Tag Archives: monopoly

War for California’s broadband future isn’t (quite) over

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The politics of broadband in California are largely driven by the campaign cash that incumbent telephone and cable companies – and sometimes the unions representing their employees – stuff into the pockets of senators and assembly members. That influence is moderated by the energetic, but often futile efforts of broadband activists across the state. So it was with assembly bill 1665, which is on its way to governor Brown’s desk.

If he signs it, AB 1665 will transform the California Advanced Services Fund (CASF) from a useful source of capital for broadband companies that aim to inject at least a little competition into California’s highly concentrated, sclerotic broadband market into a $300 million slush fund, mostly for telcos with rural monopolies, like AT&T and Frontier, but also allowing a taste for cable companies, like Comcast and Charter.

The fight against the pork barrel that AB 1665 became was led by a loose coalition of regional broadband consortia representing largely rural, coastal areas, beginning at Del Norte County on the Oregon border and running south through Monterey County, skipping San Francisco and San Mateo counties, which have stayed out of the fray. Independent Internet service providers and the umbrella organisation which represents many of them – CISPA – were also on the front line.

Their reaction was swift to the lopsided votes that put AB 1665 on track to become California law. You can read a running compilation here, but Sean McLaughlin, the executive director of Access Humboldt put it well…

Sadly, in AB 1665 public interests have been subverted to benefit private interests. We know that the broadband provider industry, rooted in a history of monopoly dominance over the telecommunications marketplace, has captured our legislature when a thoughtful proposal for public support to bridge the digital divide is perverted into a thoughtless gift to private interests.

The official vote tallies notwithstanding – politics is a complicated sport – several lawmakers stood against the tide of lobbyist cash and love. First among them was senator Mike McGuire (D – Healdsburg), who challenged the conventional, campaign contribution-centric wisdom at the California capitol and openly opposed AB 1665.

Senate majority leader Bill Monning (D – Monterey) refused to vote in favor of the bill. Assemblymen Mark Stone (D – Santa Cruz) and Marc Levine (D – San Rafael) signed on as co-authors months ago in the hope of reaching a sane result, and then conspicuously withdrew their names when the pork turned rancid. They all deserve thanks.

Several – but not all – republicans opposed AB 1665. Assemblyman Randy Voepel (R – Santee), who previously endorsed an independent CASF proposal in his district, voted no and was joined by seven of his assembly colleagues, most from southern California’s Axis of Anita Bryant, but also including Jordan Cunningham from San Luis Obispo.

The war isn’t quite over. Broadband advocates will make their case to Brown, and then wait. He has until 15 October 2017 to decide.

I’m part of that loose coalition. I’m involved and not making any apologies. Take it for what it’s worth.

California senate votes to pay $300 million for slower broadband

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Assembly bill 1665 was approved by the California senate this afternoon on a lopsided vote. The initial count was 32 in favor and 2 against, but the roll was left open for a while, so the final numbers could be different. The no votes came from Mike McGuire (D – Healdsburg) and Janet Nguyen (R – Garden Grove).

The bill will drop California’s minimum speed standard to 6 Mbps down/1 Mbps up, and allocate $300 million in construction subsidies under rules that all but guarantee the money will go to AT&T and Frontier Communications. It also imperils pending projects. AB 1665 now goes back to the assembly for a concurrence vote.

More telco perks added to $300 million broadband subsidy bill as California senate vote nears

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Incumbent telephone and cable companies convinced their friends in the California legislature to add another slab of pork to a broadband subsidy bill, as the senate prepares to vote on it. Assembly bill 1665 started out as a telco-centric bill, and subsequent amendments, including the the ones added on Friday, have made it even more one-sided – in most areas of the state, it will be impossible for independent broadband projects to qualify for support from the California Advanced Services Fund (CASF).

Two assembly members have taken their names off of the bill. Mark Stone (D – Santa Cruz) and Marc Levine (D – San Rafael) were co-authors, but they both withdrew their support as the gifts to telephone and cable companies became more blatant and local opposition grew in their districts.

AB 1665 reinstates a tax on telephone bills, and pumps $300 million into CASF for infrastructure grants. But it re-writes the rules of the program, lowering the minimum acceptable broadband speed to 6 Mbps download and 1 Mbps upload. If you have service available at that level, then your community isn’t eligible for broadband upgrade grants. But even if you don’t, the money won’t be coming to your town, except by way of your incumbent telephone company.

The bill also allows AT&T and Frontier Communications to reserve areas based on 1. promises of future upgrades and 2. acceptance of federal subsidy money. They would be able to apply for CASF grants in those otherwise eligible areas, but independent projects would be out of luck. AT&T and Frontier will be free to game the system and pocket most of the $300 million in return for providing service that doesn’t meet California’s current minimum standard of 6 Mbps down/1.5 Mbps up, if they so choose.

The amendments added to AB 1665 on Friday reinforce those privileges, among other things explicitly excluding areas where AT&T and Frontier are receiving federal subsidies.

Cable companies get some perks too. They’ll be able to launder grant money through their customers, and avoid oversight by the California Public Utilities Commission. Cable lobbyists also tightened the screws on public housing communities, who will no longer be able to use CASF money to install WiFi equipment and offer free access if someone is selling broadband service at 6 Mbps down/1 Mbps up or better. Even if that service costs more than residents are supposed to be able to afford.

A vote could come as early as tomorrow in the senate. If it gets the necessary two-thirds majority, it’ll go back to the assembly for a concurrence vote on amendments.

CenturyLink-Level 3 deal moving ahead in California, but not until October

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CenturyLink will be allowed to buy Level 3 Communications, under the terms of a settlement reached in June with some of the organisations that challenged the deal, if the California Public Utilities Commission endorses a proposed decision posted this morning by a CPUC administrative law judge.

If the usual process is followed, commissioners will make the final decision at their 12 October 2017 meeting, or a later meeting if there’s significant disagreement amongst them. It’s theoretically possible that a vote could be taken at their 28 September 2017 meeting, but only in the sense that it’s theoretically possible for a tornado to blow through a junkyard and produce a fully functional iPhone. And even if it did, Apple’s lawyers would crush it, claiming patent infringement by the tornado. So expect a final decision in October, not September.

The proposed decision also throws out a challenge to the settlement by the California Emerging Technology Fund (CETF)…

This Settlement involves compromises of parties’ preferred outcomes. The fact that multiple parties, with divergent interests, reached a mutually acceptable compromise, however, provides evidence that the Settlement is reasonable in light of the record. Even though CETF does not join in the Settlement, the Settling Parties still include the Joint Consumer Groups representing consumer interests. The Settlement addresses the Joint Consumer Groups’’ concerns by providing discrete benefits to California consumers including,, among other things, improved service quality, funding for facility expansion and certainty for enterprise and wholesale customers with existing contracts.

There’s no mention of Telnyx LLC in the proposed decision. Telnyx jumped into the CPUC’s review of the deal at the last minute, claiming that Level 3 was cutting off wholesale VoIP services to independent service providers. Although ALJ Regina DeAngelis gave Telnyx permission to participate in the proceeding, she threw out their protest, because it wasn’t properly filed. Although Telnyx can continue to participate, it has nothing of substance on the table.

Proposed decision approving CenturyLink-Level 3 transaction, 8 September 2017

Open access does not guarantee open broadband competition

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When national governments run mobile broadband networks, they do not run them well. That’s the unsurprising conclusion of a white paper published by GSMA, the trade association for mobile network operators that rely on GSM standards to one extent or the other – in other words, pretty much all of them.

A trade association that lobbies governments to advance the interests of its members might be expected to oppose what amounts to nationalisation of mobile network infrastructure and operations. So it’s hardly shocking that GSMA’s brief overview of publicly-owned open access mobile networks – the government or a favored company builds one, single network and sells wholesale space on it to mobile retailers – doesn’t have much good to say.

But the report should be judged on its merits, and not dismissed simply because of the source. On that basis, it does point to a couple of supportable, and pedestrian, conclusions.

First, it highlights an ordinary truth about big government infrastructure projects: far more are proposed than implemented, and even the ones that move forward usually aren’t started, let alone completed, on schedule. The paper looks at five open access mobile network initiatives. Three – in Kenya, Russia and South Africa – never began, and one, in Mexico, is taking shape slowly, with no guarantee that anything will actually be built. In that sense, mobile networks are little different than other government led infrastructure projects.

Then there’s the fifth network, in Rwanda. It was actually built, in a public-private partnership with KT, a big South Korean telecoms company, and it’s been operating for about three years. Build out has been slower than planned and might never reach its target of covering 95% of the population, but it does reach something like a third of the population and it’s the only source of 4G LTE service in the country.

The GSMA white paper is woefully short on details, but it does provide one interesting, quantitative indicator that few benefits have flowed to consumers, at least not yet. Since the open access 4G network was launched late in 2014, the price of mobile broadband service has stayed flat – the three major mobile operators all charge around 6 cents per megabyte/$60 per gigabyte.

That’s also not surprising. To the extent the three companies re-sell service on the Rwandan open access 4G network, they all have the same wholesale cost. With only three players, the mobile market is very concentrated, which means it’s less likely that they’ll engage in a profit-killing, price led race to the bottom.

California senate committee votes to give telcos $300 million for slower broadband

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The California legislature continued its love affair with telecommunications companies on Wednesday. The senate’s energy, utilities and communications committee, chaired by Ben Hueso (D – San Diego), voted 8 to zero to approve assembly bill 1665 in its current form and send it on to the senate appropriations committee for further review.

It wasn’t exactly unanimous. One senator, Mike McGuire (D – Healdsburg), who had opposed the bill, abstained when the vote was taken, as did two republicans, Anthony Cannella (R – Merced) and Mike Morrell (R – Rancho Cucamonga).

The version that was approved by the senate EU&C committee was the one that was put on the table in July, when telco and cable lobbyists convinced the author, Eduardo Garcia (D – Imperial County), to add more perks for them and more barriers for would-be competitors. However, it’s not clear whether a third helping of pork proposed by the EU&C committee staff would get slathered on as it winds through the legislative process.

AB 1665 would lower California’s broadband standard from a minimum of 6 Mbps download/1.5 Mbps upload speeds, to 6 Mbps down/1 Mbps up. That’s despite a move by the federal agriculture department to set the minimum acceptable speed for rural areas at 25 Mbps down/3 Mbps up.

The bill would also re-write the rules for the state’s primary broadband construction subsidy program – the California Advanced Services Fund (CASF) – in such a way that it will be difficult, if not impossible, for anyone other than AT&T or Frontier Communications to tap into the $300 million allocated for infrastructure grants. It adds further sweeteners for incumbents, such as letting them use CASF grant money to pay for operating costs and, in a nod to the cable industry, allowing them to launder it through individual property owners in order to avoid any direct oversight by the California Public Utilities Commission, which oversees the fund.

Next stop for AB 1665 is the senate appropriations committee. If it gets a green light there, it’ll go to a floor vote by the full senate, and then back to the assembly to reconcile the different versions passed by the two houses.

CenturyLink-Level 3 deal blows past key California deadline

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Too late.

The already poor chance that CenturyLink would get permission from the California Public Utilities Commission to buy Level 3 Communications before the end of September took another steep nosedive yesterday. A 5:00 p.m. deadline came and went without a draft decision – yes or no – being released by the CPUC administrative law judge (ALJ) and commissioner handling the case.

In the normal course of business, proposed decisions have to go through a 30 day public review and comment process before being voted on by commissioners. To get on the commission’s 28 September 2017 agenda, a draft decision had to be posted by close of business yesterday. That didn’t happen and that means CenturyLink and Level 3 won’t get California’s blessing before their 30 September 2017 target date for closing the deal.

Unless.

Unless the commission grants a Hail Mary motion for an emergency exception to the 30-day rule that CenturyLink filed one minute after yesterday’s deadline passed.

The odds of that happening are, to be generous, exceedingly slim. For three reasons.

First, it’s – let’s say unusual – to ask to shorten the review period for a proposed decision that hasn’t been issued yet. According to the rough schedule set by the commissioner in charge of the case – Martha Guzman Aceves – a draft decision isn’t even due until mid-October.

Second, the assigned ALJ, Regina DeAngelis, was very clear at a pre-hearing conference earlier this month that she thinks the 30 day review period is mandatory and rebuffed oral arguments to the contrary. It wasn’t a reach on her part, it was just conventional wisdom, particularly when a Californian proceeding continues to be challenged by officially recognised parties, as this one is.

Finally, the standard for shortening the 30 day review period is not whether it’s a matter of corporate convenience but rather if it’s a matter of public interest and it’s “an unforeseen emergency situation”. It’s hard to see how short circuiting the normal debate over a contested transaction – particularly one as bad for California’s telecoms market as the proposed CenturyLink-Level 3 hookup – is in the public interest, and even harder to believe there’s anything unforeseen happening. It’s common for fraught proceedings to run a year or more at the CPUC and it was CenturyLink’s choice to wait almost five months before formally beginning this one.

DeAngelis’ pre-hearing conference warning to CenturyLink and Level 3 is worth repeating: “I’m hoping there’s something more that the parties can do to prepare for a decision at a later date”.

Cable gains subs as consumers flee DSL

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Cable companies own the residential wireline broadband market and are increasing their lead over telephone companies, at least where the major players are involved. An analysis piece by Sean Buckley in FierceTelecom breaks out the subscriber numbers for the 15 biggest Internet service providers in the U.S., ranked by total subscriber count as of 30 June 2017. It shows big cable with a 64% to 36% market share advantage and positive net subscriber growth, while big telco is stuck in reverse.

In the second quarter, the seven largest cable ISPs netted 430,000 new subscribers, while the eight biggest telcos lost 16,000 subs. The reason, according to Buckley, is consumers dumping outdated DSL-based service…

The effect of cable’s DOCSIS 3.1 drive was clearly felt by traditional telcos, which lost 233,260 more wireline broadband users, a slight improvement compared to the 360,783 this group lost during the same period in 2016. A big piece of this for large telcos such as AT&T and Verizon was the decline of DSL subscribers. AT&T and Verizon lost 104,000 and 72,000 legacy DSL subscribers during the quarter. But the biggest loser was Frontier Communications, which bled an additional 101,000 wireline broadband users. CenturyLink followed closely behind, losing 77,000 in the second quarter.

Comcast and Charter alone account for more than half of the market, with 27% and 24% shares respectively. Together, the two biggest telco ISPs – AT&T and Verizon – can’t even match Charter’s market share, let alone Comcast’s. AT&T has 16% of the total and Verizon has 8%, when added together and rounded, their total is 23%.

These latest numbers are good and bad news for big cable companies. Good, because sub count is the name of the game, and they’re winning hands down. Bad, because it’s one more data point that highlights a continually growing concentration of market power into a very few hands. When you take into account the fact that cable companies deliberately don’t compete with each other, on a market by market basis their dominance is increasingly indistinguishable from a true monopoly.

No Halloween treat for CenturyLink-Level 3 deal in California

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CenturyLink’s proposed purchase of Level 3 Communications appears likelier than not to be delayed for months. Yesterday, the California Public Utilities Commission set a tentative schedule for completing its review of the deal, with a target date of mid-November. That would mean the two companies will have to agree to extend their self-imposed deadline of 31 October 2017 if they still want to complete the transaction.

That won’t necessarily be the case. The ruling issued by commissioner Martha Guzman Aceves yesterday is vague – in many respects – and leaves room for a faster decision. On the other hand, there’s nothing in it that would keep the process from dragging on longer.

The CPUC has to decide if allowing CenturyLink to buy Level 3 is in the public interest. Yesterday’s ruling appears to take a narrow approach to answering that question. The real problem with the deal – the damage it would do to telecoms competition in California – isn’t explicitly mentioned. Rather than taking a top to bottom look at all the issues involved, the scope of the enquiry is, for now, limited to the settlement that CenturyLink reached with some of the organisations that objected to the deal.

But not all of them. The California Emerging Technology Fund is actively opposing the settlement, arguing it doesn’t go far enough, and a VoIP company – Telnyx – jumped in at the last minute and could yet make its presence felt. So long as the transaction is being actively contested, it is difficult, if not impossible, to short cut the CPUC’s review.

There is virtually no chance that the CPUC will approve the deal before the end of September, an outcome that a CenturyLink lawyer, Norm Curtwright, last week called “almost too awful to contemplate”. The horror of blowing past Halloween must be beyond human imagination, but that’s the reality now facing CenturyLink and Level 3.