Californian ISPs pass on upgrades, open door to subsidised competition

by Steve Blum • , , , ,

Exercising the right to refuse first.

It looks like the right of first refusal hurdle has been cleared for broadband infrastructure subsidies in California, and successfully so. Assuming no filings are stuck somewhere in the system, only Frontier Communications has told the California Public Utilities Commission that it will upgrade broadband service on its own in at least some of its territory. For up to a year, the commission won’t fund competing broadband projects in the 7 communities identified by Frontier.

That means that beginning on 1 December 2014, telephone and cable companies and independent Internet service providers alike can apply for constructions grants and loans from the California Advanced Services Fund anywhere else in the state where broadband service doesn’t meet the 6 Mbps down/1.5 Mbps up minimum standard. And if no one does, local governments can apply starting on 1 May 2014, but only for unserved areas – places where there’s effectively no existing broadband service at all.

Contrary to my own dire predictions, the big incumbents did not try to game the system in order to effectively shut down the CASF program and stall potential competitors for a year.

Instead, Frontier submitted a focused and verifiable commitment to improve service in communities that sorely need it. It’s possible that Frontier could fail to follow through, but its commitment letter was more specific and binding than a competitor’s grant application would have been. And faster to implement, assuming that the federal money Frontier is relying upon materialises.

It’s not a completely clear path to CASF subsidies. Another change in the program allows incumbents to review grant and loan applications one by one, and then submit a better proposal. That’s arguably a good thing for both taxpayers in general and specifically the people who live in an area where incumbents want to arm wrestle for the opportunity to upgrade infrastructure. But it creates additional risk for ISPs who are deciding whether or not to apply.

I don’t think it’ll matter much, though. Incumbents have always had the chance to challenge CASF project proposals on eligibility grounds, either by arguing about it or rushing in to improve service. Anyone who submits a CASF application knows that incumbents aren’t likely to roll over and play dead.