CPUC not ready to cripple dark fiber competition just yet

by Steve Blum • , , , ,

No decision so far from the California Public Utilities Commission regarding changing the rules of the game for privately owned electric companies when they engage in dark fiber leasing and other telecoms business activities. The commission was scheduled to vote Thursday on a draft decision that, as currently written, would require Southern California Edison to give 75% of the gross revenue it gets from leasing out dark fiber to its electric customers. Up until now, it’s only had to hand over 10% of gross telecoms revenue to ratepayers.

The vote was bumped two weeks, to 22 March 2018. It’s the second time it was delayed. The first time, CPUC president Michael Picker pulled it off the agenda – any commissioner is allowed to do that once for any particular item, usually. This time, it was commissioner Clifford Rechtschaffen who asked for the delay. He’s the “assigned commissioner” in this case, and he’s the one who opened up what was originally a routine request by SCE to approve a master fiber lease deal with Verizon, and turned it into what could end up being a much broader reevaluation of how telecoms businesses of private electric utilities are regulated.

SCE and consumer advocacy groups – who have a strangely narrow view of what consumers need – continue to press their respective points of view, and changes might still be made to the draft decision.

Both SCE and Pacific Gas and Electric installed fiber networks on their electricity transmission infrastructure, originally to manage those systems. Installing a couple of fiber strands costs virtually the same as installing a couple of hundred, while going back and adding more strands later effectively doubles the cost. So network operators, of any sort, routinely add extra strands – usually lots of extra strands – when building new fiber routes.

PG&E and SCE were no different. Over the past twenty years or so, they’ve leased out extra capacity to other telecoms companies, and turned it into a nice side business run according to rules established by the CPUC back when it all started. They’ve also built extensions to their original fiber networks, to serve telecoms customers. Fiber built to support electric operations was treated as an allowable expense by the CPUC, which regulates electric rates partly on that basis, but extensions for fiber customers were not.

Up until now, it’s been a win-win scenario for electric companies and consumers, who need affordable broadband access as much as they need electric service. PG&E and SCE are major source of independent, long haul dark fiber capacity in California, which is a segment of the broadband market that woefully lacks competition, as the CPUC has acknowledged.

Reducing the incentives for them to compete would be a very bad decision.

My clients include Californian cities that have municipal electric utilities with fiber interests, and cities that just want better broadband. I am not a disinterested commentator. Take it for what it’s worth.