Hard deadline for money beats soft promise of broadband investment

by Steve Blum • , , , ,

No. You show yours first.

By a four to one vote, the California Public Utilities Commission approved a $1.5 million grant to build a fiber to the home project in Nicasio, a wealthy community in western Marin County. As has become common, commission president Michael Picker cast the only no vote. The grant from the California Advanced Services Fund (CASF) covers 60% of construction costs; the remaining 40% will be raised locally

The required matching funds plus costs of offering will be obtained by a notes offering, which will be registered with the California Department of Business Oversight under the Securities & Exchange Commission’s standardized process, the Small Company Offering Registration (SCOR) process. The homeowners in the project area will be offered an opportunity to purchase the notes. The interest rate will be based on market conditions. Currently, the applicant is proposing an interest rate of 3% per year…

Originally, the applicant had planned to offer the Broadband Utility Note securities under the Intra- state offering exemption of the Securities Act of 1933; however, after consultation, the applicant’s legal advisor advised them that for the Nicasio project, a SCOR offering would be a better alternative.

Inyo Networks and Praxis – the same companies that are behind the Digital 395 project – have a year to sell enough bonds to build the project. From the commission’s point of view, this leeway is a departure from previous procedures, which, in theory, required CASF grant applicants to have their matching funds in place.

In reality, it’s laying the financial cards face up on the table. In the past, applicants have put together financing and other deals in advance only to see them evaporate due to processing delays at the commission – rules call for decisions to be made in 106 days, while actual wait times can stretch to well over a year. And then there are the cases where the money is said to be available, but the details are, um, murky. Sorting that out can tie up CASF money for years as well.

It would be best if the commission met its own deadlines and made decisions quickly enough to hold business models together and keep investors from walking away in frustration. But having the 60% in hand and a hard deadline of a year will make it easier for Inyo to raise the rest and will give the commission the transparency and accountability it needs to run the program more efficiently. It’s an improvement and should be standard practice.