Tag Archives: ponderosa telephone

Comcast protests we’re not cherrypicking, it’s our cherry that’s been picked

by Steve Blum • , , , ,

Comcast tried to paint itself as a champion consumer choice, as its lawyers clashed with those representing Ponderosa Telephone at the California Public Utilities Commission last week. The question is whether Comcast should be allowed to compete as a telephone company against Ponderosa, which is a small, heavily subsidised rural telco. But the core issue is whether allowing wireline telephone competitors to target high revenue potential customers in rural telco service areas will lead to even greater taxpayer subsidies for less affluent and less densely populated communities that companies like Ponderosa are required to serve.

In this case, the wrangling is mostly about Tesoro Viejo, a new, upscale master planned community of 5,200 homes in Madera County, although Comcast also hinted that other areas that are lucrative enough to meet its return on investment model will likewise be targeted. Ponderosa wants Comcast’s application for permission to enter its market to be iced until the CPUC makes a cosmic decision as to whether the dozen or so rural telcos remaining in California will face such competition. The commission’s concern is that competitors will cherrypick customers on the high side of the digital divide and leave the rest even worse off than before.

In a completely disingenuous argument – and that’s the kindest way to characterise it – Zeb Zankel, a lawyer representing Comcast, tried to make the administrative law judge hearing the case to believe that corporate strategy has nothing to do with it

We didn’t reach out. We didn’t pick. Comcast did not pick. We were picked. And we were picked presumably because Comcast has service offerings that presumably Tesoro Viejo just sought its service offerings in addition to Ponderosa, as it should. Consumers should have choice. So I think this repeated allegation of cherry picking is simply untrue.

What Zankel, um, neglected to mention was that redlined communities routinely reach out to Comcast and other cable companies for service, and are just as routinely turned down. Unless the potential customers can afford a sufficiently hefty monthly bill and they are densely packed enough to keep the cost of delivering service low.

If what Zankel said is true, then Comcast would be jumping on the chance to extend service throughout southern Madera County. But it’s not. It wants to serve Tesoro Viejo, with the income levels and household density of a suburb, and ignore the surrounding rural residents.

That’s cherrypicking.

Comcast reveals plan to pick a juicy cherry in Madera County

by Steve Blum • , , , ,

Tesoro viejo

Comcast wants permission to offer phone service to a new Madera County development in Ponderosa Telephone’s territory. In a required public disclosure of a private meeting between a California Public Utilities Commission staffer and a lobbyist and a lawyer for Comcast, the company revealed that it is targeting Tesoro Viejo, a master planned community of 5,200 upscale homes on two and a half square miles of rural land in southern Madera County.

According to the filing, Comcast says that if it offers phone service in the development, it would create “additional consumer choice” but “would have limited effect on Ponderosa and its draw on [a rural telco subsidy] fund”. As a matter of general policy, the CPUC doesn’t authorise competitive phone service in areas where small, heavily subsidised rural telcos, like Ponderosa, operate. That policy is under review, but Comcast doesn’t want to wait, presumably because it’s already put out a press release saying it will provide…

A wide range of innovative and advanced technology solutions, including high speed broadband, WiFi, video entertainment and “smart home/smart business” security/automation offerings, to homes, businesses and public spaces throughout the new Tesoro Viejo master-planned community.

Telephone service isn’t specifically mentioned – it would make for an awkward conversation at the CPUC – but the press release’s boilerplate includes phone service in the list of Comcast’s otherwise unregulated offerings.

Ponderosa wants to block Comcast, arguing that the CPUC already has concerns about competing telephone service leading to higher subsidy costs in rural areas, and if Comcast is allowed to pursue its plan, “the cherry-picking problem will be exacerbated”.

Comcast’s claim of a “limited effect” on CPUC subsidy requirements is disingenuous. The effect will be limited to the relatively affluent and densely packed customers in the development, who would otherwise be paying Ponderosa for phone and, perhaps, broadband, service. The CPUC will still have to help keep Ponderosa afloat so that its less well off and more scattered rural customers can continue to be served. Less revenue from the most profitable customers means more subsidies than would otherwise be required.

On the other hand, Comcast is correct when it says that allowing it to compete with Ponderosa will lead to greater consumer choice. At least for consumers who 1. have sufficient income to meet its revenue targets, and 2. are close enough together to minimise its cost and maximise its profit.

The CPUC has a hard decision to make: limit consumer choice and the need for taxpayer subsidies for all, or pick up the increased tab for rural residents while their new, more affluent neighbors reap the benefits of an open market. It’s a question that should be deliberatively answered at a top policy level, and not ad hoc in response to a company’s target of opportunity.

Collected documents regarding Comcast’s expansion into Ponderosa’s territory are here.

Comcast seeks CPUC blessing to compete with rural telco, but only for not so rural customers

by Steve Blum • , , , ,

Sierra 625

Comcast says it’s striking a blow for telecoms competition, Ponderosa Telephone says no, it’s cherrypicking business customers at the expense of rural residents. At issue is Comcast’s request to expand the area in which it’s authorised to offer telephone service to include the service territory of Ponderosa Telephone Company, a small, incumbent local exchange carrier (ILEC) that serves parts of Fresno, Madera and San Bernardino counties. Presumably, Comcast is eyeing Fresno and/or Madera counties, where both it and Ponderosa operate.

Historically the California Public Utilities Commission, which regulates telco operating authority, has protected small, rural phone companies from competition. That’s not because of sentimental attachment. Those small telcos serve communities that aren’t sufficiently lucrative markets to attract big incumbents like AT&T and, consequently, are heavily subsidised. As Ponderosa points out in its protest, the CPUC previously concluded that allowing competitors to pick and chose their customers in rural communities would “result in the small ILECs losing revenue and needing to seek a larger draw from the [telephone subsidy] program”.

With no apparent sense of irony, Comcast claims to be fighting for a competitive telecoms market, reminding the commission that it has “found that the presence of competition in local telecommunications markets leads to efficient pricing, improved service quality, expanded product and service capabilities, greater reliability, and increased consumer choice”. But Comcast’s application also says that it won’t expand its footprint and will only increase service in areas where it presently offers video service – areas that are densely populated enough to support its urban/suburban business model. This isn’t about upgrading service or infrastructure in truly rural communities.

Comcast is correct about the benefits of competition, despite going to great expense to avoid facing it elsewhere. But Ponderosa’s point is also true. The more it relies on revenue from remote and economically deprived communities, the more taxpayer subsidies it will need to continue to serve them.

The dispute is formally about voice telephone service, but it involves broadband policy too. Both Comcast and Ponderosa are retail Internet service providers, who rely on privileges granted by state law – either as telephone or video companies – to build wireline infrastructure in the public right of way and access wholesale services. Changing those privileges and protections will also change the economics, and consequently the availability, of broadband service in Ponderosa’s territory.

Do you limit the choices available to homes and businesses in places where revenue runs thicker in order to reduce the subsidies needed to maintain baseline service in more sparsely populated communities? Or do you maintain the status quo – in service as well as public support – for all?

That’s the choice the CPUC has to make, and it comes as no surprise. The commission is in the process of reexamining its telecoms competition policy in rural areas, as both Comcast and Ponderosa point out. Ponderosa argues, correctly, that this is a major policy decision and shouldn’t be made by default in a narrow, administrative proceeding. Near term, the CPUC should reject Comcast’s application, but long term, it has a difficult problem to solve.

Collected documents regarding Comcast’s expansion into Ponderosa’s territory are here.

CPUC says a kiss for Cressman beats the alternative

by Steve Blum • , , , ,

“Just so we understand, it screws five families”, said an animated Michael Peevey, president of the California Public Utilities Commission as he lambasted a move to slice $373,000 from a proposed Fresno County broadband project.

Ponderosa Telephone Company asked for a $1 million grant from the California Advanced Services Fund (CASF) to build a fiber optic middle mile line to the mountain community of Cressman, use it to upgrade DSL service for 65 homes there, and then extend it two and a half miles to five more homes in Rush Creek. But adding those five homes costs $74,000 each, more than twenty times the CASF average.

The justification offered was that Ponderosa could later come back and build out to a U.S. Forest Service station in Blue Canyon and then continue on to complete a fiber loop for the area. That seemed like a fine idea to commissioner Michel Florio, who thought that the five homes should be trimmed from the proposal on the table, and added later when Ponderosa was ready to complete the whole project.

“Over a third of the cost of the project is for Rush Creek which only serves five households”, Florio said, pointing out that average household income in the area ran as high as $80,000 per year. “It seems unjustified to me”.

But Peevey insisted that the money would be spent one way or the other. “The only point is do you exclude these five homes or not. You’re going to have to complete it eventually”, he said.

It came down to the vote. Commissioner Carla Peterman sided with Florio, but Catherine Sandoval and Michael Picker went with Peevey. Once Florio’s proposed changes were rejected, the original proposal was put on the table and all five commissioners agreed to fund it as written.

Tellus Venture Associates assisted with several CASF proposals in the current round, so I’m not a disinterested commentator. Take it for what it’s worth.

CPUC connects Salinas Valley to Silicon Valley with fast, cheap fiber

A 91-mile fiber optic middle network for the Salinas Valley, stretching from Santa Cruz in the north, to Watsonville, Moss Landing, Castroville, Salinas, Gonzales and Soledad in the south, is on the way. On a unanimous vote this morning, the California Public Utilities Commission approved a $10.6 million grant to Sunesys, LLC from the California Advanced Services Fund (CASF).

“The key point for me was that typically that these projects only make a price commitment for two years”, said Commissioner Michel Florio. “In this case the provider has made a commitment for at least five years, maybe as long as fourteen years”.

Pointing out that there are “still more jobs in agriculture” in the Salinas Valley than in an other sector, Commissioner Catherine Sandoval highlighted the acute need for better broadband access in the area, as expressed at public meetings the CPUC held in Salinas last year. “This could be a game changer”, she said. “This is a middle mile project, a back bone that is critical”.

The project will bring low cost wholesale fiber access to Salinas Valley Internet service providers and major commercial and institutional customers all along its route, at a maximum cost of $1,550 per month for any contracts, of any length signed in the first five years. By comparison, unsubsidised dark fiber can cost up to ten times as much. The network will interconnect with major north-south fiber lines in Salinas and Soledad, and terminate in Santa Cruz where Sunesys earlier built a dark fiber connection to Santa Clara, which provides access to several Tier 1 exchanges in Silicon Valley.

Since the Santa Clara connection was built 4 years ago, the price of wholesale Internet bandwidth in Santa Cruz has dropped by a factor of one hundred, to less than a dollar a megabit per month. Cruzio, a local ISP, leveraged this access to light up last mile fiber optic connections for downtown Santa Cruz businesses and improve speed and reliability for thousands of consumers. This new line is expected to do the same for Salinas Valley communities.

On the retail side, the commission also approved CASF funding for two last mile projects in the Paradise Road and Monterey Dunes areas of northern Monterey County, proposed by Surfnet Communications, a local ISP (and a Ponderosa Telephone project in Fresno County), albeit without the haircut proposed by Florio.. These two systems are the first of what are expected to be many consumer and small business-oriented projects that connect directly to the Sunesys middle mile network.

Gonzales councilman Robert Bonincontri and city manager Rene Mendez told commissioners of the tremendous need for connectivity in the Salinas Valley, where unemployment rates are high and household income levels are low, even when work is available. The social and economic impact of the project, coupled with its financial viability – demonstrated by the Surfnet proposals, as noted in the approved resolution – was the reason commissioners opted to fund 80% of its construction cost. Normally, CASF grants are limited to between 60% and 70% of the tab.

The next step is to finalise construction plans and route details, with completion expected within two years.

Tellus Venture Associates assisted with several CASF proposals in the current round, including the Sunesys and Surfnet projects, so I’m not a disinterested commentator. Take it for what it’s worth.

Ponderosa takes trimmed broadband grant in the Sierra

by Steve Blum • , , , ,

While offering a token defence of its original request, the Ponderosa Telephone Company has effectively agreed to chop $373,000 from a $1 million proposal to build fiber middle mile connections and upgrade DSL service in the Sierra Nevada near Cressman in Fresno County. The company asked for a grant from the California Advanced Services Fund (CASF) for the project, but ran into opposition at the California Public Utilities Commission.

Commissioner Michel Florio put an alternative on the table, that would remove 5 homes – at a cost to CASF of $75,000 each – from the project and ask Ponderosa to come back with a more cost effective plan to serve them and their neighbors. The revised project would reach 65 homes at a cost of about $10,000 each.

Via its lawyers, Ponderosa is now saying that’s OK

Although Ponderosa would prefer that the Draft Resolution be adopted, [Florio’s] Alternate Draft Resolution correctly captures Ponderosa’s viewpoint regarding the alternative proposal for the project:

Ponderosa stated that if the Commission determines that eliminating the Rush Creek segment of the project is a more prudent use of CASF funds, they will still consider the revised project technically and financially viable.

Ponderosa supports the Alternate Draft Resolution in the event that the original Draft Resolution is not adopted.

Although there’s a vague commitment from Ponderosa to “provide wholesale access to its network”, there’s still no specific pricing or cost formula required, as the commission has done in the past with the Karuk tribe’s middle mile project in Humboldt County and as proposed for the Sunesys project in the Salinas Valley.

The Cressman project is on the CPUC’s agenda for a vote tomorrow morning.

Online ride sharing companies adapting to Californian rules

by Steve Blum • , , , , , , , , ,

If Lyft’s customers were this happy before there were rules, just think how they must feel now.

California’s pioneering attempt to regulate online ride sharing services such as Lyft and Uber seems to be going as smoothly anyone could expect. The California Public Utilities Commission was briefed this morning on progress made since it adopted rules setting safety, training, insurance and other operational standards for transportation network companies, as it now calls them, including…

Obtain a permit from the [CPUC]…require criminal background checks for each driver, establish a driver training program, implement a zero-tolerance policy on drugs and alcohol, and require insurance coverage.

Five companies applied for permits, including Rasier, which is Uber’s California arm, Lyft, Wingz (formerly Tickengo), Sidecar and Summon (formerly InstantCab). Only Summon has made it though the process, with the other four still smoothing out rough spots in their applications.

As might be expected from entrepreneurial start ups, all five had innovative interpretations of what the regulations actually require. None proposed using traditional state-certified driving schools for their training programs, instead relying on various mixtures of online training and in person coaching. The CPUC hasn’t fully blessed those approaches – it kicked back Rasier’s original plan to just give drivers a list of schools – and plans to evaluate actual results in the fall.

Originally, these app-enabled companies tried to fly under the regulatory radar by claiming to only be connecting willing private individuals who were looking for casual rides. But as the businesses became more sophisticated it was increasingly difficult to maintain that position in the face of bitter opposition from taxi companies that were accustomed to leveraging local licensing rules to restrict competition and keep prices artificially high. After some initial skirmishing, including fines and cease and desist orders, the CPUC developed and approved the new rules last September.

In other actions, the CPUC delayed voting on three broadband projects proposed for subsidies from the California Advanced Services Fund. The contentious Cressman proposal submitted by Ponderosa Telephone Company was bumped to April to comply with public notice laws and the two Surfnet projects were delayed two weeks, so they can be taken up at the same time as the related Sunesys project.

Tellus Venture Associates assisted with several CASF proposals in the current round, including the Surfnet and Sunesys projects, so I’m not a disinterested commentator. Take it for what it’s worth.

CPUC commissioner proposes modest haircut for Cressman

by Steve Blum • , , , , , ,

Update 13 March 2014: The CPUC delayed the vote on the Cressman project to 10 April 2014.


It doesn’t have to look good to look better.

Commissioner Michel Florio wants to trim five homes from a project proposed by Ponderosa Telephone Company in Fresno County, and save the California Advanced Services Fund (CASF) $373,000. The project in and around the remote community of Cressman has been stalled for months, at Florio’s request, and now it’s clear why

The fiber optic extension from Lower Cressman to…Rush Creek will cost $621,700, or 36% of the total project costs. This equates to CASF funding of $74,604 per household, more than 23 times the average funds per household of approved CASF grants, for the Rush Creek portion of the Cressman Project. The Commission considers this portion of the project unreasonably expensive since it would bring broadband access to only five additional households.

Ponderosa has drawn fire from Florio in the past. A proposal to spend, by one reckoning, $55,000 per household to provide fiber-to-the-shack service in the Beasore area of Madera County was approved by the California Public Utilities Commission, but only after Florio dissented and provided graphic photos of the boarded up, snow bound buildings that were being claimed as homes in the area.

So he’s put a deal on the table: cut the five outlier homes from the project, allow Ponderosa to come back with a better plan to build out in the area (reaching more people in the process) and knock the per household tab of the overall project from $15,000 to $10,000. That’s still a hefty price – exceeded recently only by Ponderosa’s Beasore project – but it’s a worthy attempt to drag CASF priorities back towards the concept of providing the greatest good for the greatest number of people.

The CPUC is scheduled to vote on Florio’s proposal this Thursday, 13 March 2014.

CPUC pushes open access to subsidised middle mile fiber

by Steve Blum • , , , , ,

Access only by fiber or snowmobile.

Once again, the California Public Utilities Commission has set an expectation that publicly subsidised middle mile fiber should be available on a wholesale basis. To gain approval for a $1.8 million subsidy for a fiber to the home system in a remote area of Madera County, Ponderosa Telephone Company agreed to sell access to the fiber backhaul line that will feed it. According to a CPUC staff presentation to commissioners

Ponderosa has affirmed that wholesale access to the network will be provided in the project area. For example, if a wireless carrier chooses to put up a tower in the project area, backhaul access will be available.

It came at the prodding of commissioner Catherine Sandoval, who pushed for “a commitment to sell wholesale backbone services” at an earlier meeting, and on Thursday cited Ponderosa’s agreement to do so as a reason for supporting the project, despite its high cost per household. Sandoval emphasised the value of middle mile access to schools, and the likelihood of it attracting mobile carriers to the area, which currently lacks cell coverage.

“Wholesale access” wasn’t made a specific condition for the grant, nor was it specifically defined. But an earlier decision approving a middle mile project in Humboldt County clearly stated that it includes making dark fiber available…

[CPUC] staff has checked with the Project team to determine if it is building sufficient fiber strands and capacity is being built into the KRRBI middle-mile part of the project to ensure that the network is able to support future demand such as access to dark fiber to wholesale providers…The KRRBI middle mile network shall be made available for wholesale access to other potential CASF grantees at reasonable rates and terms. These reasonable rates shall be at cost.

To build sustainable businesses and compete with incumbents, independent Internet service providers need the level of control over quality and costs that dark fiber provides. The commission will have an opportunity to build on these precedents, when it considers a grant application for a DSL upgrade in Fresno County, also proposed by Ponderosa, that justifies a high cost per household on the basis of the middle mile fiber required to build it.

CPUC approves $1.8 million for “fiber to the vacation cabin”

by Steve Blum • , , , , ,

No phone, no water, no power, no people. But wicked fast email.

“I’m a big supporter of fiber to the home, but fiber to the vacation cabin is a different thing”, said commissioner Michel Florio as he argued against giving a $1.8 million grant to the Ponderosa Telephone Company to build broadband infrastructure in a remote area of Madera County. His fellow commissioners did not agree, though, and the project was approved on a 4 to 1 vote.

The money, from the California Advanced Services Fund, will pay about 60% of the cost of building an FTTH system in Beasore and Central Camp, two communities in the Sierra National Forest that are tiny in the summer and all but uninhabited in the winter. The debate has focused on how much the California Public Utilities Commission would be spending per household, if it moved ahead. There was no clear answer to the question, but based on the information presented, it looks like the number is closer to the $55,000 figure that’s based on the 2010 census, rather than the $11,000 that Ponderosa claimed.

If you reckon a household as being a place where people live year-round.

Florio despatched a staffer to Madera County earlier this week to take a look. He came back with photos that showed that the area is all but closed down for the winter. Many of the “housing units” claimed by Ponderosa are tightly boarded up one room cabins, without electricity or indoor plumbing. Much of the area is only accessible by snowmobile. But if you count all that, then the cost per home probably is nearer the $11,000 claimed by Ponderosa. Which is still more than the previous CASF subsidy limit of $10,000 per household.

The other commissioners had mixed reasons for supporting the subsidy, ranging from president Michael Peevey’s what-else-will-we-do-with-the-money comments to commissioner Carla Peterman’s less than enthusiastic acceptance of a public safety argument (there’s no mobile phone service either), despite her doubts that the CPUC will “get the most bang for the buck”. Going forward, she said she wanted the commission to be proactive about finding areas with fundable broadband needs, rather than just waiting to see what proposals come in.

Tellus Venture Associates assisted with several CASF proposals in the current round, so I’m not a disinterested commentator. Take it for what it’s worth.