PG&E seeks to use its California fiber to compete as a telco

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A vast, competitive fiber network will soon open up in northern California, if the California Public Utilities approves Pacific Gas and Electric Company’s request to operate as a telephone company. PG&E applied for a telco-style certificate of public convenience and necessity (CPCN) so it could sell services on the fiber network it’s built throughout California. Currently, it only allows other certified telephone companies to use its fiber, which was mostly built to support its own operations.

According to PG&E’s application

Applicant intends to provide services to telecommunications carriers and business, government, and educational enterprises, and such services may include managed wavelength point-to-point connections, Ethernet services, private fiber networks, and wireless backhaul. Applicant intends to offer services that other telecommunications providers and large enterprise customers require as the overall demand for wireless and broadband services continues to grow. Applicant does not intend to provide residential local exchange services…

Competition in the telecommunications markets, and especially those markets with a limited number of providers, will benefit customers as they will ultimately enjoy competitive pricing and expanded product and service offerings. Where new entrants like Applicant enter the market, existing providers may react by extending different service offerings and/or decreasing prices. Increased choice among providers promotes competitively driven rates for telecommunications services.

Reading between the lines of the application, it seems that PG&E no longer intends to lease its dark fiber, as it currently does with licensed phone companies, and instead it will move up the value chain and sell lit services. It would be a shame if it eventually played out that way, since the list of companies willing to lease dark fiber is already shrinking.

PG&E won’t be the first privately owned electric company to add telecoms to its portfolio. Southern California Edison was granted telco status almost 20 years ago, and the revenue sharing deal it struck with the CPUC could be a template for PG&E as well. SCE gives 10% of its gross fiber revenue back to its electric customers, with the rest going to shareholders. PG&E is proposing to split its after tax profits 50/50 between shareholders and electric customers, which might net out somewhere in the same ballpark. That’ll be one of the issues the CPUC is certain to spend some time chewing through.

From the standpoint of broadband customers, its good news, the potential lack of dark fiber service nothwithstanding. Once PG&E has a CPUC-blessed pathway to telecoms profits, it should compete more vigorously against other wholesale fiber service providers, including big incumbents like AT&T, Comcast and Charter. PG&E’s fiber footprint isn’t nearly as wide, but it is significant and adding a robust competitor to the market will be good for everyone, except of course incumbents who extract lucrative rents from rural monopolies and cozy urban and suburban duopolies.