Tag Archives: frontier

Legislative games put $2.2 million Riverside FTTH project in peril


Red zone is where federal subsidies pay for slow broadband service.

Anza Electric Cooperative is giving another push to its proposal for a $2.2 million California Advanced Services Fund (CASF) grant to pay for expanding its fiber to the home system in rural Riverside County.

It sweetened its application yesterday by promising a low cost tier of service – $25 per month for symmetrical 10 Mbps service – to households that are eligible for any one of a long list of public assistance programs. Combined with offers of free service to a short list of non profit groups and discounted service to others, and low cost (sometimes no cost) computers, it’s a way to raise the profile of its application a bit, and perhaps move it through the California Public Utilities Commission’s vetting process more quickly.

That’s important because if a commission vote doesn’t come soon, the Anza project might be killed by assembly bill 1665, which is awaiting a vote in the California senate.

AB 1665 would change the rules for CASF, which is the state’s primary broadband infrastructure subsidy program. The bill would make it effectively impossible to award CASF grants for high speed fiber projects where an incumbent telco – in this case, Frontier Communications – might eventually use federal subsidies to pay for minimal upgrades to low speed, 1990s vintage DSL technology.

Because it had to get around legislative deadlines, AB 1665 was declared to be an urgency bill, which means it takes effect the moment it’s signed by the governor. If it makes it that far, it’ll go into effect no later than mid-October.

This sudden death clause was added to the bill by its nominal author, assemblyman Eduardo Garcia, who turned over writing responsibilities to telco and cable lobbyists early in the process. He’s a democrat and, ironically, represents Riverside County, although not the part that includes the project area. Anza is in the assembly district next door, which is represented by republican Randy Voepel, who sent a letter of support for the project, but has otherwise been missing in action as AB 1665 slithers through through the legislature.

In the past, the CPUC has taken the position that what counts are the rules that are in effect when the application is filed. But that’s not firm ground in any case, and for the Anza project, it’s very thin ice. Frontier has been aggressively litigious – at times, egregious – in opposing state subsidised broadband upgrades. Except, of course, when it’s getting the subsidies. And attitudes towards competitive projects are hardening at the CPUC. If AB 1665 becomes law before the CPUC votes on whether or not to fund it, the outlook for the Anza project is very bleak.

Bad telecoms regulatory decisions won’t be saved by non-existent good will

The game isn’t over when the California Public Utilities Commission votes to impose conditions on big mergers. Telecoms companies will immediately challenge decisions, administratively and in court, and try to wriggle out of obligations by any means possible.

Comcast is doing that now in Vermont, where that state’s public utilities commission required it to build out 550 miles of line extensions into rural areas. According to an article by Jon Brodkin in Ars Technica

The company’s court complaint says that Vermont is exceeding its authority under the federal Cable Act while also violating state law and Comcast’s constitutional rights…

Comcast’s complaint also objected to several other requirements in the permit, including “unreasonable demands” for upgrades to local public, educational, and governmental (PEG) access channels and the building of “institutional networks (“I-Nets”) to local governmental and educational entities upon request and on non-market based terms”…

Comcast often refuses to extend its network to customers outside its existing service area unless the customers pay for Comcast’s construction costs, which can be tens of thousands of dollars.

When faced with demands for conditions or concessions, Comcast is particularly stroppy – rather than negotiate, it mounted a smash mouth campaign against opposition to its failed bid to do a massive three-way merger/market swap deal with Charter and Time Warner in 2015.

Other companies, that are all sweetness and light while trying to convince regulators to okay their deals, can also turn nasty once the ink has dried. For example, Frontier Communications was represented by friendly, knowledgable telecoms professionals while it sought, and received, CPUC permission to buy Verizon’s wireline telephone systems in California. But within a few months of the sale closing, those key frontline people disappeared from public view, either fired as the company downsized or relegated to back rooms. They were replaced by litigious lobbyists who engage in scorched earth opposition to any project, program or requirement that doesn’t suit their business model.

Likewise, CenturyLink is spinning a handful of feeble promises into epic concessions as it seeks CPUC permission to buy Level 3 Communications. But the actual agreement is stuffed with weasel words and CenturyLink has consistently played hardball with both opponents and the commission. There’s no reason to think it’ll be any less aggressive in pursuing its interests if and when it’s a done deal. That’s a fact of life that the CPUC would do well to consider as it grinds its way through its review.

Cable gains subs as consumers flee DSL

Cable companies own the residential wireline broadband market and are increasing their lead over telephone companies, at least where the major players are involved. An analysis piece by Sean Buckley in FierceTelecom breaks out the subscriber numbers for the 15 biggest Internet service providers in the U.S., ranked by total subscriber count as of 30 June 2017. It shows big cable with a 64% to 36% market share advantage and positive net subscriber growth, while big telco is stuck in reverse.

In the second quarter, the seven largest cable ISPs netted 430,000 new subscribers, while the eight biggest telcos lost 16,000 subs. The reason, according to Buckley, is consumers dumping outdated DSL-based service…

The effect of cable’s DOCSIS 3.1 drive was clearly felt by traditional telcos, which lost 233,260 more wireline broadband users, a slight improvement compared to the 360,783 this group lost during the same period in 2016. A big piece of this for large telcos such as AT&T and Verizon was the decline of DSL subscribers. AT&T and Verizon lost 104,000 and 72,000 legacy DSL subscribers during the quarter. But the biggest loser was Frontier Communications, which bled an additional 101,000 wireline broadband users. CenturyLink followed closely behind, losing 77,000 in the second quarter.

Comcast and Charter alone account for more than half of the market, with 27% and 24% shares respectively. Together, the two biggest telco ISPs – AT&T and Verizon – can’t even match Charter’s market share, let alone Comcast’s. AT&T has 16% of the total and Verizon has 8%, when added together and rounded, their total is 23%.

These latest numbers are good and bad news for big cable companies. Good, because sub count is the name of the game, and they’re winning hands down. Bad, because it’s one more data point that highlights a continually growing concentration of market power into a very few hands. When you take into account the fact that cable companies deliberately don’t compete with each other, on a market by market basis their dominance is increasingly indistinguishable from a true monopoly.

Legacy telcos chalk up historically bad financial results


Forward looking statement.

It’s hard times for legacy telephone companies, at least the sort that have to rely on wireline – mostly copper – systems to serve customers. The plummeting share prices of Frontier Communications, CenturyLink and Windstream have gone where no telco has gone before. According to a story by Sean Buckley in FierceTelecom, that’s the conclusion of financial analysts at Cowen…

“Shares in the wireline [incumbent/rural carrier] space (CenturyLink, Frontier, Windstream) have endured the worst three consecutive quarters in industry history, with shares plummeting an average of -20% in 4Q16, -21% in 1Q17, and -24% in 2Q17 (we note another -5% in 3Q17 thus far), mostly from Frontier and Windstream as CenturyLink shares are being supported by the Level 3 acquisition,” Cowen said in a research note…

Overall, the three companies face the industry-wide challenge of balancing strategic service growth with ongoing legacy service declines and losing market share to cable operators.

Additionally, each of these companies has been dealing with specific headwinds in their businesses. Frontier has been challenged by integrating the properties it purchased from Verizon in California, Texas and Florida, while CenturyLink is dealing with a raft of lawsuits over alleged consumer fraud issues.

Windstream isn’t a factor in California, but Frontier and CenturyLink are, and both companies are showing increasing signs of desperation as they try to bend regulators and lawmakers to their will.

CenturyLink wants permission – quickly – to buy Level 3 and consolidate ownership of key long haul fiber routes in California into a cozy club of three monopoly-centric telcos. It needs a fast yes from the California Public Utilities Commission in order to close the deal by its self imposed end-of-September deadline, and its arguments and pleadings have taken on a shrill, incoherent tone.

Frontier is fighting on two fronts. Its attempts at the CPUC to derail competitive fiber builds in rural areas where it hoped to milk monopoly profits from decaying copper have pushed past the boundaries of truth, and its lobbyists are trying to get the California legislature to stop the bleeding by building a statutory wall.

Radical innovation is needed. Allowing Frontier and CenturyLink to hold businesses and consumers hostage will only be short term help, at a high long term price that Californians should not have to pay.

Cracks in Frontier’s business model widen

Competition and a botched takeover of Verizon wireline systems in California, Texas and Florida are pushing Frontier Communications deeper into the red, as its customers cancel service. According to an article in the Wall Street Journal, via Morningstar.com, company executives have backed away from predictions that falling subscriber revenue would soon be on the way up…

Revenue has instead declined companywide for the past year. Frontier’s 2016 loss widened to $373 million from $196 million a year earlier. The company plans to devote at least $1 billion this year on capital spending to keep its network humming.

“Cable companies are beating the pants off Frontier,” said Jonathan Chaplin, an analyst for New Street Research, noting that companies like Charter Communications Inc. have invested more heavily in marketing, network equipment and customer service in the past three years.

The stiffened competition came just as Frontier faced pressure to cut costs, partly so it could pay for the networks it bought. The result was a series of network failures and complaints about customer service.

Frontier’s share price has been in free fall, dropping 69% this year according to the article. It went so low that the company had to do a reverse split, giving shareholders 1 share for every 15 they previously owned, to keep the share price from dropping below the $1 mark and risking being kicked off of the NASDAQ exchange.

Bankruptcy doesn’t appear to be an immediate threat, although the article pointedly notes that two other companies that bought systems from Verizon – FairPoint Communications and Hawaiian Telcom – did file for Chapter 11 protection. The longer term outlook is more uncertain. Frontier has $17 billion in debt and has to make a $2.4 billion payment in three years. To do that, it’ll have to look to the bond market for refinancing.

If it doesn’t start gaining subscribers, it won’t “demonstrate sustainability to the bond market” and could hit a brick wall. That’s something to keep in mind as Frontier scrambles after California broadband subsidy money and tries to fend off competition with promises of future upgrades.

CPUC debunks Frontier’s service claims, approves FTTH grant in Phelan

The high desert community of Phelan, in San Bernardino County, will get gigabit class fiber to the home service. The California Public Utilities Commission voted four to one yesterday to approve a $28 million grant to Race Telecommunications, which will cover 60% of the cost of building the project. The single no came from commission president Michael Picker.

The decision had been delayed two weeks, while Race and Frontier Communications explored ways they might work together. That discussion came at the request of commissioners, who were trying to avoid spending state money in an area that was also getting federal subsidies, albeit for relatively minor upgrades to ageing DSL systems that will not meet the CPUC’s minimum standards.

The CPUC also did some ground truthing and discovered Frontier’s service claims did not line up with reality, according to commissioner Clifford Rechtschaffen…

Since our last meeting [CPUC staff] has gone down to Phelan’s central business district and established that they are in fact going forward with their upgrades to some households and businesses. They also though, and this I think is quite significant, they determined based on the engineering constraints of the project, that Frontier’s upgrade would not reach nearly 100% of the community not even the 85% that we thought before, but more like 60%. So 40% of the community would not be served. And that’s very significant. That means that we have a significant portion of the community would not be served in an area that we have identified as our highest priority.

But Rechtschaffen also warned that the Phelan project shouldn’t set a precedent, and other pending projects should be looked at differently.

The backlog of proposals for California Advanced Services Fund subsidies is being whittled down. Four grant applications are still pending, and only one of those – a middle mile project proposed by Ducor Telephone in the Tulare County mountain community of Kennedy Meadows – is completely outside of the current phase of the federal Connect America Fund subsidy program. Although, as a small rural telephone company, Ducor has access to money from related federal programs.

The other pending projects – Connect Anza in Riverside County, Vandyland in Santa Barbara County and Las Cumbres in Santa Cruz County – are, like Phelan, in the former Verizon territories acquired by Frontier and share some overlap with federally funded areas.

Frontier’s broadband claims can’t be trusted, says Race’s reply to grant protest

“Frontier is attempting to subvert the [California Public Utilities] Commission’s [California Advanced Services Fund] rules and processes to block a sorely needed project for a disadvantaged community”. That’s the bottom line of Race Telecommunications’ reply to Frontier Communications’ last minute trashing of a $28 million grant for an FTTH system in Phelan and other, nearby high desert communities in San Bernardino County.

The key issue is whether Frontier provides service in the area at the CPUC’s minimum 6 Mbps download and 1.5 Mbps upload speed level. Frontier has made increasingly expansive claims about what it will do in the future, but has offered no proof that it has actually done anything yet. In its reply, Race points to Frontier’s ads that similarly, and falsely, promise fast service in a Californian desert community…

Boron, CA is the site of a successful and fully constructed Race CASF project that is 100% Fiber to the Home. According to Frontier, they have been investing funds in Boron since 2012 and advertise speeds of up to 50 Mbps download. Frontier also claims “to be Boron’s only Internet provider that uses a completely fiber optic network.” These claims are inherently false and further demonstrate the lengths that Frontier will go to deceive consumers and the Commission in regards to their service levels. Customers in Boron and Phelan face many issues with Frontier’’s alleged service – from billing problems, to dishonesty regarding service eligibility. The reality is Frontier has not met the past serviceability needs of this area and cannot document they can do so now. Further, Frontier’s publicly released documents demonstrate its inconsistent definitions of available bandwidth speeds with admitted shortcomings in network capacity. With Frontier’’s woeful rural deployment history as the backdrop, when contrasted against Race’s “Gigafy” solutions, the goals of the Commission will be met and competitive choice for the citizens of Phelan will result with long-term benefit.

The CPUC put Race’s Phelan FTTH proposal through an excruciating review process that dragged on for nearly two years. Anyone who applies for a grant from CASF has to document the lack of service in the project area in detail, and provide verifiable information about financing, budgets, business and construction plans and a long list of other items. Race has played by the rules and passed the test; Frontier has not.

At this point it’s about keeping faith: with independent ISPs, like Race, who rely on the rules and level playing field professed by the CPUC, and with the thousands of people in Phelan who have a right to expect fair treatment.

Letters of support for the Gigafy Phelan grant, submitted by Race Telecommunications, 26 June 2017.
Reply to Frontier’s comments about Gigafy Phelan, submitted by Race Telecommunications, 26 June 2017.
Reply to the CPUC’s office of ratepayer advocates’ comments about Gigafy Phelan, submitted by Race Telecommunications, 26 June 2017.

Case against San Bernardino FTTH embraces low federal expectations

A proposed $28 million grant for a fiber to the home project in the Phelan area of San Bernardino County has drawn two formal challenges. One, from Frontier Communications, was completely predictable, but the other, from the California Public Utilities Commission’s office of ratepayer advocates (ORA), was somewhat unexpected.

Only somewhat, because ORA has a track record of sporadically opposing grants for FTTH systems from the California Advanced Services Fund (CASF). However, its objections usually second guess design or budget decisions. This time though, ORA is taking Frontier’s side, arguing that CASF subsidies shouldn’t be given for projects in areas where incumbents are getting federal money via the Connect America Fund program.

There are two big problems with that argument. First, the federal money generally pays for minimal upgrades to existing, and typically antiquated, broadband infrastructure. To get the money, Frontier only has to commit to providing service at 10 Mbps download and 1 Mbps upload speeds. In other words, substandard service that leaves communities underserved by the CPUC’s minimum benchmark of 6 Mbps down and 1.5 Mbps up, and therefor eligible for CASF money.

ORA makes much of Frontier’s claims that it can do better, but if this project is approved, Race Telecommunications will offer gigabit service for $60 a month to every home in its footprint. And that’s an enforceable obligation, since it’s tied to the grant money. Frontier, on the other hand, can’t be forced to deliver on its half promises about speeds and it’s making no commitments about prices.

Second, Frontier won’t be serving all the homes in Race’s proposed project area: the federal money is scattered around a checker board of census blocks, per the map above. Some people will be left without broadband service at all, and others will end up with speeds that wouldn’t have been considered sufficient ten years ago, let alone today.

The real problem is that the federal program is poorly designed. It pays for propping up incumbents’ slow service, out of date infrastructure and inconsistent deployment. If the aim is to avoid overlapping subsidies, then it’s the federal money that should be spent elsewhere. Its increasingly aggressive rhetoric and lawyerly intimidation notwithstanding, Frontier does not own exclusive rights to the Phelan community. The people – the ratepayers – there deserve advocacy too.

$900K chopped from San Bernardino FTTH subsidy plan, but it’s moving again

A fiber to the home project in San Bernardino County is back on track, sorta. California Public Utilities Commission staff cut $900,000 from a proposed $29 million grant to Race Telecommunications for the Gigafy Phelan project, and sent it all back into a 30 day comment, reply and commission consideration cycle.

Gigafy Phelan is an ambitious attempt to extend FTTH service to 8,400 homes in California’s high desert region, in and around the town of Phelan. Or maybe it’s 7,600 homes. It depends on how homes is defined, and in this case it’s more than academic. It makes a $900,000 difference.

The federal census bureau tracks housing units and households. A housing unit is a discrete structure where people might live: “a house, an apartment, a mobile home or trailer, a group of rooms, or a single room that is occupied, or, if vacant, is intended for occupancy as separate living quarters", as the census bureau, as quoted by CPUC staff, puts it. A household is an occupied housing unit, regardless of the number of occupants or the relationships between them.

The California Advanced Service Fund – the broadband subsidy program that would pick up the tab – uses households as its primary metric. Housing units is a better measure, since a home that’s unoccupied today is as likely to be occupied tomorrow as any other, and everyone needs broadband service. But it’s just a way of keeping score and, so long as it’s done consistently, one way works pretty much as well as another.

It’s also a poor excuse for whittling down an FTTH project at the 11th hour, particularly one that delivers a gigabit for $60 a month and is the second "highest-scoring pending project application on the CASF’s project evaluation scoring matrix".

The revisions open up a window for another round of protests, and you can expect Frontier Communications will continue to object, claiming that its substandard, 10 Mbps down/1 Mbps up, federally subsidised service – at no particular price point – is enough for people who live in Phelan. The A in CASF stands for Advanced services. It’s time to get on with it.

CPUC, California lawmakers need to be as rational as a telecoms monopolist

Update: the CPUC delayed action on the Gigafy Phelan project, and rescheduled it for consideration at its 25 May 2107 meeting.

Frontier Communication’s request to the California Public Utilities Commission to squash a potential competitor is economically rational – it has a monopoly and wants to keep it – which is why it should be rejected. Utility regulators exist to moderate monopolist impulses, not turbocharge them. If the CPUC rejects a $29 million infrastructure grant request from Race Telecommunications for its Gigafy Phelan fiber to the premise project, it will be handing over effective broadband ownership of 8,000 San Bernardino County homes to Frontier, which in turn will redline 3,000 of them because they haven’t been blessed with federal subsidies. Of the remaining 5,000, only a fraction will receive service that meets the CPUC’s minimum standard of 6 Mbps download and 1.5 Mbps upload speeds.

I made that point in reply comments I filed on Friday with the CPUC, as a rebuttal to the challenge Frontier mounted. I also debunked Frontier’s attempt to invoke assembly bill 1665, which would kill Race’s project if it actually makes it into law…

The bill in question – Assembly Bill 1665 – has not been enacted or similarly endorsed by the California Legislature. It is a controversial bill which has only been heard in a single assembly committee. In fact, a Frontier representative raised objections to the bill during the hearing…

It is disingenuous in the extreme to characterise AB 1665 as California policy or, indeed, anything other than a wish list submitted for consideration by its prospective beneficiaries, which include Frontier Communications, its objections notwithstanding.

Frontier’s objections to AB 1665 amount to almost isn’t good enough, I want it all. Which make plain its intent to use policy makers as tools to cement its grip on rural broadband customers while scooping any available subsidy money into its own pocket. Which is a completely and economically rational way of looking at the world. The CPUC and California legislators should respond in kind.

Race Telecommunications reply comments on Resolution T-17525 – CASF grant to construct the Gigafy Phelan project, 5 May 2015
Tellus Venture Associates reply comments on Resolution T-17525 – CASF grant to construct the Gigafy Phelan project, 5 May 2015