Tag Archives: cpuc

CPUC’s cable franchise renewals remain private and privileged

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Cable companies won’t be held publicly accountable for their business practices or service levels by the California Public Utilities Commission. That’s the result of a unanimous vote by commissioners on Thursday.

The CPUC’s semi-independent office of ratepayer advocates (ORA) asked the commission to revisit a 2014 decision that established a perfunctory, closed door review of statewide video franchise renewals. Cable lobbyists sweet talked California lawmakers into ending local franchise authority in 2006, and replacing it with a single, statewide process run by the CPUC. But they gamed the bill – the Digital Infrastructure and Video Competition Act, or DIVCA as it’s known – so that there’s very little they need to do to get a statewide franchise, and even less they need to show the CPUC when it comes up for renewal every ten years.

The way the CPUC interpreted its responsibility in 2014, the only avenue for local governments or citizens to object was to take a cable company to court and win. Only if a cable company doesn’t comply with a court order by the time their ten year franchise rolls around for renewal, will the CPUC listen to a public complaint. ORA can go a little further and review confidential material, but if they find something wrong, all a cable company has to do is resubmit the application.

Otherwise, the CPUC has a chummy conversation with the cable company and rubber stamps the renewal.

Even though he issued the decision that was approved on Thursday, commissioner Clifford Rechtschaffen offered a sliver of hope that maybe there’s a way that the CPUC can listen to someone other than cable company lawyers and lobbyists…

I do recognise that ORA has raised a legitimate question about how it can effectively advocate during this franchise renewal process. So I look forward to learning more about the way that ORA can do this and bring legitimate concerns about issues within our jurisdiction to the Commission’s attention.

It’s only a sliver, though. Rechtschaffen expressed his sympathy in a narrow, legalistic way, which is how the CPUC has viewed its duties under DIVCA. In order to do anything more, it will have to change its thinking and claim greater responsibility.

California broadband decisions hide in D.C.’s shadow today

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The big broadband news will be coming from the FCC later this morning (although there won’t be much, if anything, that’s actually new). But the California Public Utilities Commission is also meeting today, with a handful of broadband-related issues to decide.

One of the resolutions up for a vote would slap down a request from the CPUC’s office of ratepayer advocates to take another look at how cable companies are (not) held accountable under California’s statewide franchising law. A cable company’s statewide franchise comes up for review every ten years, but it’s done behind closed doors and renewal is effectively automatic. ORA wanted the CPUC to reconsider that gift, but did not convince the commissioner who wrote the draft – Clifford Rechtschaffen – that there was good reason to do so.

Another draft resolution begins the process of bringing the California Advanced Services Fund (CASF) broadband subsidy program into line with changes dictated by assembly bill 1665, which was signed into law earlier this year. AB 1665 gave AT&T and Frontier Communications a privileged place at the head of the subsidy line, and the resolution that’s likely to be approved today fills in some of the details, but leaves hard questions for later. Like whether Frontier or AT&T should be held accountable for making false promises about where and how they’ll upgrade broadband infrastructure.

There are also three housekeeping items, involving the technicalities of the California Advanced Services Fund (CASF). One reinstates a tax on phone bills – also authorised by AB 1665 – to collect the money that’ll be funnelled to Frontier and AT&T. The other two are about due diligence – financial reporting rules for regional broadband consortia and waiving a performance bond requirement for a grant recipient that gained CPUC certification instead.

There’s not much suspense about the outcome today, either in Washington, D.C. or in San Francisco. All five broadband items are on the CPUC’s consent agenda and, absent objection from a commissioner, will slide through without discussion.

PG&E must put all its fiber on the market, not just the bits it, or others, want sold

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PG&E agrees with many of the restrictions that the California Public Utilities Commission’s office of ratepayer advocates (ORA) wants to put on its proposed telecommunications business plan. Without knowing the details of PG&E’s 2,600 mile fiber network in northern California, it’s impossible to know whether that climb down is a strategic retreat or a concession rendered meaningless by the simple facts of its infrastructure or business plan.

The CPUC is reviewing PG&E’s application for certification as a telephone company. Over the years, PG&E has built up an inventory of fiber optic assets, either because it had internal communication needs or because another telecoms company swapped fiber strands for access to PG&E’s electricity transmission and distribution infrastructure. It wants permission to put those assets on the market, either as simple dark fiber or the medium for lit transportation services.

ORA wants to ban PG&E from “using fiber lines installed in the power zone” of utility poles for its dark fiber and lit service business. The power zone is the uppermost area of poles, where wires used for electric service are installed. The area below it, where cable and telephone companies attach their wires, is the communications zone. But that’s only on poles used for distribution of electricity – low voltage, last mile service in telecoms terms. Poles used for transmission of electricity – middle mile, in other words – don’t have a communications zone. Any fiber installed on transmission infrastructure is, by definition, in the power zone.

The conditions proposed by ORA are in the context of utility poles used “for network distribution”. If what ORA wants and what PG&E is agreeing to only involves fiber installed on poles used for distribution, and not on transmission poles, or conduit of any kind, then it might be no big deal. PG&E might not have a significant amount of fiber in the power zone of local distribution poles. That’s an expensive proposition, compared to installing fiber in the communications zone, where safety concerns are fewer and construction costs are less. So it might not make a difference either to PG&E’s business plan or to its ability to be a competitive counterweight to telecoms incumbents with monopoly business models.

But if those conditions affect more than a trivial amount of last mile fiber, or in any way restrict PG&E’s ability (or willingness) to sell access to middle mile routes on its vast transmission infrastructure – the crown jewel of its network – then the CPUC should reject them. Instead, the CPUC should treat PG&E as the incumbent it is: all of its fiber should go on the market. Otherwise, allowing it to act as a telecoms company will not “enhance competition in the public interest”, as PG&E claims.

PG&E rebuttal testimony regarding its CPCN application, 8 December 2017

CPUC review of PG&E telecoms plan must focus on big picture, not narrow interests

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Three groups filed testimony with the California Public Utilities Commission opposing PG&E’s plan to put its 2,600 miles of fiber on the market, as dark strands and for lit service (links are below). Caltel, a lobbying group for telecoms resellers – CLECs – offered quibbling and self-interested comments. The two others – the CPUC’s office of ratepayer advocates and TURN, an old school utility consumer advocacy organisation – urged the CPUC to either reject the plan or cripple it with nonsensical restrictions, on the basis of an outdated and narrow view of what utility regulation is all about.

For TURN and ORA, it’s about micromanaging PG&E’s fiber in the same way as its regulated, monopoly electric and gas business. They give no thought to the benefits of having an independent source of dark fiber or lit service in northern California. ORA and TURN make one dimensional arguments about what might or might not be fair to PG&E’s electric customers and, remarkably, to big incumbent telecoms companies, while ignoring the fact that electric consumers are also broadband and telephone subscribers. Protecting broadband companies that exercise unregulated monopoly and duopoly control over prices and products from PG&E’s limited competition will only hurt consumers.

Dark fiber is a critical resource for independent, competitive telecoms operators. Thanks to the CPUC’s reliance on TURN and ORA – instead of exercising its own initiative – CenturyLink will be rolling Level 3 Communications’ previously independent dark fiber into its monopoly-centric business model over the next two years. Ironically CenturyLink controls a significant amount of the capacity on PG&E’s fiber routes, via its acquisition of Level 3-owned IP Networks. The CPUC would not be serving the public interest if it protected CenturyLink’s monopoly by locking PG&E out of the telecoms business, or restricting its ability to fully use the fiber it owns.

The CPUC has the responsibility to maximise value, quality and availability across a range of utility services for Californians, individually and for the economy as a whole. It should fulfil its responsibility by independently evaluating all the pluses and minuses of PG&E’s telecoms plan, and not relying solely on the arguments of narrow interests.

Caltel testimony regarding PG&E CPCN application, 22 November 2017
Office of Ratepayer Advocates testimony regarding PG&E CPCN application, 22 November 2017, part 1
Office of Ratepayer Advocates testimony regarding PG&E CPCN application, 22 November 2017, part 2
Office of Ratepayer Advocates testimony regarding PG&E CPCN application, 22 November 2017, part 3
TURN testimony regarding PG&E CPCN application, 22 November 2017

Frontier orders a California broadband subsidy sandwich

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The first application for construction (and maybe operations) subsidies from the California Advanced Services Fund (CASF) since the program was gutted by the California legislature landed in the hopper at the California Public Utilities Commission.

Frontier Communications is asking for a $1.8 million grant, without specifying how much, if anything, it’s willing to pay out of its own pocket. It wants the money to pay for a fiber to the home system in and around the remote San Bernardino County town of Lytle Creek…

Frontier’s proposed project will cover about 4.4 square miles and is a combination of middle-mile and last-mile infrastructure using Frontier’s existing poles and rights of way to deploy fiber-to-the-home (“FTTH”) facilities capable of providing High Speed Internet, Ethernet, and VoIP service with speeds of up to 1 Gbps download and 1 Gbps upload.

“Capable of” and “up to” are weasel words that incumbent telcos, like Frontier, put in ads and other marketing material with the intent of pulling the rug out from under consumers when they have the gall to ask for it. In its project summary, Frontier makes no promises about the service it will actually offer, or the price it will charge.

Frontier says it plans to serve 339 homes with the subsidy, which comes out to $5,300 each. But what Frontier doesn’t mention is that Lytle Creek is one of the blank spaces on its federally subsidised checkerboard. It’s sandwiched between areas where the Federal Communications Commission is paying for service at 10 Mbps down/1 Mbps up, which is below the otherwise federal standard of 25 Mbps down/3 Mbps up. The middle mile infrastructure that Frontier wants all Californians to pay for will support the promise, if not necessarily the reality, of modern service for some while condemning the rest to speeds consistent with 1990s DSL infrastructure.

The purpose of CASF is to extend the benefits of 21st century broadband service to all Californians. Frontier’s Lytle Creek proposal might do that for some. Before writing the check, the CPUC needs to make sure it will deliver it to all.

More people, more fire hazards, more damage costs for utilities, at least for now CPUC says

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San Diego Gas and Electric’s shareholders will have to pick up the tab for $379 million of the $2.4 billion worth of damage (and legal fees) caused by a series of wildfires in 2007. Yesterday, the California Public Utilities Commission unanimously approved a draft decision by an administrative law judge that assigned the blame to SDG&E because, as commissioner Carla Peterman put it, SDG&E “failed to meet its burden to prove it was a prudent manager”.

That means SDG&E can’t pass the cost on to ratepayers, via a proposed $1.67 per month add on to bills for six years.

There was some discomfort with the decision, though. Some commissioners believed they were put in a straightjacket by California law and court decisions, and suggested the legislature could, or should, act to give them more discretion. Commission president Michael Picker said that while yesterday’s decision was about a particular set of circumstances, the real problem is much larger…

The number of people who are choosing to live in areas that we now know to be elevated fire hazard or extreme fire hazard is growing. That area is actually growing as we get more information about the impact of climate change. The fuel area has grown from about 31 thousand square miles of California to 77 thousand square miles of California. That’s almost 42% of the state’s landmass. Add to that the fact that as people move into these areas which are growing in terms of the severity of the hazard and we see more and more severe wind storms and lightning storms, happening more frequently here in California, we also know that those people demand and have a right to have both electric and telecommunications as they move into those fire hazard areas. So this is becoming an increasingly complex area for us.

Here, the decision that we have to make is about whether the utility or the ratepayers should be responsible for the financial cost associated with these very specific fires. What we talk about here may or may not have any precedence on any future fire issues that come before us.

This fall’s wildfires were even more destructive and, particularly, have put PG&E in the crosshairs. No causes have been established or blame assigned yet, but there’s a clear possibility that PG&E will take the hit for billions of dollars in damages. Particularly if the same law, logic and court decisions that drove yesterday’s decision are applied.

California wildfires are everyone’s problem, regardless of who’s at fault

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The recent wildfires that struck seemingly everywhere all at once, but particularly hard in the northern California wine country, might have been caused, in part, by wind whipped electric lines surrounded by a canopy of dense, dry trees. If that’s what happened, then electric companies, and particularly PG&E, could be liable for billions of dollars worth of damage.

It poses a difficult public policy question: who pays? Ratepayers, shareholders or taxpayers?

Coincidentally, the California Public Utilities Commission is due to decide that question at this week’s meeting, at least in regards to a series of wildfires in San Diego County in 2007. San Diego Gas and Electric, Cox Communications and contractors who worked on utility pole routes had to pick up a $2.4 billion tab for damages and legal fees. SDG&E is asking the CPUC for permission to pass $379 million in costs on to ratepayers, at the rate of $1.67 per month for six years.

As written, the draft decision on the table for the CPUC would deny the request, because “the costs of the 2007 Wildfires were incurred due to unreasonable management by SDG&E”.

If commissioners go along with it, SG&E shareholders will absorb the immediate cost, in the form of lower dividends or a depressed share price.

The immediate cost.

Long term, it’s a more complicated question. If more money has to be spent on tree trimming, wind loading mitigation and similar measures, it’ll change the maintenance cost calculation that determine how much telecoms companies have to pay for the right to attach their fiber and copper to utility poles that are primarily designed to support electric service.

Going forward, someone will have to pay. Whatever the immediate decision, that someone will be the people who live in SDG&E service area, directly via higher electric rates, indirectly to meet return on investment goals necessary to attract investment or via higher broadband rates driven by the cost of maintaining joint pole routes.

With the cost of rebuilding after the recent wildfires not even calculated, and a future with even bigger disasters looming as a real possibility, the CPUC has hard choices to make. Simply kicking the cost of the San Diego fire back to current investors is tempting, but a nuanced solution with a statewide mandate – including electric and broadband customers as well as investors – is needed.

Incumbents get first grab at California broadband subsidies and subs in January

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Yesterday, California’s broadband infrastructure subsidy fund began its transition from a bottom-up program focused on independent, locally developed projects, to a top down one that’s gamed for the benefit of incumbents. The first post-assembly bill 1665 rules for the California Advanced Services Fund (CASF) were put on the table by the California Public Utilities Commission.

The draft lays out the process for facilities-based incumbents – broadband service providers that own and operate their own equipment, wired or wireless – to exercise their right of first refusal for unserved areas. If they claim an unserved area by 15 January 2018, they’ll effectively have at least year to build out. No one else will be eligible for CASF subsidies.

No one else.

What the draft rules imply but don’t explicitly say, and AB 1665 clearly states anyway, is that an incumbent who takes a right of first refusal on an area will be eligible to apply for CASF grants to pay for at least a part of the work needed to upgrade it. In other words, they go straight to the head of the line.

The process will be more or less run the same way that a much more restrictive right of first refusal offer was three years ago. At the time, only Frontier Communications, in its pre-Verizon acquisition days, held back a handful of small territories. At the time, incumbents couldn’t tap into CASF money and had to pay for the promised upgrades themselves.

This time around, with Frontier hemorrhaging subscribers and shareholder equity and AT&T bent on fencing off its decaying rural copper systems so it can replace them with low performing wireless systems, it might be different. Frontier lobbied hard for AB 1665, in the apparent hope it could turn CASF into its private piggy back. AT&T will be less interested in the money than in protecting its rural monopolies. But both will have an incentive to jump in on the right of first refusal.

What they won’t have a particular incentive to do, though, is to fulfil any of the promises they make. There is no particular penalty for claiming an area for a year, stalling beyond that however they long they can, and then doing nothing at all. There’s a general rule that could be used to penalise false statements, but AT&T and Frontier employ plenty of lawyers and lobbyists who know how to bend and break the truth legally.

The CPUC is scheduled to vote on the right of first refusal scheme next month. Public comments can be submitted for the next two weeks.

Draft resolution – California Advanced Services Fund interim “right of first refusal” processes and timelines, 14 November 2017
Final resolution – implementation of new timelines for California Advanced Services Fund applicants, 26 June 2014
Chaptered version, assembly bill 1665, 15 October 2017

We’re not selling lit service to Verizon, says SCE

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In an apparent attempt to dial down the heat on regulatory review of its dark fiber leasing deal with Verizon, Southern California Edison wants to remove any reference to electronics from the paperwork it filed with the California Public Utilities Commission.

SCE has been in the dark fiber business for a couple of decades, and is certified by the CPUC as a competitive telephone company – it holds a certificate of public convenience and necessity (CPCN) that allows it to lease dark fiber and sell other telecommunications services, including lit data transport, on its 5,000 mile fiber network. Because it’s first and foremost a regulated, privately owned electric utility, there are conditions attached, such as sharing revenue with ratepayers and closer, ongoing scrutiny of its telecoms business by the CPUC than would otherwise be the case.

Earlier this year, SCE asked the CPUC to give its blessing to a master fiber lease agreement with Verizon. The idea was to have the CPUC approve top level terms for what would be an open-ended business arrangement between SCE and Verizon. Within the constraints of that master agreement, the two companies would be able to negotiate leases for particular fiber strands on particular routes as the need arose over time. It’s a common practice in the fiber business and would eliminate the need to file the necessary, but nearly identical, paperwork with the CPUC every time SCE leases a new strand to Verizon.

At first, it seemed uncontroversial. The commissioner responsible for the review, Cliff Rechtschaffen, outlined a perfunctory decision making process. Then two things happened. The commission began an overall look at the way utility poles are managed in California, and Pacific Gas & Electric asked for essentially the same CPCN authority SCE has, under terms that were largely similar, but used a different formula for determining how money should be split between ratepayers and shareholders. Rechtshaffen widened the scope of his enquiry, citing, among other things, SCE’s apparent intention to sell lit services to Verizon. In other words, instead of leasing bare strands of dark fiber and letting Verizon worry about the rest, it would presumably be attaching electronics to each end and transporting data back and forth. Which is something PG&E also wants to do.

Since then, TURN, an old school consumer advocacy group, and the cable industry’s lobbying front organisation have jumped in on the proceeding, even as California’s recent wildfire catastrophes have made relations between the CPUC and privately owned electric utilities increasingly fraught.

SCE’s latest move is to tell the CPUC that it wants to take out the word “electronics” from its original application “because it suggests that the subject of the Application involves lit fiber, when it does not”.

Since it’s the first time around, PG&E will get a hard look at its request for telephone company status, and there’s no doubt a decision will take many months, if not years. SCE, on the other hand, has been in the fiber business for nearly 20 years, operating under rules approved by the CPUC that have provided significant benefits to electric ratepayers and telecoms subscribers, who are pretty much the same people anyway. Neither the company, its customers or the public that depend on both should have to suffer through an interminable review of a simple contract that plays by those rules.

California broadband subsidies will be top down, incumbent focused

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The California Public Utilities Commission plans to take a more active role in deciding where and how broadband infrastructure will be subsidised, and to work more closely with incumbents in the process. Yesterday, commissioners discussed how they will run the California Advanced Services Fund (CASF) program under new rules adopted by the California legislature. Assembly bill 1665 was signed into law by governor Jerry Brown last month. It requires the commission to periodically designate which communities in California can receive CASF money, based on a slower minimum broadband speed standard – 6 Mbps download and 1 Mbps upload – that will slash the number of eligible households from 300,000 to just 20,000, according to one CPUC estimate.

Commissioner Martha Guzman Aceves, who is taking the lead on redesigning the CASF program, said she wants to set specific goals for broadband deployment and work with incumbent providers to achieve them…

The key one I really want to focus on is…the overarching program goals. It can really help us work on how we have this regional focus that is goal driven and certainly one of the things I’ll be mentioning that I want us to consider as one of those goals is to be driven in the areas of highest economic need…

With the federal CAF program and other dynamics there is going to be provider engagement. Again, as I mentioned, the example of Oroville, where you could actually work with Comcast and AT&T to expand to the unserved areas. So this is a new area, it’s one where I think we have a responsibility to really be engaged to ensure that that engagement is balanced.

Up until now, infrastructure projects were created at the local level, usually by independent broadband providers, and then proposed to the CPUC for CASF funding. Incumbents are equally eligible, but a couple of small Frontier Communications grants aside, preferred to either ignore the program, or complain bitterly with varying degrees of truth whenever an independent project was proposed.

AB 1665 flipped that process completely around, giving the CPUC responsibility for making the first-cut decisions on where projects should be built and putting incumbents at the head of the line for getting the money to do it.

That’s really not a reversal for the CPUC itself, though. As president Michael Picker noted, commissioners have wanted, to varying degrees, to proactively manage the CASF program rather than simply responding to proposals as they came in.

Guzman Aceves and communications division director Cynthia Walker outlined a timetable for completing the overhaul by next September. Until then, the plan is to continue funding projects from the $30 million that’s leftover from the old program. No details were given about that process would work though. In the past, the CPUC has tended to take the position that grant proposals are assessed on the basis of the rules in effect as of the application date, but there’s been no indication whether that’s the case now.

CPUC presentation, California Advanced Services Fund, 8 November 2017