Comcast wants permission to offer phone service to a new Madera County development in Ponderosa Telephone’s territory. In a required public disclosure of a private meeting between a California Public Utilities Commission staffer and a lobbyist and a lawyer for Comcast, the company revealed that it is targeting Tesoro Viejo, a master planned community of 5,200 upscale homes on two and a half square miles of rural land in southern Madera County.
According to the filing, Comcast says that if it offers phone service in the development, it would create “additional consumer choice” but “would have limited effect on Ponderosa and its draw on [a rural telco subsidy] fund”. As a matter of general policy, the CPUC doesn’t authorise competitive phone service in areas where small, heavily subsidised rural telcos, like Ponderosa, operate. That policy is under review, but Comcast doesn’t want to wait, presumably because it’s already put out a press release saying it will provide…
A wide range of innovative and advanced technology solutions, including high speed broadband, WiFi, video entertainment and “smart home/smart business” security/automation offerings, to homes, businesses and public spaces throughout the new Tesoro Viejo master-planned community.
Telephone service isn’t specifically mentioned – it would make for an awkward conversation at the CPUC – but the press release’s boilerplate includes phone service in the list of Comcast’s otherwise unregulated offerings.
Ponderosa wants to block Comcast, arguing that the CPUC already has concerns about competing telephone service leading to higher subsidy costs in rural areas, and if Comcast is allowed to pursue its plan, “the cherry-picking problem will be exacerbated”.
Comcast’s claim of a “limited effect” on CPUC subsidy requirements is disingenuous. The effect will be limited to the relatively affluent and densely packed customers in the development, who would otherwise be paying Ponderosa for phone and, perhaps, broadband, service. The CPUC will still have to help keep Ponderosa afloat so that its less well off and more scattered rural customers can continue to be served. Less revenue from the most profitable customers means more subsidies than would otherwise be required.
On the other hand, Comcast is correct when it says that allowing it to compete with Ponderosa will lead to greater consumer choice. At least for consumers who 1. have sufficient income to meet its revenue targets, and 2. are close enough together to minimise its cost and maximise its profit.
The CPUC has a hard decision to make: limit consumer choice and the need for taxpayer subsidies for all, or pick up the increased tab for rural residents while their new, more affluent neighbors reap the benefits of an open market. It’s a question that should be deliberatively answered at a top policy level, and not ad hoc in response to a company’s target of opportunity.