Incumbents get first grab at California broadband subsidies and subs in January

by Steve Blum • , , , ,

Yesterday, California’s broadband infrastructure subsidy fund began its transition from a bottom-up program focused on independent, locally developed projects, to a top down one that’s gamed for the benefit of incumbents. The first post-assembly bill 1665 rules for the California Advanced Services Fund (CASF) were put on the table by the California Public Utilities Commission.

The draft lays out the process for facilities-based incumbents – broadband service providers that own and operate their own equipment, wired or wireless – to exercise their right of first refusal for unserved areas. If they claim an unserved area by 15 January 2018, they’ll effectively have at least year to build out. No one else will be eligible for CASF subsidies.

No one else.

What the draft rules imply but don’t explicitly say, and AB 1665 clearly states anyway, is that an incumbent who takes a right of first refusal on an area will be eligible to apply for CASF grants to pay for at least a part of the work needed to upgrade it. In other words, they go straight to the head of the line.

The process will be more or less run the same way that a much more restrictive right of first refusal offer was three years ago. At the time, only Frontier Communications, in its pre-Verizon acquisition days, held back a handful of small territories. At the time, incumbents couldn’t tap into CASF money and had to pay for the promised upgrades themselves.

This time around, with Frontier hemorrhaging subscribers and shareholder equity and AT&T bent on fencing off its decaying rural copper systems so it can replace them with low performing wireless systems, it might be different. Frontier lobbied hard for AB 1665, in the apparent hope it could turn CASF into its private piggy back. AT&T will be less interested in the money than in protecting its rural monopolies. But both will have an incentive to jump in on the right of first refusal.

What they won’t have a particular incentive to do, though, is to fulfil any of the promises they make. There is no particular penalty for claiming an area for a year, stalling beyond that however they long they can, and then doing nothing at all. There’s a general rule that could be used to penalise false statements, but AT&T and Frontier employ plenty of lawyers and lobbyists who know how to bend and break the truth legally.

The CPUC is scheduled to vote on the right of first refusal scheme next month. Public comments can be submitted for the next two weeks.

Draft resolution – California Advanced Services Fund interim “right of first refusal” processes and timelines, 14 November 2017
Final resolution – implementation of new timelines for California Advanced Services Fund applicants, 26 June 2014
Chaptered version, assembly bill 1665, 15 October 2017