Private sector rules applied to municipal broadband subsidies in California

An entity that is not a telephone corporation.

Local governments will have to meet the same requirements as independent, private sector Internet service providers in order to qualify for broadband infrastructure subsidies from the California Public Utilities Commission. That’s the implication of a ruling issued by CPUC president Michael Peevey last week. Those requirements could include performance bonds and penalties for failing to meet conditions the commission might put on subsidised projects or for not complying with its regulations.

Earlier this month, Peevey released a draft of a proposed decision that would expand eligibility for grants and loans from the California Advanced Services Fund, in keeping with a law – senate bill 740 – passed by the state legislature last year. SB 740 allowed ISPs to apply for CASF subsidies under tighter restrictions than traditional, regulated telephone companies. It also allowed local government agencies to apply, but under ever more limited conditions. The draft decision said the question of how to deal with local agencies would be left for later. Later is now.

Last week’s ruling lumps local agencies and ISPs together as “entities that are not a telephone corporation”, making no allowance for the differences between public and private sector broadband providers. The additional restrictions that the legislature placed on local agencies will be dealt with as scheduling problems and as a higher bar that needs to be cleared during staff review of applications.

In effect, the CPUC is telling cities, counties and other local agencies that if they want money from the commission, they’ll have to play by the same rules as private sector applicants. That makes a certain amount of sense from the commission’s point of view: it has no legal jurisdiction over local government – its job is to regulated privately owned utilities – and it’s not willing to simply hand over money without accountability. It could be a problem for local governments – which are likewise reluctant to surrender authority – but that’s a question for later (and largely for lawyers).

As a practical matter, the question is irrelevant for most, if not all, Californian cities, because they can only get subsidies for completely unserved homes and businesses. No middle mile facilities, no projects that include areas where anything better than dial-up is available (excepting satellite, but including mobile service). The few places like that in the state are in remote, unincorporated areas. There are exceptions, but not many – possibly, none – that can support economically viable projects unless a city is otherwise in the broadband business.

The CPUC could vote on the new rules as early as its 5 February 2014 meeting. Even so, it could be 2015 before new grant applications are accepted.