Subsidised dark fiber leverages private investment for Salinas Valley last mile upgrades

by Steve Blum • , , ,

Middle mile threads last mile gaps; last mile follows.

A project that will bring fast, fiber optic broadband to the Salinas Valley is nearing the halfway mark and could be done by this coming fall. Sunesys LLC (now owned by Crown Castle) won a $10.6 million grant from the California Advanced Services Fund (CASF) in 2014 to build a 91-mile open access middle mile fiber line from Santa Cruz to Soledad. It will bring cheap, wholesale bandwidth to towns along the way – Castroville, Chualar and Gonzales, for example – that lack Internet access that meets the California Public Utilities Commission’s minimum standard of 6 Mbps download and 1.5 Mbps upload speeds.

The necessary new last mile systems that would connect homes in this economically depressed region to this new middle mile network are also in sight. If the CPUC approves the purchase of Time Warner and Bright House cable systems by Charter Communications next month, then deals cut with the City of Gonzales and Monterey County will require Charter to upgrade its existing analog systems to full digital capabilities. The availability of this inexpensive dark fiber played a key role in the success of the negotiations between Charter and the City of Gonzales.

It’s no coincidence. Because Charter doesn’t offer broadband in Monterey County and most of AT&T’s service is below the CPUC’s minimum, Charter’s franchise areas are eligible for CASF infrastructure grants, for both middle and last mile projects. So that’s the route the Sunesys fiber is taking.

Charter isn’t likely to be applying for CASF grants to finish the work it’s promised to do. Cable companies shy away from any subsidy program that could bring them under tighter regulatory scrutiny by the CPUC. So Charter will be investing its own capital in order to complete the required digital upgrades. If you assume, for example, that’ll involve more than 20,000 Salinas Valley homes at a cost of $2,500 each – a wild guess, but not too wild – it would mean more than $50 million in new capital for last mile infrastructure along the route. That’s not a bad return on the CPUC’s middle mile investment.

I’m assisting the City of Gonzales with its efforts at the CPUC and its negotiations with Charter. I am not a disinterested commentator. Take it for what it’s worth.