FCC small cell decision “not logical and rational” D.C. court rules

by Steve Blum • , , , ,

Spock look

The Federal Communications Commission’s March 2018 decision to scrap federal environmental and historical reviews for small cell sites was “arbitrary and capricious” according to the federal appeals court based in the District of Columbia, aka the D.C. circuit. In an opinion issued this morning, the D.C. circuit judges said “the commission failed to justify its confidence that small cell deployments pose little to no cognizable religious, cultural, or environmental risk”.

Today’s decision does not directly affect appeals of the FCC’s September 2018 wireless or August 2018 wireline rulings – those are being fought out in the ninth circuit federal appeals court in San Francisco. But it’s good news for the local governments that are challenging the FCC’s preemption of local ownership of poles and other infrastructure in the public right of way. They made the same top line argument – that the FCC acted arbitrarily and capriciously – that the D.C. circuit judges accepted today.

There is at least one key difference between the March FCC ruling, which was challenged by Indian tribes, and its August/September rulings. The March ruling directly involved federal environmental and historical preservation law, and the August/September rulings did not. The D.C. judges said “we owe no deference to the FCC’s interpretations of the [National Historic Preservation Act and National Environmental Policy Act]” because those laws are administered by another agency. On the other hand, they allowed as how “the FCC is entitled to deference to its reasonable interpretations of ambiguous provisions of the Communications Act”.

A major similarity between the two cases is the contention that the FCC didn’t do its homework, instead deciding in advance what the new rules should be, and then going through the motions of public review and comment before writing an argumentative ruling to justify what it intended to do in the first place. The D.C. judges agreed…

The Commission failed to justify its determination that it is not in the public interest to require review of small cell deployments. We therefore grant the petitions in part because the Order’s deregulation of small cells is arbitrary and capricious. The Commission did not adequately address the harms of deregulation or justify its portrayal of those harms as negligible. In light of its mischaracterization of small cells’ footprint, the scale of the deployment it anticipates, the many expedients already in place for low-impact wireless construction, and the Commission’s decades-long history of carefully tailored review, the FCC’s characterization of the Order as consistent with its longstanding policy was not “logical and rational.”

The ninth circuit judges in San Francisco will decide the challenge to the August and September decision on their own. It’s worth noting, though, that the D.C. circuit is generally reckoned to be more accepting of agency discretion than the ninth circuit. That was one of the reasons that the FCC colluded with wireless carriers to try to move the case elsewhere. If the D.C. judges didn’t accept the FCC’s sophomoric arguments, there’s even less chance that the San Francisco judges will.

Links to petitions, court documents and background material are here.

Update: FCC limits the extent of its pole ownership preemption, as it tries to defend it against appeals

by Steve Blum • , , , ,

Update, 9 August 2019.

In its brief, the FCC backed down from what appeared to be a blanket assertion that all publicly owned property within the public right of way is the same thing as the public right of way. This preemption of local property rights only applies “when the property in question is controlled by the same government entity that controls the rights-of-way”, the brief said.

By that reasoning, if a city owns a light pole along a road controlled by a state agency such as Caltrans, it can charge a mobile carrier as much as it wants to use it. But the rent for another city pole, located just around the corner on a side street maintained by the city, would be limited to $270 a year. And that’s just a simple example. California has a complex web of jurisdictions, with federal, state, county, city, special district and tribal authority constantly overlapping.

The FCC brief also goes through considerable legal contortions to extend its preemption to publicly-owned electric utilities, even if those utilities don’t control the right of way in question. I’m still trying to unravel that.

Whatever else the FCC thinks it’s doing, it is not making things simpler for cities or mobile carriers.


The Federal Communications Commission defended its sweeping preemption of local government property rights, permitting authority and control of the public right of way in a (not so) brief filed last night with the San Francisco-based ninth circuit federal appeals court. Click here for the full set. At first glance, it appears to restate previous arguments made in its original orders and in subsequent court proceedings. It’s 187 pages, with nearly 700 pages of back up documents. I’ll have a summary on Monday, but if there are hidden gems I’ll post an update.

Links to petitions, court documents and background material are here.

With Frontier in free fall, California needs a Plan B

Frontier stock chart 8aug2019

Frontier Communications’ strategy of upgrading fiber speeds for high income, urban customers, and letting poor, rural ones rely on slow, wireless broadband systems didn’t seem to make an impression on Wall Street. The company’s stock price lost nearly 25% of its already diminished value after the release of second quarter 2019 results on Tuesday.

Even before this latest crash, a study by the California Public Utilities Commission concluded that Frontier is sinking in California, and it’s time to start thinking about what happens next…

While Frontier’s priorities are in maintaining and growing its [legacy telephone] properties, the company’s financial resources have become so deteriorated as to threaten its ongoing ability to pursue these priorities going forward. Frontier’s common stock price has dropped by around 98% since its high in February 2015, and as of April 10, 2019 its market cap was at $261.2- million – notably, Frontier has invested more than that in California alone over the first 21 months of its ownership. The parent company’s earnings have been consistently negative since the second quarter of 2016. Its annual debt service payments are now consuming more than one- fifth of its total operating revenues, making prospects for raising additional debt or equity financing extremely challenging. It is now abundantly clear that Frontier’s decision to purchase Verizon California in 2015 was both ill-timed and ill-conceived…

The Commission should establish a process to proactively examine the alternatives that would be available to maintain adequate service to Frontier California customers in the event that the parent company no longer has the financial resources to provide safe and reliable services in California.

That warning was published last month, and relied on data that was current as of April 2019. At the end of that month, Frontier’s share price was $2.85, which was about 2% of its 2015 high of $125.70 (after factoring in a reverse split). Yesterday it closed in penny stock territory at 93¢, less than 1% of its peak value and less than a third of its April high.

Two million Californian homes look to Frontier for telephone and broadband service, and many of them have no other option, as the CPUC report notes. The time for being proactive is running out.

Frontier CEO confirms affluent, urban communities to get 1,000X better broadband than poor, rural ones

Frontier 2q2019 broadband results

On Tuesday, Frontier Communications’ CEO confirmed the findings of a California Public Utilities Commission study that concluded that Frontier (as well as AT&T) is “disinvesting in infrastructure overall”, and the disinvestment is “most pronounced in the more rural and low-income service areas”. The company released its financial results for the second quarter of this year on Tuesday, announcing a $5.3 billion loss for the three months and 71,000 fewer broadband subscribers.

Most of the lost accounts – 46,000 – were DSL customers, served, at least in California, via decaying copper networks Frontier acquired from Verizon. Much of that territory is rural, and falls under the federal Connect America Fund subsidy program. Frontier affirmed it is switching to low capacity fixed wireless broadband systems in CAF territories, which in theory will deliver the 10 Mbps download and 1 Mbps upload speeds (actually, 8 Mbps down/800 Kbps up, 80% of the time) that the program requires.

That’s in contrast to the 10 Gbps upgrades that Frontier announced it was making in high capacity, fiber-to-the-home (FTTH) systems formerly owned by Verizon, which are predominantly in more affluent urban and suburban communities. This thousand-fold disparity between Frontier’s rural and urban infrastructure is a deliberate strategy, according to the Seeking Alpha transcript of CEO Dan Murphy’s conference call with Wall Street analysts…

Our objective continues to be to optimize our business, leveraging our best assets for future growth, while managing the elements of our business in secular decline by executing on cost efficiency programs and selective capital investment.

“Best assets” = FTTH to people with money to spend; “elements…in secular decline” = copper systems where household incomes are low. Murphy was straightforward with the analysts, not just because that’s what they wanted to hear but also because there are criminal penalties for lying to Wall Street.

Unlike lying to the CPUC: when seeking approval to take over Verizon’s systems, it claimed it “is strategically focused solely on wireline telecommunications” and “all of Frontier’s capital and human resources are concentrated on wireline communications services”.

A decade late and megabucks short, Kern County fiber project gets environmental approval

by Steve Blum • , , ,

Caltrans slow 2

After ten years of review, the California Public Utilities Commission is about to approve environmental clearances for a middle mile fiber project in Kern County, subsidised by the California Advanced Services Fund (CASF). Mediacom, a cable company that owns a handful of scattered systems in remote parts of California, applied for a $286,000 CASF grant in 2009, intending to build a 32 mile middle mile fiber route from Inyokern – an unincorporated community along U.S. 395 near Ridgecrest – to its system that serves the Lake Isabella area in eastern Kern County.

The CPUC speedily approved the grant, which represented 40% of the total cost of the project at the time. Back then, CASF typically subsidised less than half of the construction cost of broadband infrastructure projects. These days, that figure could be as high as 100%.

It’s not a complicated build, or one that should raise legitimate environmental objections. The plan was, and still is, to install fiber generally along state route 178, mostly by burying it in the already-developed right of way. Some problematic segments would run on existing pole routes or, in one case, underneath a bridge.

The draft resolution that the CPUC is scheduled to vote on next week doesn’t explain why it took a decade to figure out that the environmental impact of such a project is effectively nil. Anecdotal reports over the past decade have pointed the finger of blame at federal agencies and Caltrans, all of which have a role to play. But the CPUC is the lead agency for environmental approvals of this sort, and ultimately bears responsibility for getting it done.

A lot has changed since 2009. The cost of installing broadband conduit has steadily increased, largely due to demand for new fiber growing faster than the supply of contractors and skilled workers able to install it. Another factor is a state law, passed in 2014, which imposes so-called “prevailing wage” requirements on CASF projects. Instead of paying market rate wages, contractors on CASF-subsidised projects have to pay union scale rates blessed by a state agency. The CPUC has, however, approved grant supplements in the past to cover the difference.

Even so, what was a six-figure construction project in 2009 is easily a seven-figure project today. Assuming Mediacom builds the project, it might reasonably conclude that it would have come out ahead financially if it had paid the entire 2009 tab itself.

Wrangling over T-Mobile’s federal antitrust settlement continues in California

by Steve Blum • , , , ,

Two organisations that largely make their living objecting to utility company requests at the California Public Utilities Commission, and then billing the company involved or the CPUC for their time, filed a me too response yesterday to T-Mobile’s bid to speed up review of its proposed merger with Sprint.

T-Mobile, Sprint and DISH reached an agreement a couple of weeks ago that satisfied anti-trust objections raised by the federal justice department. The deal would let T-Mobile take over Sprint, while DISH would get reseller rights on the new network, and spectrum and retail assets to eventually build a competing system. They then asked the CPUC to accept the federal settlement as received wisdom and approve it immediately.

The CPUC’s public advocates office and a major telecoms union swiftly replied, arguing that 1. there was no procedural basis for what T-Mobile asked, and 2. the new deal with DISH needs to be examined rather than rubber stamped.

TURN and Greenlining, which style themselves utility consumer advocates and vigorously partake of the CPUC’s “intervenor compensation” program, [restated those arguments in yesterday’s filing](https://tellusventure.com/downloads/cpuc/t

mobile_sprint/turn_opposition_motion_to_advise_tmobile_sprint_5aug2019.pdf). DISH’s plans, in particular, took some heat, raising the question of how deeply and actively it might need to be involved as the CPUC’s merger review moves ahead.

They also rightly accused T-Mobile of “dismiss[ing] the need for a [CPUC] review and public interest determination of its wireless transaction, instead operating under the presumption that the commission’s review of the wireless transaction has no legal effect”.

There’s no end in sight yet, for either the tussle over the DISH settlement or for the CPUC’s review overall. Last week, T-Mobile asked for and received emailed permission from the administrative law judge managing the case to file a response to everyone’s objections. They can do that any time in the next couple of weeks, but don’t expect them to wait very long.

“Hunger games” duels for broadband subsidies proposed by FCC

by Steve Blum • , , , ,

Hunger games

Broadband subsidies from the Federal Communications Commission are paid for out of the Universal Service Fund" (USF) which, in turn, gets its money from taxes on telephone bills. The FCC runs four programs that way: the Rural Digital Opportunity Fund (formerly known as the Connect America Fund), the e-rate program that pays for broadband service to schools and libraries, the rural health care program, which does the same for hospitals, and the Lifeline program, which buys down service costs for low income households.

Altogether, $11.4 billion was collected for the four accounts last year. The FCC’s republican majority believes “capping the Fund overall will strike the appropriate balance between ensuring adequate funding…while minimising the financial burden on ratepayers”. The next step would be “prioritizing the funding among the four universal service programs and…evaluating the tradeoffs associated with these funding decisions”.

Right now, budgets and priorities for the four programs (and the taxes imposed) are set individually. Instead, the FCC wants to lump together all the broadband (and legacy telephone) subsidy programs, set a limit on the total funding and then direct the money according its own priorities. That would provoke mortal combat according to democratic commissioner Jessica Rosenworcel who said it would “unleash[] a fight for support between connecting kids in schools and hooking up hospitals” and called the proposal “the universal service hunger games”.

The FCC is taking reply comments from interested parties about its proposal. On Thursday, the California Public Utilities Commission went on record opposing it. Directly or indirectly, California backstops those programs with money from state taxpayers, and limiting or shifting federal dollars could raise costs here.

Another problem with USF that the CPUC points out is that it’s funded by taxes on old school voice service, but the money mostly goes towards broadband…

The FCC has explicitly declined to assess surcharges on broadband Internet access service even though almost all the USF programs subsidize only broadband services…The FCC should address this discrepancy by expanding the base of services to fund the USF, rather than continuing to rely inequitably on a shrinking number of ratepayers who purchase the assessed services that fund the USF.

On top of that, the FCC claims that broadband is an “information” service, rather than a “telecommunications” service. Continuing to subsidise it with taxes collected via telephone bills could become problematic.

Final reply comments are due on 26 August 2019.

FCC approves new broadband subsidy and data collection programs, but each ignores the other

by Steve Blum • , , ,

The Federal Communications Commission will be asking for comments on its plan to spend, at first, $16 billion and eventually $20 billion on rural broadband subsidies, with a minimum speed requirement of 25 Mbps down and 3 Mbps up. It’s also moving ahead with a new broadband availability data collection process, based on electronic map files, rather than spreadsheets. The two initiatives were approved at yesterday’s FCC meeting.

Both democratic commissioners – Jessica Roseworcel and Geoffrey Starks – objected to the republican majority’s blind acceptance of broadband availability data submitted by Internet service providers as a basis for deciding where subsidies should be spent.

Rosenworcel said in a statement that the new subsidy program relies on the same bad data as the old Connect America Fund program…

There’s something fundamentally wrong here. We do not start with maps. We do not start with data. In fact, take a look at the draft rulemaking before us and it barely mentions the fact that we have a separate proceeding we are voting on today involving maps.

In fact, this rulemaking rushes past that effort and simply proposes a successor to our existing Connected America Fund, distributing $16 billion dollars before any new data comes before this agency. Before any new maps are developed. I understand the impulse to move fast. I know that we should be working at warp speed to get modern communications to too many places that have waited too long for digital opportunity. So let’s do it. But let’s commit to doing it right.

This is putting the cart before the horse.

The new availability data collection process should eventually result in more accurate maps, but there’s no firm timeline for it to get underway. Rosenworcel’s objections are a good example of another big problem with it: collecting the data is one thing, but getting agencies to upgrade their systems and their analytical skills to effectively use it is a problem that’s yet to be solved.

T-Mobile tempo goes from waltz to tango at CPUC

by Steve Blum • , , , ,

Tango

T-Mobile’s request for rapid approval of its merger with Sprint and sale of assets to DISH got a staccato response from opponents at the California Public Utilities Commission, but the next step won’t necessarily follow that rhythm. The CPUC’s public advocates office and the Communications Workers of America – a major telecoms industry union – filed their objections yesterday, just three working days after T-Mobile’s motion was submitted.

The objections fall mainly into two categories: procedural and substantive. The procedural objections boil down to “this motion asks the commission to do something that is not provided for anywhere in the rules – to take ‘advisement’ of new facts, after the case has been submitted and the record closed”.

The substantive objections revolve around the sketchy details and uncertain outcome of the settlement that T-Mobile, Sprint and DISH reached with federal justice department. For the past year, the CPUC review has generated thousands of pages of legal argument and testimony about a deal that’s not exactly on the table anymore…

The proposed merger as set forth in this proceeding is solely between Sprint and T-Mobile; however, it appears that Dish Network now has a crucial role in the transaction; namely, to acquire some of Sprint’s assets in order to become a fourth major wireless carrier and allegedly alleviate antitrust concerns. Obviously, Dish’s role in this was not part of the Application because it had not occurred yet; thus, no party has had the opportunity to investigate or analyze the current proposal…

The Commission should consider whether the deal that is actually being proposed is in the public interest.

The standard process for reopening the record and allowing new developments, such as the agreement with DISH to (maybe) launch a competing nationwide mobile network, is lengthier and more contentious. It’s no surprise that T-Mobile, or anyone in their right mind, would want to avoid it. Whether they can or not is in the hands of the administrative law judge managing the case. There’s no particular timeline for him to make a decision.

Led by AT&T meltdown, big U.S. pay TV companies take a dive in second quarter

by Steve Blum • , , , ,

AT&T’s video businesses bled out in the second quarter of 2019, losing nearly a million net subscribers. Its two old school linear platforms, the DirecTv satellite service and the DSL-based Uverse service, hemorrhaged 778,000 subscribers while its DirecTv Now streaming platform took a 168,000 subscriber hit.

Actually, it’s the DirecTv Then platform – its new name, announced yesterday, is AT&T TV Now.

It’s a similar, if less gruesome, story for the other three major U.S. pay TV companies. DISH, which is positioning itself for a run at the mobile telecoms sector, lost 79,000 satellite subscribers but picked up 48,000 Sling streaming customers, for a net loss of 31,000 monthly accounts. That’s better than expected – analysts had predicted a net loss of 252,000 subs – and better than the two big cable companies.

Comcast lost 224,000 video subs, and Charter Communications had a net loss of 141,000, with residential cancellation offset a bit by a gain in business accounts.

All up, the major legacy pay TV companies lost 1.3 million subscribers between April and June of 2019. The second quarter of the year is traditionally a tough time for the subscription video business, as people take advantage of summer to move from one home to another, or to just take off and shut down utilities for a few weeks.

Even so, this year’s second quarter losses are “freaking ugly”, as one Wall Street analyst put it.

It was especially ugly for AT&T, though. It lost more than twice as many subscribers as the other three combined. It comes during a period when AT&T is trying to enter the video and motion picture business in a big way, with its acquisition of HBO, the Warner Bros. studios and the Turner networks. So far, it’s misplaying its hand. Grafting businesses driven by artistic and marketing creativity onto a monopoly model telco is a losing proposition.

It’s going to take more than an uninspired rebranding to make AT&T pretty again.