California broadband subsidies should build, not follow, business case

14 April 2017 by Steve Blum
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More than twenty companies and organisations offered their critiques of the first draft of a bang for the buck analysis of where the California Public Utilities Commission might focus its dwindling broadband infrastructure subsidy money. Many of the comments can be summed up as give me the money, with incumbent telcos and cable companies laying down defensive fire aimed at heading off potential competition – more about that on Monday.

Three of the commenters – the Karuk Tribe, and the CPUC’s office of ratepayer advocates and the consumer group TURN in a joint submission – made a fair point about the overall approach: by prioritising communities with bigger, denser populations, the analysis paralleled the sort of market evaluation done by Internet service providers when they decide whether or not to serve a particular area. As the ORA/TURN comments put it…

Taking a “think like an ISP” approach may duplicate efforts by ISPs that are already pursuing areas with their own capital expenditures. For example, at the [workshop held by the CPUC to discuss the draft], AT&T commented that it already deploys in areas where it sees population growth. Taking this approach may neglect areas which ISPs would not target and therefore are areas most in need of the CASF program’s funds.

A major reason CPUC analysts took that approach was to try to reach as many Californians as possible, partly because more people will benefit, but also because the California Advanced Services Fund – the source of the money – has a legislative mandate to bring sufficient broadband service to 98% of the state. You need to reach lots of people to do that.

Another reason to “think like an ISP” is to increase the likelihood that private sector companies will bear the financial and opportunity costs of applying for CASF money and, ultimately, build successful systems. The economic realities of building both broadband infrastructure and a sustainable business have to be considered.

But there’s more to the calculus than economic viability. As TURN, ORA and the Karuk Tribe correctly point out, broadband infrastructure subsidies should also be spent in a way that make bad business cases into good ones. That doesn’t mean ignoring more densely populated areas, but rather recognising that those are the cherries – if you want them, take the whole tree.

Download the comments…

Bolinas Fire
Bolinas Utilities
Greenfield Communications – sorry, secret
Humboldt County
Karuk Tribe
Las Cumbres
Marin County
Mendocino County
Office of Ratepayer Advocates/Toward Utility Rate Normalization
Sierra Business Council
Small LECs