Tag Archives: cetf

CETF audit, more CPUC reforms approved by California legislature

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A second round of California Public Utilities Committee reorganisation was approved in the final hours of the legislative session on Friday night. Senate bills 19 and 385 are heading to the governor’s desk. The main one is SB 19, carried by senator Jerry Hill (D – San Mateo), who has been deeply involved in CPUC reform efforts ever since a massive, fatal explosion of a PG&E pipeline in San Bruno in 2010.

There are general changes that affect the way the commission does business overall. Area code assignments aside, none specifically relate to the way telecommunication services or companies are regulated.

SB 19 expands the commission’s audit responsibilities, and a legislative staff analysis makes it clear that the broadband-focused California Emerging Technology Fund is a primary target…

The CPUC has often negotiated settlements, particularly related to mergers of companies, which create new entities or programs. For example, the California Emerging Technology Fund (CETF) was developed and funded as a separate nonprofit entity by the CPUC through the approved mergers between SBC-AT&T and Verizon-MCI. Last year, [former assemblyman Mike Gatto] requested an audit of the CETF. However, the CPUC had suggested that they lack the statutory authority to conduct an audit of CETF and other similarly constructed entities.

This bill will ensure the CPUC has the statutory authority to conduct such audits and require the audits are conducted in a manner that adheres to approved general auditing practices.

Other changes include banning public utility executives from becoming CPUC commissioners for “two years after leaving the employment of the utility”. Commissioners would directly appoint the chief administrative law judge and a chief internal auditor. The job of staff ethics officer would be baked into law and the public advisor’s office would be responsible for handling complaints about the way the commission does business.

Some of the CPUC’s transportation-related duties would be transferred to other state departments, including regulation of moving companies, private buses, and some water transportation and passenger aircraft. The changes seem to be consistent with governor Brown’s wishes and it’s a good bet he’ll approve both bills.

CenturyLink defends Level 3 deal with Trumpian flourish

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They could have just tweeted it.

Sean Spicer has a new gig, ghostwriting legal briefs for CenturyLink. There’s no other way to read CenturyLink’s latest filing with the California Public Utilities Commission. It’s a whingeing, self-contradictory and occasionally bitter reply to the California Emerging Technology Fund’s (CETF) continued opposition to CenturyLink’s proposed purchase of Level 3 Communications.

CETF’s objections weren’t particularly on point – they were more concerned with spending CenturyLink’s money than maintaining a competitive fiber market in California – so it’s no surprise that the rebuttal skids and spins like a Lada sedan in a Moscow ice storm. It collides with itself, jabbing a finger toward a woolly promise to spend big on California infrastructure and work with CETF and others to “identify projects for such investment”, but quibbling in the fine print of a footnote that those are merely “possible locations”.

On the central question before the CPUCwill the transaction cripple wholesale fiber competition in California? – CenturyLink offers facts and alternative facts. It first says, okay, so we’re taking out a competitor

The instant transaction involves the transfer of control at the parent level of the Level 3 Operating Entities that provide services to a (limited) number of wholesale and enterprise customers only. The transfer is to CenturyLink, the parent company of a non- dominant carrier in California that also provides competitive services to wholesale and enterprise customers.

But, it continues, fewer competitors doesn’t mean less competition

By any measure, the Level 3 Operating Entities, even when combined with the CenturyLink Operating Entities, will remain a non-dominant competitive provider without any particular market power in any relevant telecommunications market (e.g., backhaul, long haul, enterprise, etc.).

Nonsense.

Both have considerable market power now, as two of the four major long haul fiber owners on key California routes, and Level 3 is the only independent operator. Rolling it into the monopoly business model embraced by AT&T and Verizon – the other two – and by CenturyLink will only add to the wholesale fiber crunch identified by the CPUC as a root cause of California’s “highly concentrated” residential broadband market.

The CPUC needs to separate truth from fiction, and base its decision on broadband market realities and not on corporate bluster or well-meaning wishful thinking.

CenturyLink and Level 3 joint reply to CETF comments, 25 July 2017
CETF comments on CenturyLink purchase of Level 3, 21 July 2017

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.

California broadband adoption rate flat for 5 years

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The in-home broadband subscription rate in California is the same now as it was five years ago, and the cost of service is the biggest barrier to adoption. That’s the top line result from an annual survey commissioned by the California Emerging Technology Fund. This year, the research was carried out by U.C. Berkeley’s Institute of Governmental Studies. It found that in 2017, 69% of Californian households are connected to the Internet via a “computing device”, which is the same rate as in 2013.

Another 18% of Californian households get Internet access “through a smart phone only”. That figure has gone up over the five years: in 2013, it was 6%.

Age, income and ethnicity matter. Homes surveyed where the “householder” is younger than 30 years old are well above the 69% average, with 78% reporting broadband access. On the other hand, Internet connectivity drops off sharply past age 65 – 60% for everyone 65 and older, and just 49% at 75 and older.

White households have a broadband take rate of 83%, which compares to Asian American and African American households at 64% and 63% respectively, and to Latino households, which have an overall adoption rate of 54% and just a 32% rate among Spanish speakers. Latinos are also far more likely to be limited to smart phone access only.

There’s a clear household income trend too – 48% of household where income levels are less than $20,000 a year have in-home broadband access, compared to 90% of households with income at $100,000 or more. Reliance on smart phones is likewise linked to income, with 27% of households with income of less than $20,000 relying solely on mobile service. That figure drops to 9% in homes where income is at $100,000 or more.

Price is the major reason people do not have broadband service in their homes. Of the Californians who don’t have connectivity, 69% cite cost as a factor and 34% say it’s the main reason. No other factor comes close. Only 12% say it’s because of technical difficulties or a lack of knowledge. That’s in line with other studies that point to service and equipment costs as the primary barrier to broadband adoption.

California’s broadband growth flat for six years

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There are two ways to look at the latest Field Poll/California Emerging Technology Fund survey of household Internet penetration: the number of homes with someone online, at one level or another, jumped five points from 79% in 2015 to 84% in 2016, or broadband uptake has stalled in the Golden State for six years.

The case for the former is the topline gloss of the survey which has total broadband penetration at 84%, if you define broadband penetration as at least one person in the house with a smart phone in his or her pocket. That’s the number that went up 5% in one year.

If you look at fixed broadband service, though, it’s a different and depressing picture. In 2010, 70% of homes in California had a broadband subscription – via wireline or fixed wireless service – that was available, in theory, to everyone in the house, all the time. Six years later, in 2016, that number was… wait for it… 70%.

That means that 16% of Californian homes have no Internet access at all, and 14% are second class cyber-citizens, as the Field Poll press release makes clear

The difference between those who have broadband Internet access through a home computing device and those who don’t is fostering what some are calling an “under-connected” class of Internet users. And, these users largely come from the same population subgroups as those with historically lower levels of residential Internet access. For example, not only are low-income Californians less likely than high-income earners to have Internet access at home (68% vs. 97%), the disparities grow wider when comparing how residents with access are connecting to the Internet. Just 43% of Californians with incomes of less than $22,000 can access the Internet at home through a computing device, compared to 94% among those with incomes of $100,000 or more.

Similarly, a smaller proportion of the state’s Spanish-speaking Latinos (69%) than others have access to broadband Internet at home, and just 39% connect to the Internet through a home computing device.

Mobile broadband is as much an essential 21st century service as true home or business Internet access. But it’s not the same thing – people need both, to reap the full benefits of the digital age.

There’s a lot of work yet to do.

Broadband gaps to fill, but willingness to do so in northeastern California

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Many homes will still be without broadband service in northeastern California, even after upgrades paid by the federal Connect America Fund (CAF-2) program are complete. That’s mostly because the census blocks deemed eligible for the subsidies by the Federal Communications Commission are limited – many thousands of unserved homes are outside of those areas – but also because the FCC doesn’t necessarily require that all homes in a given census block be served.

I ran an analysis for the California Center for Rural Policy (CCRP), ahead of a meeting with Frontier Communications executives and supervisors from the six counties – Lassen, Modoc, Plumas, Shasta, Siskiyou and Tehama – in the region. It was organised by CCRP and the California Emerging Technology Fund (CETF) and held in Redding on Thursday. It was a follow up to the agreement negotiated between Frontier and CETF, during the regulatory review process that led to approval of Frontier’s purchase of Verizon’s wireline telephone systems in California.

The subsidised census blocks in Frontier’s service territory are concentrated in Modoc, Lassen and Shasta counties. Once the CAF-2 funded census blocks are built out – the deadline is the end of 2020 – there will still be about 1,500 homes without access to wireline broadband service. In those blocks alone. Pulling back and looking at the entire six county region, including AT&T’s territory (but not areas served by small rural phone companies), there will be more than 30,000 homes without access, with about a third of those in Plumas County.

One approach to fixing the problem is to build more middle mile fiber deeper into the region, to make last mile build outs less expensive and boost capacity all around. I ran that analysis too. A Digital 395-scale project – 500 miles, say, of dark fiber through a strategic corridor at a $100 million-plus cost – could, for example, boost wireline broadband availability in Modoc County from the current 36% to 74%, and from 56% to 81% in Lassen County.

There are other ways to approach it, particularly when there’s an incumbent telephone (or cable) company that’s willing to address the problem. As Frontier was in last week’s meeting. The company has a stated policy of working with local communities – doing more than just giving money to a softball team, as one exec put it – and so far, they’re living up to it. The problem of connectivity in northeastern California isn’t solved yet – that’ll take years – but at this point everyone involved is pushing toward a real solution. That alone is a refreshing change.

Tellus Venture Associates presentation, Northeastern Broadband Meeting with Frontier Communications, 23 June 2016

Frontier to offer broadband lifeline service in California, if allowed to buy Verizon systems

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Lifeline’s reach, if the deal goes through.

Frontier Communications will implement an interim low income broadband lifeline program in California, if it gets regulatory approval to buy Verizon’s wireline systems. In an agreement reached with the California Emerging Technology Fund (CETF), Frontier is promising to offer a special package to its voice lifeline customers that comprises…

  • 13.99/month for the low-income broadband service (which is a new affordable product for the Verizon service area and an improved product in the Frontier legacy service areas), available only to Lifeline voice customers, existing or new customers.
  • Frontier shall not require any more information from applicant than is required for the California LifeLine program.
  • Up to 7 megabytes per second (Mbps) downstream where 7 Mbps is available and the highest available upstream speed. If less than 7 Mbps service is available, Frontier will provide the highest available downstream and upstream speeds of service.
  • Free Installation.
  • Free Modem with wireless router.

It’s anticipated that the special deal for California would be phased out if and when the Federal Communications Commission establishes a national broadband lifeline program. That’s what makes it an interim program. Frontier and CETF are setting an “aspirational target” of signing up 200,000 low income households.

In the agreement, Frontier also commits to extend 10 Mbps down/1 Mbps up broadband service to 100,000 homes in “selected areas across the Verizon footprint” and 7,000 homes in its “legacy California service areas”, and upgrade service for 250,000 homes in Verizon’s current territory to 25 Mbps down/2 Mbps up. That’s all in addition to upgrading service to 77,000 Verizon homes at the 10/1 level using subsidies from the federal Connect America Fund program (CAF), which it previously said it would do.

The 100,000 homes currently without Verizon DSL service are mostly in rural areas, as are the 77,000 that fall under the federal CAF program. The 250,000 homes that Frontier is pledging to upgrade, though, might be anywhere in Verizon’s current territory, which includes urban and suburban areas, mostly in southern California.

One caveat: the agreement allows it to use Hughesnet satellite service, which Frontier already resells, as a possible way of meeting those goals.

There are other deal points regarding a few dozen public access locations, money for 50,000 tablets for low income areas, and paying non-profit organisations to market broadband service to people that don’t use it yet.

Memorandum of understanding between Frontier and CETF (33 MB)
CETF summary of the deal

Tellus Venture Associates assisted CETF with research, strategy development and policy options. I’m not a disinterested commentator. Take it for what it’s worth.

Home broadband service grows in California but not overall Internet access

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High speed home broadband service in California continues to grow, albeit slowly, but Internet use has flatlined among Californian adults. That’s one of the findings of a survey conducted by the Field Poll on behalf of the California Emerging Technology Fund.

According to the report, 87% of Californian homes were connected to the Internet in 2014 and 79% have high speed access – sorta. The survey classified smart phone access as “broadband”. And it is, in comparison to the 6% of homes that still rely on dial-up modem service. The remaining 2% didn’t say how they’re getting their Internet connection – apparently there was no box to check labeled via my neighbor’s WiFi. The split is 71% with computer access (which could be via wireline or a wide variety of wireless technologies) and 8% just relying on smartphones.

Although the take rate for broadband service is climbing – it had been hovering around 75% the past couple of years – total home use has not. That figure has been fluctuating around 86% or 87% for the past four years. Broadband growth, it seems, is coming from converted dial up customers and the I don’t know crowd.

The top line results that were released didn’t drill down on why, but it’s fair guess that the answer is something like last year’s when 36% of those who aren’t connected at home said it’s because they’re not interested in the Internet or they don’t need it, 22% said either access or computers are too expensive and 21% said they don’t know how to use it. Out-of-home broadband access is important – 6% of Californians rely on it completely. The most common source of access for those who don’t have it at home is the public library.

Click to download the 2015 press release
Click to download the 2015 slide presentation
Click to download the 2014 slide presentation

Public sector broadband customers are slow to change, even when it means fast broadband

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Schools and other big broadband users have been slow to sign up for service on Digital 395, a 500-plus mile fiber network that reaches from Reno, down the eastern Calfiornia side of the Sierra Nevada, along U.S. Highway 395, to Barstow. The slower than expected take up rate for anchor institutions is causing financial headaches for the system, according to Michael Ort, president of Praxis Associates, the lead company on the Digital 395 project.

“We need to think about the long term sustainability of these systems”, Ort said.

The more than $100 million it took to build it came from federal stimulus program grants and from the California Advanced Services Fund. To get that money, backers had to demonstrate support from government agencies and other major institutions. Organisations up and down the length of the project were quick with letters of support, but enthusiasm for the concept did not automatically become willingness to buy.

Forty percent of those anchor institutions have not signed up for service yet, and those that have tend to buy low speed service that doesn’t take advantage of the gigabit-class bandwidth an open access fiber network like Digital 395 makes possible, Ort told attendees at a broadband conference in Riverside earlier this month, organised by the California Emerging Technology Fund. Hospitals are signing up for high speed connections, he said, but that aside the average institutional customer is buying 36 Mbps service, with many opting for 10 or 15 Mbps.

Meanwhile, one third of Digital 395’s annual operating budget – $1.5 million – is going to pay property taxes. That’s good for local governments and schools, but it makes for a rough financial ride.

A skeptical eye finds more broadband opportunities

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The California Public Utilities Commission collects a mountain of data from Internet service providers, and does a good job of sorting it out and publishing it in a very accessible way. But as a state regulatory agency, the CPUC can’t arbitrarily decide which claims it’ll believe and which it’ll discount. So it runs tests.

Ryan Dulin, the head of the CPUC division that regulates telecoms companies and manages broadband infrastructure subsidies through the California Advanced Services Fund (CASF), demonstrated how that works for mobile broadband, running a speed test on his Verizon service during his presentation at a broadband conference for local government officials. The result was 4 Mbps download and 1.5 Mbps upload speeds. Which is just a teeny bit different from the service report Verizon submitted to the commission, claiming it delivers somewhere between 10 Mbps and 25 Mbps download speeds in Riverside, where the event – organised by the California Emerging Technology Fund – was held this week.

It highlighted the need to drill further down into the data and do on-site verification, if local agencies and independent Internet service providers want to pursue CASF-subsidised broadband projects. When my turn to speak came, I showed how a couple of analytical techniques that I’ve helped develop – along with colleagues from several regional broadband consortia – that highlights where local broadband gaps and opportunities can be found.

One was the broadband report card analysis I initially ran for the East Bay Broadband Consortium, which grades the broadband infrastructure in neighborhoods, cities and counties on an A-B-C-D-F scale. The other was a broadband opportunity heat map, which highlights areas that are eligible for CASF funding according to population density – from red, which means lots of potential customers, down to green which means not so much. The Central Coast Broadband Consortium was the first to use that technique to identify broadband development priority areas.

The key is to focus on primary wireline network operators – incumbent cable and telephone companies, mostly – and ignore, at least initially, what wireless companies and resellers claim to deliver. That helps policy makers and entrepreneurs figure out what’s actually on the poles and in the ground, and set priorities for broadband investment.