“Framework” for telecoms competition in rural telco territories considered by CPUC

by Steve Blum • , , , ,

Tesoro viejo 2

A rousing and thoroughly disingenuous defence of telecommunications competition doesn’t appear to be enough for Comcast to get permission right now to cherry pick affluent households in Ponderosa Telephone Company’s territory. A pair of California Public Utilities Commission administrative law judges (ALJs) said in a ruling last Friday that even though allowing competitive telecoms companies into the protected service areas of California’s small, rural telcos should be considered on a case by case basis, those decisions should be made within a common framework.

The two ALJs – Mary McKenzie and Hazlyn Fortune – are managing what the CPUC calls a rulemaking proceeding that’s looking at the way California subsidises, and consequently protects, small telephone companies that serve remote and sparse rural communities that aren’t lucrative enough to attract big telecoms service providers. Or at least used to be. As California’s suburbs spread further out from cities, new developments are springing up on farm and ranch land that’s served by rural telcos.

Citing Comcast’s case as an example, they decided that the next step in that process is to establish a general set of rules that will guide future decisions about who should provide telephone service and, in some cases, broadband service in those new communities…

The Commission will first consider adopting general criteria in this Rulemaking as a framework for allowing competition, which will then be evaluated on a case-by-case basis considering local conditions for each individual small [rural telco] service territory where an application is filed by a potential competitive local exchange carrier (CLEC) seeking a certificate of public convenience and necessity (CPCN).

Comcast’s request to be allowed to provide telephone service in the upscale Tesoro Viejo development north of Fresno is being handled by another ALJ, Zhen Zhang, in a separate case. In theory, Zhang doesn’t have to wait for McKenzie and Fortune to finish their work, which could take months. In practice, since ALJ’s produce draft decisions for consideration by CPUC commissioners, it would probably be a waste of time to, as Ponderosa described it, put “the cart before the horse”.

Frontier digs a deeper digital divide in rural California with taxpayers’ shovel

by Steve Blum • , , , ,

Frontier verizon pole santa barbara county 10oct2015

A handful of rural communities in Lassen, Modoc and Kern counties will get their first taste of wireline broadband service from Frontier Communications if the California Public Utilities Commission approves infrastructure construction grants next month.

Unfortunately, it’s just a taste.

Frontier’s (and AT&T’s) strategy, as identified by a CPUC study earlier this year, of “disinvesting in infrastructure overall”, which is “most pronounced in the more rural and low-income service areas”, continues to be business as usual. Both of Frontier’s projects up for California Advanced Services Fund grants propose to deliver low speed service over ageing copper telephone lines. The $11 million would be spend on a desperately needed 137 mile fiber route and essential central office equipment upgrades, but Frontier’s interest in improving rural infrastructure, even when taxpayers are picking up the tab, ends there. As the CPUC’s draft resolution approving the Kern County grant describes the project, “Frontier will upgrade the existing communications facilities to increase broadband capacity but will not replace the copper cable infrastructure”. Likewise, the northeastern California project adds middle fiber and electronic equipment, but leaves “legacy copper infrastructure” in place.

It’s not an accident or anomaly. It’s deliberate.

Frontier continues to bleed customers and revenue, and selective fiber upgrades are the solution, according to CEO Dan McCarthy, who spoke about the company’s third quarter 2019 financial results

We achieved a sequential improvement in fiber net losses with only 1,000 in the third quarter. However, consumer copper losses of 52,000 were worse than the second quarter. In copper, although we experienced a sequential increase in gross additions, this was offset by a sequential increase in churn and we continue to manage this business for a decline. Fiber broadband gross additions increased sequentially in the third quarter and we also had a slight sequential improvement in fiber broadband churn. With the completion of the upgrades of the fiber network to be 10 gigabit capable, we have increased our emphasis on selling at higher speed tiers.

Frontier’s strategy is economically rational, and is probably its best shot at pulling shareholder value out of penny stock territory. What makes it rational, though, is the California legislature’s irrational (but well compensated) decision to subsidise 1990s era broadband service over 1890s era copper wires, and not hold incumbent telcos to the same standards in rural communities as they voluntarily and rationally adopt in densely populated, high income cities and suburbs.

CPUC commissioner asserts “a significant role” over broadband affordability and essential service

by Steve Blum • , , , ,

Rechtschaffen 2 20may2019

In a ruling issued on Friday, CPUC commissioner Clifford Rechtschaffen ended any doubt over whether an inquiry into the affordability of utility services includes the cost and quality of broadband access: it does. The decision puts wind in the sails of an analysis of broadband pricing and service speeds prepared by California Public Utilities Commission staff, and meets strident objections from AT&T, Comcast, Charter Communications and other monopoly model incumbents head on…

This amended scoping memo confirms that communications services, such as broadband internet access, are included within the scope of this proceeding. This amended scoping memo finds that [California Public Utilities] Code Sections 709, 280, 281, 275.6, and the Moore Act all demonstrate that the Legislature contemplated a significant role for the Commission in closing the digital divide in California and bringing advanced communications services, including broadband internet access, to all Californians. This proceeding may assist in that goal.

The California Cable and Telecommunications Association, which is a Sacramento lobbying front organisation for Comcast, Charter and other cable companies, argued that the CPUC shouldn’t look into the affordability of broadband service because it is “an interstate service governed by federal law, and defined as an “information service” and not a “telecommunications service”. In reply comments, AT&T agreed, saying “broadband is not a public utility service”. A joint filing by small rural telephone companies said much the same thing.

Unfortunately for them, the primary legal basis for their objections – the Federal Communications Commission’s blanket preemption of state broadband regulations was overturned by a federal appeals court. So long as the FCC says that broadband is an information service, it can’t wield its telecommunications authority as a magic weed whacker to chop down state regulations.

In his ruling, Rechtschaffen also set next June as the deadline for CPUC action on affordability and service standards for broadband and other utilities, including electricity, water, gas and voice services.

Collected documents from the CPUC’s investigation into essential service and affordability metrics for utilities are here.

T-Mobile gives CPUC some insight into post-Sprint merger plans for California, but won’t make it public

by Steve Blum • , , , ,

The hundred-plus pages of testimony submitted by three T-Mobile executives to the California Public Utilities Commission sheds a little more light on what the company intends to do in California when – if – it acquires Sprint and spins off customers, employees and assets to DISH. But most of the specific plans for California submitted to the CPUC last week were filed confidentially.

Chief operating officer Michael Sievert toned down the company’s weasel words about T-Mobile and Sprint workers in California, saying that the number of employees three years after the merger closes will be “equal to, or greater than” the current T-Mobile and Sprint total, even taking into account employees who might be transferred to DISH. However, he didn’t reconcile his pledge with another T-Mobile commitment to open a call center in the San Joaquin Valley and staff it up with 1,000 workers. That leaves open the possibility that hundreds of employees, from all over California, will be given a choice between unemployment or moving to Fresno County to begin a new career as a customer service rep.

Chief technical officer Neville Ray’s testimony boils down to we weren’t planning to use Sprint’s 800 MHz spectrum for 5G or much of anything else, so nothing changed. He also discusses leasing 600 MHz spectrum from DISH – T-Mobile has an option to do so but, according to Ray, hasn’t decided whether or to what extent to exercise it. If T-Mobile did lease that spectrum, though, it would mean cash flowing back to DISH and, presumably, less pressure to do something with it before the Federal Communications Commission takes it back.

In other words, T-Mobile’s option might result in a significant financial benefit to DISH, that could offset some of the financial penalties it might incur if it doesn’t meet its obligations to build out a competitive 5G network. Given DISH’s history of spectrum dealing, there’s reason to question the settlement’s fundamental premise that a new, facilities-based mobile broadband network will result. The lower the net cost of walking away, the less incentive DISH has to meet its nominal commitments.

Ray also submitted California-specific information about T-Mobile’s 5G deployment and service plans, mirroring the national level information given to the FCC. But unlike the national data, T-Mobile wants to keep its promises to California secret. Those could become public as the CPUC review moves ahead, but there’s no particular reason at this point to think they will.

The filing made by executive vice president Thomas Keys made minor updates to his previous testimony, but wasn’t particularly enlightening.

Opponents of the merger have two weeks to digest T-Mobile’s testimony and respond. The CPUC public advocates office’s quest for more information from DISH is running in parallel. Opponents could similarly ask T-Mobile to provide additional data and/or ask for more time to review it all, but at this point the case is still on a trajectory for a final decision in February 2020.

Links to the stack of arguments and exhibits everyone has filed are here.

My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary, but I like to think I’m good looking too. Take it for what it’s worth.

The wonderfulness of the T-Mobile/Sprint merger is only more wonderful, CPUC told

by Steve Blum • , , , ,

Tmobile store la 23oct2019

T-Mobile, Sprint and DISH filed their responses to the latest questions posed by the California Public Utilities Commission as it extends its review of the T-Mobile/Sprint merger to take into account the settlement reached by the companies with federal anti-trust attorneys.

I’m still working through the nearly 200 pages of “testimony”, particularly the statements by T-Mobile executives. From a quick scan, it looks like they’re following the line laid down by the company’s lawyers: nothing to see here, move on. But more on that later. Or check out the links below.

DISH’s chief D.C. staff lobbyist, Jeff Blum, responded to the question posed by commissioner Clifford Rechtschaffen in his ruling extending the CPUC’s review: “what are DISH Network’s California service obligations?”. Responded, but didn’t exactly answer. He detailed DISH’s federal obligations, and since California is still arguably one of the fifty United States the implication is those apply equally here. But he also laid out the fine print, which details granular requirements with granular penalties for granular non-compliance, which doesn’t exactly guarantee that DISH will do anything in particular in California.

Two Sprint executives – chief commercial officer Brandon Draper and staff lobbyist Peter Sywenki – filed declarations that amounted to I know nothing. Since they don’t work for T-Mobile, they aren’t “privy to [T-Mobile’s] business and network plans”.

Two hired gun economists, Mark Israel and Timothy Bresnahan, affirmed their previous paid testimony in support of the merger and offered assurances that what that they described the first time around was, if anything, even better than they thought.

Supplemental Testimony of G. Michael Sievert, 7 November 2019
Supplemental Testimony of Neville R. Ray, 7 November 2019
Supplemental Testimony of Thomas C. Keys, 7 November 2019
Testimony of Jeff Blum on behalf of Dish Network Corporation, 7 November 2019
Supplemental Testimony of Brandon Dow Draper, 7 November 2019
Supplemental Testimony of Peter N. Sywenki, 7 November 2019
Supplemental Testimony of Mark A. Israel, 7 November 2019
Supplemental Testimony of Timothy F. Bresnahan, 7 November 2019

Links to the stack of arguments and exhibits everyone has filed are here.

I don’t know who Jeff Blum is, and he’s not my dad. My dad was Geoff Blum. My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary, but I like to think I’m good looking too. My dad was amused by that. Take it for what it’s worth.

DISH stalls discovery of its California plans, so PAO asks judge to compel cooperation

by Steve Blum • , , , ,

Dish ces press conference 2012

DISH doesn’t want to disclose what its intentions are for the Californian customers, employees, spectrum, cell sites and retail stores it might – or might not – get from T-Mobile and Sprint when – if – the two companies combine. In a motion filed on Tuesday, the California Public Utilities Commission’s public advocates office (PAO) said that DISH stonewalled requests for information about its California-specific privacy policy, and network build out and customer service plans. So, the PAO is asking the administrative law judge managing the CPUC’s review of the merger to “compel responses” from DISH.

Last month, the scope of the CPUC’s inquiry was expanded to include DISH’s future role in California’s telecoms marketplace, following a settlement with federal anti-trust enforcers that calls for pre-paid subscribers, and redundant employees and real estate to be transferred to DISH, in order to keep four competitors alive in the U.S. mobile telecoms market.

The PAO has broad authority to request and, generally, get information from companies involved in mergers and asset transfers. Usually, companies push back and DISH is no different – its answers (see links below) consist largely of complaints that the PAO’s questions “are overbroad, unduly burdensome,
vague, and ambiguous” and “not relevant to the scope of this proceeding”. The bit about the scope of the proceeding is important because DISH, like T-Mobile and Sprint, disputes “the scope of the Commission’s jurisdiction…over wireless services”.

Arm wrestling over information disclosures is common enough. What makes it different in this case is the compressed timeline for the CPUC’s expanded review of the T-Mobile/Sprint merger. Assuming no deviation from the current schedule, the case is on a trajectory for a final commission vote in February. But if there’s a procedural detour to resolve DISH’s role and responsibility in the case or to, once again, allow time to work through a late document dump, the review could be extended for weeks, or even months. Or T-Mobile could make good on its threat to move ahead without the CPUC’s blessing.

More information should be forthcoming later today. T-Mobile, Sprint and, it appears, DISH are due to submit their explanation for why the federal settlement only makes the California wonderfulness of the merger even more wonderful. Or at least no worse. Stay tuned.

DISH Network Corporation’s Responses and Objections To the California Public Advocates Office’s Data Request No. 001, 20 September 2019
DISH Network Corporation’s Responses and Objections To the California Public Advocates Office’s Data Request No. 002, 31 October 2019
Motion of the Public Advocates Office to Compel Responses to Data Requests, 5 November 2019

Links to the stack of arguments and exhibits everyone has filed are here.

My clients include California cities who do business with T-Mobile. I like to think that has no bearing on my commentary, but I like to think I’m good looking too. Take it for what it’s worth.

Ponderosa Telephone makes its case for blocking Comcast’s bid to cherrypick “high end” households

by Steve Blum • , , , ,

Tesoro viejo construction 25aug2019

Ponderosa Telephone shot back at Comcast’s claims that no harm would come from its proposed cherry picking of affluent households in a new, high end development outside of Fresno. In comments filed with the California Public Utilities Commission last week, Ponderosa made its case for denying Comcast permission to offer telephone service in its territory. The company argued that if the CPUC wants to change its current policy of protecting small rural telcos from competition, it should do so on a top level basis, and not on case by case requests from a major telecoms company.

Particularly if that telecoms company’s request for special treatment is “disingenuously misleading”.

California has 13 rural telephone companies that serve remote communities. Or in some cases, communities that used to be reckoned as remote, before the arrival of suburban and exurban sprawl. Rural telecoms service can be expensive – miles and miles of lines are needed to reach scattered homes and businesses. Low population density means low revenue density, so to keep telephone service affordable both the CPUC and the Federal Communications Commission back fill rural telco’s budgets with subsidies from universal service funds. To keep the tab for taxpayers as low as possible, the CPUC doesn’t allow competitive telephone companies, or big incumbents who want to exert their monopoly model might, to carve off service areas where the revenue potential is the highest and the need for subsidies is the lowest. If there’s a need at all.

That policy is under review, in a CPUC proceeding that could take years to resolve. Meanwhile, Comcast wants permission to add telephone service – it already can offer broadband and TV service – to newcomers able to afford a home in the (relatively) pricey Tesoro Viejo development, just north of Fresno. That would be costly to taxpayers, Ponderosa said…

Comcast seeks to raid the most profitable consumers in Ponderosa’s service territory. This “cherry-picking” concern by [non-carrier of last resort telcos] operating in [rural telco] territories was a factor that led the Commission to conclude that wireline competition would “leave behind residential, small business, and community anchor institution customers in more scattered and harder to serve areas of the rural carrier’s territory”; “adversely affect the bulk of the hard-to-serve and high cost customers”; and “result in the [small rural telcos] losing revenue and needing to seek a larger draw from the [California High Cost Fund rural subsidy] program.”

Abandoning, or at least substantially modifying, decades-old rural telecoms policy might be necessary, as 21st century digital services replace legacy telephone technology and business models that, in some respects, date back to the 19th century. It needs to be done thoughtfully and carefully, and not on the basis of requests for case by case special treatment by telecoms giants.

Sprint takes half billion dollar revenue hit after ending improper California, federal subsidies

by Steve Blum • , , , ,

Sprint booth mwc la 2019 22oct2019  Klovia 2 att net s conflicted copy 2019 11 04

Losing California and federal subsidies it took for inactive Lifeline accounts smacked Sprint hard in the third quarter of 2019. The company released financial results yesterday, reporting that its third quarter revenue dropped to $5.0 billion, compared to $5.3 billion in the second quarter, and $5.4 billion in the third quarter last year.

Cutting off, and perhaps reimbursing, the money it was collecting for 885,000 Lifeline customers nationwide – and an estimated 145,000 in California – who were no longer using the service was number one of two reasons for the slide, according to a statement released by chief financial officer Andrew Davies

We recently notified the FCC that we had claimed monthly subsidies for serving subscribers even though these subscribers may not have met usage requirements under Sprint’s usage policy for the Lifeline program. We are committed to reimbursing federal and state governments for any subsidy payments that were collected incorrectly. While not material to overall results, net operating revenue, wireless service revenue, adjusted EBITDA*, operating income, and net loss in the quarter were all negatively impacted by this issue.

Wireless service revenue of $5.0 billion in the quarter was down $453 million year over year, mostly due to both lower Lifeline revenue as a result of the associated usage issue discussed above and the continued amortization of prepaid contract balances as a result of adopting the new revenue standard last year.

The Federal Communications Commission initially pegged Sprint’s liability at “tens of millions”, but that was just starters. It didn’t include co-subsidies from state programs or fines. One investment analyst group estimates the total liability in “the low billions of dollars”.

So far Sprint’s, um, oops hasn’t surfaced in the California Public Utilities Commission’s review of the pending Sprint/T-Mobile merger, although the Communications Workers of America tried unsuccessfully to make it an issue at the FCC.

CPUC queues up $24 million subsidy for 11 California broadband projects

by Steve Blum • , , , ,

Mobile home park

Eleven broadband infrastructure projects by four companies will be considered by the California Public Utilities Commission next month. Draft resolutions approving California Advanced Services Fund (CASF) subsidies for 11 out of the 13 grant proposals submitted in the May application window were posted on Thursday. The drafts are linked below.

Making the CPUC’s new six month deadline for processing applications is a major milestone for staff, and they deserve congratulations. In the past, reviews have sometimes dragged on for years, with endless and often meritless challenges allowed from marginal broadband providers who wanted to fence off service-poor communities. There was mischief this time around – Digital Path, a wireless ISP, tried to claim a vast swath of northeastern California for example – but challenges were rigorously vetted.

The 11 grants total $23.8 million. The projects would extend broadband service to 1,219 homes, for an average subsidy of $19,500 each. There’s wide variance within that average, though, largely due to where those homes are.

Casf grant totals draft resolution 31oct2019

Frontier Communications is up for $11.1 million, which would pay for VDSL upgrades for the 263 homes in Modoc and Lassen counties in northeastern California and the Taft area in Kern County. According to Frontier, the technology is capable of delivering broadband speeds of up to 115 Mbps download and 7 Mbps upload, but the company is only promising to provide the CASF program’s absolute minimum of 10 Mbps down/1 Mbps up.

Plumas-Sierra Rural Electric Co-op is in line for five grants in Plumas and Lassen counties, totalling $8.9 million. Most of the 414 homes will receive direct fiber-to-the-premise service at a minimum of 100 Mbps down/20 Mbps up, although the system will be able to deliver symmetrical gigabit service. One of the projects, in Lake Davis in Plumas County, is a combo fiber and wireless build, with about half the homes receiving fixed wireless broadband service at the minimum of 10 Mbps down/1 Mbps up.

Cruzio, an independent Internet service provider based in Santa Cruz, has one grant for $2.4 million on the table. It targets 263 homes in seven mobile home parks in Santa Cruz County. It’s a full fiber-to-the-premise project, with symmetrical, 1 Gbps down and up promised.

Charter Communications has three grants totalling $1.4 million pending. The projects would extend its hybrid fiber coax plant to two mobile home parks in Riverside and Ventura counties and a neighborhood in Highland in San Bernardino County. The company promises to provide a minimum of 940 Mbps down/35 Mbps up speeds to a total of 279 homes. The draft resolution would also give Charter a pass on the CASF program requirement that monthly subscription prices, for at least some of a grant recipient’s broadband service tiers, be guaranteed for at least two years. A second exception requested by Charter – that it be allowed to charge for equipment and installation – was denied.

The $23.8 million total is $8.3 million less than originally requested for the 11 projects. Most were scaled back, for a variety of reasons including challenges from existing providers, overlaps with federally subsidised areas and due diligence verifications by CPUC staff. Two grant applications – one by Charter in Riverside County and another by Web Perceptions, a local wireless ISP in Sonoma County – are missing from Thursday’s batch. Charter’s proposed project in Perris in Riverside County was challenged by Frontier (and Charter returned the favor for Frontier’s Taft project, albeit only with partial success). Web Perceptions’ application wasn’t challenged but, judging by the publicly available information, it was poorly prepared. It’s a fair assumption that both were denied, but there’s no official word.

The Central Coast Broadband Consortium assisted Cruzio with its Equal Access Santa Cruz grant application, and I happily participated in that effort. I’m not a disinterested commentator. Take it for what it’s worth.

Charter Communications – Highland Orchid Drive, Country Squire Mobile Estates , Silver Wheel
Cruzio – Equal Access Santa Cruz
Frontier Communications – Northeast Project: Phase1
Frontier Communications – Taft Cluster
Plumas Sierra – Mohawk Vista Mid-Mile/Last Mile
Plumas Sierra – Elysian Valley Mid-Mile/Last Mile
Plumas Sierra – Keddie Mid-Mile/Last Mile
Plumas Sierra – Lake Davis Mid-Mile/Last Mile
Plumas Sierra – Eureka Mid-Mile/Last Mile

Large scale telco, cable and mobile service outages follow California power cuts

by Steve Blum • , , , ,

Cell site outages 28oct2019

Hundreds of thousands of Californians lost their wireline broadband and phone service over the past week, as the state’s major electric utilities cut off power to millions of people in an attempt to prevent wildfires from breaking out. Mobile broadband and telephone subscribers were equally hard hit, with one county – Marin – losing more than half of its cell sites at one point.

The Federal Communications Commission has been tracking wireline and mobile service outages since last Friday, when the power cuts were hitting hard in Pacific Gas and Electric’s northern California territory, and public safety power shutoffs were beginning to bite in the southern California service areas of San Diego Gas and Electric and Southern California Edison. I’ve compiled all of their reports through yesterday into a single document, which you can download here.

From a telecoms point of view, the outages were at their peak on the FCC’s Sunday morning (0830 California time, 28 October 2019) report. At that time 455,000 telco and cable subscribers in 32 counties were without their landline connections and 3.3% of the total number of cell sites were down.

Some counties were hit much harder than others. Marin County lost 57% of its cell sites, while there were no reports of cell site outages in Santa Barbara County. Calaveras, Humboldt, Lake, Napa, Santa Cruz and Sonoma counties lost between 19% and 39% of cell sites.

It’s not clear what the wireline outage figure represents. Participation in the FCC’s disaster reporting system is voluntary. The list of willing companies hasn’t been made public and there’s no way of knowing if all of the telephone and cable companies in those counties are cooperating. The reports from the ones that are cooperating are based on “communications infrastructure status and situational awareness information” and “network outage data”. Which might not include all, or maybe even most, of the households and businesses which are offline because their equipment – cable and DSL modems, for example – don’t have backup power. The network might be fully functional, but if customer premise equipment is down, then service is too.

So that 455,000 customer wireline outage figure might be low.