Tag Archives: rlec

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 considers eventual convergence of rural broadband and phone

by Steve Blum • , , , ,

Telecommunications service and infrastructure is subsidised in a couple of different ways in rural California. The California Advanced Services Fund pays the lion’s share of the cost of building broadband infrastructure in under and unserved areas, and the California High Cost Fund supports telephone service as well as infrastructure. The latter is divided between rural areas served by bigger incumbents, like AT&T, Verizon and Frontier, and those served by small rural companies, like Pinnacles Telephone or Ponderosa.

In all cases, the money to pay for it comes from taxes on telephone – and not broadband – bills. Various euphemisms are used – surcharge, fee – but for all practical purposes, it’s a tax.

Regulation follows the same pattern: telephone service rates, costs, territories and standards are closely watched, broadband service and infrastructure is largely unregulated.

A law approved by the California legislature in 2012 began a rethink of how the California Public Utilities Commission runs those regulations and subsidies. Commissioner Catherine Sandoval was assigned to see that process through. She presented her proposed solution to the commission last week…

What this bill does is it requires the CPUC to consider the funding of broadband capable networks as well as high quality voice networks in these rural areas that are served by the rural telephone companies. And this is very important because it recognises that we have to invest in the networks of the future and that these networks are absolutely critical for economic participation, for safety, for health, as well as for our future.

The CPUC adopted the decision she drafted, which, among other things, keeps the existing distinction between broadband and telephone service for small rural telcos on the books, but launches a study next year to see how necessary it’ll be to maintain it over the long term, for subsidy and regulatory purposes. As the decision states

The Broadband Networks and Universal Service studies are consistent with our “ground-truthing” effort through the CPUC’s Broadband Mapping program that supports our analysis of where broadband investments may be merited through the California Advanced Services Fund. Such studies will allow for evidence-based decision-making based on local conditions.

The study will evaluate…

The extent of broadband capable network build-out in the [small rural telco] areas including information on speed capability and offerings, latency, data caps, and other relevant factors for broadband and high-quality voice. The studies will account for the [new FCC standard under the CAF order]() that broadband networks eligible for federal support have speeds of 10 mbps down and 1 up, and evaluate what investments would be needed to comply with that standard, and document the extent to which Small ILEC broadband meets California’s underserved standard of 6 mbps down and 1.5 mbps up.

The Broadband Networks and Universal Service studies will identify barriers to broadband capable network and high quality voice build-out including: population density; demographic factors including income levels, business, government, and local institutions; terrain; access to electricity or reliance on diesel; environmental permits, and; other factors that affect investment in broadband capable networks. The studies will account for the cost of burying lines underground in light of weather and fire danger issues.

In the meantime, small rural telcos can keep regulated phone and unregulated broadband service financially separated, and will remain protected from wireline competitors.

If you’re interested in a good primer on how rural telephone service regulation and subsidies work in California, I recommend reading the decision.

Rural telcos can bust a move on big incumbents, says CPUC commissioner

Typically, telephone companies do not intrude on each other’s territory, but that’s a matter of custom, not a fundamental law of the universe. Commissioner Catherine Sandoval says that breaking down that barrier could be a way to improve broadband coverage in rural areas, if small rural telephone companies are willing to take on big incumbents, with the encouragement of the California Public Utilities Commission.

She spoke at the Central Sierra Connect Broadband Consortium conference in Tuolumne City last week about going to public meetings in rural areas and hearing from speaker after disgruntled speaker…

It turns out that what they were disgruntled about is they said that ‘my neighbor who’s just down the road has terrific Internet access and I don’t have Internet access and I want better Internet access’. And when we asked who their carrier was, their carrier was not a rural local exchange carrier, they were in the territory next door, which is served by the incumbent local exchange carrier. And they were very frustrated because the incumbent hadn’t built out to their area. And when they asked when are you going to build out there were no solid plans about when the build out was going to happen.

And these were people who lived very close to the RLEC who are begging to be RLEC customers. So one of the things that we’re doing is also talking with the RLECs about whether and how that can be made possible. So people really wanted know, what are the barriers, why can’t this be done? Well, the truth is it can be done and there’s a variety of ways that we can do it, either by the RLECs becoming competitive local exchange carriers and interconnecting across their boundaries and serving in their neighbor’s boundary. You can also petition the FCC to change the boundary.

Particularly where one has seen the documentation that the FCC has done, where they’ve looked at areas in America that are designated as unserved by the FCC’s definition in terms of broadband, which is a very low definition. 3 megabits down, 768 up is their definition of unserved.

Most of the people who live in unserved territories in the United States are in incumbent local exchange carrier areas, they are not in RLEC territories. I think the message here for our friends that are ILECs is that people want your investment, people want better service. We really would like the ILECs to step up and invest in these rural areas".

Sandoval said that changes to state law allow the CPUC to take money that’s earmarked for subsidising plain old telephone service in rural areas and use it to help small rural telephone companies build out broadband infrastructure.