Tag Archives: cpuc

CPUC should follow New York’s lead, hold Charter to obligations

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The California Public Utilities Commission imposed a long list of obligations on Charter Communications, when it granted permission for the purchase of Californian cable systems belonging to Time Warner and Bright House in 2016. Some of those requirements mirror the conditions that the New York Public Services Commission attached to its approval of the deal.

Unlike the NYPSC, however, the CPUC has not demanded public accountability from Charter. New York regulators nipped at Charter’s heels since the acquisition closed, and then revoked permission and ordered Charter to reverse the sale and give up its New York markets because “the company was not interested in being a good corporate citizen”.

Typically, the CPUC does not take an active role in enforcing conditions attached to telecoms deals. The job of being the cop on the beat is often left up to outside organisations. If you want a particularly vivid example of how that approach does or doesn’t work, take a look at the mess surrounding Frontier Communications’ purchase of Verizon’s wireline phone systems in California in 2016.

Although it’s arguably right to expect outside parties to take responsibility for enforcing their own contracts, there’s little reason to think they’ll take on the additional work of policing the CPUC’s own decisions. For example, when it approved the Time Warner purchase, the CPUC gave Charter two and a half years – until November 2018 – to convert its legacy TV-only analog systems to digital service…

Within 30 months of the closing of the Transaction, New Charter shall convert all households in its California service territory to an all-digital platform with download speeds of not less than 60 Mbps…

On December 31, 2016 and every year thereafter until December 31, 2019 New Charter shall submit a progress report to the Commission and [the CPUC’s office of ratepayer advocates] identifying progress made.

In theory, the CPUC has some idea already as to whether or not Charter is performing. It’ll be a relatively straight forward process to confirm that all of Charter’s analog systems in the San Joaquin Valley, and in Modoc and Monterey counties, have been upgraded to digital service come November. The CPUC should be as proactive in enforcing its own decisions and pursuing the public interest as its New York colleagues.

Performance, not weasel words, should drive California broadband subsidies

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The reboot of the California Advanced Services Fund (CASF) broadband infrastructure subsidy program continues, with a new round of comments and suggestions landing at the California Public Utilities Commission.

I drafted the Central Coast Broadband Consortium’s filing. One issue that the CPUC should consider very carefully is what qualifies as a bona fide service offer.

When the California legislature allowed lobbyists for AT&T, Frontier Communications, Comcast and Charter Communications to rewrite the law and turn CASF into their own, private piggy bank, the minimum broadband standard was lowered to 6 Mbps download and 1 Mbps upload speeds. If an incumbent “offers” such service, then the area in question isn’t eligible for an infrastructure grant.

The point we made is that…

In order for such an offer to be valid, an incumbent provider must be capable of actually delivering service at 6 Mbps download and 1 Mbps upload speeds (hereinafter, “6/1 service”) consistently to any household that subscribes to it. Although it is common industry practice to advertise service at a certain level and then condition it with a long and difficult to parse list of exceptions, there are no such exceptions in the statute. An incumbent is either capable of delivering 6/1 service to every household that subscribes to at least that level of service at all times, or it is not. If an incumbent is not capable of fulfilling an offer of 6/1 service, or better, at all times in any given census block or to any given household, then that census block or household is unserved.

An offer that can’t be fulfilled is not a offer at all. Incumbents should not be allowed to block independent projects on the basis of marketing claims or service that meets the minimum standard only some of the time. The 6/1 standard is ridiculously low to begin with. The least the CPUC can do is require incumbents to actually meet it.

CPUC won’t kill SCE’s dark fiber business. Yet

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Southern California Edison fought its dark fiber battle to a draw, but all out war looms on the horizon. That’s my reading of a proposed decision by a California Public Utilties Commission administrative law judge that would end SCE’s quest for approval of a bulk fiber lease deal with Verizon, if the commission votes to approve it next month.

SCE, like other electric utilities in California, installed fiber optic cables on its pole routes, initially to monitor and operate its infrastructure. But one cable has dozens of fiber strands, and over the past 20 years SCE has leased out some of that surplus capacity, under terms approved by the CPUC that require it to rebate 10% of the gross revenue generated to electric customers.

Usually, the CPUC reviews SCE’s fiber leases one by one. But last year, SCE asked permission to sign a master lease with Verizon, and then add individual fiber routes to it over time.

That rational and reasonable approach was first accepted, then rejected after rookie commissioner Clifford Rechtschaffen stepped in. So-called consumer advocates, who don’t seem to understand that consumers need fast, affordable and competitive broadband service too, jumped in as well. The ultimate result was a proposed decision that would have split the gross revenue 50/50. SCE said that would kill its dark fiber business model – which is probably true – and that, in any event, the Verizon deal was dead because of the CPUC’s delays.

With the SCE decision looming, Pacific Gas and Electric also asked to cancel its request for CPUC permission to get into the telecoms business.

The proposed decision published yesterday would allow SCE to withdraw its application for approval of the now moot Verizon deal, but opens the door to a comprehensive, and potentially far more damaging, review of electric companies’ dark fiber leases…

The scope of the proceeding has raised broad policy issues that include identifying what policy frameworks promote the most effective utilization of ratepayer-funded dark fiber throughout California’s regulated electric utility infrastructure and assure safety, universal access to utility services, and non-discriminatory access to this infrastructure, especially amidst policy changes at the federal level. The Commission may consider opening a rulemaking to consider these and other broad policy issues and, in that broader context, reconsider the appropriate revenue sharing allocation for dark fiber route leases.

Electric companies are one of the few sources of independent dark fiber left in California. Killing their fiber business would harm consumers, both as electric customers, who would have no revenue to split at all, and as broadband customers, who pay high monopoly prices for low levels of service.

For now, we can only hope that “universal access to utility services” means all utilities, including broadband.

Frontier knows how to game the broadband subsidy system, and that’s OK CPUC says

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The California Public Utilities Commission has decided that broadband subsidy proposals can be challenged almost forever, instead of right up until the moment commissioners vote, as it has allowed in the past. It rejected an appeal of a 2017 grant by a wireless Internet service provider in Trinity County, Velocity Communications, ruling that once a draft decision is issued, ISPs can’t submit speed test data that purports to show that the area in question is “served” and thus ineligible for a California Advanced Services Fund (CASF) grant. That’s good news.

The bad news is that until the draft decision is issued – typically a month before the commission votes – incumbents can take all the pot shots at grant applications they want. By rejecting the appeal, commissioners put their stamp of approval on the routine practice of ignoring the deadlines they set. It’s OK, they said, for Frontier Communications to persistently lobby staff after the formal challenge period closes…

Velocity is correct that Commission staff accepted a late filed challenge from Frontier…the deadline for submitting letter challenges to a CASF application is 14 days after web posting of the CASF application by Commission staff. Historically, Commission staff has been lenient with this requirement and accepted late-filed challenges after the 14-day period out of an abundance of caution…

What Velocity fails to acknowledge, however, is the significant difference between Commission staff accepting a late filed challenge while the evidentiary record is still open compared to accepting new evidence after the proposed resolution has been issued and the evidentiary record has been closed. There is no statute, Commission decision, resolution, or rule prohibiting Commission staff from accepting a late filed challenge while the evidentiary record is still open (prior to the issuance of the draft resolution), which is what staff did in regard to Frontier’s challenge.

Allowing ISPs to file perpetual challenges to broadband infrastructure projects wouldn’t be a huge barrier if the CPUC otherwise stuck to its schedule, which calls for a final decision on proposals within three and a half months. But abuse of its open door policy – Frontier is a major offender – creates delays that can drag on for years and effectively kill independent projects that incumbents find inconvenient.

Slow decisions lead to slow broadband service, and that suits Frontier’s and ATT’s business model perfectly.

PG&E cancels competitive dark fiber business plan

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That didn’t take long.

Four days after informing the California Public Utilities Commission that it couldn’t reach agreement with a grab bag of protesting organisations, Pacific Gas and Electric threw in the towel. It’s ending its plan to become a competitive telecommunications company. It won’t put its extensive inventory of surplus dark fiber, and potentially other services, on the open market.

In its request to withdraw its application for certification as a competitive telecoms company, PG&E said the world has changed since it began the process more than a year ago…

Given PG&E’s present circumstances, it is in the public interest that PG&E make current informed decisions in light of the new environment before investing significant resources in launching the new [competitive telecoms] business. PG&E and parties have diligently engaged in settlement negotiations to expeditiously make progress towards full resolution of the issues in this proceeding. However, as more time passes, the uncertainties of PG&E’s current circumstances outweigh the potential economic and busines benefit of the proposed [competitive telecoms] business. Therefore, the public interest is protected by allowing PG&E to exercise its prudent business decision-making to not continue to pursue the [competitive telecoms] business, at this time, given the significant change in circumstances since the filing of the…Application in April of 2017.

PG&E didn’t say exactly which circumstances had changed, but top of the list has to be the estimated $12 billion in damages it might have to pay out as a result of last year’s wildfires. When a company faces an existential financial threat, it’s time to scrap diversification plans and focus on the core business.

But that’s not the only circumstance that’s changed. The CPUC seems to be intent on killing the competitive dark fiber business in California. Last year’s decision to wave through CenturyLink’s purchase of Level 3 Communications took the last major source of independent dark fiber in California off the market, and its savaging of Southern California Edison’s plan to do a bulk dark fiber deal with Verizon sent a clear message that electric companies that want to compete in the telecoms space need not apply.

When California’s utility regulator lines up – wittingly or not – on the same side as big, monopoly model telecoms companies like AT&T, Comcast and Charter Communications, it’s game over. Retreat was PG&E’s only option.

PG&E’s competitive dark fiber ambitions stall at CPUC

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Update: PG&E filed a request with the CPUC, asking to withdraw its application to become a certified, competitive telecoms company. More tomorrow.

It’s been more than 15 months since Pacific Gas and Electric asked for permission to get into the dark fiber business in a big way. In April 2017, it asked the California Public Utilities Commission to certify it as a telecoms company, which would allow it to lease its surplus dark fiber to commercial customers. It’s already in the dark fiber business, but it’s limited to leasing capacity to service providers that are already certified.

As is common practice, potential competitors and so-called consumer advocates jumped into the middle of the CPUC’s review – intervened, as its called. Instead of managing its own process, the CPUC was content to let these intervenors dicker with PG&E. It wasn’t productive. I attended a couple of those sessions as an observer – my clients include municipal electric utilities with fiber interests – and wasn’t impressed by the quality of the conversation. Now, those talks have broken down and everything was tossed back into the lap of the CPUC administrative law judge who currently has the ball (it’s been passed around a bit).

According to a joint update PG&E and the intervenors filed with the CPUC

Despite the good faith effort of the Parties, it became clear that an agreement would not be reached on any of the issues and all settlement discussions ended on July 30, 2018…the Parties no longer believe that settlement will be reached on any of the issues in this proceeding.

Now, the ALJ hearing the case is asking PG&E to answer several pertinent questions about its quest to add telecoms to its portfolio. That would have been a fine thing to do a year ago.

We’ve already seen Southern California Edison’s fiber deal with Verizon collapse this year, due to the CPUC’s needlessly complicated process, and the misguided efforts of competitors, advocates and a CPUC commissioner to extract benefits, public or otherwise, from it. It would be a tragedy for Californian consumers – who need affordable broadband access as much as they need electricity – if PG&E’s bid to make the northern California telecoms market more competitive also fails.

California legislature considers utility fire liability changes

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The fires ravaging California this morning are a stark reminder that last year’s horrific blazes were no fluke. They are the new normal. Figuring out how to live with this reality is the most pressing task in front of the California legislature when it reconvenes later today.

One of the many issues is who pays?

Under California law, if the cause involves an electric utility’s infrastructure, then it has to pay for the full cost of the damage, whether it was fully, or even truly, at fault. And whether or not it was negligent. By one reckoning, Pacific Gas & Electric’s shareholders face a $12 billion tab from last year’s fires alone. Southern California Edison is in the same boat. It’s natural to want someone else to pay for any kind of damage suffered by the public, but there’s also the question of how to keep electricity flowing in California, at affordable rates and in a sustainable manner. Assessing the liability of electric companies as you would for any other business is one way to balance those interests.

Before they left for their summer vacation, key lawmakers agreed with governor Jerry Brown to fast track a solution. While they were gone, Brown released a draft of his preferred approach. According to the proposed bill’s summary…

In a civil action…against an electrical corporation or a local publicly owned electric utility seeking damages arising from an unintended fire that occurred on or after January 1, 2018, when electrical infrastructure is a substantial cause of the fire, this bill would require the court to balance the public benefit of the electrical infrastructure with the harm caused to private property and determine whether the utility acted reasonably.

Telecoms companies can be hit with the same kind of liability claims, as Cox Communications was for a 2007 fire in San Diego County. And they rely on pole routes that are largely built and maintained by electric companies. The top priority has to be the safety of all Californians, but maintaining affordable access to modern electric and telecoms service is important too.

CPUC and Frontier must put broadband upgrade cards on the table

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When the California Public Utilities Commission allowed Frontier Communications to buy Verizon’s wireline systems in California, it imposed a long list of conditions, including commitments made as part of settlements reached with organisations that objected to the deal. Some of those obligations required Frontier to upgrade broadband service to more than 800,000 homes.

One of those organisations is the California Emerging Technology Fund, which is embroiled in a dispute with Frontier over nearly every aspect of that settlement. CETF claimed in a complaint filed with the CPUC that Frontier “does not intend to honor” its commitments, including, among other things, the upgrade schedule it offered in 2016.

In its formal response to CETF’s allegations, Frontier never actually says that it kept to that timetable. All it says is that “Frontier sent a letter to the Communication Division dated March 8, 2018 on its commitments that includes a confidential attachment reflecting completed locations through December 31, 2017”. It sent a letter, but doesn’t say what’s in the letter or even claim that the letter documents fulfillment of its obligations.

It did include a table, shown above, which gives an overview of what it believes its obligations to be. It’s not a revelation. It simply repeats what’s in a similar table included in its 2016 settlement with consumer groups, plus a much smaller promise of 7,000 upgraded homes in northeastern California made to CETF, plus the households that the Federal Communications Commission is paying Frontier $228 million to upgrade via its Connect America Fund program.

One striking omission is how Frontier plans to meet its promises. In the course of winning the CPUC’s approval for the Verizon deal, Frontier promised specifically to upgrade wireline service, and claimed it “focused solely on wireline telecommunications”. Since then, it has publicly backtracked on that pledge.

Frontier’s obligations are to the people who live in the communities where it intends to upgrade broadband service. Both the CPUC and Frontier have a duty to let them know where, when and – particularly – how those upgrades will be made.

Don’t confuse social services groups with ISP sales departments

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It’s been a bad few weeks for so called broadband adoption programs in California. First, the shotgun marriage between Frontier Communications and the California Emerging Technology Fund (CETF) turned into a messy divorce, having only reached a tiny fraction of its “aspirational” target of 200,000 new broadband subscribers.

Then the California Public Utilities Commission launched an effort to recover $244,000 from a Los Angeles County adoption program, that was funded by a regional broadband consortia grant from the California Advanced Services Fund. That program had an even loftier goal: it was called California’s One Million New Internet User Coalition (NIU Coalition). A CPUC investigation resulted in allegations of “false reports” submitted by the group, regarding time spent – and billed – training residents of low income communities in the mysteries of the digital world.

These programs are intended to get more people to use Internet-delivered services and subscribe to broadband service. In theory, that’s what “adoption” means. It’s a marketing metric that’s expressed as the percentage of potential customers who buy a particular category of product or service. To increase the adoption rate, you need to close more sales. Period.

The problem is that the non-profit corporations and community based organisations that chase “adoption” grants are not well equipped to meet Internet subscriber sales quotas. Instead, they tend to focus on advocacy or education – digital literacy, as it’s sometimes called. Or they simply give computers and Internet access away. That might be worthy thing, but at best it’s an indirect way to drive broadband subscriptions.

Computer giveaways, free Internet access and digital literacy classes are not sales tools. Those sorts of programs play a role in connecting more people to Internet-delivered services and closing the digital divide. But you can’t measure their success by the number of new subscriptions they generate. Trying to do that just leads to acrimony when ridiculous targets aren’t met. There are better ways to hold educational and social services organisations accountable than by pretending they are the sales department for Internet service providers.

Zero understanding of dark fiber business means zero benefit to Californian consumers

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Southern California Edison is driving home the point that rebating half of its dark fiber leasing revenue to electric customers would kill its ability to compete in the telecoms market. A draft decision by CPUC commissioner Clifford Rechtschaffen would replace a nearly 20 year old gross revenue sharing formula – 90% to SCE, 10% to electric customers – with a 50/50 split.

In closed door meetings with top California Public Utilities Commission staff, an SCE executive and an in-house lobbyist said, in effect, that Rechtschaffen doesn’t understand the dark fiber business…

Contrary to unsupported statements in [Rechtschaffen’s draft decision], a 50/50 gross revenue sharing mechanism would not provide sufficient return to justify shareholder investment. The 50/50 gross revenue sharing implies equal sharing of benefits, but ignores the incremental costs, risks, and business liabilities incurred by shareholders…

Shareholders would have to recover all of their costs through the remaining 50%, if possible, resulting in disproportionally less or negative benefits for shareholders since customers do not incur any incremental costs. There is no evidence in the record that the 50/50 split is an economically viable mechanism to justify shareholder investment.

Both SCE and the Utility Reform Network (TURN), a non-profit organisation that claims to speak for consumers, filed longer written comments about Rechtschaffen’s draft.

TURN shows a similar lack of understanding about telecoms. It argues that SCE’s dark fiber business should micromanaged by the CPUC, similar to the way privately-owned electric utilities are regulated.

That’s nonsense. Electric utilities are monopolies that provide an essential service, and it is rational to regulate them as such. Independent dark fiber companies have to make their living competing against unregulated, monopoly business model telephone companies. Micromanaging one of the few remaining competitive sources of dark fiber in California, while ignoring, if not actively assisting, monopoly telcos is perverse.

Californian consumers need fast and affordable broadband service every bit as much as they need electricity. Thinking that cutting them in on more of SCE’s fiber revenue will be a benefit to them is pure fantasy. SCE put it correctly and succinctly in its comments: “the ‘interests of ratepayers’ are better served by 10% of gross revenues than by 50% of zero”.