Tag Archives: monopoly

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 misses night and day difference between lit and dark fiber

The Federal Communications Commission’s decision to allow CenturyLink to buy Level 3 Communications might have broken with merger review practices, but it is solidly in line with its past nonsense regarding wholesale broadband services. Earlier this year, the FCC justified backing away from common carrier regulation of business-to-business service with the circular argument that if ISPs – Comcast and Charter Communications, in particular – don’t follow common carrier rules, then common carrier rules don’t apply.

In its latest departure from logic, the FCC majority claimed that allowing a managed services-centric legacy telco to buy the nation’s largest independent fiber company wouldn’t harm the market for “long-haul transport service” because lit service and dark fiber are the same thing…

In conducting our review, we evaluate the competitive availability of long-haul transport considering both lit transport services and dark fiber, as we recognize dark fiber as a substitute for lit fiber transport services for purposes of our public interest analysis and there is no basis in our record to distinguish between lit and dark fiber transport.

There is, in fact, a huge difference between buying lit (or managed) service, where bandwidth quality, reliability, capacity and routing are determined by the provider, and leasing particular strands of dark fiber between two points and lighting it up with your own equipment.

The latest example of why that’s an important distinction came three weeks ago when the County of Santa Cruz lost internal connectivity and its primary link to the Internet during a major wildfire, due to an otherwise unrelated cut in an AT&T fiber line. County staff didn’t know that the direct connections between major sites they thought they were buying from AT&T were actually being routed through San Jose. A single misplaced chop by a road construction crew was enough to take it all down.

Dark fiber is also an essential building block for competitive service providers. When independent ISPs are forced to buy managed service on terms dictated by the monopolies they’re competing against, anything resembling a free market disappears. By ignoring this distinction and approving the CenturyLink-Level 3 deal with no thought given to the damage it will do, the FCC is whacking market competition, not regulatory weeds.

FCC limits scope of merger reviews as it okays CenturyLink-Level 3 deal

CenturyLink can close its deal to buy Level 3 Communication, and will probably do so tomorrow. The Federal Communications Commission gave the final green light to the deal on Sunday, without imposing any significant conditions. The FCC’s decision amounts to a manifesto that lays out how the republican majority will sharply restrict its review of future mergers and acquisitions.

The previous democratic-majority FCC took a broad look at proposed mergers, sometimes imposing conditions aimed at extracting general public benefits, but not necessarily directly related to problems caused by the transaction itself. One example was the low price Internet package AT&T was required to offer to low income households when it was allowed to buy DirecTv.

In a statement, FCC chair Ajit Pai said such conditions are a thing of the past…

This is in line with past pronouncements by the Commission that we will use conditions “only to remedy harms that arise from the transaction (i.e., transaction-specific harms)” and that are “related to the Commission’s responsibilities under the Communications Act and related statutes,” and we “will not impose conditions to remedy pre-existing harms or harms that are unrelated to the transaction.”

For the CenturyLink-Level 3 deal, the FCC found those transaction-specific harms to be virtually non-existent. The sole condition it attached to its approval was a five year price freeze on business services in 10 buildings scattered across the U.S. (but none in California), where Level 3 and CenturyLink both serve customers. That’s out of 4,600 buildings where the two companies currently compete.

The loss of an independent dark fiber competitor to a legacy telco with a monopoly-centric focus on lit services isn’t a problem, according to the FCC decision, because 1. there’s no meaningful difference between dark fiber and lit service and 2. the federal justice department took care of any imaginable problems by requiring the new company to lease out 24 dark fiber strands on 30 particular intercity routes, including five in California.

Pai and the other two republicans on the commission, Michael O’Rielly and Brendan Carr endorsed the decision; democrats Mignon Clyburn and Jessica Rosenworcel disagreed with it, to one extent or another.

California broadband subsidy program heads for the deep freeze

With the stroke of a pen, governor Jerry Brown transformed the California Advanced Services Fund (CASF) into a piggy bank for AT&T and Frontier Communications. Carve outs for federally subsidised service areas and the right of first refusal on unserved areas give them an opportunity to claim CASF money for the projects they want to do, and block independent projects virtually everywhere else in their service areas.

Going forward, two questions need to be answered: what will happen to pending CASF infrastructure grant applications and how will the California Public Utilities Commission implement the new rules?

Earlier this year, the CPUC went through a preliminary information gathering exercise, in anticipation of assembly bill 1665 becoming law. No conclusions were reached, but one can hope that action will come faster than the 14 months it took to get from the last legislative rework of the CASF program to the first applications accepted under it. Technically, that application window is still open and a project proposal could still be submitted but, given that AB 1665 took effect immediately, there’s no clear path for review and approval.

The same is true for the four pending CASF grant applications. One, in the Kennedy Meadows area in the southern Sierra was submitted by the Ducor Telephone Company is on reasonably firm ground, at least from a statutory perspective. Ducor is a small rural incumbent telco, and has the same rights as Frontier and AT&T in its very limited service area.

But the other three – Surfnet in Santa Cruz County, Renegade in Santa Barbara County and the second phase of the Connect Anza project in Riverside County – are less certain. Past practice indicates that those applications should be evaluated under the rules in effect when submitted. But all three are, to one extent or another, in Frontier’s newly protected service area. Frontier tried to stop a San Bernardino County project by falsely claiming 1. they would have the entire area upgraded by August (they didn’t) and 2. that protecting federally funded areas was already California policy (it wasn’t); it is safe to assume that opposition to the pending projects will be just as fierce and disingenuous.

The only certainty is that nothing will happen quickly. Two of those projects – Surfnet and Ducor – have been stuck in the evaluation process for more than two years, despite a CPUC time limit of three and a half months for such reviews.

The days of big, state-subsidised independent broadband projects are over in California.

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.

California broadband subsidies are now a rigged game

The era of state-subsidised independent broadband projects is over in California. It ended Sunday night when governor Brown signed assembly bill 1665 into law, with immediate effect.

AB 1665 added $300 million to the California Advanced Services Fund (CASF) specifically for infrastructure subsidies, but drastically changed the way the money can be spent. It’s messy and meandering, like most pork laden bills, but the key elements are:

  • The money has to be spent in areas where broadband service is available at less than 6 Mbps download and 1 Mbps upload speeds. A small fraction of the money might go to areas with 10 Mbps down/1 Mbps up in the future, but the critical number is the 1 Mbps up. That’s the limit for AT&T’s and Frontier’s ageing 1990s DSL systems in rural communities.
  • Even then, telcos, cable companies and wireless operators will be able to exercise an annual right of first refusal and block projects in areas that would otherwise qualify for funding. There’s a nominal requirement that whoever blocks projects has to upgrade service, with the help of CASF money of course, but loopholes allow delays that are long enough to kill any independent project that’s on the drawing board.
  • AT&T and Frontier will have the exclusive right to CASF money in areas where they’ve accepted federal subsidies under the Connect America Fund program, at least until mid–2020. The census blocks that have been awarded those federal subsidies are scattered in checkerboard fashion across rural California, effectively killing the business case for independents to expand in whatever CASF-eligible areas might be left.
  • Individual homeowners may apply for means-tested grants to pay some of the cost of building line extensions to their property. As a practical matter, it means cable companies, like Comcast, that have line extension charges built into their business models will be able to tap up to $5 million from CASF to get to homes that are just outside of their existing service areas.
  • By the California Public Utilities Commission’s estimate, the number of CASF-eligible households will plunge from 300,000 to 20,000. I’ve run the numbers too, with similar results: regardless of which assumptions you use, eligibility will drop from hundreds of thousands of homes to tens of thousands.

Most, if not effectively all, of those homes will be reserved for AT&T and Frontier. The game is egregiously rigged in their favor. Such hope as might be left rural California can be found in the words of Robert A. Heinlein:

Certainly the game is rigged. Don’t let that stop you; if you don’t bet you can’t win.

Brown approves $300 million gift to telcos but vetoes streetlight giveaway

Just before the clock hit midnight last night, California governor Jerry Brown signed assembly bill 1665 into law, but vetoed senate bill 649.

AB 1665 takes effect immediately. It lowers California minimum broadband service standard to 6 Mbps download/1 Mbps upload speeds and adds $300 million to the California Advanced Services Fund for broadband infrastructure, to be spent under rules will give it to AT&T and Frontier in exchange for token upgrades. That they would, in most cases, be making anyway.

Unless the legislature overturns Brown’s veto – an unlikely scenario – SB 649 is dead. It would have forced cities and counties to lease streetlights and other vertical infrastructure to wireless companies at a price far below market value, and would have given them open access to most other publicly-owned property.

In his veto message, Brown said making it easier to deploy wireless technology was a worthy goal, but SB 649 was tipped too far in favor of wireless companies…

There is something of real value in having a process that results in extending this innovative technology rapidly and efficiently. Nevertheless, I believe that the interest which localities have in managing rights of way requires a more balanced solution than the one achieved in this bill.

Brown is setting the stage for another attempt next year. It’s a safe bet that it’ll happen. Getting access to street light poles and traffic signals, among other things, and rolling back the ability of local governments to manage permits for wireless infrastructure is a top priority of telecoms lobbyists. Particularly mobile carriers, but also wireline telcos and cable companies that see wireless technology as a way of supplementing their existing service.

Or in the case of Frontier and AT&T, using it as an excuse to downgrade infrastructure by ripping out rural copper networks and replacing them with fixed wireless systems that, at best, will arguably meet the new, lower service standards approved by Brown.

One way or another, major California broadband policy decisions due this weekend

**Update, 15 October 2017, 0754**: no decision yet on AB 1665 or SB 649. Governor Brown signed AB 1145 into law yesterday.

There are two significant broadband-related bills remaining on governor Jerry Brown’s desk, and one relatively minor one, and he’s leaving them until the last minute. For each, he must choose one of three options by 11:59 p.m. Sunday:

  • Sign it into law.
  • Veto it.
  • Do nothing and let it become law automatically Monday morning, at the stroke of midnight.

The two big ones are assembly bill 1665 and senate bill 649. AB 1665 would lower California’s standard for acceptable broadband service to 6 Mbps download and 1 Mbps upload speeds. It also sets aside $300 million for infrastructure deployment under rules that all but guarantee that the money will go to AT&T and Frontier Communications in exchange for minimal service upgrades that they would, in most cases, be doing anyway.

SB 649 is potentially an even bigger gift of public assets to telecoms companies. It requires local governments to lease out vertical infrastructure in the public right of way – streetlight poles, traffic signals and pretty much anything else that sticks up in the air – to wireless companies for $250 a year. That’s below – far below, in some cases – the market rate in most California cities. It also requires cities and counties to lease out other property, whether they want to or not, and prunes back their already limited discretion over where wireless infrastructure can be installed.

Then there’s AB 1145. It gives cable companies access to payments from local government for utility undergrounding projects, without requiring them to meet the obligations that normally fall on a public utility. Cable industry lobbyists also managed to get some deal sweeteners slipped into AB 1665 and SB 649 – cash is king, and Comcast, Charter and friends give a lot of it to California lawmakers. As do AT&T and Frontier.

On the other hand, Brown is hearing from a growing list of opponents) to AB 1665, and nearly every California city and county has gone on record against SB 649. The political heat is rising.

Guessing which way Brown will decide to go is a long running, and frustrating, game in Sacramento. The only thing we know for sure is that we don’t have long to wait.

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.