Tag Archives: cetf

Money and performance at center of CETF’s fight with Frontier

by Steve Blum • , , , ,

Frontier Communications says the California Emerging Technology Fund (CETF) has to return $714,000, if it asks for it. CETF’s response on Friday was we don’t have it anymore.

When Frontier won California Public Utilities Commission approval in 2015 to buy Verizon’s landline telephone systems in California, a long list of conditions was attached. Among them was a contract that committed “up to” $3 million to achieve the “aspirational goal” of signing up 200,000 low income Californian households for broadband service – from any provider, not just Frontier. In return, CETF dropped its opposition to the Verizon deal.

A second implementation contract spelled out more detailed terms: Frontier would pay $60 to non-profit groups recruited by CETF for each new, qualified broadband subscriber. Frontier also agreed to periodically advance portions of the money, and CETF agreed to return any unused funds after the contract expired on 30 June 2018.

The non-profits only signed up 4,300 subs, while Frontier advanced CETF $1 million. By Frontier’s math, that leaves $714,000 in the bank.

CETF wants the program to continue. Frontier is willing to go along with that for another year, up to a point. Which wasn’t enough for CETF, so the dispute landed at the CPUC. CETF wants the commission to rewrite the contracts by fiat. Frontier prefers them as they are and hinted in a reply filed with the CPUC that it might come looking for its money.

CETF says it only has $294,000 left in “trust” it because it similarly advanced cash to its non-profit clients, with the expectation that they would be signing up a lot more new subscribers than they did. A sample CETF grant contract, included in one of Frontier’s CPUC filings, says that unearned money has to be paid back. That might be, um, difficult for some non-profits. Without favorable intervention by the CPUC, CETF might be on the hook for the difference. Which would be, um, inconvenient.

There’s more.

In a rhetorical back flip, CETF argues that it wasn’t the 200,000 household goal that was “aspirational” (even though the contract said it was). Instead, CETF says it was the clear contract expiration date that was a fuzzy target.

CETF then makes what ought to be Frontier’s case. It argues that because the program is a failure, Frontier needs to fix it…

Instead of 200,000 low-income broadband home adoptions, there are only 11,038, which means the shortfall is a staggering 188,962 households. This is prima facie evidence that Frontier’s approach was in need of revision to fulfill its obligations.

Only 39% of those new subscribers were signed up by CETF’s non-profit clients. The remaining 61% were directly acquired by Frontier. Even if you assume that Frontier is obliged to continue its efforts to bring more low income households into the online world, the numbers don’t suggest that the best way to do it is to continue working through CETF’s non-profit sales channel.

A hearing in front of a CPUC administrative law judge is scheduled for 28 November 2018.

CPUC tells Frontier to answer charge it’s not meeting Verizon purchase obligations

by Steve Blum • , , , ,

Frontier Communications’ delivery on promises made when it received permission to buy Verizon’s Californian telephone systems in 2015 will be investigated by the California Public Utilities Commission. Earlier this year, the California Emerging Technology Fund (CETF) asked the commission to unilaterally change some of the conditions they imposed on Frontier when they approved the deal, claiming that the goals of the decision were not met.

According to the CPUC administrative law judge handling the case, last month CETF and six of its non-profit clients sent a letter to commissioners accusing Frontier of “attempting to abandon their obligations and escape their public benefit commitments”. As a result, Frontier will have to defend itself in an evidentiary hearing, maybe next week, maybe later depending on whether the ALJ agrees to postpone it, as both parties have requested.

It’s complicated. The so-called “public benefits” relate to a program Frontier contractually agreed to pay for, which is aimed at signing up low income households for broadband service. Via CETF, it would pay the non-profit organisations $60 for every new, qualified broadband subscriber – up to a total of $3 million – as well as providing free Chromebooks and setting up a relative handful of free WiFi access points. The money would have been paid regardless of whether a qualified household signed up for service from Frontier or another broadband provider.

The program has the “aspirational” goal of recruiting 200,000 low income subscribers and was supposed to run through last June. According to Frontier’s latest response to the allegations, the non-profits only managed to sign up 4,300 new broadband households over two and a half years. CETF claims that it was Frontier that failed because its low income broadband packages were poorly designed (confusingly, it has three), and it dragged its feet fixing them.

Frontier’s response says it fulfilled its contracts as written: the company provided cash and Chromebooks based on the performance of CETF and its non-profit clients; the results “reflect the difficulties of promoting broadband adoption”.

There’s also a hanging question about a balance of $715,000 that Frontier says it advanced to CETF, but wasn’t paid out to the non-profits because they didn’t generate the required sign ups. Its filing pointedly states that CETF is “obligated to return these unused funds to Frontier no later than July 30, 2018, but Frontier has not requested return of these funds”.

Yet.

Frontier, CETF broadband adoption deal crashes and burns

by Steve Blum • , , , ,

A forced partnership between Frontier Communications and the California Emerging Technology Fund (CETF) to enroll low income broadband users fell far short of its 200,000 household goal, gaining only 9,173 subscribers over its two and a half year lifespan. That number is one of the few things that Frontier and CETF agree on. Who’s to blame and what comes next are hotly disputed.

It’s uncertain how many of those households were enrolled by CETF. Frontier independently acquired some, if not most, of those new subs through its normal sales channels.

One of the conditions the California Public Utilities Commission imposed when Frontier bought Verizon’s wireline telephone systems in California was an “aspirational” – delusional would be a better description – pledge to bring 200,000 low income households into the digital world in less than three years. To do that, Frontier promised to distribute “up to” $3 million to community organisations, via CETF. It’s a non-profit corporation tasked with managing tens of millions of dollars worth of so called “public benefit” obligations that were likewise extracted from telecoms mergers in California.

(It’s completely separate from the California Advanced Services Fund – that money comes from taxpayers and is directly administered by the CPUC).

In May, a month before the agreements that created the program expired, CETF asked the CPUC to amend its original decision and, in effect, extend the two contracts between CETF and Frontier by decree. And, as a kicker, fine Frontier $35 million. Frontier’s response amounts to a deal is a deal.

There are other issues. One involves Frontier’s promise to give 50,000 Chromebooks to low income households – it’s unclear how many were distributed. Frontier says it will continue to give away the devices, but only to its own subscribers. Another is Frontier’s $13.99 low income broadband package, which has morphed into a confusing and hard to find array of three packages with different rules and price points. Then there’s the 50 free WiFi hotspots Frontier pledged to fire up. It apparently managed to get 17 in operation, and is working on the rest.

There’s more to the dispute. The documents published so far are linked below, and I’ll be writing about it in the weeks ahead.

On the face of it, Frontier is more or less doing what it promised. The contracts that CETF signed are vague and larded with weasel words, like “aspirational” and “up to”. The $3 million figure was a cap, with the amounts paid determined by the performance of CETF and its partners – $60 per new broadband sub they signed up (whether for Frontier’s service or someone else’s) and $50,000 for workshops. The only significant hard deadline was the expiration of the second, implementation contract at the end of last month (the initial settlement contract set the goals and outlined the program, the second one filled in the details).

On the other hand, there’s the question of what the CPUC thought it was getting when it gave Frontier permission to buy Verizon’s Californian systems. The CPUC’s formal decision was bundled up with all the settlement contracts Frontier signed with CETF, and several other groups that “intervened” in the case. Commissioners will have to decide whether to reopen that review.

Commonly, the CPUC either rejects this sort of request – a “petition to modify” a decision – or just makes technical corrections. I’m not going to hazard a guess as to what they’re going to do with this one. It’s worth noting, though, that three of the other “intervenors” – the CPUC’s office of ratepayer advocates, TURN and the Center for Accessible Technology – filed an ambivalent joint response. They “take no position regarding…CETF’s request for commission action”, but instead “urge the commission to investigate the allegations”.

Translation: it’s a mess.

Documents published to date:

CETF audit, more CPUC reforms approved by California legislature

by Steve Blum • , , , ,

A second round of California Public Utilities Committee reorganisation was approved in the final hours of the legislative session on Friday night. Senate bills 19 and 385 are heading to the governor’s desk. The main one is SB 19, carried by senator Jerry Hill (D – San Mateo), who has been deeply involved in CPUC reform efforts ever since a massive, fatal explosion of a PG&E pipeline in San Bruno in 2010.

There are general changes that affect the way the commission does business overall. Area code assignments aside, none specifically relate to the way telecommunication services or companies are regulated.

SB 19 expands the commission’s audit responsibilities, and a legislative staff analysis makes it clear that the broadband-focused California Emerging Technology Fund is a primary target…

The CPUC has often negotiated settlements, particularly related to mergers of companies, which create new entities or programs. For example, the California Emerging Technology Fund (CETF) was developed and funded as a separate nonprofit entity by the CPUC through the approved mergers between SBC-AT&T and Verizon-MCI. Last year, [former assemblyman Mike Gatto] requested an audit of the CETF. However, the CPUC had suggested that they lack the statutory authority to conduct an audit of CETF and other similarly constructed entities.

This bill will ensure the CPUC has the statutory authority to conduct such audits and require the audits are conducted in a manner that adheres to approved general auditing practices.

Other changes include banning public utility executives from becoming CPUC commissioners for “two years after leaving the employment of the utility”. Commissioners would directly appoint the chief administrative law judge and a chief internal auditor. The job of staff ethics officer would be baked into law and the public advisor’s office would be responsible for handling complaints about the way the commission does business.

Some of the CPUC’s transportation-related duties would be transferred to other state departments, including regulation of moving companies, private buses, and some water transportation and passenger aircraft. The changes seem to be consistent with governor Brown’s wishes and it’s a good bet he’ll approve both bills.

CenturyLink defends Level 3 deal with Trumpian flourish

by Steve Blum • , , , ,

They could have just tweeted it.

Sean Spicer has a new gig, ghostwriting legal briefs for CenturyLink. There’s no other way to read CenturyLink’s latest filing with the California Public Utilities Commission. It’s a whingeing, self-contradictory and occasionally bitter reply to the California Emerging Technology Fund’s (CETF) continued opposition to CenturyLink’s proposed purchase of Level 3 Communications.

CETF’s objections weren’t particularly on point – they were more concerned with spending CenturyLink’s money than maintaining a competitive fiber market in California – so it’s no surprise that the rebuttal skids and spins like a Lada sedan in a Moscow ice storm. It collides with itself, jabbing a finger toward a woolly promise to spend big on California infrastructure and work with CETF and others to “identify projects for such investment”, but quibbling in the fine print of a footnote that those are merely “possible locations”.

On the central question before the CPUCwill the transaction cripple wholesale fiber competition in California? – CenturyLink offers facts and alternative facts. It first says, okay, so we’re taking out a competitor

The instant transaction involves the transfer of control at the parent level of the Level 3 Operating Entities that provide services to a (limited) number of wholesale and enterprise customers only. The transfer is to CenturyLink, the parent company of a non- dominant carrier in California that also provides competitive services to wholesale and enterprise customers.

But, it continues, fewer competitors doesn’t mean less competition

By any measure, the Level 3 Operating Entities, even when combined with the CenturyLink Operating Entities, will remain a non-dominant competitive provider without any particular market power in any relevant telecommunications market (e.g., backhaul, long haul, enterprise, etc.).

Nonsense.

Both have considerable market power now, as two of the four major long haul fiber owners on key California routes, and Level 3 is the only independent operator. Rolling it into the monopoly business model embraced by AT&T and Verizon – the other two – and by CenturyLink will only add to the wholesale fiber crunch identified by the CPUC as a root cause of California’s “highly concentrated” residential broadband market.

The CPUC needs to separate truth from fiction, and base its decision on broadband market realities and not on corporate bluster or well-meaning wishful thinking.

CenturyLink and Level 3 joint reply to CETF comments, 25 July 2017
CETF comments on CenturyLink purchase of Level 3, 21 July 2017

Centurylink deal still contested in California, still an insider game

by Steve Blum • , , , ,

CenturyLink’s purchase of Level 3 Communications faces opposition in California, despite a squishy settlement reached with three of the four organisations that objected to the deal. The fourth organisation – the California Emerging Technology Fund (CEFT) – registered its formal rejection of the settlement in comments filed with the California Public Utilities Commission on Friday.

Because Level 3 is certified as a telephone company, the CPUC has to determine if the transfer is in the public interest – whether or not anyone protests. But pretty much anyone is allowed to jump in too – intervene in CPUC jargon – and if certain requirements are met, they can claim intervenor’s compensation for their troubles, whether or not anything genuinely useful comes of it.

CenturyLink and the three groups who settled – TURN, the Greenlining Institute and the CPUC’s office of ratepayer advocates – are pushing the CPUC to short circuit the full review process and accept the agreement they reached between themselves as a substitute. The pressure is on because CenturyLink and Level 3 have a self-imposed deadline of 30 September 2017 to close the transaction. If the review follows typical CPUC timelines a decision might not come until sometime next year, which is a result CenturyLink is anxious to avoid.

Absent its own settlement, CETF is pushing for a full review, and in the process turning up the pressure on CenturyLink. It would be unusual for the CPUC to forgo an independent inquiry if effective opposition remains. In its filing on Friday, CETF correctly points out that the settlement agreed by the other three objectors has nothing of real value it it – all CenturyLink is obliged to do is aspire to invest $323 million in its operations in California. It takes the position that the deal poses grave dangers to Californian broadband but, still, nothing that a few hundred million dollars won’t fix, if its spent with proper supervision.

Wrong.

Whether CenturyLink spends its money its own way or spreads some of it around in the ways suggested by CETF, the result will still be the end of what open competition remains on many of California’s key fiber routes. The best way to fix a problem is to not cause it in the first place. The CPUC needs to make its own decision based on a complete and disinterested review. It should not subcontract the job out to organisations with more narrow interests, however well intentioned they might be.

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 growth flat for six years

by Steve Blum • , , ,

There are two ways to look at the latest Field Poll/California Emerging Technology Fund survey of household Internet penetration: the number of homes with someone online, at one level or another, jumped five points from 79% in 2015 to 84% in 2016, or broadband uptake has stalled in the Golden State for six years.

The case for the former is the topline gloss of the survey which has total broadband penetration at 84%, if you define broadband penetration as at least one person in the house with a smart phone in his or her pocket. That’s the number that went up 5% in one year.

If you look at fixed broadband service, though, it’s a different and depressing picture. In 2010, 70% of homes in California had a broadband subscription – via wireline or fixed wireless service – that was available, in theory, to everyone in the house, all the time. Six years later, in 2016, that number was… wait for it… 70%.

That means that 16% of Californian homes have no Internet access at all, and 14% are second class cyber-citizens, as the Field Poll press release makes clear

The difference between those who have broadband Internet access through a home computing device and those who don’t is fostering what some are calling an “under-connected” class of Internet users. And, these users largely come from the same population subgroups as those with historically lower levels of residential Internet access. For example, not only are low-income Californians less likely than high-income earners to have Internet access at home (68% vs. 97%), the disparities grow wider when comparing how residents with access are connecting to the Internet. Just 43% of Californians with incomes of less than $22,000 can access the Internet at home through a computing device, compared to 94% among those with incomes of $100,000 or more.

Similarly, a smaller proportion of the state’s Spanish-speaking Latinos (69%) than others have access to broadband Internet at home, and just 39% connect to the Internet through a home computing device.

Mobile broadband is as much an essential 21st century service as true home or business Internet access. But it’s not the same thing – people need both, to reap the full benefits of the digital age.

There’s a lot of work yet to do.

Broadband gaps to fill, but willingness to do so in northeastern California

by Steve Blum • , , ,

Many homes will still be without broadband service in northeastern California, even after upgrades paid by the federal Connect America Fund (CAF-2) program are complete. That’s mostly because the census blocks deemed eligible for the subsidies by the Federal Communications Commission are limited – many thousands of unserved homes are outside of those areas – but also because the FCC doesn’t necessarily require that all homes in a given census block be served.

I ran an analysis for the California Center for Rural Policy (CCRP), ahead of a meeting with Frontier Communications executives and supervisors from the six counties – Lassen, Modoc, Plumas, Shasta, Siskiyou and Tehama – in the region. It was organised by CCRP and the California Emerging Technology Fund (CETF) and held in Redding on Thursday. It was a follow up to the agreement negotiated between Frontier and CETF, during the regulatory review process that led to approval of Frontier’s purchase of Verizon’s wireline telephone systems in California.

The subsidised census blocks in Frontier’s service territory are concentrated in Modoc, Lassen and Shasta counties. Once the CAF-2 funded census blocks are built out – the deadline is the end of 2020 – there will still be about 1,500 homes without access to wireline broadband service. In those blocks alone. Pulling back and looking at the entire six county region, including AT&T’s territory (but not areas served by small rural phone companies), there will be more than 30,000 homes without access, with about a third of those in Plumas County.

One approach to fixing the problem is to build more middle mile fiber deeper into the region, to make last mile build outs less expensive and boost capacity all around. I ran that analysis too. A Digital 395-scale project – 500 miles, say, of dark fiber through a strategic corridor at a $100 million-plus cost – could, for example, boost wireline broadband availability in Modoc County from the current 36% to 74%, and from 56% to 81% in Lassen County.

There are other ways to approach it, particularly when there’s an incumbent telephone (or cable) company that’s willing to address the problem. As Frontier was in last week’s meeting. The company has a stated policy of working with local communities – doing more than just giving money to a softball team, as one exec put it – and so far, they’re living up to it. The problem of connectivity in northeastern California isn’t solved yet – that’ll take years – but at this point everyone involved is pushing toward a real solution. That alone is a refreshing change.

Tellus Venture Associates presentation, Northeastern Broadband Meeting with Frontier Communications, 23 June 2016

Frontier to offer broadband lifeline service in California, if allowed to buy Verizon systems

by Steve Blum • , , , ,

Lifeline’s reach, if the deal goes through.

Frontier Communications will implement an interim low income broadband lifeline program in California, if it gets regulatory approval to buy Verizon’s wireline systems. In an agreement reached with the California Emerging Technology Fund (CETF), Frontier is promising to offer a special package to its voice lifeline customers that comprises…

  • 13.99/month for the low-income broadband service (which is a new affordable product for the Verizon service area and an improved product in the Frontier legacy service areas), available only to Lifeline voice customers, existing or new customers.
  • Frontier shall not require any more information from applicant than is required for the California LifeLine program.
  • Up to 7 megabytes per second (Mbps) downstream where 7 Mbps is available and the highest available upstream speed. If less than 7 Mbps service is available, Frontier will provide the highest available downstream and upstream speeds of service.
  • Free Installation.
  • Free Modem with wireless router.

It’s anticipated that the special deal for California would be phased out if and when the Federal Communications Commission establishes a national broadband lifeline program. That’s what makes it an interim program. Frontier and CETF are setting an “aspirational target” of signing up 200,000 low income households.

In the agreement, Frontier also commits to extend 10 Mbps down/1 Mbps up broadband service to 100,000 homes in “selected areas across the Verizon footprint” and 7,000 homes in its “legacy California service areas”, and upgrade service for 250,000 homes in Verizon’s current territory to 25 Mbps down/2 Mbps up. That’s all in addition to upgrading service to 77,000 Verizon homes at the 10/1 level using subsidies from the federal Connect America Fund program (CAF), which it previously said it would do.

The 100,000 homes currently without Verizon DSL service are mostly in rural areas, as are the 77,000 that fall under the federal CAF program. The 250,000 homes that Frontier is pledging to upgrade, though, might be anywhere in Verizon’s current territory, which includes urban and suburban areas, mostly in southern California.

One caveat: the agreement allows it to use Hughesnet satellite service, which Frontier already resells, as a possible way of meeting those goals.

There are other deal points regarding a few dozen public access locations, money for 50,000 tablets for low income areas, and paying non-profit organisations to market broadband service to people that don’t use it yet.

Memorandum of understanding between Frontier and CETF (33 MB)
CETF summary of the deal

Tellus Venture Associates assisted CETF with research, strategy development and policy options. I’m not a disinterested commentator. Take it for what it’s worth.