Will the CPUC pick up the tab for unionising independent broadband projects?

FacebookTwitterGoogle+PinterestLinkedInRedditEmail

When the state legislature was considering a bill to impose union wages and work rules – so-called prevailing wage rules – on broadband projects subsidised by the California Advanced Services Fund, an independent analysis by legislative staff pointed to the unknown but hefty – “likely in the millions of dollars” – extra cost…

This bill would become effective on January 1, 2015 for all infrastructure projects funded in part by the CASF, including those projects which are currently underway. The [California Public Utilities Commission] will … make a determination of whether the project costs will change as a result of this bill. If so, the CPUC will need to determine whether the CASF grant amount should be adjusted to accommodate higher labor costs.

That proposal – assembly bill 2272 – was signed by the governor last week and is now law. Which means it’s time to calculate the extra cost and figure out who will pay for it.

There’s a general assumption that the CPUC will increase grant amounts to to the extent of the original subsidy, often 60% of the total, but sometimes more. (It’s the same question for loans, which can be up to 20% of total construction costs).

No one seems to have a good guess as to what will happen to the share of the cost that would normally be paid for by the ISP. The idea of having the CPUC pick up the entire tab has been discussed, but I haven’t detected any enthusiasm for it.

Any increase in CASF funding – at 60%, 100%, whatever – for an existing project has to be written into a resolution and voted on by commissioners. Sometimes, that process happens quickly. But often not. And it can’t start until ISPs with existing grants figure how much to request.

Another option is for the commission to simply approve a standard formula to apply to these one-time project cost increases. But anything less than 100% will have to be covered by the ISPs. Extra costs and delays will impact business models and could very well kill many projects.

That’s a result that will only please big incumbent cable and telephone companies, particularly the ones that tried to choke off CASF funding in the legislature last year and gave a pile of cash to the assemblyman responsible for the new law.