The final version of the California Public Utilities Commission’s decision allowing CenturyLink to buy Level 3 Communications was just released. There are no apparent changes from the draft on the table when the CPUC unanimously approved it last Thursday – minor formatting aside, that could not happen under CPUC rules. Even an obvious typo on page 3 wasn’t corrected.
Update, 18 October 2017: the CPUC posted the final decision, no changes:
CenturyLink’s purchase of Level 3 Communications has the blessing of the California Public Utilities Commission. In a unanimous vote yesterday, commissioners approved a decision authored by administrative law judge Regina DeAngelis that grants permission, subject to various administrative requirements and compliance with a settlement agreement reached with consumer advocacy groups. There was only a brief comment from commissioner Cliff Rechtschaffen, regarding minority contracting goals.
The settlement dances around the central problem posed by the merger: the increasing concentration of California’s already uncompetitive market for dark fiber and other wholesale services. CenturyLink will have to work with the groups – including the California Emerging Technology Fund, which was otherwise shut out of the decision – to identify a project, or maybe more than one, that’ll expand middle mile fiber infrastructure in under and/or unserved areas. But assuming this new infrastructure is eventually built, there’s no requirements regarding how, or even if, it’ll be offered to potential customers.
There’s a capital investment target, but it’s squishy. CenturyLink committed to $323 million in capital spending in California over the next three years, but only “aspires” to invest in network expansion and upgrades or meeting customer demand. That’s a loophole big enough to march a platoon of accountants through.
There are weak requirements for CenturyLink to honor existing service contracts in California for two years, and to give 90 days notice if – when – it exits the dark fiber business.
The only bona fide effort at protecting market competition so far has come from the federal justice department, which is forcing CenturyLink to give up control of a couple dozen fiber strands on key intercity routes, including five in California.
The remaining hurdle is permission from the Federal Communications Commission. Given the justice department’s okay, that seems likely to come soon, perhaps today but no later than early next week, if the FCC sticks to the timeline posted on its website.
CenturyLink’s purchase of Level 3 Communications appears ready to sail through to approval by the California Public Utilities Commission later this morning. The proposed decision, drafted by CPUC administrative law judge Regina DeAngelis, was still on the consent agenda as of last night. That means no commissioner wants to talk about it or hold it for consideration at a later meeting.
That’s not a guarantee of approval today – commissioners can put a hold on the decision or pull it off the consent agenda for discussion during the meeting. But odds are it’ll be one of a dozen or so items that’ll be disposed of in a single batch vote, without comment.
DeAngelis posted a revised version of her draft decision yesterday afternoon. It only contains relatively minor edits, and a new warning to CenturyLink that approval “is granted subject to…continued cooperation with Commission Staff Data Requests relating to their facilities”.
What the decision doesn’t do is impose swingeing requirements for network expansion, as unsuccessfully demanded by the California Emerging Technology Fund. It does approve a settlement CenturyLink reached with old school consumer advocacy groups that’s largely meaningless, particularly in regards preventing or mitigating the damage the deal will do to California’s wholesale broadband market.
CenturyLink and Level 3 are two of maybe four major fiber network operators between major Californian cities, and Level 3 is the only one with dark fiber leasing built into its business model. Opportunities to lease dark fiber from CenturyLink, let alone AT&T and Verizon, are vanishingly rare.
Fortunately, the federal justice department did not outsource its investigation to advocacy groups. It’s requiring CenturyLink to give up control of 24 strands of fiber on key routes, including five in California, and turn them over to a bona fide dark fiber company, at a price and on strict terms.
Assuming CPUC approval comes today, the only remaining hurdle is a final blessing from the Federal Communications Commission. That seems likely to come soon. The FCC notified CenturyLink that it was restarting its informal shot clock, with the countdown nominally ending on Monday.
Frontier Communications is backtracking on pledges made to the California Public Utilities Commission as it successfully sought permission to take over Verizon’s copper and fiber systems in California. During that process, it claimed to be a “dedicated wireline service provider” as it was trying to convince the CPUC that it could do a better job than Verizon…
Frontier is strategically focused solely on wireline telecommunications and has a long and successful history providing those services. Unlike Verizon and other large telecommunications carriers that have multiple business divisions—such as wireless and international—that compete for capital resources and management attention, all of Frontier’s capital and human resources are concentrated on wireline communications services.
Not any more. In a recent filing with the Federal Communications Commission, Frontier (along with Windstream and Consolidated) said it’s moving ahead with plans to spend federal subsidies on wireless service, rather than wireline upgrades (h/t to Trish Steel at the Broadband Alliance of Mendocino County for the heads up)…
Frontier, for example, has already begun testing fixed wireless in very rural [Connect America Fund-subsidised] areas. As Frontier’s Chief Financial Officer has explained, Frontier believes that this could be a “good solution” to the deployment challenge “in very rural America[,] and if it works the way [Frontier is] expecting it to work…[Frontier] will deploy more of that next year.”
On the face of it, Frontier’s plans for fixed wireless broadband service are similar to AT&T’s. Both companies are required to offer service at a minimum of 10 Mbps download and 1 Mbps upload speeds in federally subsidised areas, and putting up an access point with wide coverage is one way to claim they’re meeting that obligation, even though the service is unlikely to be accessible to all, or even most, of the people under that umbrella.
There’s one key difference between Frontier and AT&T, though. Because it’s also a mobile carrier, AT&T already has wireless sites, licensed spectrum and a deep reservoir of wireless engineering talent. Frontier has none of it.
CenturyLink’s purchase of Level 3 Communications is on track to be approved by the California Public Utilities Commission on Thursday. It’s always possible that a decision could be bumped to a later meeting, but there’s no indication at this point that there will be any delays.
A settlement CenturyLink reached with anti-trust lawyers at the federal justice department last week takes the edge off the damage the deal will do to California’s broadband market, although it doesn’t eliminate it. Level 3 is the largest independent source – often the only source – of dark fiber, which competitive broadband providers need to compete with the likes of AT&T and Comcast.
That agreement has CenturyLink giving up dark fiber strands on 30 key routes, including five in California. Unlike the CPUC’s review, the federal investigation into the effects of the merger identified the real danger it poses…
Dark fiber is a crucial input for large, sophisticated customers that need to move substantial amounts of data between specific cities. These customers have specialized data transport needs, including capacity, scalability, flexibility, and security, that can be fulfilled only by Intercity Dark Fiber. CenturyLink and Level 3 compete to sell Intercity Dark Fiber to these customers, and this competition has led to lower prices for and increased availability of Intercity Dark Fiber. The consolidation of these two competitors would likely substantially lessen competition for the sale of Intercity Dark Fiber for thirty city pairs in the United States in violation of [anti-trust law].
The justice department is, at least, going after the root of the problem by trying to reduce CenturyLink’s ability to extract monopoly rents from the detail. That’s unlike the largely meaningless but relatively harmless measures under consideration by the California Public Utilities Commission, and the equally meaningless but less benign alternatives pushed by the California Emerging Technology Fund, which just aim to spread the rents around.
PG&E has revealed more details about its telecommunications business plan. In testimony filed with the California Public Utilities Commission, as it seeks permission to expand its telecoms service offerings, PG&E reiterated that it has no intention of offering residential fiber to the home service, or otherwise competing in the retail space. But its motivation for providing “lit” fiber service to wholesale customers appears to be greater than previously assumed. And so is its interest.
Right now, PG&E is leasing dark fiber – bare strands of glass – to a few customers, either fiber it installed on its own poles, towers and conduit for its own use, or installed at a telecoms company’s request (and expense). There’s not much more of that inventory available, though. Of the 2,600 miles of cable it owns, only 1,000 miles has spare capacity that might be leased out. On average, that spare capacity amounts to only about 4 fiber strands, enough to offer two customers a pair of dark strands each.
Although it doesn’t make a direct connection to this very restricted dark fiber supply, PG&E clearly states that it intends to move up the value chain and offer lit fiber service. Which would allow it to serve many customers on a single pair of fiber strands…
PG&E proposes to offer “lit fiber” and other services (as market demand and availability of PG&E facilities allows) to third-party communication services providers, communication companies, and large institutional (wholesale) customers that need point-to-point services along routes where PG&E can make lit fiber available. Lit fiber is fiber optic cable that has electronic equipment (such as transmitters and regenerators) connected to it to “light” the fiber, enabling the transmission of data. In providing lit fiber, PG&E would be the service provider, owning and maintaining the equipment to light the fiber. The customers would be free of the maintenance and operation of the equipment. This contrasts to the dark fiber services that PG&E currently provides where the customers are responsible for providing and maintaining the equipment that lights the fiber.
Mobile carriers and infrastructure companies are called out as particularly good prospects. PG&E sees a sweet spot in providing long haul connectivity, via lit fiber, to mobile and other telecoms companies that need to tie a lot of far flung locations into their core networks.
Allowing two of the major – sometimes only – sources of inter-city dark fiber to merge would be anti-competitive and illegal, according to the federal justice department. So in order to gain approval to buy Level 3 Communications, CenturyLink agreed to a settlement that requires it to give up control of 24 strands of dark fiber between 30 pairs of cities, including five key California routes.
The settlement also requires CenturyLink to divest overlapping metro fiber systems in Albuquerque, Boise and Tucson.
The fiber will be leased for up to 35 years to a single company that “has the intent and capability (including the necessary managerial, operational, technical, and financial capability) of competing effectively in the sale of Dark Fiber [leases] to end users”. The transaction, and compliance with detailed instructions on how it’ll be carried out (links below), will be overseen by an independent trustee.
The lines in (and out of) California to be sold are:
- Los Angeles to Las Vegas
- Sacramento to Salt Lake City
- Sacramento to San Francisco
- San Diego to Phoenix
- San Francisco to Los Angeles
The routes between San Francisco and LA, and from San Francisco to Sacramento and on to Salt Lake City generally follow railroad right of ways. Just a quick glance at the track confirms that the fiber buried there belongs to AT&T, Verizon, CenturyLink and Level 3. It’s a critical bottleneck for anyone trying to enter the retail broadband market along those corridors.
Taking Level 3 out of the mix would leave it all in the hands of companies with a legacy, Bell-centric telephone business model that maximises profit by restricting wholesale supply and selling what’s left at retail rates. Which pretty much kills any hope of broadband competition at modern service levels.
The best solution would have been to nix the deal, and keep Level 3 as the only heavyweight independent operator in the dark fiber business. The agreement that federal anti-trust lawyers reached with CenturyLink is a reasoned, if less satisfactory, alternative.
The California Public Utilities Commission and the Federal Communications Commission still have to bless the deal. The settlement reached by the federal justice department will go a long way toward greasing the skids at both agencies.
Governor Jerry Brown has two weeks to decide if California’s broadband speed standard should be slower than it is now, and if the California Advanced Services Fund should be turned into a piggy bank for AT&T, Frontier Communications and the cable industry. That’s what assembly bill 1665 would do, if Brown allows it to become law.
He’s getting plenty of encouragement to sign it, from the California Emerging Technology Fund and, one might safely assume, the platoon of lobbyists that telephone and cable companies maintain in Sacramento and back with generous cash contributions to politicians of both parties. Of course, the payments these companies make – which the chief counsel for the state’s ethics agency once described as “kind of legalised bribery” – would be dwarfed by the $300 million that AB 1665 sets aside for them.
There are groups asking the governor to veto the bill, too. The Central Coast Broadband Consortium sent an opposition letter (full disclosure: I drafted it). The North Bay North Coast Consortium sent one too, signed by Mendocino County supervisor Dan Hamburg…
AB 1665 was to re-authorize this vital and popular state broadband program, and we worked hard this year to find a sponsor and bring this bill forward after 2 failed prior attempts. A large coalition of groups came to support the “Internet For All Now” act and momentum was gained. Unfortunately, when the incumbents saw that they could not stop this bill, they were able to insert one damaging amendment after another, each worse than the last, so that eventually the original intent of the bill was lost and now our state broadband program is a give-away to the large incumbent carriers and makes it virtually impossible for the independent providers to get funded. The loss of competition that will result from this bill will be extremely damaging to California’s future.
The California Public Utilities Commission hasn’t taken a public stance on AB 1665, but a strong indicator of where commissioners might lean on it can be found in a Federal Communications Commission filing they unanimously approved on Thursday. They recommended that the FCC keep its current 25 Mbps download/3 Mbps upload speed standard in place.
That’s quite different from lowering California’s minimum speed standard to 6 Mbps down/1 Mbps up standard, as AB 1665 would do.
Today is the day that a CenturyLink lawyer described as “almost too awful to contemplate”: October is here and CenturyLink doesn’t have permission yet to buy Level 3 Communications, from either the California Public Utilities Commission or federal regulators that are reviewing the transaction.
It’s not really all that horrible. The 30 September 2017 deadline was a target that the two companies set for wrapping everything up. It’ll cost them more to keep the financing arrangements intact, but the tab isn’t going to hugely different from what it would have been if they had a better grasp of what it takes to get big telecoms mergers okayed and allowed more time from the beginning. Or if they hadn’t wasted almost five months before filing the right paperwork with the CPUC.
At this point, commissioners are still on track to make a decision at their 12 October 2017 meeting. They’ll have a proposed decision drafted by a CPUC administrative law judge (ALJ) that would approve the deal if adopted. The first round of comments came in, and there’s nothing particularly new. Not in the arguments presented by a group of old school consumer advocacy groups, that don’t see the harm that the merger would do to California’s wholesale broadband market and support it. Or in those made by the California Emerging Technology Fund (CETF), which does understand the damage it would do but wrongly thinks that the solution is to tell CenturyLink how and where to spend a few hundred million dollars on infrastructure projects.
The best way to fix a problem is to not create it in the first place.
Interestingly, CETF wants CenturyLink’s money to go to areas that lack acceptable broadband service based on current California standards – 6 Mbps download and 1.5 Mbps upload speeds – and not according to the dumbed down, slower speeds that CETF, AT&T, Frontier Communications and the California cable industry are pushing governor Brown to sign into law.
It’s possible that the ALJ running the proceeding, Regina DeAngelis, could make changes to the proposed decision ahead of a commission vote, or commissioners are free to offer alternative versions. If that happens, or even if a commissioner just wants more time to think about what’s already on the table, a final vote could be delayed. But so far, that hasn’t happened.
Taxes not included. Except in my bonus check.
AT&T says it’s official: they are launching slow, expensive wireless Internet service in rural California, and other undefined “underserved” areas, instead of upgrading ageing copper networks to modern levels. The technology is designed to support 10 Mbps download and 1 Mbps upload speeds, although there are no guarantees.
The California Public Utilities Commission, on the other hand, decided to go in the opposition direction and unanimously endorsed the higher standard of 25 Mbps down/3 Mbps up yesterday. That’ll have no effect on AT&T’s fixed wireless roll out though, whenever that actually happens.
There seems to be a different between making it official and making it real. Using the link in the press announcement, I checked a dozen locations in California where AT&T has claimed federal Connect America Fund subsidies – where its wireless local loop service is targeted – and all came back with “AT&T fixed wireless Internet isn’t in your area yet”. I got the same response when I entered the zip codes for a couple of the Texan counties that AT&T specifically called out as ready for fixed wireless service in a separate press release.
California was on a list of nine new states, bring the total where AT&T claims to offer its 10 Mbps down/1 Mbps up wireless substitute service to 18 states.
According to Ars Technica, the base rate for the service is $70 a month, or $60 a month with a contract. AT&T isn’t disclosing the monthly rate on its website, but it does helpfully point out that the base service only includes 160 gigabytes a month. Anything over that costs $10 per 50 GB, up to $200, for a total max charge of $270 a month.
This fixed wireless service is what the California legislature voted to back with $300 million of taxpayer subsidies. Whether it happens or not depends on governor Brown, who has until 15 October 2017 to approve or veto assembly bill 1665.