Local governments will have to meet the same requirements as independent, private sector Internet service providers in order to qualify for broadband infrastructure subsidies from the California Public Utilities Commission. That’s the implication of a ruling issued by CPUC president Michael Peevey last week. Those requirements could include performance bonds and penalties for failing to meet conditions the commission might put on subsidised projects or for not complying with its regulations.
Earlier this month, Peevey released a draft of a proposed decision that would expand eligibility for grants and loans from the California Advanced Services Fund, in keeping with a law – senate bill 740 – passed by the state legislature last year. SB 740 allowed ISPs to apply for CASF subsidies under tighter restrictions than traditional, regulated telephone companies. It also allowed local government agencies to apply, but under ever more limited conditions. The draft decision said the question of how to deal with local agencies would be left for later. Later is now.
Last week’s ruling lumps local agencies and ISPs together as “entities that are not a telephone corporation”, making no allowance for the differences between public and private sector broadband providers. The additional restrictions that the legislature placed on local agencies will be dealt with as scheduling problems and as a higher bar that needs to be cleared during staff review of applications.
In effect, the CPUC is telling cities, counties and other local agencies that if they want money from the commission, they’ll have to play by the same rules as private sector applicants. That makes a certain amount of sense from the commission’s point of view: it has no legal jurisdiction over local government – its job is to regulated privately owned utilities – and it’s not willing to simply hand over money without accountability. It could be a problem for local governments – which are likewise reluctant to surrender authority – but that’s a question for later (and largely for lawyers).
As a practical matter, the question is irrelevant for most, if not all, Californian cities, because they can only get subsidies for completely unserved homes and businesses. No middle mile facilities, no projects that include areas where anything better than dial-up is available (excepting satellite, but including mobile service). The few places like that in the state are in remote, unincorporated areas. There are exceptions, but not many – possibly, none – that can support economically viable projects unless a city is otherwise in the broadband business.
The CPUC could vote on the new rules as early as its 5 February 2014 meeting. Even so, it could be 2015 before new grant applications are accepted.
Companies that provide broadband service, but aren’t traditional telephone companies regulated by the California Public Utilities Commission, would have to meet certain financial standards to qualify for broadband infrastructure grants and loans from the California Advanced Services Fund (CASF), according to proposed new rules released today.
A performance bond is required during the construction phase of the project to ensure timely completion of the project in accordance with the existing rules of the CASF program.
Obtaining a performance bond – which is sometimes also required from traditional phone companies – guarantees that projects will be finished and put applicants under a financial microscope, according to Peevey’s draft…
Based on past experience, we determine that all applicants should undergo a rigorous underwriting process to obtain a construction phase performance bond. A review of the applicant’s cash flow will be included in this underwriting process.
Under the proposed new rules, applicants would also be subject to standard CPUC oversight, including penalties for not living up to commitments.
The full commission could discuss and vote on these proposed rules as soon as its meeting on 5 February 2014 meeting. But there is still more work to do. The proposed rules only partially address the changes in the CASF program made by the legislature. Still to come, for example, are creating procedures for the right of first refusal given to incumbent carriers and figuring out how local governments fit in the picture. But it’s possible there’s enough in today’s draft to allow at least some independent ISPs to apply for CASF funding in the meantime.
Because it was tagged as urgency legislation and then approved by a two-thirds vote of the California legislature, senate bill 740 took effect the moment it was signed by Governor Brown. Even so, don’t expect any immediate changes to the way the California Advanced Services Fund (CASF) is managed or broadband construction subsidies are given out.
Eleven months ago, the California Public Utilities Commission began the lengthy process of changing CASF eligibility rules, under the assumption that the legislature would allow it. Even so, it’s still going to take six months to a year to finish rewriting the rules. Only then will the CPUC give cities and independent ISPs a chance to apply for CASF grants and loans.
An early draft of new rules was floated back in March. The general idea was to require something like the same level of financial scrutiny and collateral that telephone companies have to meet in order to be certified by the CPUC. The draft generated a fair number of comments and counter-comments that the CPUC administrative law judge working on the draft is still digesting.
Passage of SB 740 means the guess work ends and the CPUC can move ahead with writing rules to comply with it. The work done to date provides a good foundation, but it’s still many months from being complete.
Assembly bill 1299, which was also signed by the governor, doesn’t take effect until January. That gives the CPUC some breathing room to write rules for the public housing broadband programs it creates. Since it’s a relatively small amount of money – $20 million for broadband facilities and $5 million for marketing – and it has similarities with the regional broadband consortia program, writing those rules might not take so long.
According to the sponsors of the legislation, Governor Brown has showered affection and money on Californian broadband backers, signing senate bill 740 and assembly bill 1299 into law. We’re all feeling the love now.
“Congratulations everyone, SB 740 has been signed by the Governor”, said SB 740 author senator Alex Padilla (D- Los Angeles). “I know a lot of hard work, dedication, and patience went into the bill, but it’s great to know that all the work has paid off.”
“Governor also signed AB 1299,” added assemblyman Steve Bradford (D – Los Angeles) and the author of AB 1299. “Thanks to the entire team for their support and dedication on both bills”.
AB 1299 takes $20 million of that, plus $5 million from the existing CASF loan program, and gives it to public housing authorities to use for building broadband facilities and marketing those services to residents.
The remaining $70 million goes into the CASF infrastructure grant account, which, counting the projects approved today by the California Public Utilities Commission, will raise the eventual total to just about $200 million. I say eventual because it could take a while to collect all of it, maybe until 2020 or so.
Hat tip to the California Emerging Technology Fund for the news flash (and quotes), and for all the work they did to push these bills through a very difficult process. Thank you very much!
The California legislature approved senate bill 740 yesterday, adding $90 million to the California Advanced Services Fund (CASF) and widening, a bit, the list of broadband providers who can apply for construction subsidies.
The state assembly gave its blessing on a 59 to 16 vote, and sent it over to the senate, where it was approved 34 to 3. The bill now goes to Governor Brown for his approval, or not.
Assemblyman Steve Bradford (D- Los Angeles) spoke for the bill on the assembly floor, not without a bit of disingenuousness (although well within the customary Capitol allowance)…
“This bill give the PUC statutory authority to award infrastructure grants to entities such as wireless internet service providers, known as WISPs. The change will help reduce the overall amount of funding needed to achieve universal broadband access statewide because WISP technology costs substantially less per household served than the traditional providers to hard to reach areas.”
True enough, but the bill also puts severe – fatal, in most cases – restrictions on WISPs, cities or other independent broadband providers who want to apply for infrastructure grants and loans. Assemblywoman Joan Buchanan (D – Contra Costa County) was careful to point out that incumbent interests were protected…
“The California Advanced Services Fund is a universal service subsidy program to fill in where there’s market failure, often in high cost rural remote sparsely populated areas where there’s no business case for private investment without a public subsidy…this bill ensures that the fund provides support only where private investment is lacking.”
“SB 740 prioritises and targets funding for households and communities that have no broadband service. SB 740 also guarantees existing providers the option to upgrade service before a new entity gets funding.”
A companion bill, AB 1299, was also approved by the senate yesterday, and is expected to be taken up by the assembly later this morning. It would spend $25 million on broadband facilities and marketing in public housing projects.
Of all the ancient traditions and lofty values of the California legislature, few have the moral imperative of the three day weekend. Although this Friday is a work day – the end of session deadline – on the official calendar, leaders in both the California senate and assembly want to wrap up business by tomorrow evening.
Senate bill 740 is the linchpin. If two-thirds of senators and assembly members agree, it’ll pump an extra $90 million into CASF. It’s been ready for a floor vote in the assembly since Monday, but it’s ranked low on the daily priority list. Yesterday, it came within a handful of bills of being called for a vote, but was put aside as assembly members cleared the deck for their customary 4 p.m. quitting time.
It was skipped over on previous days. Lining up the required two-thirds majority vote has always been a challenge, but yesterday it was looking like there was enough support amongst assembly members.
Assembly bill 1299, which sends $25 million from CASF towards broadband facilities and marketing in public housing projects and is legislatively linked to SB 740, was similarly left hanging in the senate.
Both bills are again scheduled to be considered today, but both are on the second half of the agenda, so there are no guarantees.
Two broadband subsidy bills have been wrapped together in the California legislature, and appear to be on track for approval this coming week. Senate bill 740, which adds $90 million to the California Advanced Services Fund (CASF) and expands eligibility a bit, and assembly bill 1299, which gives $25 million of that money to public housing projects, now contain mirror language that make them all but inseparable.
Bradford is accommodating to industry lobbyists, but he is a consistent advocate for urban interests too. Broadband infrastructure subsidies have long been an issue for rural areas, where it is easier to identify service gaps and find entrepreneurs willing to step in. AB 1299 may benefit only public housing agencies, clients and the non-profits that orbit them (plus incumbent carriers, of course), but it does create a common interest between sparsely populated (and frequently republican) rural counties and the metro areas where the California legislature’s democratic majority dominates.
The full assembly could vote on SB 740 as soon as Monday and the senate will likely take up AB 1299 on Tuesday. If approved, the bills will swap places for, presumably, one more vote to get both houses on board with all the changes that have been made. Then, it’s up to Governor Brown.
SB 740 would add $90 million to the California Advanced Services Fund (CASF) and make it possible – although maybe not practical – for independent Internet service providers and cities to apply for grants and loans to build out broadband infrastructure. Assuming a companion measure, assembly bill 1299 moves forward too, $70 million would be added to the broadband infrastructure grant kitty and $25 million would go towards broadband facilities and marketing in public housing projects, with the $5 million difference being made up via the lesser used infrastructure loan fund.
Looking ahead to the next two weeks, SB 740 needs to be approved by a two-thirds vote of the assembly, which is by no means guaranteed, then it goes back to the senate, which has to agree to recent amendments. The senate voted nearly unanimously to back it earlier this year, but that was before a nasty fight with cable lobbyists erupted, forcing the changes.
Assuming it moves all the way through the process before the 13 September 2013 deadline, it would then go to Governor Brown’s desk. He’d have a month to decide whether or not to veto it.
Update: AB 1299 made it out of the senate appropriations committee’s suspense file too, and will head to a vote of the full senate. If approved there (it only needs a majority vote to make it), it’ll go back to the assembly for concurrence in the senate’s amendments.
It’s a procedural limbo that was originally created to allow lawmakers to delay significant spending or tax bills until after the state budget is approved. It’s evolved into a mechanism that allows legislative leaders to pick which bills move forward and which don’t. Leaders, including appropriations committee members, will allow some bills to move forward to a vote by the full assembly, probably next Thursday. The rest will be dead for this year, although some might be considered again next year.
It’s a chance to kill the bills behind closed doors, with no one except Sacramento insiders knowing how or why. It was a struggle to get SB 740 approved by the assembly utilities and commerce committee because of some nasty opposition tactics used by the cable industry. In theory, cable lobbyists backed off, saying they were neutral regarding the bill after crippling changes were made. But they would be even happier if it died completely.
If you’re interested, either way, you can contact members of the assembly and senate appropriations committees, and let them know what you think.
The amount of money available to the current round of California Advanced Services Fund (CASF) infrastructure grant applicants is probably something like $135 million, considerably less than the $148 million I’ve been estimating. The California Public Utilities Commission (CPUC) has published the proposed budget for the California Advanced Services Fund (CASF) for next fiscal year, which runs from July 2014 to June 2015. It shows a sharp increase in overhead costs for running the program, including an extra $1.5 million for the state’s broadband mapping project.
Earlier this year, I estimated – too optimistically – that there was $158 million or so available for CASF infrastructure grants. Deducting the $10 million that might be given to the Digital 395 project next month leaves $148 million. That’s based on the original $200 million infrastructure grant kitty, less approved grants (about $41 million) plus rescinded grants and project cost savings. And less previously published overhead costs, which totalled about $2.5 million as of last December.
The proposed budget released today pegs total CASF overhead costs at $3.6 million for next fiscal year alone, $2.9 million of which will come out of the infrastructure grant kitty. The staff workload has increased because of the new consortia program and the three dozen or so infrastructure grant applications submitted over the past year, so it’s not unreasonable to assume the new numbers are in line with the latest run rate.
Assuming then, in round numbers, that 1. the overhead costs charged to the infrastructure grant kitty are running at the rate of about $1.6 million a year now, 2. will jump to $2.9 million starting next July and 3. admin costs are likelier to go up than down, the total hit from January 2013 through June 2015 will be in the $5 million to $6 million range. If the CPUC takes the prudent course and earmarks overhead money for a year or two more – there could be dozens of grants to manage in that time – $10 million total isn’t unreasonable and it could go higher depending on how many more years it’ll take to finish those projects off.
Throwing everything on the table – previous expenditures, existing and assumed budgets, the Digital 395 spiff – and discounting my previous optimism, $135 million is my new estimate. That’s against $222 million in published requests.