Tag Archives: utility regulation

California lawmakers give cable utility perks, without utility obligations


Quirky economics.

Cable companies want the benefits of being a legally recognised public utility, but not the responsibilities. One of those benefits is to be compensated when a public works project requires the relocation of lines, either on poles or underground. The California assembly’s communications and conveyance committee thought that cable companies deserve it too, and unanimously endorsed a bill yesterday that would reimburse them for relocation work when a project is being paid for out of bond money that’s been approved by voters.

Assembly bill 1145 is sponsored by the California Cable and Telecommunications Association, the cable industry’s Sacramento lobbying front. That means CCTA wrote it and then found a legislator to carry it. “Author” it, as the term of art goes. That friendly fellow turned out to be assemblyman Bill Quirk (D – Hayward). He presented the bill, and launched into what sounded like the beginning of a history lecture before being cut off by an affable “move the bill” from a sufficiently educated committee member.

Quirk did have enough time to descend into complete nonsense. He tried to draw a false distinction between “regulated monopoly utility companies” and cable companies. The only good thing that can be said is that it turned into bipartisan nonsense, when the ranking republican on the committee, Jay Obernolte (R – Big Bear) agreed, saying cable companies are not a “natural monopoly”.

Historically, there was a difference between telephone companies, which have been state regulated utilities for more than a century, and cable companies, which were originally franchised by local governments but managed to escape that oversight ten years ago. At least in California. Today, the differences are diminishingly small, particularly in urban and suburban markets where cable and telephone companies sell the same services and enjoy a comfortable, unregulated duopoly.

The distinguishing characteristics of a natural monopoly are high initial capital costs, usually related to infrastructure construction, and powerful economies of scale, both of which give the first mover in the market insurmountable advantages over would be competitors. In the old analog world, telephone and television service were completely different businesses, linked only by a common dependence on wireline networks. Now, both offer voice and video, and face competition in those segments from wireless providers. But they are also almost always the only wireline broadband option and wireless service is not a credible substitute, in either practical or microeconomic terms.

So yes, if phone companies are reimbursed for moving their lines then cable companies should be too. They should be treated the same. In every way. Bringing cable operators and telcos under the same regulatory umbrella is the only rational approach in today’s digital world. The way to do it is not to continually give cable (or telephone) companies special carve outs in state law, as AB 1145 does. The way to do it is to recognise and regulate them for what they are: two formerly natural monopolies who have merged into an interchangeable duopoly.

Telecoms lobby pushes California lawmakers to muzzle local government



City councils and county boards of supervisors in California have an annoying habit of listening to residents and questioning the broadband marketing hype spun in out-of-state corporate headquarters and spread in Sacramento, where perks and campaign cash buy an attentive audience. Keeping local government out of any meaningful oversight role is a high priority for cable and telco lobbyists, and their successful efforts are evident as the final texts of key legislation begin to take shape.

Senate bill 512 by senator Jerry Hill (D – San Bruno) began as a response to the natural gas explosion that devastated his constituency, and the ensuing backchannel finagling between PG&E and CPUC commissioners. It’s still part of a package of California Public Utilities Commission reforms pending at the capitol, but provisions that would have given local governments more clout, and the money to wield it, were severely pruned back in the face of fierce – sometimes bitter – opposition, particularly from AT&T and the cable industry’s lobbying front.

Those lobbyists can also take comfort in the elimination of new rules for CPUC proceedings, that would have allowed local governments to enter “reports and analyses” into evidence. And a top level review of the CPUC’s role in regulating the telecoms industry no longer specifically includes an assessment of local agencies “that provide consumer protection and ensure the safety of telecommunication services”.

Local governments have virtually no regulatory authority over telecoms. The last meaningful remnant – cable franchises – was eliminated ten years ago. What’s left is a truth telling role. Incumbents defend their service monopolies by maintaining a information monopoly and using it to drive a narrative that suits their interests. Cities and counties are often the only source of credible facts and independent broadband advocacy. The California legislature should expand that role, not work to fence it in.

Detailed review of Californian telecoms policy slashed from bill


I’ll show you gut and amend.

An examination of telecommunications responsibilities at the California Public Utilities Commission has gone from being a specific study of agency duties, technological issues and, critically, broadband’s place in the regulatory mix, to being the sort of high level gloss that will gather dust on a shelf. The threat of a useful result no longer looms over cable and telephone incumbents.

As it was proposed last week, assembly bill 2903 had a long check list of broadband and other telecoms issues that the California research bureau was supposed to investigate by the end of next year, including…

  • What gaps, if any, exist in the state’s regulatory authority that are not otherwise addressed by federal law or regulation over telecommunications services, including, but not limited to, consumer protection and safety.
  • The state and local agencies in addition to the Public Utilities Commission that provide consumer protection and ensure the safety of telecommunication services.
  • The extent to which it is necessary for utility pole safety regulation to be governed by one regulatory structure regardless of the type of utility attachment.
  • How to ensure the effective administration of the Digital Infrastructure and Video Competition Act of 2006 [DIVCA].
  • The extent to which competitive telecommunications services are available in California and to what extent there are regions within California that lack competitive alternatives.
  • The role of the Public Utilities Commission in regulating the wholesale telecommunications market.

A bill that began as a classic gut and amend maneuver has instead been gutted itself.

The deletions are sure to please the incumbents. There will be no specific examination of the self-serving fiction woven by cable lobbyists that broadband, voice and video services delivered by cable companies are so radically different from the broadband, voice and video services offered by telcos that they need a completely separate – and toothless – regulatory regime of their own. That’s why the bits about unified utility pole regulations and DIVCA were taken out.

Eliminating requirements to look at competition in California’s telecoms industry is another gift to the telco and cable lobbies. They’re well on their way towards converting government granted monopolies on analog services into comprehensive control of the digital realm, and an independent investigation would be oh so inconvenient.

AB 2903’s author, assemblyman Mike Gatto (D – Los Angeles), has built an impressive record this term as an advocate for monopoly telecoms interests. These latest amendments will maintain that legacy as the legislative term – and Gatto’s career as a lawmaker – enters its final days.

This week’s version of assembly bill 2309
Last week’s version of assembly bill 2309

Green light for telecoms policy bills in Sacramento


Telecoms legislation is popular in Sacramento this summer. Legislative leaders allowed several important bills to move ahead yesterday, albeit without finalising all of the language. Negotiations and amendments will continue behind closed doors as the full assembly and senate get ready to vote.

The four bills that make up the grand package of California Public Utilities Commission reforms agreed to by the governor and three key lawmakers are moving ahead. Senate bill 215, by senator Mark Leno (D – San Francisco), tightens rules on who can speak with CPUC decision makers and when. It moved ahead on a unanimous vote.

Senator Jerry Hill (D – San Bruno) is carrying two of the bills – SB 512 and SB 1017 – and both are headed to the assembly floor, albeit with amendments yet to written. SB 1017 is bitterly opposed by telecoms companies – lobbyists from AT&T and Frontier, as well as smaller telephone companies, mobile carriers and the cable industry spoke against new rules that would give the public greater access to the information they file with the CPUC. SB 512 would open up CPUC proceedings to greater public scrutiny. Industry lobbyists successfully pushed back on provisions that would have allowed local governments to claim reimbursement for the cost of bringing actions at the CPUC, under some circumstances. That final language hasn’t been published, though. Both bills moved ahead without any republican support.

Assembly bill 2903 fills out the foursome. It sets the stage for a major reorganisation of the CPUC over the next few years – I wrote more about it yesterday. It has the distinction of never even being discussed or debated in a public hearing. Its author, assemblyman Mike Gatto (D – Los Angeles) took an unrelated bill that was already pending on the senate floor, deleted everything except the number and inserted a completely new bill using a time honored maneuver known as gut-and-amend.

Dig once requirements for Caltrans are moving ahead too. AB 1549 by assemblyman Jim Wood (D – Healdsburg) won unanimous support from both republicans and democrats on the senate appropriations committee. They also approved AB 2570 by assemblyman Bill Quirk (D – Hayward) with six ayes and one republican abstention. It makes the state telephone lifeline subsidy program more telco-friendly by making it much harder for recipients to change carriers. Another provision in the bill that would have required the CPUC to pay out the subsidies to telcos within 90 days was apparently removed, though, during closed door negotiations.

An extension of a program that subsidises broadband facilities in public housing also moved ahead. SB 745, by senator Ben Hueso, cruised through the assembly appropriations committee on a party line vote: democrats aye, republicans no.

The legislature has until the end of the month to make final decisions.

I’ve advocated for and helped to draft AB 1549, and I consulted on SB 745. I’m not a disinterested commentator. Take it for what it’s worth.

CPUC gut-and-amend reform bill published


No surprise, really.

A draft of a bill to overhaul the California Public Utilities Commission is up on the state legislature’s website. It’s a gut-and-amend job by assemblyman Mike Gatto (D – Los Angeles) on an assembly bill – AB 2903 – that originally concerned damages resulting from the state’s energy crisis in 2000.

It appears to be in line with the grand compromise reached with governor Brown in June. The California Research Bureau, a division of the state library, would get the job of evaluating the CPUC’s future role in telecoms regulation. It would be given until the end of next year to…

Conduct a study of telecommunications service governance to determine what regulatory structure would provide the appropriate regulatory oversight of telecommunications services. The study shall assess the overarching goals of the various programs carried out by the Public Utilities Commission and include a discussion of whether the commission, as a whole, is strategically aligned towards a clearly articulated public goal. This portion of the study shall take into account the history of telecommunications service regulation in the state and changes in technology to make recommendations for guiding principles to clearly define California’s goals for the regulation of the telecommunications industry.

There’s a long check list of items that the study has to cover, including the evolving mix of telecoms regulatory responsibilities at federal, state and local government levels, and how the CPUC’s historical role meshes with rapidly changing technology.

The bill hits on the other points in the grand compromise, including moving some transportation oversight duties to the state transportation department, recasting CPUC management roles, procedures and ethics rules, and generally asking the question what should the CPUC be doing in the 21st century?

And that’s the overall thrust of the bill: ask a lot of questions, but leave the answers to be worked out later, by the legislature, state agencies under the governor’s direct supervision and the CPUC itself.

I don’t expect this version to be the final-final, but given the extensive backroom discussions that have been going on over the past few weeks between lawmakers, the governor’s office and industry lobbyists, it’s probably pretty close.

Read the full version of the bill here:

Assembly bill 2903, an act relating to the California Public Utilities Commission

Small group of Californian lawmakers make big broadband policy


Gut and amend.

Major broadband-related legislation is on the horizon this week in Sacramento, although how it will ultimately read is completely unknown right now. The way things are lining up, we probably won’t know until the end of the month, when the legislature goes into its final, end-of-the-session whirlwind.

Action on a thoroughly innocuous bill involving the California Public Utilities Commission – AB 2902 – by a telecoms industry ally, assemblyman Mike Gatto (D – Los Angeles), has been pushed back a couple of times and is sitting on hold. It’s a perfect candidate for gut and amend, which is the tenderly named legislative practice of writing a completely new bill, usually secretly, and wrapping it with the skinned out remains of an old bill at the last minute. AB 2902 is just an example, though – any bill will do.

Then, the assembly appropriations committee is scheduled to consider three, considerably less industry-friendly CPUC reform bills – SB 215, SB 512 and SB 1017 – on Wednesday. Along with Gatto, the authors of those bills – senators Jerry Hill (D – San Bruno) and Mark Leno (D – San Francisco) – form the troika that negotiated the outline of a CPUC overhaul package with governor Brown in June, with the intention of working out the details in August.

Well, it’s August. New versions of Hill’s and Leno’s bills have been posted with amendments reflecting points that were openly debated at a public committee hearing in June, but apparently not yet including the grand deal reached with the governor. There will be more changes to come.

My bet is that all four bills will land in the legislative limbo known as the suspense file and disappear while legislators, lobbyists and other interested and well connected parties work things out behind closed doors. In the final days of the session, expect to see those bills, and possibly one or two others, emerge ready for fast track approval and in a radically different form. It is likely to mean major changes to broadband and other utility regulation in California.

Unfortunately, the public won’t have much to say about it, or even know what it is until it lands on the governor’s desk.

California still needs to be a broadband activist


Market actor.

Ahead of a legislative effort to shake up the way it does business, the California Public Utilities Commission adopted a high-level strategic management plan at its last meeting. The document contains the usual boilerplate about agency effectiveness, performance, and respect for the staff and the public, and touches all the politically correct bases.

But it also describes an activist role in managing the industries under its jurisdiction, including telecommunications, whether or not it can do so via direct, regulatory authority. For example, in order to ensure “that rates are just and reasonable”, the commission will…

For services where the CPUC does not directly regulate prices, monitor market conditions and take appropriate action if it appears that rates are no longer just and reasonable.

And “to provide Californians with access to necessary services”…

Promote policies and rules that provide universal service for energy, communications, water, and transportation…
Facilitate the expansion of equitable access to energy, communications, water, and transportation services.

Which includes the need to…

Encourage innovation, competition, and consumer choice in the services and technologies available to consumers.

I’ve cherrypicked a handful of sentences out of four dozen pages, but even so I’d argue it’s a fair description of a mission that goes beyond blandly accepting assurances that incumbent service providers have everyone’s best interests at heart. The justification for CPUC oversight is that utilities – broadband included – are natural monopolies that need an artificial counterweight in order to maintain something approaching a functioning market.

The telecoms industry no longer operates under the kind of micro-regulation that still obtains in the energy sector, nor should it. But it’s still the state’s duty to provide the necessary counterweight and, whether the job stays with the CPUC or lands in another agency or is taken up by its local governments, it should maintain a role that puts the principles of market rates, competition and universal service into action.

Effort to shed more light on the CPUC moves into the dark



The dust has settled in Sacramento and lawmakers are out of town on their regular summer break. But the details of changes proposed for telecommunications policy are still hazy.

The legislative package that will determine how telecoms companies and services, and other utilities, are regulated (or not) in California is still largely unwritten. That’s the plan agreed with the governor to change the way the California Public Utilities Commission does business. At this point, it looks like it will comprise five bills, although as the process grinds through that number could shift up or down:

  • Senate bill 215, by Mark Leno (D – San Francisco), would tighten restrictions on private conversations and other ex parte communications between CPUC commissioners and interested parties while some proceedings are under way.
  • SB 512, by Jerry Hill (D – San Mateo), would allow the commission to hold more meetings around the state – right now they have to have at least one per month in San Francisco – and require it to reach out to possibly interested parties when beginning proceedings. It would also allow local governments to be reimbursed for related expenses by utilities under certain circumstances.
  • SB 1017, also by Hill, would make it easier for the public to see CPUC records, including potentially greater access to information that’s filed by utilities and currently considered confidential.
  • Assembly bill 2120, by Shirley Weber (D – San Diego), that would make school also eligible for intervenor compensation, under some circumstances.

Judging from last week’s hearings, there will be significant amendments written during the break, and the outline released by the governor’s office suggests most of the changes will involve trimming back rather than expanding those bills.

That’s four.

The fifth bill, which could have the biggest impact of all on telecoms policy, is a wild card. Assemblyman Mike Gatto (D – Los Angeles) will, to all appearances, take charge of writing the central reforms, which will move some oversight responsibility, for example for transportation companies, from the CPUC to other state departments immediately, and leave decisions on who will regulate telecoms companies to 2018. The process for studying options and making those decisions is a complete unknown right now. The month long break is a perfect opportunity for closed door meetings between industry lobbyists and key legislators to figure it out, though. You know, the kind of meetings they don’t want the CPUC to have.

Lawmakers must wrap it all up by the end of August. Which means decisions will come fast – the three senate bills are due for a final public hearing on the first day back – and will be made largely out of public view.

CPUC reforms bump ahead, but details are still lacking


The assembly utilities and commerce committee has approved two senate bills – SB 215 and SB 512 – that are key elements of a proposed package of California Public Utilities Commission reforms, although the details are yet to be worked out. One of the standard practices of the California legislature is for amendments to bills to be worked out behind closed doors after committee members vote to approve them. And that was the explicit understanding yesterday, which was agreed on largely party line votes – democrats tending to favor, republicans not.

The committee also approved SB 1017, which would open up more information submitted by regulated utilities to CPUC. That measure was bitterly opposed by telephone companies, who found a sympathetic ear from chairman Mike Gatto (D – Los Angeles), one of the three legislators who joined with governor Brown on Monday to announce the deal. Gatto’s suggested accomodation was to simply exempt information submitted by telecoms companies from disclosure rules. That idea was politely shot down by the measure’s author (and another member of the troika), senator Jerry Hill (D – San Bruno), who said in effect that the intent was to open all of the CPUC’s business to more public scrutiny. No guarantees, though, that the final language will read one way or the other.

A measure that extends broadband facilities subsidies for public housing also moved forward. SB 745 was approved by the committee with largely technical amendments suggested in a previously published analysis.

Yesterday’s votes by Gatto’s committee keep all four bills alive for the purposes of the current legislative session. The real language will likely come to light in August, after lawmakers come back from their summer break. The broad outline of the grand CPUC reform plan was made public on Monday, but the details are still very much in play. Stay tuned.

CPUC reform proposal increases transparency and avoids drag


The long list of reforms planned for the California Public Utilities Commission by governor Jerry Brown and a trio of lawmakers will make proceedings more transparent and open to public participation, and appears to moderate some of the procedural sand that current proposals would throw into the gears. Well meaning sand, but sand nonetheless.

The package announced on Monday rolls in bills that Bay Area senators Jerry Hill and Mark Leno have already put on the table. As currently written, the palindromic senate bills 215 and 512, by Leno and Hill respectively, would put further limits on closed door meetings between commissioners, senior staff and people with an interest in matters before the CPUC. The commission could spread its meetings around the state – right now the vast majority are at its San Francisco headquarters – and would be required to publish more information about proceedings in progress and better statistics about how well it meets deadlines, and make some practices less lawyerly.

That’s all to the good. The more information that’s available on a timely basis and the fewer opportunities for finagling behind the scenes, the more level and fair the playing field will be. It’s a way of counterbalancing the resources and motivated attention that big, regulated utilities can bring to bear on the commission.

What isn’t on the governor’s list is a provision in Hill’s proposal that would require the CPUC to seek out potentially interested parties and encourage them to participate, before a proceeding is formally kicked off. Given the statewide reach of commission decisions and the multitude of agencies, businesses and interest groups in California, that alone could drag out decisions for additional months or years.

Also missing is an expansion of what is known as intervenor compensation. That’s money that utilities or, sometimes, the commission itself pays to individuals or organisations that jump into proceedings and oppose, to one degree or another, the positions taken and requests made by those utilities. SB 512 would add local governments to the list of intervenors eligible for compensation, and a third, apparently defunct bill, AB 2120, would have included schools. There’s nothing wrong with local governments getting involved – I’ve enthusiastically helped clients do just that – but the last thing California needs is a new ratepayer subsidised cottage industry of consultants and lawyers selling cities, counties and school districts on the dubious value of making speculative filings. The deal reached with the governor – at least as announced – leaves that perk out and rightly so. If you subsidise more gridlock, you’ll get more gridlock.

What the package does do is remove requirements that often require third parties to fight it out to the bitter end in order to qualify for compensation. To the extent it encourages brevity and focus, that’s a good thing.

What we really need, of course, is to start seeing the actual bill language. The first clue could come later today. Both SB 215 and SB 512 are up for a hearing today in the assembly’s utilities and commerce committee, chaired by LA assemblyman Mike Gatto, also a member of Monday’s legislative troika.

UPDATE: AB 2120 isn’t defunct, after all. It’s moving to a hearing in the senate appropriations committee in August. SB 512 was approved by the assembly utilities and commerce committee, still with the intervenor compensation language more or less intact.