New digital literacy, broadband access grant program approved by CPUC

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The California Public Utilities Commission approved a new broadband promotion program at its meeting in San Francisco yesterday. Via the California Advanced Services Fund (CASF), the program will award grants for digital literacy training and community broadband access projects. Non-profit groups, schools, local governments and other not-for-profit organisations can compete for the $5 million initially available, with the first round of applications due on 31 August 2018.

There’s a fast lane – expedited review – for applications requesting grants of $100,000 or less, and that meet other specific requirements, such as serving a low income community and offering technical support. In addition, preference will also be given to projects that serve rural areas and/or people with “limited English proficiency” and “limited educational attainment”. Grants can pay for up to 85% of eligible project costs.

One knotty problem is evaluating the effectiveness of “broadband adoption” projects. Strictly speaking, adoption is a marketing metric, typically expressed as the percentage of people who buy a particular category of services or products. The obvious solution is to get subscriber data from Internet service providers, but that’s something that big ISPs, and particularly AT&T, do not want to do. They treat it as proprietary information. One possible work around is to sign non-disclosure agreements, and the CPUC will work on creating a standard one for grantees to use. But the CPUC isn’t requiring ISPs to participate, so it might not get very far.

The commission also made relatively minor changes to its existing grant program for public housing communities. It didn’t change its standards, though. Unlike other CASF-funded infrastructure projects, which have to offer at least 10 Mbps download and 1 Mbps upload speeds, facilities in public housing only have to deliver 1.5 Mbps down, with no particular upload requirement.

The new adoption program – $20 million total – was created by the state legislature last year, when it turned the lion’s share of CASF – more than $300 million – into a piggy bank for AT&T and Frontier Communications. Those new rules are still under development at the CPUC, with a final version expected by the end of the year.

Net neutrality bill thottled by AT&T’s friends in the California legislature

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In an ugly display of legislative muscle yesterday, assemblyman Miguel Santiago (D – Los Angeles), the chair of the California assembly’s communications and conveyances committee, gutted senate bill 822, the lead network neutrality bill in the California legislature.

The other net neutrality bill, SB 460, was withdrawn by its author, senator Kevin de Leon (D – Los Angeles). Although it’s technically still alive, SB 460 is dead as a practical matter (although resurrection is always a possibility at the California capitol). Santiago rejected the deal de Leon reached with Weiner over the weekend. Although no explanation for de Leon’s withdrawal was offered, it’s not hard to connect the dots.

Santiago, who has pocketed tens of thousands of dollars from telecoms companies$8,800 from AT&T alone this session – offered drastic amendments that blasted big holes in SB 822, and called for a vote, over Weiner’s objections.

Seven other committee members, including all four republicans, fell in line with Santiago and voted aye on the amendments: Jay Olbernolte (R – San Bernardino), Eduardo Garcia (D – Riverside), Brian Maienschein (R – San Diego), Devon Mathis (R – Tulare), Jim Patterson (R – Fresno), Freddie Rodriguez (D – San Bernardino), Sabrina Cervantes (D – Riverside).

Weiner shot back at Santiago…

What the committee just did was outrageous…the amendments that the committee just adopted eviscerate the bill. It’s no longer a real net neutrality bill. It is astounding to me that the committee would, and that you would ask the committee, to take that vote before hearing my presentation, before hearing public comment, before hearing support and opposition for amendments that were issued less than 12 hours ago. So I will state for the record: I think what just happened, I think was a violation of assembly rules but even if it wasn’t it’s fundamentally unfair.

Nevertheless, the committee moved ahead and considered the now-gutted version of SB 822.

For the next couple of hours, arguments for and against reinstating network neutrality rules followed a predictable path. Supporters of SB 822 urged the committee to reinstate the original language. Opponents, led by AT&T, said amended or not, they didn’t support it.

Weiner then tried to take SB 822 off the table, saying “I don’t want a vote today on this bill”.

Santiago rejected the request, citing a legislative deadline that comes at the end of next week. It was a phony excuse – as committee chair, he could have brought the bill back for another hearing well before then. Garcia moved for a vote, and assemblyman Evan Low (D – Santa Clara) seconded him. Both are also reliable friends of AT&T. Garcia carried a bill creating a $300 million piggy bank for telcos last year and Low pushed to allow them to rip out rural copper networks a couple of years ago.

Then came the second and final vote. Olbernolte and Mathis flipped and voted no. Patterson effectively did the same by abstaining, as did Rob Bonta (D – Alameda) and Chris Holden (D – Los Angeles). But Low, Sydney Kamlager-Dove (D – Los Angeles) and Sharon Quirk-Silva (D – Orange) added their support and the amended – eviscerated – version of SB 822 was approved. Its next stop is the assembly’s privacy and consumer protection committee.

Correction: Sabrina Cervantes (D – Riverside) recorded an aye vote for SB 822. The post above was corrected and updated, per the posted vote tally.

San Francisco muni FTTP project hits the rocks

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San Francisco’s $1.9 billion plan to build a citywide fiber to the premise system is dead. At least for now. According to a story by Joshua Sabatini in the San Francisco Examiner, temporary mayor Mark Ferrell didn’t intend to file the paperwork needed to put a tax measure on the November ballot by yesterday’s deadline (h/t to everyone who sent me the link – much appreciated). There’s no indication he changed his mind and, according to the Examiner, would-be private sector partners were told to stand down…

The Office of Contract Administration sent a June 13 letter to the three bid teams informing them of the delay. “The City and County of San Francisco has decided to further consider factors essential to the success of the project prior to issuing a Request for Proposals (RFP),” the letter said. “Given the groundbreaking nature, complexity, and cost of this project, it is important that we reduce uncertainties to the extent possible prior to issuing an RFP.”

The letter continued, “In the coming months, the City intends to research a number of factors, including how market conditions and the construction environment would affect the project.”

Ferrell iced the project because a poll showed that voter approval of a tax increase “was just short of the two-thirds needed to pass”, according to the Examiner. Perhaps. It’s also relevant that Ferrell will soon hand over the mayor’s job to London Breed, who won the job in a special election earlier this month. She hasn’t said yet what she plans to do and all Ferrell can say is that he’s leaving behind a “briefing binder”. Translation: they’re not besties.

Three teams were in the running to manage, operate and, perhaps, partly fund the project. At least two were led by local Internet service providers, Monkey Brains (with the assistance of Black and Veatch, Nokia and Zayo) and Sonic.net. The third contender is list only as “FiberGateway”. There’s no obvious broadband company that goes by that, but for what it’s worth, Altice, a mid sized cable operator with a relative handful of systems in California, uses it as a product name.

Deal reached to combine California net neutrality bills

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The two network neutrality revival bills moving through the California legislature are now one. Sorta. According to a story in the Los Angeles Times by Jazmine Ulloa, senators Scott Weiner (D – San Francisco) and Kevin de Leon (D – Los Angeles) agreed yesterday to partner up on their net neutrality bills – senate bills 822 and 460, respectively. Weiner will carry the core net neutrality regulations – no blocking, throttling, paid prioritisation or zero rating – while de Leon’s bill will focus on the simpler task of requiring state and local agencies to only buy Internet service from companies that follow those rules.

They also agreed to bind the two bills together. Both have to be passed by the legislature and signed by governor Jerry Brown in order for either one to take effect. It’s both or nothing.

According to the article, the two senators decided it was time to close ranks…

Wiener said combining forces was necessary to reinstate net neutrality in California amid heavy lobbying in Sacramento from major internet service providers, “playing the bills against each other with the goal of killing both.”

It’s a win-win solution for them. Weiner has done the heavy lifting on the issue, crafting and re-crafting his bill’s language so it would withstand the inevitable court challenges from telecoms companies. De Leon, on the other hand, has an almost certainly doomed November election campaign against U.S. senator and fellow democrat Diane Feinstein to worry about. His bill is not as well written and he’s been largely silent on the issue for the past few months. Weiner gets the legislative win; de Leon scores at least some points with democratic voters.

The amended bills haven’t been published yet. It’ll be important to read the changes carefully. The California assembly’s communications and conveyance committee is scheduled to vote on the bills tomorrow. Standard practice is for committee chairs, in this case assemblyman Miguel Santiago, and their staff to negotiate changes beforehand. Santiago’s committee has been kind to industry lobbyists in the past, and could try to weaken SB 822, as senator Ben Hueso, chair of the senate energy, utilities and communications committee appeared to do when his committee reviewed it.

AT&T holds minorities, poor hostage in California net neutrality battle

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The California assembly’s communications and conveyances committee hasn’t published its analysis of network neutrality legislation yet, but it’s getting plenty of analytical help from AT&T. The Electronic Frontier Foundation (EFF) has uncovered another bespoke white paper that’s circulating behind closed doors in Sacramento. It’s authored by a hired gun economist and distributed by Cal Innovates, a lobbying front for AT&T, Uber and several small companies and non-profits.

The piece takes aim at the ban on zero rating proposed by senator Scott Weiner (D – San Francisco) in senate bill 822. That’s a technique major Internet service providers use to give content – particularly video, that they own and/or sell – an advantage over their competitors by leveraging their control over the bandwidth their customers buy. If, for example, you watch AT&T’s video via your AT&T mobile connection, it doesn’t count against your monthly data cap. If you watch Netflix, though, it does.

The paper claims that “low income and minority Californians enjoy disproportionately greater benefits from zero-rated data”. Low income Californians tend to rely solely on smartphones for Internet access because, well, they don’t have a lot of money. But zero rating, according to EFF, produces the the exact opposite of what AT&T’s lobbying front claims

Users who depend on their wireless device for Internet access are highly likely to pay overage fees when they try to take advantage of the full, open web. These overage fees are part of a scheme to force wireless Internet users to only use products and services that the wireless ISP has exempted from their own arbitrary data caps—and to punish users when they stray from those products and services. The CTIA’s own study confirms that if they can drive Internet users to their chosen zero rated products to the detriment of potentially superior services.

In other words, any harm is the result of AT&T’s deliberate marketing and network management tactics. They’re telling the legislature: screw us with net neutrality and we’ll screw minorities and the poor.

The communications and conveyances committee is scheduled to consider SB 822, and a weaker net neutrality revival bill, SB 460, carried by senator (and U.S. senate candidate) Kevin de Leon (D – Los Angeles), on Wednesday. The committee has a history of accommodating big telcos and cable companies. We’ll soon know whether history will repeat itself.

CPUC urged to keep broadband promotion subsidies provider neutral

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Broadband promotion grant rules should have air tight guarantees that the money won’t be used to promote any particular Internet service provider. That’s the consensus of several organisations that reacted to a draft decision that would have the California Public Utilities Commission set up a broadband “adoption” program, subsidised by the California Advanced Services Fund (CASF).

As the new rules were being developed, big, incumbent ISPs argued, in effect, that they should be able to leverage the money to supplement their subscriber acquisition – aka sales – efforts. The first draft of the rules is a little ambiguous on that point. Although the money would flow through (presumably) non-profit organisations, partnerships with ISPs are encouraged. No one seems opposed with the idea of working with ISPs. After all, the goal is to convince more Californians to buy Internet access and join the online world. ISPs have to be part of the mix for that to happen.

But exclusive deals are something else again. Big ISPs such as AT&T, Frontier Communications, Comcast and Charter Communications don’t play well with others. As anyone who has watched the parade of sock puppets that the big carriers march into legislative hearings can tell you, when they can rope non-profits into working for them, they will. In its comments to the CPUC, the California Emerging Technology Fund (CETF) said Frontier wants to do exactly that…

Currently, CETF is being pressured by Frontier Communications to have CBO grantees for adoption outreach market only Frontier’s affordable offer. This is contrary to the role of a non-profit organization to educate a potential subscriber to all affordable offers available, and help choose the best one for his or her needs.

Most of CETF’s funding comes from Frontier and Charter these days, to run such subscriber acquisition campaigns in their territories.

The Greenlining Institute, TURN (aka the Utility Reform Network, aka Toward Utility Rate Normalisation) and the CPUC’s office of ratepayer advocates also pushed for clear language banning exclusive deals between grant recipients and ISPs. As TURN and Greenlining put it

The Commission should ensure that those partnerships do not require digital literacy programs to exclusively promote one Internet Service Provider’s services at the expense of competition and informed consumer choice. These program participants are exceptionally vulnerable in that they have been recently introduced to the internet and on-line environment and presumably have little to no knowledge regarding the various options and “players” in the marketplace. These consumers will likely be looking to these programs for guidance and advice on adoption options. These consumers should not be misled or otherwise given the impression that they do not have a choice for internet services through program materials, branding, or other marketing materials solely from the ISP partner that would likely be accessible during the grant- funded program.

Rebuttals, should there be any, are due next week. The CPUC is scheduled to make a final decision on 21 June 2018.

The complete set of CASF reboot documents is here.

Debate California’s future, don’t dismiss it

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The plan for dividing California into three states – dubbed Cal 3 by its proponents – qualified for the November general election this week. Reaction from the political establishment of both major parties generally ranged from I don’t think so to yawn. One exception was state senator Joel Anderson (R – San Diego County) who, according to the San Francisco Chronicle, said he will vote for it and called it “a barometer of the potential unhappiness of the state”.

On the other hand, lieutenant governor Gavin Newsom, who is the odds on favorite to win the governorship on the same ballot scorched the idea, while simultaneously downplaying it, according to the Los Angeles Times

“California’s success is being a cohesive state, particularly at a time of Trump and Trumpism,” Newsom said. “We’re now the fifth largest economy in the world. Why would we cede that to splitting the state up into three?”

Newsom said the breakup proposal would lead to “litigation, consternation, north versus south, all kinds of constitutional issues,” but he added he is not spending a lot of time dwelling on the proposal.

So far, all his opponent, republican John Cox, has offered is “no comment”.

Labelling it a protest vote or dismissing it as a time consuming distraction are equally wrong. I haven’t made up my mind whether to vote yes or no on it, but I do think it’s an opportunity for Californians to have an adult discussion about how our state is run, and who really runs it.

A spokeswoman for the Cal 3 campaign, Peggy Grande, framed the core question in a press release “the reality is that for an overmatched, overstretched and overwrought state government structure, [California] is too big to succeed”. Her premise is correct: California’s government is increasingly dysfunctional, at both the political and administrative level.

Cal 3’s conclusion, that the only solution is breaking up the state, is eminently debatable, though. Candidates for state offices should address the issue and offer their own solutions, not dismiss the initiative or turn it into an equally meaningless protest.

That might be too much to hope for.

SCE proposes doing CPUC reviews the old, costly way to save its fiber business

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Instead of shooting Southern California Edison’s fiber business in the head, the California Public Utilities Commission might have shot itself in the foot. Earlier this year, commissioner Clifford Rechtschaffen drafted a plan to kill the business model that the CPUC approved for SCE’s dark fiber leasing enterprise nearly 20 years ago. It was in response to a request from SCE for approval of a high volume master fiber lease agreement it negotiated with Verizon.

In a recent closed door meeting with Rechtschaffen’s staff (plus an advisor to commissioner Lianne Randolph), SCE proposed scrapping the master lease and using the existing time and labor intensive – for SCE and the CPUC – method of reviewing each new agreement individually.

The original idea was to get the CPUC’s blessing for the overall terms of the deal, to avoid the necessity of submitting each, individual route lease for review. It would have meant less work for everyone involved, and allowed SCE to lease more dark fiber more quickly, first to Verizon and then presumably to any other broadband carrier or customer that, with the CPUC’s approval, negotiated a similar master lease agreement.

Neither efficiency or the broadband needs of Californian consumers seemed to be on Rechtschaffen’s mind. He proposed changing the revenue sharing arrangement from 90% of gross fiber leasing income going to SCE and 10% to its electric customers, to 25% to SCE and 75% to ratepayers. SCE argued – correctly – that taking away the lion’s share of the revenue would remove the financial incentive for it to pursue more fiber business. That would knock a major independent competitor out of the southern California telecoms market.

By submitting fiber leases the old way – which it still has the right to do, so far – SCE maintains an incentive to continue competing…

Like all other dark fiber leases for the last 19 years, the lease route orders under the MLA would receive the revenue sharing mechanism designated for dark fiber leases in [the original 1999 CPUC decision]

It’s not ideal – repetitive item by item review is a waste of taxpayers’ money – but it is a solution that would preserve a competitive fiber market in southern California. Rechtschaffen hasn’t responded yet, and might not do so publicly. SCE’s original application is still pending – what eventually happens with it will tell the story.

Net neutrality bills converge at the California capitol

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The two network neutrality bills moving through the California legislature will finally be reviewed together, or at least one after the other, in a committee hearing. Next week, the California assembly’s communications and conveyances committee is schedule to take up senate bills 460 and 822.

SB 822, by senator Scott Weiner (D – San Francisco) is the stiffer and better written measure. It mimics the same three bright line rules that the Federal Communications Commission enforced until this past Monday – no blocking, throttling or paid prioritisation – and adds zero rating to the list.

Zero rating is the practice of not counting a carrier’s own content against data caps. For example, if AT&T said that its mobile customers could watch all the DirecTv video they wanted, but anything they streamed from Netflix would count against their monthly data limit, then that would be zero rating.

State and local agencies would also not be allowed to buy Internet service – mobile or fixed – from companies that don’t abide by SB 822’s rules.

The bill was recently amended, but the changes are generally technical. A sharper distinction was drawn between “mass market” and “enterprise” services – the rules would apply to mass market service, but not to “offering[s] to larger organisations through customised or individually negotiated arrangements or special access services”. Language that specifically authorises the California attorney general to bring offending companies to court was eliminated. The net neutrality rules would be written into consumer protection law, which already gives the attorney general authority to act.

SB 460 is authored by senator Kevin de Leon (D – Los Angeles). It was cobbled together as a legislative deadline ticked down at the beginning of the year and isn’t as well thought out as SB 822. But de Leon was senate majority leader until recently and has the desperate job of trying to unseat fellow democrat Diane Feinstein in this year’s U.S. senate race. Owning a bill that takes on a high profile issue targeted by democrats at the national level will help him raise money and gain name recognition.

Both bills won’t make it through the legislative process and land on governor Brown’s desk. The likeliest outcome will be for the two to be combined into a jointly authored bill. The best opportunity to do so might come at next Wednesday’s hearing. The question is whether the often industry-friendly communications and conveyances committee will choose the weaker or stronger option.

Judge allows AT&T to buy Time Warner, no strings attached

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A federal judge decided yesterday that AT&T may buy Time Warner’s video and motion picture content companies, including HBO, CNN and the Warner Brothers movie studio. Judge Richard Leon, who was appointed by president George W. Bush, put no conditions on the acquisition. He simply ruled “the government’s request to enjoin the proposed merger is denied”.

The 172 page decision does an excellent of outlining the current state of the video distribution market. AT&T wants to buy Time Warner so its DirecTv and other video services – delivered via satellite and mobile and wireline networks – can better compete with the likes of Netflix, Comcast (which also owns an extensive stable of content companies) and Amazon. Leon’s decision picks apart, and ultimately rejects, the federal justice department’s claim that the deal would “substantially lessen competition in the video programming and distribution market”.

What the decision doesn’t do is examine AT&T’s ability to use its monopoly/duopoly control over consumer Internet access in the U.S. to freeze out competing programming and online content distributors, and to raise prices for captive subscribers. That concern is particularly high this week, with the end of federal network neutrality rules that might have prevented that kind of harm.

AT&T will use its online muscle to make the most of this $85 billion purchase, as Leon’s decision makes clear

AT&T witnesses testified that they believe the company’s future lies in the use of online and mobile wireless connections to access premium video. As John Stankey, the AT&T executive who will be tasked with running Time Warner should the merger proceed, explained, AT&T acquired DirecTV in 2015 not in an effort to double down on the satellite business—a concededly mature and indeed declining asset—but to “pick up a lot of new customers that we could work on migrating” to new, innovative products necessary to compete in the future.

It’s possible that the federal justice department will challenge Leon’s decision, and could ask an appeals court to put the deal on hold while it’s under review. That’s all speculative, though. As of now, AT&T and Time Warner can close the sale next week as planned.