SCE proposes doing CPUC reviews the old, costly way to save its fiber business

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Instead of shooting Southern California Edison’s fiber business in the head, the California Public Utilities Commission might have shot itself in the foot. Earlier this year, commissioner Clifford Rechtschaffen drafted a plan to kill the business model that the CPUC approved for SCE’s dark fiber leasing enterprise nearly 20 years ago. It was in response to a request from SCE for approval of a high volume master fiber lease agreement it negotiated with Verizon.

In a recent closed door meeting with Rechtschaffen’s staff (plus an advisor to commissioner Lianne Randolph), SCE proposed scrapping the master lease and using the existing time and labor intensive – for SCE and the CPUC – method of reviewing each new agreement individually.

The original idea was to get the CPUC’s blessing for the overall terms of the deal, to avoid the necessity of submitting each, individual route lease for review. It would have meant less work for everyone involved, and allowed SCE to lease more dark fiber more quickly, first to Verizon and then presumably to any other broadband carrier or customer that, with the CPUC’s approval, negotiated a similar master lease agreement.

Neither efficiency or the broadband needs of Californian consumers seemed to be on Rechtschaffen’s mind. He proposed changing the revenue sharing arrangement from 90% of gross fiber leasing income going to SCE and 10% to its electric customers, to 25% to SCE and 75% to ratepayers. SCE argued – correctly – that taking away the lion’s share of the revenue would remove the financial incentive for it to pursue more fiber business. That would knock a major independent competitor out of the southern California telecoms market.

By submitting fiber leases the old way – which it still has the right to do, so far – SCE maintains an incentive to continue competing…

Like all other dark fiber leases for the last 19 years, the lease route orders under the MLA would receive the revenue sharing mechanism designated for dark fiber leases in [the original 1999 CPUC decision]

It’s not ideal – repetitive item by item review is a waste of taxpayers’ money – but it is a solution that would preserve a competitive fiber market in southern California. Rechtschaffen hasn’t responded yet, and might not do so publicly. SCE’s original application is still pending – what eventually happens with it will tell the story.