Broadband needs grow as California’s subsidy fund runs dry

27 October 2020 by Steve Blum
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Salinas taco bell broadband

There’s about $194 million left for broadband infrastructure upgrades in the California Advanced Services Fund (CASF). That’s less than half of pending grant requests, even before possible “kickers” for Internet service providers bidding for federal Rural Digital Opportunity Fund (RDOF) subsidies are factored in.

It might not be even that much. My estimate includes an optimistic allowance for the cost of running the program, which has increased over time and will likely continue to grow. A new program that offers broadband planning grants to tribes will be added to general overhead as well. The higher those expenses climb, the less money will be available for infrastructure upgrades.

My estimate of the money remaining in CASF has bounced around this year. In June, it looked like there was only $145 million available, versus the $533 million in infrastructure grant proposals filed in May. Then last month, the California Public Utilities Commission proposed doubling the tax that funds it for the final two years it’s authorised to collect it. At the time, it was thought that the ultimate shortfall – the result of declining in-state telephone revenue over the past three years – would be $53 million, which calculates out to $216 million left to spend, versus $400 million in grant requests – some of the proposed projects were trimmed.

Tuesday of last week, two days before commissioners voted, a new estimate was published and showed the deficit climbing to $77 million. No explanation was given, but the likeliest culprit is the covid–19 pandemic. The latest figures are based on actual money collected, rather than estimates. People changed the way they communicate this year, and a shift from old school telephone calls to online methods is already evident.

One thing seems certain: without action by the legislature, California will no longer have a functioning broadband infrastructure development program or a meaningful subsidy fund. We can only hope that lawmakers do better in 2021 than they did this year.

CASF Infrastructure Account, with new surcharge increase to 1.019%

Authorised – total $575,000,000
Infrastructure shortfall (est.) ($68,643,411)
Infrastructure Account net of shortfall $506,356,589
Infrastructure awards as of 31 Dec 2019 $271,333,358
Infrastructure grants awarded in 2020 $10,825,350
Cumulative admin overhead as of 30 Jun 2019 $16,732,595
Estimated admin overhead FY 2019-25 $13,142,082
Total Infrastructure Account spent/encumbered $312,033,385
Funds remaining for new CASF infrastructure grants $194,323,204