Tag Archives: california

Zorro in, Yoda out as a new political era begins in California

by Steve Blum • , , , ,

Zorro 625 tall

California has had three democratic governors in the past 75 years: Pat Brown, Jerry Brown and Jerry Brown’s chief of staff. And the chief of staff – Gray Davis – didn’t end well. That changes on Monday, when Gavin Newsom is sworn in.

Jerry Brown earned his reputation as the wise old man at the California capitol. But he’s also a skilled operator, with the finest political mind in California. He would jump into a fight when it was both necessary and winnable, and he rarely, if ever lost. By contrast, Newsom is a crowdpleaser with a swashbuckling persona. He’ll have to duel with fellow Sacramento action heroes once the Jedi master leaves town.

Brown often accommodated telecoms companies that have political money to spend. He was willing to veto one giveaway to telcos in 2017, but he signed another. His office successfully pressured the CPUC to reverse its endorsement of net neutrality rules in 2014, allegedly to protect cash flows from AT&T, Comcast and other monopoly model broadband companies. Then last year, Brown signed California’s own net neutrality law, although it was a politically safe move because the real teeth had been taken out of it, and what was left was destined to be iced by federal courts.

Newsom has to decide to what degree he’ll please telecoms lobbyists who, he must hope, will continue to write big checks to him, to lawmakers and to party causes.

Newsom also has to fill a vacant seat on the California Public Utilities Commission. Who he appoints could say a lot about his priorities – or lack thereof – regarding utility policy in general and, perhaps, broadband policy in particular. Assuming no one resigns from the CPUC, Newsom will have one seat to fill in his first two years as governor. Carla Peterman, who came to the CPUC from the California Energy Commission, ended her term on Monday.

Brown began his third term as governor in 2011, and in his first three months appointed people to the CPUC who had a diverse range of industry experience. Mike Florio was a longtime attorney with TURN, a utility consumer advocacy group, Catherine Sandoval is a telecoms law professor and former FCC staffer, and Mark Ferron was a banker and tech financier. Over time, though, Brown shifted to appointing close aides with extensive political and, particularly, climate change portfolios, but virtually no industry or regulatory experience.

With more political debts to pay and none of Brown’s elder statesman gravitas, Newsom could succumb to pressure and appoint commissioners who appeal to allies with a special interest in the CPUC’s business. There’s no deadline for filling the vacant CPUC seat. Brown was about three weeks into his term when he made his first appointments. It’ll be interesting to see if Newsom can move as quickly.

Weak net neutrality language offered to save California assembly’s “integrity”

by Steve Blum • , , , ,

Network neutrality rules have another chance in Sacramento tomorrow. The California assembly’s privacy and consumer protection committee takes up senate bill 822, after it was eviscerated – to use the author’s verb – by the communications and conveyances committee last week. Anything might happen, but the cards on the table now point toward modest and rickety repairs, rather than complete reversal of the damage.

The privacy and consumer protection committee published its staff analysis of the bill, which suggested simplifying it by referencing the now-repealed 2015 net neutrality decision by the Federal Communications Commission, and telling Internet service providers to comply with the rules it laid down – no more, no less. That would be consistent with what the communications and conveyances committee chair, assemblyman Miguel Santiago (D – Los Angeles), claimed he was doing. He was actually trying to gut SB 822 completely, which he and his wingmen – assemblymen Evan Low (D – Santa Clara) and Eduardo Garcia (D – Riverside) – succeeded in doing, with help from most of the other committee members, republican and democrat alike.

But taking Santiago at his word is a convenient fiction for the privacy and consumer protection committee staff, who diplomatically wrote

In order to preserve the integrity of the institution and the committee hearing process, it is improper for one committee to wholly undo the exact amendments of the prior committee.

Integrity might seem like a poor choice of words in this context. Santiago, Low and Garcia are reliable friends of AT&T, and Wednesday’s committee hearing was an exhibition of pure political muscle.

There are problems with simply incorporating the defunct Obama-era FCC net neutrality decision by reference. It was crafted by then-FCC chair Tom Wheeler, who saw himself as an active referee on the telecoms playing field. Rather than try to write detailed rules, Wheeler laid out three “bright line” principles – no blocking, throttling or paid prioritisation – and left the details to be decided by commissioners as the game progressed. For example, zero rating wasn’t explicitly banned, although the FCC was moving in that direction. Although the FCC’s decision is chock full of policy analysis and examples, it’s weak on thou shalts and thou shalt nots. It’s a very poor basis for enforcement by courts that interpret and apply laws, rather than make policy as the FCC does.

So the California legislature has a choice. It can pass an unenforceable bill or it can add enough detail and depth for courts to make meaningful rulings, as SB 822 tried to do. Or it can create its own referee, which seems to appeal to no one.

It’s a safe bet that, as he did last week, SB 822 author, senator Scott Wiener (D – San Francisco), will continue negotiations behind the scenes, right up until tomorrow afternoon’s hearing. It’s far from certain, though, whether he’ll have any more success.

Frontier CEO leaves the door open to a California exit

by Steve Blum • , ,

Frontier Communications had a rough day yesterday, following the release of its fourth quarter 2017 results and the announcement that is would no longer be paying dividends to shareholders. Instead, it will direct that money toward paying down its substantial debt.

The company’s share price dropped about 24% on the day, continuing a slide that’s seen it lose more than 80% of its value over the past year. In a conference call with analysts, president and CEO Dan McCarthy was asked about rumors that Frontier was trying to sell off the wireline systems it acquired from Verizon two years ago in California, Texas and Florida – what it calls its “CTF” market. According to the transcript posted on SeekingAlpha, McCarthy is making no promises…

First of all, I’d say, we don’t comment on any specific rumors or speculation or stories that are in the market…

But I would say that we’re very pleased with the assets we acquired in the last transaction, the CTF assets. And their performance continues to improve each and every month. And we’re very pleased with where we’ve taken that to this point.

But as we’ve always said in the past, we would always do what’s right for shareholders in trying to improve value creation and recognise the substantial value of our assets and reduce our leverage over time.

McCarthy also confirmed that Frontier is deploying fixed wireless service – as opposed to upgrading wireline DSL systems – and plans to expand that coverage to 15,000 to 20,000 homes in California, Texas and Florida this year.

Frontier continues to lose broadband customers in the three former Verizon states, although the rate of decline slowed. In the fourth quarter of 2017, Frontier lost 17,000 DSL and 2,000 fiber-to-the-home customers in that territory, versus 19,000 and 11,000 respectively in the third quarter. Its video business showed a similar pattern, with a net decrease of 17,000 subscribers in California, Texas and Florida, versus 24,000 lost in the previous quarter.

Frontier preps to say adios to California, report says

by Steve Blum • , ,

Less than two years after it flipped the switch and took over Verizon’s wireline systems in California – and the two million subscribers that were on those systems at the time – Bloomberg is reporting that Frontier wants out. According to the story by Nabila Ahmed and Scott Moritz, the company has engaged advisors in an attempt to reduce a crushing debt load by selling off assets (h/t to Fred Pilot at Eldo Telecom Blog for the pointer)…

The company is considering a sale of a package of landline assets in California, Florida and Texas that it acquired from Verizon Communications Inc. in a $10.5 billion deal just two years ago, the people said, asking not to be identified because the matter is private. The assets are likely to be sold in parts rather than as a single package, one of the people said…

Frontier has seen its customer base and margins shrink as rural residents abandon landlines in favor of wireless carriers.

Frontier is being squeezed on all sides. Cable companies “are beating the pants” off it, according to one stock analyst and its DSL business – with services often running slower than wet string and dodgy business practicescontinue to bleed subs.

But who would want to buy those systems?

We can safely rule out a Verizon come back. It’s hard to imagine AT&T wanting to take on more rural copper, when it’s doing its best to replace wires with low speed – 10 Mbps down/1 Mbps up – wireless technology. But if there’s a case for extending that business model into Frontier’s territory – think FirstNet – AT&T might be interested. Mark it low probability, though.

That leaves CenturyLink, which has no significant Californian subscriber base, or one of the smaller rural telcos, of which there are many. Or something completely out of the blue. The question then becomes: who has the capital and expertise needed to succeed in California’s rural telecom market?

AT&T’s FirstNet deal means more but slower broadband in rural California

by Steve Blum • , , , ,

Governor Brown’s decision to join the federal FirstNet public safety radio system has pluses and minuses for rural broadband development in California. The system is intended to provide data connectivity and interoperable communications for police, fire and other first responder agencies across the U.S. The federal government awarded a $6.5 billion contract to AT&T to build and operate it.

As a part of the deal, AT&T is getting 20 MHz of spectrum in the 700 MHz band. It’s allowed to use it for consumer broadband service so long as public safety communications have priority. The company plans to combine the FirstNet build out with deployment of its rural fixed wireless broadband service, which runs on a similar slice of spectrum in the 2.3 GHz band and promises 10 Mbps download and 1 Mbps upload speeds.

Both FirstNet and AT&T’s wireless local loop service are based on 4G LTE technology, and not the next generation 5G standard that’ll be the basis for urban mobile broadband service upgrades.

On the plus side, it means that AT&T has to extend its wireless broadband reach to pretty much every remote corner of California. AT&T will likely lease existing facilities or contract out operations in some cases, but it will be doing a lot of construction work too. Since the core technology it’s deploying supports both public safety and consumer users, any place it plants a FirstNet tower should also get at least a minimum level of wireless broadband service. Should.

On the minus side, the deal will turbocharge AT&T’s campaign to rip out rural copper networks and replace them with low speed wireless broadband systems. The federal government is already subsidising that effort with its Connect America Fund program. The combination of FirstNet’s extra dollars and spectrum, and the regulatory grease that comes with public safety projects makes it even cheaper and easier for AT&T to fence off rural communities from competition while offering substandard service at monopoly prices.

California joins federal FirstNet public safety radio system, run by AT&T

by Steve Blum • , ,

Governor Brown announced that the state is opting in to the nationwide FirstNet public safety radio system that’ll be run by AT&T, under a contract from the federal government. Yesterday was the deadline, and California was the last state to decide. All 50 states have now opted in.

In his opt-in letter, Brown said he still has reservations about the 25 year project…

This letter serves as notice…that California has decided to participate in the deployment of the nationwide, interoperable broadband network as proposed in the FirstNet State Plan. While California remains concerned that the proposed plan does not address all our State’s needs, California is opting into the plan with the expectation that our concerns will be addressed throughout our partnership

A side letter from the head of California’s office of emergency services, Mark Ghilarducci, outlined those concerns. They include interoperability, particularly while FirstNet is under development and some agencies have it while others don’t, the extra charges AT&T intends to impose for secure communications and the robustness of AT&T’s wireless sites.

Ghilarducci said that the federal government wasn’t offering a genuine choice, “because FirstNet’s regulatory and procedural process makes the opt-out option in California untenable”.

New Hampshire had similar concerns, and originally decided to build its own first responder radio system, but reversed course and announced it is going with FirstNet as the clocked ticked down yesterday. In the end, New Hampshire governor Chris Sununu didn’t believe there was a real choice either. “The additional risk associated with being the only state to opt-out creates too high a barrier for New Hampshire to continue down the opt-out path alone”, he said.

AT&T’s FirstNet system will use 20 MHz of spectrum in the 700 MHz band, and be based on 4G LTE technology.

Frontier punts on California broadband subsidy obligation

by Steve Blum • , , ,

Frontier is bragging about how well it’s doing with the broadband infrastructure and service upgrades it promised to do, in exchange for $2 billion in federal subsidies. But not in California.

When it accepted the Federal Communications Commission’s Connect America Fund (CAF) money in 2015, Frontier agreed to deliver a minimal level of service – 10 Mbps download and 1 Mbps upload speeds – to 58,000 homes and businesses in California in exchange for a total of $228 million, paid out over six years in $38 million increments.

Those upgrades were supposed to be completed over the following five years, with 40% of the claimed territory upgraded by the end of next week – 31 December 2017. It put out a press release this week, patting itself on the back for meeting its obligations in 17 states. But California wasn’t on the list.

An email to Frontier’s public relations department asking for an update on its progress in California, or at least an explanation of why it won’t make its required deadline, went unanswered. California was one of three states where Frontier acquired systems from Verizon in 2015, and cut over in 2016. The other two states – Texas and Florida – were on the mission accomplished list, so the reason can’t be some kind of cosmic issue with the Verizon acquisition.

Since there are ten other states where Frontier also accepted CAF money but isn’t claiming to have met the 40% build out requirement – states which were not involved in the Verizon transaction – it’s more plausible that the failure is systemic in nature.

Frontier – and AT&T, which accepted CAF subsidies in California but also hasn’t claimed success – have a week to pull things together and fulfil the obligations they assumed. And then the FCC and the California Public Utilities Commission will have to verify those claims. Which might still happen. But if they can’t even reach enough of the low hanging fruit to get to 40% of federally subsidised Californian homes and businesses in two years, it will be hard to believe any promises that they’ll be willing or able to the harder work needed to upgrade the remaining 60% in the next three.

Brown okays new rules for subscription services, CPUC reform, law enforcement

by Steve Blum • , ,

As we’re waiting for governor Jerry Brown to decide the fate of the two big broadband bills of the 2017 California legislative session – assembly bill 1665 and senate bill 649 – it’s a good time to take a quick look at some other relevant legislation he’s approved.

Brown signed SB 19 and SB 385 into law. Together, those two bills reorganise some of the California Public Utilities Commission’s responsibilities, although telecommunications oversight was left untouched.

He also okayed AB 1034, which would restrict the ability of government agencies to cut off telecommunications services. It’s an issue that’s arisen during protests, when agencies – BART is the example – shut down cell service as a means of crowd control. Now, that can only be done with a judge’s order or in an “extreme emergency situation that involves immediate danger of death or great bodily injury”.

Although its applicability to broadband service is certain to be challenged, Brown approved SB 313. Among other things, it makes it illegal for a business to…

Charge the consumer’s credit or debit card, or the consumer’s account with a third party, for an automatic renewal or continuous service without first obtaining the consumer’s affirmative consent to the agreement containing the automatic renewal offer terms or continuous service offer terms, including the terms of an automatic renewal offer or continuous service offer that is made at a promotional or discounted price for a limited period of time…

A consumer who accepts an automatic renewal or continuous service offer online shall be allowed to terminate the automatic renewal or continuous service exclusively online, which may include a termination email formatted and provided by the business that a consumer can send to the business without additional information.

Anyone who has tried to figure out how much broadband service really costs, after promotional packages expire, or tried to cancel it, will appreciate this bill.

California broadband adoption rate flat for 5 years

by Steve Blum • , ,

The in-home broadband subscription rate in California is the same now as it was five years ago, and the cost of service is the biggest barrier to adoption. That’s the top line result from an annual survey commissioned by the California Emerging Technology Fund. This year, the research was carried out by U.C. Berkeley’s Institute of Governmental Studies. It found that in 2017, 69% of Californian households are connected to the Internet via a “computing device”, which is the same rate as in 2013.

Another 18% of Californian households get Internet access “through a smart phone only”. That figure has gone up over the five years: in 2013, it was 6%.

Age, income and ethnicity matter. Homes surveyed where the “householder” is younger than 30 years old are well above the 69% average, with 78% reporting broadband access. On the other hand, Internet connectivity drops off sharply past age 65 – 60% for everyone 65 and older, and just 49% at 75 and older.

White households have a broadband take rate of 83%, which compares to Asian American and African American households at 64% and 63% respectively, and to Latino households, which have an overall adoption rate of 54% and just a 32% rate among Spanish speakers. Latinos are also far more likely to be limited to smart phone access only.

There’s a clear household income trend too – 48% of household where income levels are less than $20,000 a year have in-home broadband access, compared to 90% of households with income at $100,000 or more. Reliance on smart phones is likewise linked to income, with 27% of households with income of less than $20,000 relying solely on mobile service. That figure drops to 9% in homes where income is at $100,000 or more.

Price is the major reason people do not have broadband service in their homes. Of the Californians who don’t have connectivity, 69% cite cost as a factor and 34% say it’s the main reason. No other factor comes close. Only 12% say it’s because of technical difficulties or a lack of knowledge. That’s in line with other studies that point to service and equipment costs as the primary barrier to broadband adoption.

California’s broadband speeds rank second among its peers

by Steve Blum • , ,

Where it really counts, California’s broadband speeds come out on top, or nearly so. We’re the sixth largest economy in the world, and our average broadband speeds rank second, 1 Mbps behind Japan. According to the Akamai State of the Internet report for April through June of 2016, the average Internet user in Japan connected to its content delivery network at 17.1 Mbps, while the average Californian connected at 16.1 Mbps.

Average connection speeds in Japan slowed a bit in the second quarter, from a high of 18.2 Mbps, as did California’s average, which was 16.4 Mbps in the first quarter of 2016. No explanation was offered for the decrease, but it’s worth noting that a similar dip occurred in other markets at the higher end of the speed range.

The gross size of an economy seems to be a weak predictor of Internet speeds. The U.S. is the biggest economy, but only ranks third on Akamai’s broadband hit parade. Germany (14.1 Mbps) and the U.K. (15.0 Mbps) are both top five economies and are in the top five for broadband speeds, although their relative positions are flipped.

The second biggest economy, China, was in eighth place with a 5.2 Mbps average speed, ahead of Brazil (4.8 Mbps) and India (3.6 Mbps). France (9.6 Mbps) and Italy (8.2 Mbps) fall in between, but fail to clear the 10 Mbps hurdle.

Although the level of development varies, big economies have a lot in common. Populations tend to be large and diverse, with a wide range of income levels. People cluster in dense urban communities, but a significant number live in lightly populated but otherwise expansive rural areas.

Akamai’s data only includes Internet connections that cross its network, and many Internet users have connections that are too slow to support or make much use of the media rich content it distributes. But the report is a useful gauge insofar as it reflects the actual speeds experienced by typical consumers with access to true broadband service. By that measure, California is looking very good.

Update: post was edited to clarify the reason that Akamai’s data does not include all Internet users. H/T to @akamai_soti for pointing out the original text was ambiguous.