Tag Archives: cpuc

Frontier, CETF broadband adoption deal crashes and burns

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A forced partnership between Frontier Communications and the California Emerging Technology Fund (CETF) to enroll low income broadband users fell far short of its 200,000 household goal, gaining only 9,173 subscribers over its two and a half year lifespan. That number is one of the few things that Frontier and CETF agree on. Who’s to blame and what comes next are hotly disputed.

It’s uncertain how many of those households were enrolled by CETF. Frontier independently acquired some, if not most, of those new subs through its normal sales channels.

One of the conditions the California Public Utilities Commission imposed when Frontier bought Verizon’s wireline telephone systems in California was an “aspirational” – delusional would be a better description – pledge to bring 200,000 low income households into the digital world in less than three years. To do that, Frontier promised to distribute “up to” $3 million to community organisations, via CETF. It’s a non-profit corporation tasked with managing tens of millions of dollars worth of so called “public benefit” obligations that were likewise extracted from telecoms mergers in California.

(It’s completely separate from the California Advanced Services Fund – that money comes from taxpayers and is directly administered by the CPUC).

In May, a month before the agreements that created the program expired, CETF asked the CPUC to amend its original decision and, in effect, extend the two contracts between CETF and Frontier by decree. And, as a kicker, fine Frontier $35 million. Frontier’s response amounts to a deal is a deal.

There are other issues. One involves Frontier’s promise to give 50,000 Chromebooks to low income households – it’s unclear how many were distributed. Frontier says it will continue to give away the devices, but only to its own subscribers. Another is Frontier’s $13.99 low income broadband package, which has morphed into a confusing and hard to find array of three packages with different rules and price points. Then there’s the 50 free WiFi hotspots Frontier pledged to fire up. It apparently managed to get 17 in operation, and is working on the rest.

There’s more to the dispute. The documents published so far are linked below, and I’ll be writing about it in the weeks ahead.

On the face of it, Frontier is more or less doing what it promised. The contracts that CETF signed are vague and larded with weasel words, like “aspirational” and “up to”. The $3 million figure was a cap, with the amounts paid determined by the performance of CETF and its partners – $60 per new broadband sub they signed up (whether for Frontier’s service or someone else’s) and $50,000 for workshops. The only significant hard deadline was the expiration of the second, implementation contract at the end of last month (the initial settlement contract set the goals and outlined the program, the second one filled in the details).

On the other hand, there’s the question of what the CPUC thought it was getting when it gave Frontier permission to buy Verizon’s Californian systems. The CPUC’s formal decision was bundled up with all the settlement contracts Frontier signed with CETF, and several other groups that “intervened” in the case. Commissioners will have to decide whether to reopen that review.

Commonly, the CPUC either rejects this sort of request – a “petition to modify” a decision – or just makes technical corrections. I’m not going to hazard a guess as to what they’re going to do with this one. It’s worth noting, though, that three of the other “intervenors” – the CPUC’s office of ratepayer advocates, TURN and the Center for Accessible Technology – filed an ambivalent joint response. They “take no position regarding…CETF’s request for commission action”, but instead “urge the commission to investigate the allegations”.

Translation: it’s a mess.

Documents published to date:

CPUC approves FTTH grants, but says Frontier needs skin in the game

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Frontier Communications will get $2.7 million from the California Advanced Services Fund (CASF) for two fiber to the home projects. One is in the Imperial County towns of Desert Shores and Salton Sea Beach, and the other in Lytle Creek, in the mountains of San Bernardino County. The California Public Utilities Commission unanimously approved the subsidies at its meeting yesterday, and declined to add another $600,000 as demanded by Frontier.

At least for now.

The commission is in the middle of rebooting the CASF program, following the California legislature’s rewrite of the law that governs it. Lawmakers effectively transformed CASF from a source of independent and, to a degree, competitive broadband infrastructure financing, into a piggy bank for Frontier and AT&T. The language in the new law allows for 100% funding of broadband projects, but doesn’t require it. Commissioner Martha Guzman Aceves is in charge of making the changes, and she held out hope that Frontier could come back later and get the rest of the money. Commissioner Liane Randolph said that would be something to consider, but companies should share at least some of the costs…

I am supportive of both of these projects at the level currently recommended by staff. I’m open to – if there’s an opportunity in the future, if the criteria changes and there’s a procedural way that they can apply for more funds, but we would be approving these projects with the understanding that we would be approving them at 80 and 90 [percent] at this time. I think it’s important for the companies to have a financial participation in the project. They will eventually be able to earn a profit on this infrastructure.

As it stands, taxpayers will pick up the tab for 80% of the Lytle Creek project and 90% of the Desert Shores project. At that level, both projects will be turning a profit for Frontier within a handful of years, according to CPUC staff estimates. On the other hand, Frontier has threatened to not build anything at all if it has to invest its own money.

CPUC votes today on Frontier’s California cash grab

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Frontier Communications isn’t getting any sympathy yet from the California Public Utilities Commission. Commissioners are scheduled to vote this morning on grants for two southern California fiber to the home projects, in Lytle Creek, in the mountains of San Bernardino County, and Desert Shores and Salton Sea Beach in Imperial County. The subsidies would come from the California Advanced Services Fund (CASF).

You might think that Frontier would be happy with a gift of $2.7 million of taxpayer money, but it isn’t. It wants $3.3 million, which is the full tab for building the systems. Including the cost of buying customer premise equipment for customers who don’t exist – there are about 200 empty homes in the Desert Shores project area. Frontier claimed its household count was based on its own “its well tested methodology used extensively in broadband deployment”. Turns out Frontier’s “well tested methodology” involves using 2016 population figures, instead of the newer but, um, inconvenient data generated by the California finance department in 2017.

CPUC staff rejected Frontier’s arguments that the CPUC should pay for 100% of both projects, instead of the 80% and 90%, respectively, that’s currently proposed, saying…

Frontier has offered an interpretation of AB 1665 whereby every project is evaluated according to the unique set of criteria, chosen by the applicant, that will justify full funding for that project.

Assembly bill 1665 was passed by the California legislature and signed into law by governor Jerry Brown last year. The bill rewrote the rules for the CASF program, turning it into a private piggy bank for Frontier and AT&T, with some spiffs on the side for cable companies. It’s not surprising that Frontier thinks it can whack CASF with a hammer any time it’s running a little low on cash, but that’s the product of a seemingly limitless sense of entitlement, rather than a rational interpretation of the law.

So far, the give and take has been with staff. Commissioners will have the final say later this morning.

California electric company fiber leasing gets a reprieve

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The California Public Utilities Commission won’t kill electric companies’ independent fiber enterprises just yet. The dispute over how to share the money that Southern California Edison earns from leasing out surplus fiber with its electric customers was bumped to next month. The changes in the latest version proposed by commissioner Clifford Rechtschaffen – including making it a 50/50 split of gross revenue instead of the 10% that goes to ratepayers under current rules – were significant enough to trigger a 30 day review period. That also gives the CPUC time to think about how to handle SCE’s request to cancel its original request for a ruling, because the contract that triggered it – a master fiber lease agreement with Verizon – is off the table.

Frontier tells CPUC give us all the money!

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Frontier Communications isn’t happy with the bonus that California Public Utilities Commission staff wants to bestow on it. Instead, Frontier is demanding the CPUC pay the entire cost of two fiber to the home projects in outlying areas of California.

Frontier applied for two grants from the California Advanced Services Fund (CASF), one for $1.8 million in the San Bernardino County mountain community of Lytle Creek, and the other for $1.5 million in two towns – Desert Shores and Salton Sea Beach – in Imperial County. The applications asked the CPUC to pay 100% of the cost of the projects. The CPUC has always had the discretion to do that, but up until now has typically limited last mile infrastructure subsidies to 60% to 70% of construction costs.

When the California legislature rewrote the rules for CASF subsidies last year, it bowed to cash pressure from lobbyists for Frontier – as well as AT&T, Comcast, Charter and other big monopoly model incumbents – and turned the program into their private piggy bank. One change specifically – and unnecessarily – authorised the CPUC to pay for “all or a portion” of a project, based on an assessment of its worthiness.

So that’s what CPUC staff did when they evaluated Frontier’s applications, and drafted two resolutions for commissioners to consider at their meeting tomorrow. They recommend giving Frontier grants for 90% of the Desert Shores project cost and 80% in Lytle Creek.

That’s more than any other last mile project subsidised by CASF, but it still isn’t enough for Frontier. It filed objections to the staff proposal, essentially arguing that the CPUC is obligated to give them all the money.

Nonsense.

The CPUC’s job is to try to untangle the mess that lawmakers made last year when the CASF program was rewritten. That means developing a rational process for identifying and funding broadband projects in unserved and otherwise eligible areas of California, Frontier’s overwhelming sense of entitlement notwithstanding.

SCE says fiber deal with Verizon is dead, and the CPUC killed it

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Southern California Edison and CPUC commissioner Clifford Rechtschaffen exchanged shots on Thursday, as the battle over electric company fiber continues. Rechtschaffen released a new version – an “alternate” – of a draft decision that required SCE to give up 75% of the gross revenue it would have received from a fiber master lease agreement (MLA) it reached with Verizon. He cut that down to 50%, which is still significantly more than the 10% that the existing rules, which have been in effect for almost 20 years, require.

Whether or not SCE knew Rechtschaffen’s revisions were coming, it filed a preemptive motion asking to withdraw the application that kicked off the proceeding almost a year and half ago. That application was initially given a green light in a proposed decision that was issued in June 2017, and then pulled back for what turned out to be a year of wasted argument.

SCE said that while the CPUC dithered, Verizon found fiber elsewhere and the agreement and the application are now irrelevant…

In the seventeen months since SCE filed its application, Verizon Wireless has continued to obtain the additional infrastructure it requires from its existing providers. While there may be future business opportunities with Verizon Wireless for dark fiber lease transactions independent of the MLA, at this time, the volume of lease route orders SCE would be able to enter into under the MLA is less than what SCE had planned when it filed the application. Had the Commission adopted the June 5, 2017 proposed decision, SCE may have been able to carry out the MLA, but at this juncture the original justification for the application is no longer economically viable.

No doubt, the proposed revenue split – whether it’s 75/25 or 50/50 – is a factor too. Under the current 10/90 formula, SCE says it wasn’t making very much money. It claims ratepayers were already getting 74% of the profit from fiber leases. If that’s the case, then either of the new formulas would have shoved its fiber business deep into the red. That’s not economically viable either.

The California Public Utilities Commission is scheduled to vote on, well, something on Thursday. Whether it does or not is another question – last week’s back and forth could mean it’ll be delayed again.

Utility wildfire liability will be settled behind closed doors in Sacramento

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The California legislature took care of one key item of business before it headed out on its month long summer break on Thursday. The senate and the assembly went through the necessary motions to create a conference committee that will decide how liability for California’s continuing epidemic of wildfires will be assigned. Changes to senate bill 901, carried by senator Bill Dodd (D – Napa), will be negotiated largely out of public view over the next few weeks, and then put to a straight up or down vote – no amendments or meaningful debate allowed under normal circumstances.

Dodd says that the conference committee will hold some open meetings, but that’s legislative theater. The real work will be done in private.

That seems to worry senator Jerry Hill (D – San Mateo), who, like Dodd represents a community that’s suffered from Pacific Gas and Electric’s maintenance practices. In 2010, an exploding gas line killed eight people and destroyed a neighborhood in San Bruno. On Thursday, Hill slammed the idea of relieving PG&E of responsibility for fire damage…

After San Diego Gas and Electric was held accountable for the 2007 San Diego wildfires, they didn’t come to the legislature trying to change liability rules. They upgraded their infrastructure, they made safety improvements, to prevent future disasters. SDG&E improved their tree trimming around power lines and de-energised lines…during the very high wind events. PG&E didn’t do these same safety improvements on their system. Recent Cal Fire reports show that they didn’t properly cut back trees near their power lines, likely violating state law in 11 of 16 fire reports released so far. So let’s be careful about the reforms that are being proposed by PG&E.

The legislature is due back in Sacramento on 6 August 2018, and the final version of SB 901 could be released then. We should get a chance to see what it says – there’s supposed to be a 72 hour waiting period between the time it’s posted and a vote is taken.

Quick changes to utility wildfire prevention, liability law expected in Sacramento today

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As huge wildfires burn in California and elsewhere in the West, legislative leaders and governor Jerry Brown put changes to the way utility lines are managed on a fast track at the capitol. A bill to allow for shutting off power when fire danger is high and reworking the way electric utilities are held liable for fires and ratepayers are charged for prevention efforts was sent to a conference committee on Monday.

That’s a legislative maneuver that allows legislative leaders – democrats and republicans alike – to negotiate the details of a bill amongst themselves, and then put it to a straight up or down vote in both houses.

The latest published version of senate bill 901 is largely a statement of intent, listing dozens of goals, including…

  • The Public Utilities Commission should establish fire risk reduction and mitigation standards, including protocols for disabling reclosers and deenergizing lines. All protocols should meet or exceed industry best practices. Disabling reclosers and deenergizing lines can cause impacts to fire and police response, the availability of water, hospitals, schools, evacuation centers, and other critical facilities.
  • Even when utilities operate their systems reasonably and prudently, there is an increasing risk of catastrophic losses given the changing conditions in California.
  • Due to these factors, California’s electric utilities face potentially enormous legal exposure even if the utility is not at fault or if the damages are compounded by extreme weather events or other circumstances.
  • Current legal standards should be refined to prospectively allow the courts to determine the liability of electric utilities when they have acted reasonably in installing, maintaining, and operating their transmission systems.

Investigations into last year’s northern California fire storms put responsibility largely on Pacific Gas and Electric, and Southern California Edison will likely be similarly blamed for the catastrophic fires that rampaged through its territory. Both companies potentially face many billions of dollars in liability claims and possible criminal charges, because power lines came into contact with trees during high winds. Electric utilities, publicly and privately owned, are legally responsible for trimming back vegetation and keeping their lines clear and safe.

But high winds and extreme heat seem to be increasingly common – SB 901 attributes the rising danger to climate change – and what’s worked in the past isn’t enough to prevent future fires.

Both houses of the legislature have final floor sessions scheduled for today, ahead of their month-long summer break. They’ll have to move fast today.

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.

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.