Tag Archives: competition

PG&E’s bid to be a fiber company gets a long review

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

PG&E will have to explain how it manages requests from telecoms companies to hang cable and other equipment on its utility poles, as the California Public Utilities Commission reviews its application to become a fully certified, commercial fiber network operator. After a meeting with PG&E and the companies and organisations that have raised objections to PG&E’s move, the administrative law judge, Jessica Hecht, and the commissioner, Liane Randolph, handling the review laid out a year-long review schedule that identifies the issues that will be addressed.

Among them is guarding against the possibility that PG&E will use its control of utility poles to put competing telecoms companies at a disadvantage. PG&E is being required to disclose…

  • Internal policies and procedures for reservation of space in and on PG&E support structures, and include forecasts for future reservation needs, if any, to accommodate its anticipated telecommunications services.
  • Statistics showing the mean and median times PG&E currently takes to respond to requests for access to its support structures, and for completing any rearrangements required to accommodate other attachers’ attachments.

Other concerns include how PG&E will split the money it makes from its planned fiber business. Some of the objectors want most of it to be funnelled back to electric customers, presumably in the form of lower rates, while PG&E is proposing a 50/50 split of fiber profits. Several of the topics under review have to do with how PG&E will keep a relatively unregulated telecoms unit separate from its highly regulated energy business, including maintaining security and safety standards, and avoiding cross-subsidies between two very different kinds of enterprises.

In general, PG&E will have to provide a lot of details about its fiber business and operations plans to the CPUC, although some of that information will likely be kept confidential.

PG&E adopts a dark fiber and wholesale telecoms services business model

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

The low ball fiber business plan that PG&E submitted to the California Public Utilities Commission drew criticism from several organisations that probably didn’t fully understand it – publicly traded companies usually downplay the profit potential of new ventures, to avoid hyping stocks and running afoul of federal securities laws. In its application for certification as a telecommunications company, PG&E estimated that it "will have approximately 1-5 customers after one year and will have more than 5 customers by the fifth year after commencing provision of the services". That led to speculation that there was some kind of backroom bargaining going on with incumbent telcos or other big carriers.

Not so, said PG&E in its formal reply to that criticism

The key public interest benefit resulting from PG&E adding services to its existing offerings is that it increases the supply of those services at competitive prices, which means there will be more competition in both the wholesale and retail markets, which will in turn result in more innovation and lower prices. Therefore, PG&E’s CLEC will benefit competition and is in the public interest. Certain interveners may have misinterpreted PG&E’s low estimate of the initial number of customers as a limit or cap. But this was a conservative estimate, as PG&E does not want to over-promise and then under-deliver on the benefits of adding new services to its existing offerings. However, PG&E does not intend to limit itself to this estimated number of customers. PG&E will evaluate the economics of serving any non-residential, qualified customers and will provide service to those for whom it is economical to do so. As a financially and operationally qualified provider that would leverage existing assets to offer additional telecommunications at an incremental cost that will benefit its telecommunications customers, PG&E’s expansion of services will benefit competition. PG&E does not claim these benefits will appear overnight, but expects that the competitive benefits will materialize over a few years.

It also stated flat out that "after becoming a [certified telecoms company], PG&E will continue to offer a dark fiber product". And that its wholesale customers could very well include broadband providers that want to offer competitive service to residential customers. Access to high capacity, low cost Internet bandwidth can be a substantial roadblock for entrepreneurial service providers. Where it becomes available, such as along the Digital 395 corridor in eastern California, consumer-level competition follows. The CPUC should simply take PG&E at its word and make its promises legally enforceable.

PG&E will slow walk its own fiber builds, just like everyone else’s

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

It’s not going to speed up the process for reviewing requests to attach fiber optic cable to its utility poles, but PG&E won’t give its own, in-house telecoms unit any short cuts either. That’s the top line from PG&E’s reply to objections filed against its request for formal certification by the California Public Utilities Commission as a telecoms company. Several companies and organisations that are, at once, potential competitors, customers and suppliers to a PG&E-operated fiber optic venture (that’s the interconnected nature of the telecoms business) asked the CPUC to delve deeply into the way utility pole attachments are managed.

In its reply, PG&E – correctly – sorted the issues into two buckets: concerns that it would abuse the monopoly power it has as an electric company to benefit its telecoms business in the future, and general complaints about the way it manages its poles now. To alleviate the former, it proposes to maintain an arms-length relationship between the telecoms enterprise and the staff who manage its poles. Any attachment requests from its own, in house unit will have to be submitted in exactly the same, excruiatingly bureaucratic way as any other telecoms company, and slowly processed in the order received.

As for the way that process works, PG&E takes the position that it’s a matter that relates to how it operates as an electric utility, and has no bearing on whether or not it should be allowed to operate a separate telecoms business. It then goes on to explain that it should be allowed to drag out pole attachment approvals because all the people who do that kind of work get paid by the electric side of the house – which is to say by electric ratepayers – and if they had to work faster it would raise everyone’s energy bills.

That’s a semi-true statement, as far as it goes, but it misses the point. If PG&E goes beyond simply leasing dark fiber and becomes an active player in California’s telecoms market, then it should also have to begin taking on the associated responsibilities. An expanded role also brings expanded revenue, and managing poles more like a telecoms company – to one extent or another – is part of the cost of doing business.

Mobile competition brings big benefits to urban consumers

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

Not so bright in rural California

Competition works. Even in the telecoms business. Referencing an article in the Wall Street Journal, FierceWireless is reporting that the cost of mobile data has dropped 13% in the past year, and the reason is increasingly heated competition between the four major carriers, with reintroduction and aggressive marketing of unlimited data plans at the top of the list…

In a detailed article on the topic, the Wall Street Journal reported that the cost of wireless service plans fell 7% in March and an additional 1.7% in April. When comparing April data against the same month last year, the publication reported that wireless service prices have declined by almost 13%. The WSJ cited the Labor Department’s consumer price index for the numbers; the Consumer Price Indexes (CPI) program “produces monthly data on changes in the prices paid by urban consumers for a representative basket of goods and services,” according to the agency.

The effect was so great that the CPI went into negative territory for the first time in seven years. Mobile pricing wasn’t the only reason, but it accounted for about half the drop.

One significant caveat, though, is that the CPI is based on urban costs. The price of mobile data wouldn’t be different in rural areas, but its availability and the way it’s marketed is.

A quick look at the California Public Utilities Commission’s broadband availability map shows that while people living in urband and suburban communities enjoy the full benefit of four aggressively competing mobile broadband providers, those in rural areas do not. And while the same plans might be available everywhere, different needs push people in different areas toward different packages.

For example, plans designed to be used in homes as a wireline substitute of sorts are more popular in rural communities – the article did not look at whether prices for those particular packages are likewise experiencing the same, downward competitive pressure, but from what little I’ve seen it would appear not.

Competition matters.

Support for PG&E as a telecoms competitor, if that’s all it is

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

I’ll show you a pole attachment.

Seven objections, of one variety or another, were filed against PG&E’s bid to be certified as a telecommunications company by the California Public Utilities Commission. Links to all are below.

Three came from industry players, including Crown Castle, which has a growing and competitive fiber footprint in California, and two lobbying fronts, one for cable operators and the other for competitive local exchange carriers (CLECs), which are companies that largely rely on reselling access to physical facilities owned by big telcos and fiber network owners. Like, say, PG&E.

All three focused on access to PG&E’s utility poles. While not objecting to the direct threat PG&E poses, they don’t want it leveraging its gatekeeper position as a monopoly electric utility to squash telecoms competitors. As the cable industry’s lobbyists – the California Cable and Telecommunications Association – put it, “any [certification] granted must specifically address PG&E’s obligations to provide nondiscriminatory access to its [right of way] for all communication attachments”. Fair enough.

The remaining four objections – from the CPUC’s office of ratepayer advocates, the City and County of San Francisco and consumer advocates TURN and the Greenlining Institute – each had its own, idiosyncratic leitmotif. But all shared the common theme of competition is good, but who gets the money? Unlike major incumbent telcos, who escaped CPUC micro-management decades ago, electric utilities are subject to painstaking review of costs, pricing and distribution of profits.

So the universal assumption – and PG&E is in that universe – is that any profits from the fiber business will benefit electric customers. PG&E proposes to give back half of its fiber profits to electric customers; alternate opinions range from maybe a bit more to pretty much all of it to and give everyone a pony, too.

On the whole, it’s good news for broadband infrastructure development in California. The two primary issues – pole access and profit distribution – are easy to solve. What is far, far more difficult is quickly injecting thousands of miles of new fiber into California’s telecoms market. The faster the CPUC gets it done, the better for all.

Comments of the Greenlining Institute
Crown Castle Response
Protest of the Office of Ratepayer Advocates
Protest of TURN
Protest of the California Association of Competitive Telecommunications Companies
Response of the California Cable and Telecommunications Association
Response of The City and County Of San Francisco
Response of The City and County Of San Francisco (Exhibit)

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

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

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.

The amazing shrinking Google Fiber

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

More empty chairs.

In the latest sign that Google is backing out of the Internet access business, hundreds of employees, including two top executives, have been shuffled out of telecoms jobs and into other parts of the company. According to a Bloomberg story by Mark Bergen, Google is cleaning house at its Access division…

Milo Medin, a vice president at Access, and Dennis Kish, a wireless infrastructure veteran who was president of Google Fiber, are leaving the division but staying at the Alphabet holding company. Gregory McCray, who was appointed head of Access in February, told staff about the management changes at a Thursday meeting. An Access spokesman confirmed the changes, but declined to comment further…

The Access division has continued to shrink. About 600 employees are currently being reassigned to the Google internet business and other Alphabet divisions, according to sources familiar with the plans.

There’s no word on what Medin and Kish will be doing, which isn’t terribly surprising. When executives in troubled business lines are sent off to nebulous jobs in corporate limbo, the odds on bet is that they’ll soon be either pursuing other interests or spending more time with their families.

Now that Google has pulled back from launching new fiber markets and slowed, or perhaps even stopped, expansion of existing systems, the question is what will happen to its wireless plans in general and its acquisition of Webpass in particular.

Right now, the focus seems to be on delivering broadband service to apartment houses via wireless backhaul. That could be a good niche business, but Google has never been very interested in niche businesses that didn’t have the prospect of a hockey stick upside. Last year’s magic radio flirtation appears to be over, or at least Medin’s departure would seem to indicate that, since he’d taken the lead on it.

CPUC considers pole access, Google and fiber

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

Update, 23 March 2017: the CPUC voted 4 to 1 to approve the Digital 299 grant this morning, and unanimously approved Google’s purchase of Webpass and the enquiry into expanded utility pole access.

Three important decisions are in front of the California Public Utilities Commission this week: a $41 million (or perhaps $47 million) grant for a northern California middle mile fiber project, formally considering whether telephone companies can attach wireless gear to utility poles and what the aesthetic impacts might be, and allowing Google to buy Webpass, a mostly wireless Internet provider that’s also licensed to offer wireline service.

Although the pole access decision is routine – it would not establish new rules, just begin the process – the scope of the commission’s enquiry will be broad. But apparently that’s okay with utility companies, since none filed any objections. You can safely bet, though, that anyone with a stake in wireless services or utility poles will be watching it like a hawk.

The Webpass purchase is also uncomplicated on the face of it. Since Webpass has a CPUC-granted license to operate as a telephone company – a certificate of public convenience and necessity (CPCN) – Google needs permission to take it over. The transaction attracted the attention of a chronic protester, who was ultimately convinced to go away, and it has big implications for both current Webpass customers and Google’s plans (or lack thereof) to be a broadband service provider. Once it owns Webpass and its CPCN, Google can claim all the privileges of a phone company, including potentially the right to hang wireless equipment on utility poles.

Digital 299 is also on the agenda for this week’s CPUC meeting. It’s a proposed 300 mile fiber line linking existing routes that run through the Sacramento Valley along the I-5 corridor to the Humboldt County coast and points in between. There’s a draft decision on the table that would approve a $41 million subsidy from the California Advanced Services Fund, and commissioner Carla Peterman has promised to offer an alternate version that would add another $6 million.

The pole access item and the Webpass transfer are likely to be approved without comment – so far, there’s no indication otherwise – but the Digital 299 project faces an uncertain future. Two commissioners – Martha Guzman Aceves and president Michael Picker – have already expressed opposition. If just one of the three others join them, it’s dead.

Competition, and something more, drives Comcast upgrade in Huntsville

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

Demand.

Chalk up another win for broadband competition. Comcast announced that it was expanding its next generation – DOCSIS 3.1 – cable modem footprint to Huntsville, Alabama, and would be offering gigabit-level service to at least some customers. Details on service locations, roll out schedule and prices were lacking, though.

What clearly isn’t lacking is a competitive threat. Huntsville’s publicly owned electric utility is in the process of building a fiber to the home network that will be operated by Google Fiber and offer gigabit service at about half the price that Comcast charges in the four cities where it’s already offering it. Those cities include Nashville and Atlanta, where Google Fiber is also deploying fiber to at least some neighborhoods, Chicago, where Google-affiliate Webpass is present, and Detroit, which has neither.

Comcast similarly responded to plans in Santa Cruz to build a municipally-backed FTTH system by upgrading its plant.

AT&T previously announced that it would be offering gigabit service in Huntsville. It, too, has reliably followed Google Fiber’s lead as it prioritises the capital investments it makes in service and infrastructure improvements.

Although Comcast and AT&T are certainly playing defence and trying to prevent competitors from gaining a foothold, there’s also something like a virtuous circle effect going on. Google is – or, at least, was – identifying communities that were favorably disposed towards ultra-fast Internet service and then pumping up enthusiasm even further. For example, according to a story by Lee Roop on Al.com, Google reps spoke at a recent meeting of Huntsville entrepreneurs. One talked up the potential for small businesses and “another Google representative said homeowners can expect a $5,000 increase in their homes’ value if they add fiber optic cable”.

The more enthusiasm and awareness, the greater the market potential for high end broadband service. Competition feeds demand which draws even more competition. That’s how Huntsville is staying on the right side of the digital divide.

Action must follow CPUC broadband investigation

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

That’s a powerful force. Research should be done.
Oh, it will be, Dr. Jones, I assure you.

A proposed California Public Utilities Commission decision slams the lack of telecommunications competition in the state and goes a long way toward demolishing the artificial distinction between telephone and broadband service, infrastructure and, crucially, regulation. If it’s approved more or less as written, it will create a factual and legal foundation for modernising telecoms policy and regulation in California. But it doesn’t propose any action; it simply calls for more data collection.

That’s a problem, according to the CPUC’s office of ratepayer advocates (ORA), which submitted a critique of the draft decision

Lack of competition produces rates that fail the Commission’s statutory requirements to be just and reasonable and safe and reliable. However, ordering further studies and monitoring does nothing to address the numerous findings of fact of this proceeding. The PD seeks to continue monitoring the telecommunications market without taking any action on some of the market failures that it has found: lack of consumer choice in a highly concentrated broadband market.

The Utility Reform Network (TURN), a consumer advocacy group, offered similar comments.

One segment of the telecoms ecosystem that needs to be shaken loose of monopoly or near monopoly control is wholesale services: dark fiber, middle mile connectivity and leasing last mile copper connections, for example. Possible remedies, according to ORA’s brief, include a UK-style separation of infrastructure ownership from the retail service business, setting tougher unbundling and interconnection rules, or even “development of a public wholesale broadband network”.

At a minimum, both ORA and TURN urge commissioners to keep the current investigation open, and solve the many problems identified in the draft. That is the major failing of the proposed decision – it offers no action plan or roadmap for finding solutions.

Instead, it simply ends the proceeding. That would, in effect, put the decision on a shelf to gather dust. It would a waste and a tragedy to allow all the work that went into it to moulder away. The commission should accept the decision as a clearly articulated work plan and get on with the job. Quickly.