicians can operate safely. It’s possible to run fiber optic cables alongside power lines – PG&E does a lot of that here in California – but that’s not where telecoms companies do their work.

I’m not sure what it means (and not ruling out that I’ve just missed the obvious until now). Could be the guy is just doing some routine make-ready checks and needed to take a look at something in the power zone. Or he’s installing an electrical connection for Google’s equipment and whoever wrote the the photo’s caption – “Making room for Google Fiber on Austin’s utility poles” – doesn’t understand the difference.

Or, it could be something more interesting. Like maybe Google is partnering with Austin Energy, the municipal electric system that serves the City of Austin and surrounding areas.

There’s nothing new about municipal electric utilities getting into the fiber business. Several California cities have done so, although not yet for FTTH purposes. But Provo, Utah did, and sold the system to Google. It’s not a novel idea, even for Google.

What would be new, though, is Google working with a city utility department on a completely new overbuild. Taking advantage of (relatively clean?) pole routes owned by a city would lower expenses by a ton; having the work done and the system operated by company with Google’s cost structure and scale would drop the tab even further.

Google is promising more details on 15 October 2014 – maybe their strategy will become clearer then.

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Comcast tells FCC OK, maybe it isn’t so easy to compete against us

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If you want to go head to head with Comcast, you better have deep pockets. That’s the gist of Comcast’s response to a question from the FCC regarding the barriers faced by new Internet service providers: “describe the minimum viable scale necessary for entry, including…the number of subscribers and advertisers needed to break-even”.

I’m still slogging through the filing – it runs more than 250 pages – but Ars Technica has a good overview (h/t to the Baller-Herbst list for the pointer). It’s part of the FCC’s review of the proposed Time-Warner merger and even with Comcast’s endless evasion, it paints a bleak competitive picture.

For the most part Comcast answered, in effect, we don’t know, but did finally admit the primary difficulty a new competitor would have…

It is expected that a new service will take a number of years to break even; the number of years required will in turn depend on the service’s costs. These costs in turn depend on a variety of factors…To the extent an Internet access service provider offers other services over the same network as its Internet services – e.g., multichannel video programming, voice, technology solutions and equipment – as many of them currently do, revenue from those other services will help defray costs and accelerate the time it takes the provider to break even.

In other words, scale matters, both in terms of how much cash you can afford to burn through before hitting break even and how many extra services you can load onto a subscriber’s monthly bill. Comcast refused to be drawn on how big that is, which is not surprising since the answer – really big – refutes its core claim that merging with Time-Warner and swapping markets with Charter will have zero competitive impact on would-be competitors.

Allowing Comcast to get bigger and thicker also raises the bar for others, making it more likely that current competitors will exit the market than new ones enter it. No matter how Comcast tries to spin it, this proposed mega-deal is as anti-competitive as it gets.

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For broadband subsidies, CPUC says real world performance counts more than mobile carrier claims

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Urban California has far better mobile broadband service than rural areas of the state. That’s one of the conclusions of a study done for the California Public Utilities Commission analysing millions of field tests done at thousands of locations statewide (H/T to Jim Warner for the pointer). The study also shows that getting a true picture of what consumers can expect to experience requires factoring in the unreliability of cellular data systems.

Mobile service counts when the CPUC decides whether a community has an adequate level of broadband service. In other words, whether residents have access to at least one provider that delivers 6 Mbps download and 1.5 Mbps upload speeds. If the answer is no, then that area is eligible for infrastructure construction subsidies from the California Advanced Services Fund.

In deciding that, the CPUC will discount mobile carriers’ advertising claims and brief bursts of acceptability, according to a recent FCC filing….

For example, the report shows that wireless broadband service is much more variable than wireline service. Accordingly, the CPUC is wary of using mean throughput as an indicator of the service most customers will experience. The mean is heavily influenced by a relatively few very fast readings. Therefore, in order to determine the actual level of service most consumers experience most of the time, for grant evaluation purposes, the CPUC staff will lower a provider’s tested mean throughput by one standard deviation to determine if that service meets the CPUC’s current CASF benchmark throughput of 6/1.5.

It makes a huge difference. If the CPUC didn’t use real world standards, mobile coverage would be sufficient to lock 98% of Californians out of CASF-subsidised broadband upgrades. Using standards based on what consumers actually get, though, the data shows that more than a third of the population and two-thirds of the mostly rural land area of California are underserved by mobile carriers.

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California discounts mobile broadband performance

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Cellular data services are sometimes fast but always inconsistent. Occasional bursts of good performance skew averages based on measurements taken over periods of time, building false expectations of the speed and performance consumers will actually get. That’s one of the conclusions reached in an analysis done for the California Public Utilities Commission, based on millions of field tests conducted at thousands of locations throughout the state (H/T to Jim Warner for the pointer).

Nearly everyone in California – 98% of the population – would have access to the CPUC’s minimum standard of service (6 Mbps down/1.5 Mbps up), if carrier claims and sporadic speed spikes are taken at face value. But the CPUC’s analysis shows that doesn’t match reality…

The mean normalized standard variation can vary from as little as 25% for an urban Verizon user to as much as over 100% for a rural T-Mobile user. Rural users can expect to see much more variability in their service than urban users….

Lowering the mean speeds down by one standard deviation is necessary to approximate what most consumers can expect from their mobile service most of the time.

In real world terms, applying a variability discount to the raw data means that only 64% of Californians can get an adequate level of service from mobile carriers, leaving 36% out in the cold. Looked at in terms of land area, the story gets even worse. 66% – just about two-thirds – of the state does not have mobile data service that meets the minimum standard.

Many Californians have access to high quality mobile broadband service – the report notes that “mobile broadband, at its best, has gotten much better VERY quickly, on average”. But more than a third of the people in California and two-thirds of the land area see cellular data service at its worst.

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