California broadband subsidy bill fertile ground for monopoly mushrooms

10 May 2017 by Steve Blum
, , ,

The attempt to redirect California’s broadband infrastructure subsidy program toward incumbent telephone and cable companies and away from independent, gigabit class projects and public housing communities is descending into Alice-in-Wonderland territory. The amended text of assembly bill 1665 is posted, and it begins with a stirring call to action for the greater good of California…

The availability of high-speed Internet access, referred to generically as “broadband” and including both wired and wireless technologies, is essential 21st century infrastructure for economic competitiveness and quality of life. Economic studies confirm that the use of broadband technologies increases economic productivity as a foundation for increased efficiency in organizational operations and enhanced profitability in business…

It is the intent of the Legislature that California be a national leader and globally competitive in the deployment and adoption of broadband technology and to implement quality universal access for all residents.

What the bill doesn’t explain is how lowering California’s broadband speed standard will prepare us to better compete with our peers around the world. AB 1665 would bake a 6 Mbps download/1 Mbps upload standard into law, a rollback from the current 6 Mbps down/1.5 Mbps up minimum, and significantly below the U.S. average, let alone countries like Japan or Germany.

That’s because the bill’s intent is to reinstate a tax on telephone bills and funnel the money to the bill’s backers. The lions share – $300 million – is effectively reserved for AT&T and Frontier Communications in most of rural California, with a loophole that allows cable companies to get a taste in the suburban and exurban communities they prefer to serve.

As expected, the bill’s new text gives AT&T and Frontier de facto exclusivity in vast areas of the state in or near where they’re receiving federal subsidies, even when they spend the money on legacy infrastructure, and allows them to be reimbursed for the full cost of projects, including operating costs. Again, even when the service delivered is on a par with what you’d expect today from 1990s DSL technology.

Cable companies get their perks, too. They’d be able to bypass regulatory oversight by laundering the money through homeowners, and public housing funds, that are mostly used to install WiFi in the state’s poorest communities, would be chopped completely.

AB 1665’s attempt to conflate “quality universal access for all” with this transfer of tax money away from meaningful projects and purposes, and into the pockets of big incumbents is perversity, not credible public policy.