California legislature considers utility fire liability changes

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The fires ravaging California this morning are a stark reminder that last year’s horrific blazes were no fluke. They are the new normal. Figuring out how to live with this reality is the most pressing task in front of the California legislature when it reconvenes later today.

One of the many issues is who pays?

Under California law, if the cause involves an electric utility’s infrastructure, then it has to pay for the full cost of the damage, whether it was fully, or even truly, at fault. And whether or not it was negligent. By one reckoning, Pacific Gas & Electric’s shareholders face a $12 billion tab from last year’s fires alone. Southern California Edison is in the same boat. It’s natural to want someone else to pay for any kind of damage suffered by the public, but there’s also the question of how to keep electricity flowing in California, at affordable rates and in a sustainable manner. Assessing the liability of electric companies as you would for any other business is one way to balance those interests.

Before they left for their summer vacation, key lawmakers agreed with governor Jerry Brown to fast track a solution. While they were gone, Brown released a draft of his preferred approach. According to the proposed bill’s summary…

In a civil action…against an electrical corporation or a local publicly owned electric utility seeking damages arising from an unintended fire that occurred on or after January 1, 2018, when electrical infrastructure is a substantial cause of the fire, this bill would require the court to balance the public benefit of the electrical infrastructure with the harm caused to private property and determine whether the utility acted reasonably.

Telecoms companies can be hit with the same kind of liability claims, as Cox Communications was for a 2007 fire in San Diego County. And they rely on pole routes that are largely built and maintained by electric companies. The top priority has to be the safety of all Californians, but maintaining affordable access to modern electric and telecoms service is important too.

California’s net neutrality amigos ride into action tomorrow

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The California legislature is back in session tomorrow, following a month long summer break. The fires ravaging California will certainly be top of mind for everyone, but broadband bills remain on the table. Network neutrality is the big issue, and activists are certain to keep the pressure on to pass effective legislation.

Senate bills 822 and 460 are paired up, and together will reinstate the 2015 Obama era net neutrality rules scrapped late last year by the Trump administration’s republican majority on the Federal Communications Commission. And go a bit further.

If the deal reached in the rush to get out of town last month holds together.

SB 822 is the main event. It bans blocking, throttling and paid prioritisation – as did the 2015 rules – and adds zero rating to the list of forbidden practices. Or at least it did until the industry-friendly assembly communications and conveyances committee got its hands on it. Chair Miguel Santiago (D – Los Angeles), with close support from his wingmen, assemblymen Eduardo Garcia (D -Imperial) and Evan Low (D – Santa Clara), did the bidding of AT&T, Frontier Communications, Comcast, Charter Communications and others, and eviscerated SB 822.

The outcry from activists and democratic leadership – net neutrality is a flagship issue for the party, particularly in Washington, D.C. – was intense. Garcia backed down at a capitol press conference, and promised to work with senators Scott Wiener (D – San Francisco) and Kevin de Leon (D – Los Angeles), the authors of SB 822 and SB 460 respectively, to restore the bills to their former glory.

If all goes to plan, we should see revised drafts of both bills tomorrow or shortly thereafter. Wiener is leading the net neutrality charge and said as much at the press conference. The question will be whether the new text matches the stringent language of the original versions. With platoons of lobbyists for big telecoms companies dug in for a fight, we can take nothing for granted.

Consumers say they’re paying too much for poor Internet service

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Big Internet service providers hit all time low in customer satisfaction ratings, according to the latest American Customer Satisfaction Index (ACSI) telecommunications company rankings. The survey ranks telecoms companies and service offerings on a 100-point scale. ISPs dropped from an overall industry average of 64 out of 100 in 2017 to 62 this year, and overall the broadband industry is making people very unhappy.

According to ACSI, it’s a case of the bad just getting worse…

Internet service providers (ISPs) are down 3.1% to 62—an all-time low for the industry that along with subscription TV already had the poorest customer satisfaction among all industries tracked by the ACSI.

Customers are unhappy with the high price of poor service, but many households have limited alternatives as more than half of all Americans have only one choice for high speed broadband. Every major ISP deteriorates this year except for Comcast’s Xfinity, which is unchanged.

Verizon’s FiOS fiber to the home service is still top rated with a score of 70, and AT&T wasn’t far behind with 68. Charter Communications and Comcast are below the industry already dismal customer satisfaction average – both scored 60. Suddenlink wasn’t much better at 61, both it and Charter saw a year over year decrease of 5 points.

Frontier Communications and Cox Communications bring up the rear among major California ISPs, with customer satisfaction ratings of 54 and 59, respectively.

As a group, small ISPs did better than average, but still not great, getting a combined score of 63.

On specific aspects of service, call centers are the biggest pain point for consumers, getting a 59 out of 100 rating, while bricks and mortar store staff are well regarding, topping the benchmarks at 76. But all customer experience ratings are down from last year’s…

Internet service is less reliable (69), more prone to outages (68), and performance during peak hours is worse (68). Video streaming quality is unchanged (68), but overall data transfer speed is lagging compared with a year ago (–3% to 67), as is the quality of email, storage, and security (–3% to 69).

The rankings are based on an email survey conducted this past March and April. More than 45,000 customers responded.

CPUC and Frontier must put broadband upgrade cards on the table

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When the California Public Utilities Commission allowed Frontier Communications to buy Verizon’s wireline systems in California, it imposed a long list of conditions, including commitments made as part of settlements reached with organisations that objected to the deal. Some of those obligations required Frontier to upgrade broadband service to more than 800,000 homes.

One of those organisations is the California Emerging Technology Fund, which is embroiled in a dispute with Frontier over nearly every aspect of that settlement. CETF claimed in a complaint filed with the CPUC that Frontier “does not intend to honor” its commitments, including, among other things, the upgrade schedule it offered in 2016.

In its formal response to CETF’s allegations, Frontier never actually says that it kept to that timetable. All it says is that “Frontier sent a letter to the Communication Division dated March 8, 2018 on its commitments that includes a confidential attachment reflecting completed locations through December 31, 2017”. It sent a letter, but doesn’t say what’s in the letter or even claim that the letter documents fulfillment of its obligations.

It did include a table, shown above, which gives an overview of what it believes its obligations to be. It’s not a revelation. It simply repeats what’s in a similar table included in its 2016 settlement with consumer groups, plus a much smaller promise of 7,000 upgraded homes in northeastern California made to CETF, plus the households that the Federal Communications Commission is paying Frontier $228 million to upgrade via its Connect America Fund program.

One striking omission is how Frontier plans to meet its promises. In the course of winning the CPUC’s approval for the Verizon deal, Frontier promised specifically to upgrade wireline service, and claimed it “focused solely on wireline telecommunications”. Since then, it has publicly backtracked on that pledge.

Frontier’s obligations are to the people who live in the communities where it intends to upgrade broadband service. Both the CPUC and Frontier have a duty to let them know where, when and – particularly – how those upgrades will be made.

Don’t confuse social services groups with ISP sales departments

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It’s been a bad few weeks for so called broadband adoption programs in California. First, the shotgun marriage between Frontier Communications and the California Emerging Technology Fund (CETF) turned into a messy divorce, having only reached a tiny fraction of its “aspirational” target of 200,000 new broadband subscribers.

Then the California Public Utilities Commission launched an effort to recover $244,000 from a Los Angeles County adoption program, that was funded by a regional broadband consortia grant from the California Advanced Services Fund. That program had an even loftier goal: it was called California’s One Million New Internet User Coalition (NIU Coalition). A CPUC investigation resulted in allegations of “false reports” submitted by the group, regarding time spent – and billed – training residents of low income communities in the mysteries of the digital world.

These programs are intended to get more people to use Internet-delivered services and subscribe to broadband service. In theory, that’s what “adoption” means. It’s a marketing metric that’s expressed as the percentage of potential customers who buy a particular category of product or service. To increase the adoption rate, you need to close more sales. Period.

The problem is that the non-profit corporations and community based organisations that chase “adoption” grants are not well equipped to meet Internet subscriber sales quotas. Instead, they tend to focus on advocacy or education – digital literacy, as it’s sometimes called. Or they simply give computers and Internet access away. That might be worthy thing, but at best it’s an indirect way to drive broadband subscriptions.

Computer giveaways, free Internet access and digital literacy classes are not sales tools. Those sorts of programs play a role in connecting more people to Internet-delivered services and closing the digital divide. But you can’t measure their success by the number of new subscriptions they generate. Trying to do that just leads to acrimony when ridiculous targets aren’t met. There are better ways to hold educational and social services organisations accountable than by pretending they are the sales department for Internet service providers.

As TV subs cancel, monopoly control of broadband pipes is Comcast’s best hope to grow business

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As TV subs cancel, monopoly control of broadband pipes is Comcast's best hope to grow business

Comcast offered the perfect example last week of why big, monopoly broadband companies hate the idea of network neutrality, and are stuffing politician's pockets with cash arguing so eloquently against it.

Comcast's traditional cable television business is bleeding subscribers and revenue at an increasing pace, but its broadband business is booming. The company reported its second quarter 2018 financial results last week. It gained 260,000 broadband subs, but lost 140,000 video customers, which led to a 1.9% decrease in video revenue. Losing video subs is nothing new, but declining revenue is. It's the first time that's happened, according to a story by Ben Munson in FierceVideo.

The reason is Netflix and its over the top kin, according to Comcast CEO Brian Roberts, who spoke on a conference call with analysts

Continuing competition from virtual contributed to our 140,000 video customer net losses in the second quarter. We remain focused on segments that we can serve profitably as part of a broader relationship with the customer centered on a whole home experience.

One way of creating that “broader relationship” with a “whole home experience” is to manipulate customers' Internet traffic so the video content Comcast sells comes first and the bandwidth used to carry it is cheaper.

That's what paid prioritisation is all about. There are different ways to game it and Comcast lobbyists have tied themselves up in semantic knots trying to redefine paid prioritisation so that Comcast can claim to be against it while building fast lanes for itself. But it comes down to the same thing: use monopoly control of Internet service to make, say, Netflix's video streams slower and more expensive for consumers than Comcast's.

The potential, and the reality, of that kind of abuse of market power is the reason that the concept of non-discriminatory access and open pricing for critical infrastructure came in being – the common carrier principle. It's as applicable to broadband today as it was to ferries four hundred years ago.

Zero understanding of dark fiber business means zero benefit to Californian consumers

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Southern California Edison is driving home the point that rebating half of its dark fiber leasing revenue to electric customers would kill its ability to compete in the telecoms market. A draft decision by CPUC commissioner Clifford Rechtschaffen would replace a nearly 20 year old gross revenue sharing formula – 90% to SCE, 10% to electric customers – with a 50/50 split.

In closed door meetings with top California Public Utilities Commission staff, an SCE executive and an in-house lobbyist said, in effect, that Rechtschaffen doesn’t understand the dark fiber business…

Contrary to unsupported statements in [Rechtschaffen’s draft decision], a 50/50 gross revenue sharing mechanism would not provide sufficient return to justify shareholder investment. The 50/50 gross revenue sharing implies equal sharing of benefits, but ignores the incremental costs, risks, and business liabilities incurred by shareholders…

Shareholders would have to recover all of their costs through the remaining 50%, if possible, resulting in disproportionally less or negative benefits for shareholders since customers do not incur any incremental costs. There is no evidence in the record that the 50/50 split is an economically viable mechanism to justify shareholder investment.

Both SCE and the Utility Reform Network (TURN), a non-profit organisation that claims to speak for consumers, filed longer written comments about Rechtschaffen’s draft.

TURN shows a similar lack of understanding about telecoms. It argues that SCE’s dark fiber business should micromanaged by the CPUC, similar to the way privately-owned electric utilities are regulated.

That’s nonsense. Electric utilities are monopolies that provide an essential service, and it is rational to regulate them as such. Independent dark fiber companies have to make their living competing against unregulated, monopoly business model telephone companies. Micromanaging one of the few remaining competitive sources of dark fiber in California, while ignoring, if not actively assisting, monopoly telcos is perverse.

Californian consumers need fast and affordable broadband service every bit as much as they need electricity. Thinking that cutting them in on more of SCE’s fiber revenue will be a benefit to them is pure fantasy. SCE put it correctly and succinctly in its comments: “the ‘interests of ratepayers’ are better served by 10% of gross revenues than by 50% of zero”.

It’s small ball, but at least U.S. congress is playing the broadband game

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Two broadband-related bills were passed by the U.S. house of representatives last week. Both focus on the federal broadband bureaucracy rather than infrastructure deployment or service upgrades, but at least there’s the hope that something will come of it.

House resolution 4881 was carried by representative Bob Latta (R – Ohio). It aims to promote “precision agriculture”, which seems to be just another way of saying “ag tech”. But it’s really about bringing modern broadband service to unserved rural areas. Sorta. It sets up a series of study groups, first within the federal bureaucracy, then including people from various aspects of the agriculture and telecoms industries. They’re charged with figuring out…

  1. The status of fixed and mobile broadband Internet access service coverage of agricultural land;
  2. The projected future connectivity needs of agricultural operations, farmers, and ranchers; and
  3. The steps being taken to accurately measure the availability of broadband Internet access service on agricultural land and the limitations of current, as of the date of the report, measurement processes.

HR 3994, by Paul Tonko (D – New York), would set up an Office of Internet Connectivity and Growth inside the National Telecommunications and Information Administration. It would be responsible for doing pretty much the same thing: figuring out where broadband gaps are, and how to encourage other federal agencies to plug them.

It’s hard to get excited about either bill. At best, we can expect to see a lot of meetings over the next two or three year, capped by what I’m sure will be earnest reports. But there are a couple of encouraging things.

First, it’s good that federal lawmakers can move something, anything at all. And even better that broadband bills are moving ahead on a bipartisan basis – both passed by wide margins.

Second, there seems to be agreement that broadband responsibilities aren’t limited to the Federal Communications Commission, which is a regulator and not a developer, and the federal agriculture department’s Rural Utilities Service, which is stuck in a 1930s electric cooperative business model.

Another reason not to get excited is that neither bill is law yet. The U.S. senate has to act, which is usually not the way the bet, and the president has to sign it, which means all bets are off.

Just one touch is all it takes, FCC tells telephone, cable companies

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One of the useful things that’s come out of the Federal Communications Commission’s industry-dominated Broadband Deployment Advisory Committee (BDAC) is a draft rule that would establish a “one touch make ready” (OTMR) process for attaching new cables to utility poles. Assuming the FCC adopts it – pretty much a foregone conclusion – a new wireline competitor that wants to enter a market won’t have to wait around for incumbents to clean up their attachments before adding its own cable. Any necessary make ready work can be done by a pre-approved contractor.

The result, according to the FCC’s draft, is faster broadband build out…

OTMR speeds broadband deployment by better aligning incentives than the current multi-party process. It puts the parties most interested in efficient broadband deployment—new attachers—in a position to control the survey and make-ready processes. The misaligned incentives in the current process often result in delay by current incumbents and utilities and high costs for new attachers as a result of the coordination of sequential make-ready work performed by different parties.

Different companies, local agencies and other organisations have different takes on what the details of OTMR should be, but on the whole there’s general agreement that it’s a good idea because it reduces work for everyone. Google Fiber, in particular, has pushed for this kind of rule for a long time, and said in a blog post that it was “excited” the FCC’s proposal.

When it comes, the FCC’s decision won’t have direct effect in California, though. States have the option of regulating utility poles themselves, which California does. The FCC’s default rules apply in the 30 states that haven’t picked up that option. The California Public Utilities Commission is reconsidering how it regulates utility poles, and could adopt the same standard. The California legislature also has utilities poles on the agenda, although its more concerned with the fire hazard that electric lines present, and the liability that electric companies face.

Cable, telcos hit rock bottom in consumer satisfaction rankings

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The broadband industry is pissing off its customers. According to the latest American Customer Satisfaction Index (ACSI) telecommunications company rankings, the consumer businesses at the very bottom of the list are subscription television service (a rating of 62 out of 100), Internet service (also 62), video-on-demand service (68) and fixed line telephone service (70).

In other words, the misery caused by your local telco is only exceeded by the pain inflicted by your cable company. Both do a worse job of keeping you happy than the U.S. post office, airlines and health insurance companies (but not by much – they’re tied with social media platforms for fifth worst with a score of 73).

Mobile phone service isn’t much better. It rates a 74. Just above it at 75 are video streaming services and both investor-owned and municipal utilities.

Over-the-top (OTT) video providers like Netflix offer consumers better and friendlier service than cable and telcos, with devastating effect according to ACSI…

OTT operators have raised the bar by providing greater personalization, lower prices, more mobility—and much better customer service. As a result, cable and satellite television customers think they are paying higher prices for lesser value and receiving poor service to boot.

The effect is widespread. The entire sector faces repercussions as many of the same large companies offer service for internet, television, and voice via bundling. Subscription television and internet service providers rank last among all industries tracked by the ACSI. The implication is clear: moving in on the video streaming market won’t be enough to keep TV subscribers unless customer satisfaction improves as well.

Consumer electronics companies do the best, topping the list at 85 out of 100. Of course, there’s nothing like a cold drink to go along with a binge watching session, so breweries and soft drink makers are in second place with an 84. Online retailers and credit unions round out the top five with a score of 82.