Tag Archives: cpuc

Telcos’ California cash grab gets a nod at the CPUC

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Three parallel efforts are underway to rewrite the rules for California broadband infrastructure subsidies and use the money to support substandard service and technology deployed by AT&T and Frontier Communications. The legislature is considering assembly bill 1665, which would, among other things, add $300 million to the California Advanced Services Fund for broadband construction and operating costs, and effectively give it to AT&T and Frontier. The lower service standards and eligibility restrictions in the bill would keep independent Internet service providers out of most of rural California.

While that’s being decided, the California Public Utilities Commission is 1. tinkering with the program to bring it into compliance with a law passed last year and 2. considering what might end up being a complete overhaul of the way infrastructure grant requests are processed and prioritised.

As they’ve done so far with AB 1665, Frontier and AT&T are trying to game the system and rewrite the rules so they can lock out competitors and use CASF money as a private piggy bank to back fill their budgets and claim reimbursement for work they’d be doing anyway. They made the same self serving claims in their objections to an initial CASF priority exercise and Frontier is trying to use what should be a minor rewrite of the rules as an opportunity to grab control of the cash.

They seem to have found a willing ear at the commission. A first draft of what could become a reboot of the CASF program includes at least three gifts on big incumbents’ wish lists:

  • A lower performance standard, in particular slower upload speeds that better match the outdated first and second generation DSL systems that Frontier and AT&T maintain in rural areas.
  • Eliminating or greatly scaling back requirements that grant recipients put some of their own money into projects.
  • More opportunities to challenge applications and drag out what is already a never ending review process, including allowing annual carve outs based on promises rather than performance.

For the most part, the only regulation broadband providers face in California comes from the market, at least where it might be found. It would be a perverse outcome indeed if the CPUC – California’s utility regulator – works against the market by using taxpayer money to strengthen existing monopolies and protect them from the threat of competition.

Gonzales, California putting broadband into every home, business

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Basic broadband in every home and fast fiber for every business: that’s the goal endorsed on Monday by Gonzales city council members. The plan, as presented by staff, is to issue two requests for proposals.

The residential RFP is ambitious. There are 1,800 homes in Gonzales, which is located in California’s Salinas Valley. The city wants to provide a basic, lifeline-level of service to each one. As the report presented to the council explains

Staff has been exploring the possibility of entering into a bulk services agreement with a qualified Internet service provider (ISP) to deliver a basic level of Internet access to every home in Gonzales. Although this is a novel approach for a City to take, it is a common method of contracting for service in private communities. There are significant differences between the legal, regulatory and market conditions in cities and private communities, but staff has concluded that distributing a Request for Proposals to qualified ISPs, will clarify those issues and should produce legitimate options that can be implemented.

The second RFP would focus on building out fiber infrastructure in the commercial and industrial areas of the city. A recently completed middle mile project, built and owned by Sunesys/Crown Castle and largely paid for by a grant from the California Advanced Services Fund, runs the length of Gonzales, connecting to a Level 3 facility in Soledad to the south and to several long haul routes in Salinas, Watsonville and Santa Cruz to the north. The city is already in the process of building its own connection to this middle mile fiber, which will be one of the assets on the table when the RFPs are issued.

AT&T is the only company currently offering broadband service on a citywide basis, and it reaches most, but not all, homes and businesses. Download speeds range from 3 Mbps to 18 Mbps. The California Public Utilities Commission ordered Charter Communications to begin providing full triple play service to all residential areas by May 2018. That’s the result of a settlement reached between Gonzales and Charter, during the regulatory review of its purchase of Time Warner and Bright House cable systems last year. Commercial and industrial areas aren’t included in the agreement, though.

Naturally, both AT&T and Charter will be invited to submit proposals, along with any other interested ISPs. The two RFPs and more details regarding the financial and technical aspects of the plan are expected to be released later this summer.

City of Gonzales Broadband Infrastructure Strategy Update, 15 May 2017

I’m assisting the City of Gonzales with its broadband initiative and helped with its negotiations with Charter. I am not a disinterested commentator. Take it for what it’s worth.

Oops, CenturyLink rebuttal makes the case for CPUC intervention

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CenturyLink had to say something, and there probably wasn’t much else it could say, but its response to protests filed against its proposed acquisition of Level 3 does as much to encourage a rigorous review by the California Public Utilities Commission as it does to dissuade it.

The formal opposition to the transaction comes from a coalition of consumer advocacy groups – TURN, the Greenlining Institute and the CPUC’s office of ratepayer advocates – and the California Emerging Technology Fund. CenturyLink’s response correctly points out that some of the demands have a letter-to-Santa ring to them. Suggested remedies such as employment, diversity and build out obligations are nice things, but also dance around the central problem with the transaction: California’s long haul fiber market will go from three traditional phone companies – CenturyLink, AT&T and Verizon – plus one independent – Level 3 – to just three legacy carriers with similar, monopoly-centric business models.

But what CenturyLink is trying to do right now is head off an intensive review by the CPUC, and avoid wrangling over side issues altogether. It has two problems, though. First, the CPUC has already rejected its bid for summary approval once – that boat has sailed. Second, elimination of a competitor in a market that’s already highly concentrated is exactly the sort of outcome that is adverse to the public interest and therefore grounds for rejecting the deal. As CenturyLink was kind enough to point out

In reviewing these applications over the years, the Commission has repeatedly and consistently found that the “primary question” to determine in a transfer of control proceeding under [the summary approval process] is whether the transaction will be “adverse to the public interest”…

In brief, where – as is the case here – there is no interruption of service, no change of tariffs, no transfer of operating authority, no customer transfers, no elimination of providers, the transactions have unfailingly been found not to have any adverse impact on the public.

CenturyLink then slathers on the nonsense, claiming 1. since it doesn’t directly serve Californian consumers (a genuinely de minimis extension of its Oregon network into Modoc County aside) it can’t do harm – except that without an independent Level 3 around it can squeeze competitive, consumer focused ISPs mercilessly – and 2. Level 3 will still technically be an independent company. Fortunately, CenturyLink refutes its own bullshit and later claims – without irony – that the combined company will be able to “rationalize existing facilities” and otherwise act as a single, monopoly model-driven despot.

Full review or not, CenturyLink wants to get it done by the end of September. In California, that’s not the way to bet.

One CASF grant approved, one released and one on hold

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A $511,000 broadband upgrade grant for a cable system owned by CalNeva in Fresno County was unanimously approved by the California Public Utilities Commission at its 11 May 2017 meeting. The commission also signed off on environmental clearances and released $17 million in grant and loan subsidies for the Bright Fiber FTTH project in Nevada County. The $29 million proposal by Race Telecommunications for an FTTH system in the Phelan area, in San Bernardino County was bumped to the commission’s 25 May 2017 meeting.

CenturyLink takeover of Level 3 challenged in California

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The proposed purchase of Level 3 by CenturyLink faces two formal protests in California. One comes from a coalition of consumer advocacy groups – TURN, the Greenlining Institute and the California Public Utilities Commission’s office of ratepayer advocates – and the other from the California Emerging Technology Fund. Both generally focus on the impact that rolling together two of California’s four major fiber companies would have on broadband availability, on both a wholesale and retail basis.

The coalition – which refers to itself as the joint consumer groups – is asking the CPUC to take a hard look at the merger…

The Commission should review the Proposed Transaction and consider its effects on safety, reliability, network infrastructure, investment, and competition. This transaction will have a direct and significant impact on the availability of backhaul and other wholesale services that are critically important to ensuring a robust marketplace for broadband services as well as many other offerings that ultimately impact all California consumers.

Several possible ways of mitigating some of the damage are suggested, including “California-specific commitments” from CenturyLink regarding network infrastructure investment, service quality and price, and employment and diversity programs. But, they say, the big problem – the deal’s effect on telecoms competition in California – needs a harder look…

By eliminating Level 3 as a potential competitor in the market for wholesale and enterprise services, the Commission may indirectly increase rates for wholesale services and place additional barriers on competitors that remain in the marketplace. [CenturyLink and Level 3] make no attempt to address how this merger will impact the long-term business plans and practices of Level 3 and CenturyLink in its competition with incumbent carriers like AT&T and Frontier. The Commission should require further assurances that Level 3 will remain an independent competitive carrier throughout California and will continue to advocate for reasonable and fair access to wholesale inputs offered by incumbent carriers.

It’s early days in the process. The two protests won’t be settled immediately – that’s likely months in the future. Instead, the next step is for the CPUC to determine what the process will be going forward, in particular what sort of information it will require CenturyLink and Level 3 to provide, both to it and the challengers.

CPUC, California lawmakers need to be as rational as a telecoms monopolist

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Update: the CPUC delayed action on the Gigafy Phelan project, and rescheduled it for consideration at its 25 May 2107 meeting.

Frontier Communication’s request to the California Public Utilities Commission to squash a potential competitor is economically rational – it has a monopoly and wants to keep it – which is why it should be rejected. Utility regulators exist to moderate monopolist impulses, not turbocharge them. If the CPUC rejects a $29 million infrastructure grant request from Race Telecommunications for its Gigafy Phelan fiber to the premise project, it will be handing over effective broadband ownership of 8,000 San Bernardino County homes to Frontier, which in turn will redline 3,000 of them because they haven’t been blessed with federal subsidies. Of the remaining 5,000, only a fraction will receive service that meets the CPUC’s minimum standard of 6 Mbps download and 1.5 Mbps upload speeds.

I made that point in reply comments I filed on Friday with the CPUC, as a rebuttal to the challenge Frontier mounted. I also debunked Frontier’s attempt to invoke assembly bill 1665, which would kill Race’s project if it actually makes it into law…

The bill in question – Assembly Bill 1665 – has not been enacted or similarly endorsed by the California Legislature. It is a controversial bill which has only been heard in a single assembly committee. In fact, a Frontier representative raised objections to the bill during the hearing…

It is disingenuous in the extreme to characterise AB 1665 as California policy or, indeed, anything other than a wish list submitted for consideration by its prospective beneficiaries, which include Frontier Communications, its objections notwithstanding.

Frontier’s objections to AB 1665 amount to almost isn’t good enough, I want it all. Which make plain its intent to use policy makers as tools to cement its grip on rural broadband customers while scooping any available subsidy money into its own pocket. Which is a completely and economically rational way of looking at the world. The CPUC and California legislators should respond in kind.

Race Telecommunications reply comments on Resolution T-17525 – CASF grant to construct the Gigafy Phelan project, 5 May 2015
Tellus Venture Associates reply comments on Resolution T-17525 – CASF grant to construct the Gigafy Phelan project, 5 May 2015

Fresno broadband subsidy proposal scores two major, welcome firsts

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Update: the CPUC unanimously approved the grant for the CalNeva project in Coalinga and Huron at its 11 May 2017 meeting.

For the first time, a cable company is in line for a broadband construction subsidy from the California Advanced Services Fund (CASF). The California Public Utilities Commission is expected to decide whether or not to give CalNeva Broadband a $511,000 grant to upgrade former Comcast cable systems in Coalinga and Huron in Fresno County and provide broadband and television service to 5,500 homes.

The technology will be hybrid fiber coax (HFC), using mostly existing plant, with about seven miles of fiber and 50 miles of coax in Coalinga and Huron. Huron will be tied to the network operations center and middle mile fiber in Coalinga via a licensed, gigabit class microwave link.

CalNeva operates small cable systems in several remote, rural communities in California and Nevada. Unlike the major cable companies, they don’t seem to mind getting involved with the CPUC. That’s a refreshing change. I’ve worked on several projects where we’ve tried to interest cable companies in participating in CASF-funded projects, and received the same answer every time: no. The problem, as they see it, is that they don’t want to come under CPUC’s oversight, even in a small way. CASF is technically a telephone industry program, and companies that get grants have to agree to live by the CPUC’s telephone industry rules. At least where the details of grant administration and obligations are concerned. Cable companies, on the other hand, have lobbied themselves clear of nearly all regulatory oversight in California and they don’t want to do anything that might endanger that status.

Another refreshing difference is the speed with which this application was processed: it’s the first time the CPUC has held to its promised timeframe. The proposal was submitted in mid-January and the draft resolution approving the grant was published last month. Assuming it’s taken up by the CPUC on 11 May 2017 as expected, it’ll be a few days past the 105 day decision deadline, but well within any reasonable expectations or practical interpretation of the rules.

When evaluating whether or not to pursue CASF grants, companies have to weigh the opportunity cost of putting investment capital – usually 30% to 40% of the total project cost cost – on ice while a decision is made. A reliably quick decision, even if it’s a fast no, is less risky and costly to broadband companies, particularly independent ones, than the endless and arbitrary process many have endured. Five other active CASF project proposals have been under review for an average of 512 days – more than a year past the deadline. And that’s not counting the ones that died of old age.

If timely decisions become the norm – and the CalNeva project shows that it’s possible – the CASF program will be a much more credible and effective way of closing California’s digital divide.

Frontier makes the case, California’s AB 1665 is double disaster

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Frontier’s admittedly “late-filed” attempt to kill grant funding for the Gigafy Phelan fiber to the home proposal in San Bernardino County does a much better job of demonstrating why assembly bill 1665 is a bad idea than it does of effectively arguing against the project.

In addition to reinstating a tax on phone bills and adding $300 million to the California Advanced Services Fund (CASF), AB 1665 would lower California’s minimum broadband service standard to 6 Mbps download and 1 Mbps upload speeds. It would also give incumbent telephone companies – Frontier and AT&T, primarily – de facto exclusive rights to rural broadband customers, whether or not they offer Internet access that meets the Californian minimum or, indeed, whether they offer broadband service at all. All they have to do is accept federal money from the Connect America Fund (CAF) program to build broadband infrastructure that meets the lower standard they’re pushing, somewhere in the general area.

Frontier is so eager to claim that prize that it cited AB 1665 in its argument against Gigafy Phelan, saying “just last week, the Legislature endorsed [using federal funds] again by amending CASF funding legislation to expressly prohibit award of a CASF grant to overbuild a CAF-funded broadband project”.

The “again” bit is misleading. California law and policy is full of exhortations to tap federal funds. What’s different and dangerous about AB 1665 is that it deliberately fences off large areas from state funded broadband upgrades when infrastructure is installed that doesn’t meet the current five year old Californian standard, even if no federal money is used.

That’s a point that Frontier clearly, if probably inadvertently, makes when it says it’s “currently in construction to expand broadband access by August 2017 to about 5,000 of the 8,361 households this application proposes to serve”. Why only 60% of the homes? Take a look at the map of Phelan above. The areas tinted yellow in checkerboard fashion are where Frontier is taking federal money to do substandard upgrades; there’s no money on offer for the areas in between. Guess where the more than 3,000 homes it’s bypassing are located?

That checkerboard pattern makes it completely impractical for another company to come in and serve people who don’t live where federal money flows, with or without a CASF grant. But Frontier would be completely entitled to double dip CASF money there and use it to offer service that wouldn’t meet basic needs five years ago, let alone today.

If the current version of AB 1665 becomes law.

Frontier Communications hates double dipping, unless it’s licking the cone

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As might be expected, Frontier Communications objects to a proposed $29 million California Advanced Services Fund subsidy for a fiber to the home project in its San Bernardino County territory. Its first instinct was to try to a backdoor approach at the California Public Utilities Commission, but that was rebuffed. So yesterday Frontier filed formal comments urging the CPUC to kill the Gigafy Phelan project when it comes up for a vote next week.

There are a few problems with its arguments against it.

First, it claims it’s going to upgrade the area that Race Telecommunications wants to serve. Well, not the entire area. Only 60% of the homes. And Frontier is very careful not to mention what that upgraded service will be. That’s because it’s only willing to commit to meeting a federal subsidy program’s 10 Mbps download/1 Mbps upload standard, as its previous filings at the CPUC have made abundantly clear. That service level does not meet the CPUC’s 6 Mbps down/1.5 Mbps up minimum. So even if the upgrade is completed in August, Frontier’s service in the Phelan area will still be substandard, for both the 40% of homes it’s bypassing and for many, if not all, of the remaining 60%.

Second, it makes a very odd argument against tapping two subsidy programs in one area. The CASF grant, which would give a gigabit to 100% of the homes in the project area, comes from California taxpayers, who also contribute to the federal Connect America Fund program that is financing Frontier’s substandard upgrade. It’s a fair point that taxpayers should only be paying for one broadband upgrade project, but should it be the one that offers a gigabit for $60 a month or the one that’ll lock in ten or twenty year old technology for the next twenty or thirty years?

There’s no way that Frontier will pass up that money, though. In fact, it doesn’t pass up money even when it means engaging in the kind of double dipping that it so piously objects to in its letter to the CPUC. In 2015, Frontier pursued, and received, CASF and federal subsidies to prop up its ageing DSL infrastructure in the Humboldt County town of Petrolia.

Frontier is entitled to play subsidies as dealt. But it’s gross hypocrisy to complain about the game when the other guy ends up with better cards.

CPUC will decide if CenturyLink can buy Level 3

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CenturyLink and Level 3 have finally admitted that they need to do more than just throw a note through the window in order to get the California Public Utilities Commission’s approval of their pending transaction. The deal was done last October, but the two companies waited five months to formally apply for permission to transfer Level 3’s California telephone certifications to CenturyLink.

During that time, they tried to convince CPUC staff that it was a purely administrative matter that could be handled with a perfunctory paper shuffle. But both CPUC staff and consumer groups pushed back, with the result that a formal review is now required, nominally with the same level of regulatory scrutiny that was involved in Frontier Communication’s purchase of Verizon’s California telephone (and broadband) systems, and Charter’s takeover of Time Warner Cable and Bright House.

In the application, the companies dance around the central question, which is what happens to the Californian broadband market when the number of long haul fiber operators on key routes shrinks from four to three. Since CenturyLink is buying Level 3, it also means that California’s major supplier of industrial-class Internet bandwidth and dark fiber will be taken over by an old school telephone company with a retail mindset. Just like AT&T and Verizon, the other two major middle mile fiber owners in the state.

Most of the application is taken up with the usual legal recitals of ownership, interests and good intentions, but the companies managed to slip some whoppers in too. Such as claiming that “the proposed transfer will not diminish competition in the state in any way”. It will, since it will be more difficult and expensive for competitive broadband providers and other wholesale-level users to get the direct connections to Internet backbones that they need. Instead, they’ll be pushed into the incumbent telco business model of selling Internet bandwidth by the bit.

Californian review of the CenturyLink/Level 3 deal is vital, even more so since the Federal Communications Commission backed off from overseeing the wholesale telecoms segment. As the CPUC correctly ruled last year, California’s broadband market is highly concentrated – in other words, a monopoly or nearly so – and pointed to restricted middle mile access as a prime reason.

The CPUC should reject CenturyLink’s request to buy Level 3.

Application of CenturyLink and Level 3 for CPUC approval
Exhibits to the application, unfortunately with all the good stuff blacked out