Telecommunications service and infrastructure is subsidised in a couple of different ways in rural California. The California Advanced Services Fund pays the lion’s share of the cost of building broadband infrastructure in under and unserved areas, and the California High Cost Fund supports telephone service as well as infrastructure. The latter is divided between rural areas served by bigger incumbents, like AT&T, Verizon and Frontier, and those served by small rural companies, like Pinnacles Telephone or Ponderosa.
In all cases, the money to pay for it comes from taxes on telephone – and not broadband – bills. Various euphemisms are used – surcharge, fee – but for all practical purposes, it’s a tax.
Regulation follows the same pattern: telephone service rates, costs, territories and standards are closely watched, broadband service and infrastructure is largely unregulated.
A law approved by the California legislature in 2012 began a rethink of how the California Public Utilities Commission runs those regulations and subsidies. Commissioner Catherine Sandoval was assigned to see that process through. She presented her proposed solution to the commission last week…
What this bill does is it requires the CPUC to consider the funding of broadband capable networks as well as high quality voice networks in these rural areas that are served by the rural telephone companies. And this is very important because it recognises that we have to invest in the networks of the future and that these networks are absolutely critical for economic participation, for safety, for health, as well as for our future.
The CPUC adopted the decision she drafted, which, among other things, keeps the existing distinction between broadband and telephone service for small rural telcos on the books, but launches a study next year to see how necessary it’ll be to maintain it over the long term, for subsidy and regulatory purposes. As the decision states…
The Broadband Networks and Universal Service studies are consistent with our “ground-truthing” effort through the CPUC’s Broadband Mapping program that supports our analysis of where broadband investments may be merited through the California Advanced Services Fund. Such studies will allow for evidence-based decision-making based on local conditions.
The study will evaluate…
The extent of broadband capable network build-out in the [small rural telco] areas including information on speed capability and offerings, latency, data caps, and other relevant factors for broadband and high-quality voice. The studies will account for the [new FCC standard under the CAF order]() that broadband networks eligible for federal support have speeds of 10 mbps down and 1 up, and evaluate what investments would be needed to comply with that standard, and document the extent to which Small ILEC broadband meets California’s underserved standard of 6 mbps down and 1.5 mbps up.
The Broadband Networks and Universal Service studies will identify barriers to broadband capable network and high quality voice build-out including: population density; demographic factors including income levels, business, government, and local institutions; terrain; access to electricity or reliance on diesel; environmental permits, and; other factors that affect investment in broadband capable networks. The studies will account for the cost of burying lines underground in light of weather and fire danger issues.
In the meantime, small rural telcos can keep regulated phone and unregulated broadband service financially separated, and will remain protected from wireline competitors.
If you’re interested in a good primer on how rural telephone service regulation and subsidies work in California, I recommend reading the decision.