Higher broadband construction costs means higher costs, California senate analysis admits

by Steve Blum • , , , ,

Not again.

It’s not exactly push back, but the first hint of clear headed thinking about more or less doubling broadband construction costs has emerged from the California legislature. Assembly bill 2272 would add broadband infrastructure subsidised by the California Advanced Services Fund to the list of construction projects that are subject to the state’s so-called prevailing wage law – in other words, be subject to union work rules and wages regardless of who is doing the work. Or how much people otherwise get paid to do it.

Right now, the bill is stuck in limbo in the California senate – put on ice with dozens of other bill’s in the appropriations committee’s suspense file. An analysis prepared by committee staff finally admits that the bill will be costly, in terms of higher charges for subsidised work and in lost opportunities…

This bill will also result in unknown costs pressures to the CASF, likely in the millions of dollars, because more funds will be needed to complete the same amount of projects as a result of increased labor costs.

This bill would become effective on January 1, 2015 for all infrastructure projects funded in part by the CASF, including those projects which are currently underway. The CPUC will incur some one-time costs to identify the status of the existing projects and make a determination of whether the project costs will change as a result of this bill. If so, the CPUC will need to determine whether the CASF grant amount should be adjusted to accommodate higher labor costs. These costs are unknown and will depend on the number of existing projects, the status of those projects, and whether the CPUC determines that the CASF grant should be adjusted.

The analysis only goes halfway – 30% to 40% of the higher costs would have to be paid by ISPs, due to matching fund requirements. That would greatly reduce the incentive to build broadband infrastructure in under and unserved areas, which was the whole point of the program to begin with.

Sometime this week – likely Thursday – legislative leaders will decide behind closed doors whether AB 2272 moves forward. At this point, odds are it will skate through – union cash and campaign workers matter in an election year – but at least some of the facts are on the table.