Tag Archives: ponderosa telephone

Comcast tells CPUC it must say yes to rural cherrypicking because it can’t say no

by Steve Blum • , , , ,

Paicines pole route

Comcast took its best shot at explaining why it should be allowed to jump the queue and start competing against Ponderosa Telephone before the California Public Utilities Commission decides what the future will be for small, rural telephone companies. The answer: because the developer wants us and the Federal Communications Commission says we can.

The dispute centers on Tesoro Viejo, an upscale master planned community under construction in the foothills of Madera County. Comcast claims the developers offered Tesoro Viejo as a cherry ripe for picking, and it wants to oblige them. There’s nothing preventing Comcast from providing video and broadband service, but if it wants to bundle in telephone service and offer the full triple play, it needs the CPUC’s permission.

That’s because Ponderosa Telephone serves the foothills of Madera and Fresno counties, as well as more remote communities further up in the Sierra Nevada. It’s one of ten small, highly subsidised telephone companies that serve deeply rural areas of California, the edges of which are now right in the path of exurban development. The CPUC protects those rural telcos from competition in an effort to minimise the amount of taxpayer dollars it takes to keep them afloat.

That policy is under review, but Comcast doesn’t want to wait. Ponderosa, on the other hand, doesn’t want to be nibbled to death. It argues that top level policy has to be decided first “because competition raises public policy questions with a collective impact on stakeholders throughout the state”.

It’s a tough question. Comcast is an unlikely champion. It moves quickly to kill potential competition whenever its territory is threatened. But regardless of how disingenuous it’s being, Comcast is correct in saying that more choice brings greater benefits to consumers. Once its process is complete, the CPUC might trim, or even eliminate, the privileges that rural telcos enjoy.

Might.

That’s a decision that needs to be taken deliberately and with the full consequences for all – rural residents, exurban immigrants, California taxpayers – in mind. Doing it reactively in response to rich targets of opportunity is a disservice to everyone.

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

Comcast has to explain why it’s okay to start cherry picking rich, rural customers right now

by Steve Blum • , , , ,

Tesoro viejo youtube

The California Public Utilities Commission won’t jump the gun and give Comcast permission to compete directly with the Ponderosa Telephone Company. At least not yet. Comcast has to first explain why past CPUC decisions don’t apply to its request for permission to offer telephone service in Tesoro Viejo, an upscale master planned community of 5,200 homes in Madera County. Among other things, those rules protect highly subsidised rural telephone companies from competitors that want to cherry pick affluent customers in densely populated exurban developments, and ignore people in poorer and more sparsely populated communities.

The CPUC has been thinking about changing those rules for the past twelve years, with no decision yet on the horizon. It’s the normal course of business for the commission, which considers these kinds of issues in excruciating detail via an adversarial process that includes anyone with an interest in the outcome. It doesn’t happen quickly.

In a ruling last week, commissioner Liane Randolph rejected Comcast’s request for an immediate exception to current policy, saying that questions about why those rules do or don’t apply have to be answered first. That means considering a study of rural broadband and telephone competition completed last year, and a 2014 CPUC decision that concluded that companies like Comcast…

…may tend to serve only small portions of any of the [rural telco] service areas with high quality, high reliable voice service and…may be likely to “cherry pick” business customers rather than serve significant portions of rural service territories, particularly customers whose cost to serve is high.

That’s exactly what Comcast proposes to do in Madera County. It’s been clear that its ambitions are limited to the newly built homes, and that it does not plan to offer service to homes and businesses in the surrounding area. Ponderosa’s service territory includes traditional foothill ranch lands and remote Sierra Nevada towns, as well as new and wealthier exurbs.

Comcast and Ponderosa have two weeks to answer Randolph’s questions.

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

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.

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

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.