Tag Archives: cpuc

Incumbents get first grab at California broadband subsidies and subs in January

Yesterday, California’s broadband infrastructure subsidy fund began its transition from a bottom-up program focused on independent, locally developed projects, to a top down one that’s gamed for the benefit of incumbents. The first post-assembly bill 1665 rules for the California Advanced Services Fund (CASF) were put on the table by the California Public Utilities Commission.

The draft lays out the process for facilities-based incumbents – broadband service providers that own and operate their own equipment, wired or wireless – to exercise their right of first refusal for unserved areas. If they claim an unserved area by 15 January 2018, they’ll effectively have at least year to build out. No one else will be eligible for CASF subsidies.

No one else.

What the draft rules imply but don’t explicitly say, and AB 1665 clearly states anyway, is that an incumbent who takes a right of first refusal on an area will be eligible to apply for CASF grants to pay for at least a part of the work needed to upgrade it. In other words, they go straight to the head of the line.

The process will be more or less run the same way that a much more restrictive right of first refusal offer was three years ago. At the time, only Frontier Communications, in its pre-Verizon acquisition days, held back a handful of small territories. At the time, incumbents couldn’t tap into CASF money and had to pay for the promised upgrades themselves.

This time around, with Frontier hemorrhaging subscribers and shareholder equity and AT&T bent on fencing off its decaying rural copper systems so it can replace them with low performing wireless systems, it might be different. Frontier lobbied hard for AB 1665, in the apparent hope it could turn CASF into its private piggy back. AT&T will be less interested in the money than in protecting its rural monopolies. But both will have an incentive to jump in on the right of first refusal.

What they won’t have a particular incentive to do, though, is to fulfil any of the promises they make. There is no particular penalty for claiming an area for a year, stalling beyond that however they long they can, and then doing nothing at all. There’s a general rule that could be used to penalise false statements, but AT&T and Frontier employ plenty of lawyers and lobbyists who know how to bend and break the truth legally.

The CPUC is scheduled to vote on the right of first refusal scheme next month. Public comments can be submitted for the next two weeks.

Draft resolution – California Advanced Services Fund interim “right of first refusal” processes and timelines, 14 November 2017
Final resolution – implementation of new timelines for California Advanced Services Fund applicants, 26 June 2014
Chaptered version, assembly bill 1665, 15 October 2017

We’re not selling lit service to Verizon, says SCE

In an apparent attempt to dial down the heat on regulatory review of its dark fiber leasing deal with Verizon, Southern California Edison wants to remove any reference to electronics from the paperwork it filed with the California Public Utilities Commission.

SCE has been in the dark fiber business for a couple of decades, and is certified by the CPUC as a competitive telephone company – it holds a certificate of public convenience and necessity (CPCN) that allows it to lease dark fiber and sell other telecommunications services, including lit data transport, on its 5,000 mile fiber network. Because it’s first and foremost a regulated, privately owned electric utility, there are conditions attached, such as sharing revenue with ratepayers and closer, ongoing scrutiny of its telecoms business by the CPUC than would otherwise be the case.

Earlier this year, SCE asked the CPUC to give its blessing to a master fiber lease agreement with Verizon. The idea was to have the CPUC approve top level terms for what would be an open-ended business arrangement between SCE and Verizon. Within the constraints of that master agreement, the two companies would be able to negotiate leases for particular fiber strands on particular routes as the need arose over time. It’s a common practice in the fiber business and would eliminate the need to file the necessary, but nearly identical, paperwork with the CPUC every time SCE leases a new strand to Verizon.

At first, it seemed uncontroversial. The commissioner responsible for the review, Cliff Rechtschaffen, outlined a perfunctory decision making process. Then two things happened. The commission began an overall look at the way utility poles are managed in California, and Pacific Gas & Electric asked for essentially the same CPCN authority SCE has, under terms that were largely similar, but used a different formula for determining how money should be split between ratepayers and shareholders. Rechtshaffen widened the scope of his enquiry, citing, among other things, SCE’s apparent intention to sell lit services to Verizon. In other words, instead of leasing bare strands of dark fiber and letting Verizon worry about the rest, it would presumably be attaching electronics to each end and transporting data back and forth. Which is something PG&E also wants to do.

Since then, TURN, an old school consumer advocacy group, and the cable industry’s lobbying front organisation have jumped in on the proceeding, even as California’s recent wildfire catastrophes have made relations between the CPUC and privately owned electric utilities increasingly fraught.

SCE’s latest move is to tell the CPUC that it wants to take out the word “electronics” from its original application “because it suggests that the subject of the Application involves lit fiber, when it does not”.

Since it’s the first time around, PG&E will get a hard look at its request for telephone company status, and there’s no doubt a decision will take many months, if not years. SCE, on the other hand, has been in the fiber business for nearly 20 years, operating under rules approved by the CPUC that have provided significant benefits to electric ratepayers and telecoms subscribers, who are pretty much the same people anyway. Neither the company, its customers or the public that depend on both should have to suffer through an interminable review of a simple contract that plays by those rules.

California broadband subsidies will be top down, incumbent focused

The California Public Utilities Commission plans to take a more active role in deciding where and how broadband infrastructure will be subsidised, and to work more closely with incumbents in the process. Yesterday, commissioners discussed how they will run the California Advanced Services Fund (CASF) program under new rules adopted by the California legislature. Assembly bill 1665 was signed into law by governor Jerry Brown last month. It requires the commission to periodically designate which communities in California can receive CASF money, based on a slower minimum broadband speed standard – 6 Mbps download and 1 Mbps upload – that will slash the number of eligible households from 300,000 to just 20,000, according to one CPUC estimate.

Commissioner Martha Guzman Aceves, who is taking the lead on redesigning the CASF program, said she wants to set specific goals for broadband deployment and work with incumbent providers to achieve them…

The key one I really want to focus on is…the overarching program goals. It can really help us work on how we have this regional focus that is goal driven and certainly one of the things I’ll be mentioning that I want us to consider as one of those goals is to be driven in the areas of highest economic need…

With the federal CAF program and other dynamics there is going to be provider engagement. Again, as I mentioned, the example of Oroville, where you could actually work with Comcast and AT&T to expand to the unserved areas. So this is a new area, it’s one where I think we have a responsibility to really be engaged to ensure that that engagement is balanced.

Up until now, infrastructure projects were created at the local level, usually by independent broadband providers, and then proposed to the CPUC for CASF funding. Incumbents are equally eligible, but a couple of small Frontier Communications grants aside, preferred to either ignore the program, or complain bitterly with varying degrees of truth whenever an independent project was proposed.

AB 1665 flipped that process completely around, giving the CPUC responsibility for making the first-cut decisions on where projects should be built and putting incumbents at the head of the line for getting the money to do it.

That’s really not a reversal for the CPUC itself, though. As president Michael Picker noted, commissioners have wanted, to varying degrees, to proactively manage the CASF program rather than simply responding to proposals as they came in.

Guzman Aceves and communications division director Cynthia Walker outlined a timetable for completing the overhaul by next September. Until then, the plan is to continue funding projects from the $30 million that’s leftover from the old program. No details were given about that process would work though. In the past, the CPUC has tended to take the position that grant proposals are assessed on the basis of the rules in effect as of the application date, but there’s been no indication whether that’s the case now.

CPUC presentation, California Advanced Services Fund, 8 November 2017

FCC continues push to replace rural copper with wireless service

The Federal Communications Commission won’t preempt state regulations regarding changes in network technologies made by telephone companies – commonly referred to as copper retirement – but it will streamline its own procedures to make those transitions easier. Including replacing rural wireline systems with wireless service that has much lower capacity, reliability and consistency than the fiber networks slated for more affluent communities. That’s the gist of a draft order published by the FCC last week.

Earlier this year, the FCC opened two proceedings, aimed at making it easier to deploy wireline and wireless broadband infrastructure. The draft rules came out of the wireline enquiry.

Copper retirement is an umbrella term that covers three different types of technology changes: old style POTS (plain old telephone service) to Internet protocol (VoIP) technology, copper lines to fiber lines, and copper lines to wireless service. The FCC, like AT&T, focuses its argument on the copper to fiber transition, because it’s relatively uncontroversial. A fiber upgrade is generally considered to be a wonderful thing. The POTS to VoIP transition is a bit more troublesome – back up batteries are needed, there’s continuing concern about interoperability with legacy equipment and there are job implications for telco employees – but those are solvable problems.

Replacing copper networks with wireless service, though, is not benign. AT&T is already pushing to yank out copper in rural California, and Frontier is not far behind. The replacement wireless systems might or might not be able to support even the current low level of service delivered by these decaying systems, and will certainly not be capable of matching the fiber systems that more affluent and densely populated urban and suburban communities will get.

The California Public Utilities Commission warned the FCC not to conflate “fiber facilities with next-generation services”, yet that’s exactly what it’s doing. The FCC’s draft refers to “fiber or other next-generation technology” as acceptable replacements for copper wireline networks. The “next-generation technology” in question is fixed and mobile wireless networks that’ll use the latest equipment, but will be configured and provisioned for a much lower level of service.

The FCC is scheduled to vote on the new rules next month.

CPUC posts final decision allowing CenturyLink to buy Level 3

The final version of the California Public Utilities Commission’s decision allowing CenturyLink to buy Level 3 Communications was just released. There are no apparent changes from the draft on the table when the CPUC unanimously approved it last Thursday – minor formatting aside, that could not happen under CPUC rules. Even an obvious typo on page 3 wasn’t corrected.

Download: CPUC decision approving settlement regarding proposed transfer of control of the Level 3 operating entities, 12 October 2017.

CPUC leaves heavy lifting to feds, okays CenturyLink-Level 3

Update, 18 October 2017: the CPUC posted the final decision, no changes:

CPUC decision approving settlement regarding proposed transfer of control of the Level 3 operating entities, 12 October 2017.

CenturyLink’s purchase of Level 3 Communications has the blessing of the California Public Utilities Commission. In a unanimous vote yesterday, commissioners approved a decision authored by administrative law judge Regina DeAngelis that grants permission, subject to various administrative requirements and compliance with a settlement agreement reached with consumer advocacy groups. There was only a brief comment from commissioner Cliff Rechtschaffen, regarding minority contracting goals.

The settlement dances around the central problem posed by the merger: the increasing concentration of California’s already uncompetitive market for dark fiber and other wholesale services. CenturyLink will have to work with the groups – including the California Emerging Technology Fund, which was otherwise shut out of the decision – to identify a project, or maybe more than one, that’ll expand middle mile fiber infrastructure in under and/or unserved areas. But assuming this new infrastructure is eventually built, there’s no requirements regarding how, or even if, it’ll be offered to potential customers.

There’s a capital investment target, but it’s squishy. CenturyLink committed to $323 million in capital spending in California over the next three years, but only “aspires” to invest in network expansion and upgrades or meeting customer demand. That’s a loophole big enough to march a platoon of accountants through.

There are weak requirements for CenturyLink to honor existing service contracts in California for two years, and to give 90 days notice if – when – it exits the dark fiber business.

The only bona fide effort at protecting market competition so far has come from the federal justice department, which is forcing CenturyLink to give up control of a couple dozen fiber strands on key intercity routes, including five in California.

The remaining hurdle is permission from the Federal Communications Commission. Given the justice department’s okay, that seems likely to come soon, perhaps today but no later than early next week, if the FCC sticks to the timeline posted on its website.

CPUC set to wave through CenturyLink-Level 3 deal today

CenturyLink’s purchase of Level 3 Communications appears ready to sail through to approval by the California Public Utilities Commission later this morning. The proposed decision, drafted by CPUC administrative law judge Regina DeAngelis, was still on the consent agenda as of last night. That means no commissioner wants to talk about it or hold it for consideration at a later meeting.

That’s not a guarantee of approval today – commissioners can put a hold on the decision or pull it off the consent agenda for discussion during the meeting. But odds are it’ll be one of a dozen or so items that’ll be disposed of in a single batch vote, without comment.

DeAngelis posted a revised version of her draft decision yesterday afternoon. It only contains relatively minor edits, and a new warning to CenturyLink that approval “is granted subject to…continued cooperation with Commission Staff Data Requests relating to their facilities”.

What the decision doesn’t do is impose swingeing requirements for network expansion, as unsuccessfully demanded by the California Emerging Technology Fund. It does approve a settlement CenturyLink reached with old school consumer advocacy groups that’s largely meaningless, particularly in regards preventing or mitigating the damage the deal will do to California’s wholesale broadband market.

CenturyLink and Level 3 are two of maybe four major fiber network operators between major Californian cities, and Level 3 is the only one with dark fiber leasing built into its business model. Opportunities to lease dark fiber from CenturyLink, let alone AT&T and Verizon, are vanishingly rare.

Fortunately, the federal justice department did not outsource its investigation to advocacy groups. It’s requiring CenturyLink to give up control of 24 strands of fiber on key routes, including five in California, and turn them over to a bona fide dark fiber company, at a price and on strict terms.

Assuming CPUC approval comes today, the only remaining hurdle is a final blessing from the Federal Communications Commission. That seems likely to come soon. The FCC notified CenturyLink that it was restarting its informal shot clock, with the countdown nominally ending on Monday.

Frontier preps to pull a wireless bait and switch on Californians

Frontier Communications is backtracking on pledges made to the California Public Utilities Commission as it successfully sought permission to take over Verizon’s copper and fiber systems in California. During that process, it claimed to be a “dedicated wireline service provider” as it was trying to convince the CPUC that it could do a better job than Verizon…

Frontier is strategically focused solely on wireline telecommunications and has a long and successful history providing those services. Unlike Verizon and other large telecommunications carriers that have multiple business divisions—such as wireless and international—that compete for capital resources and management attention, all of Frontier’s capital and human resources are concentrated on wireline communications services.

Not any more. In a recent filing with the Federal Communications Commission, Frontier (along with Windstream and Consolidated) said it’s moving ahead with plans to spend federal subsidies on wireless service, rather than wireline upgrades (h/t to Trish Steel at the Broadband Alliance of Mendocino County for the heads up)…

Frontier, for example, has already begun testing fixed wireless in very rural [Connect America Fund-subsidised] areas. As Frontier’s Chief Financial Officer has explained, Frontier believes that this could be a “good solution” to the deployment challenge “in very rural America[,] and if it works the way [Frontier is] expecting it to work…[Frontier] will deploy more of that next year.”

On the face of it, Frontier’s plans for fixed wireless broadband service are similar to AT&T’s. Both companies are required to offer service at a minimum of 10 Mbps download and 1 Mbps upload speeds in federally subsidised areas, and putting up an access point with wide coverage is one way to claim they’re meeting that obligation, even though the service is unlikely to be accessible to all, or even most, of the people under that umbrella.

There’s one key difference between Frontier and AT&T, though. Because it’s also a mobile carrier, AT&T already has wireless sites, licensed spectrum and a deep reservoir of wireless engineering talent. Frontier has none of it.

Feds clear a dark path for CenturyLink-Level 3 deal in California

CenturyLink’s purchase of Level 3 Communications is on track to be approved by the California Public Utilities Commission on Thursday. It’s always possible that a decision could be bumped to a later meeting, but there’s no indication at this point that there will be any delays.

A settlement CenturyLink reached with anti-trust lawyers at the federal justice department last week takes the edge off the damage the deal will do to California’s broadband market, although it doesn’t eliminate it. Level 3 is the largest independent source – often the only source – of dark fiber, which competitive broadband providers need to compete with the likes of AT&T and Comcast.

That agreement has CenturyLink giving up dark fiber strands on 30 key routes, including five in California. Unlike the CPUC’s review, the federal investigation into the effects of the merger identified the real danger it poses

Dark fiber is a crucial input for large, sophisticated customers that need to move substantial amounts of data between specific cities. These customers have specialized data transport needs, including capacity, scalability, flexibility, and security, that can be fulfilled only by Intercity Dark Fiber. CenturyLink and Level 3 compete to sell Intercity Dark Fiber to these customers, and this competition has led to lower prices for and increased availability of Intercity Dark Fiber. The consolidation of these two competitors would likely substantially lessen competition for the sale of Intercity Dark Fiber for thirty city pairs in the United States in violation of [anti-trust law].

The justice department is, at least, going after the root of the problem by trying to reduce CenturyLink’s ability to extract monopoly rents from the detail. That’s unlike the largely meaningless but relatively harmless measures under consideration by the California Public Utilities Commission, and the equally meaningless but less benign alternatives pushed by the California Emerging Technology Fund, which just aim to spread the rents around.

Short on dark fiber inventory, PG&E moves toward selling lit service

PG&E has revealed more details about its telecommunications business plan. In testimony filed with the California Public Utilities Commission, as it seeks permission to expand its telecoms service offerings, PG&E reiterated that it has no intention of offering residential fiber to the home service, or otherwise competing in the retail space. But its motivation for providing “lit” fiber service to wholesale customers appears to be greater than previously assumed. And so is its interest.

Right now, PG&E is leasing dark fiber – bare strands of glass – to a few customers, either fiber it installed on its own poles, towers and conduit for its own use, or installed at a telecoms company’s request (and expense). There’s not much more of that inventory available, though. Of the 2,600 miles of cable it owns, only 1,000 miles has spare capacity that might be leased out. On average, that spare capacity amounts to only about 4 fiber strands, enough to offer two customers a pair of dark strands each.

Although it doesn’t make a direct connection to this very restricted dark fiber supply, PG&E clearly states that it intends to move up the value chain and offer lit fiber service. Which would allow it to serve many customers on a single pair of fiber strands…

PG&E proposes to offer “lit fiber” and other services (as market demand and availability of PG&E facilities allows) to third-party communication services providers, communication companies, and large institutional (wholesale) customers that need point-to-point services along routes where PG&E can make lit fiber available. Lit fiber is fiber optic cable that has electronic equipment (such as transmitters and regenerators) connected to it to “light” the fiber, enabling the transmission of data. In providing lit fiber, PG&E would be the service provider, owning and maintaining the equipment to light the fiber. The customers would be free of the maintenance and operation of the equipment. This contrasts to the dark fiber services that PG&E currently provides where the customers are responsible for providing and maintaining the equipment that lights the fiber.

Mobile carriers and infrastructure companies are called out as particularly good prospects. PG&E sees a sweet spot in providing long haul connectivity, via lit fiber, to mobile and other telecoms companies that need to tie a lot of far flung locations into their core networks.