Taxing a dying business and giving the money to Big Telecoms’ friends won’t get kids to school

11 August 2020 by Steve Blum
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One room school

California’s broadband infrastructure subsidy program is about to run out of money. With $145 million left in the California Advanced Services Fund (CASF) under current assumptions, and $533 million in pending project proposals, it’s likely to go dry this year, even as schools go completely online.

The problem isn’t the 2022 end of the program’s funding mechanism, as one bill sitting in the California legislature claims. Assembly bill 570 is ghostwritten by the California Emerging Technology Fund (CETF), an incumbent-funded and advised non-profit, and carried by assemblywoman Cecilia Aguiar-Curry (D – Yolo), who is also well paid by AT&T, cable companies and other industry interests. It proposes to fix CASF’s cash flow by extending the expiration date. And, with perfect pork barrel logic, by taking money away from infrastructure projects and dispersing it to special interests, such as CETF, that will support incumbents’ monopoly business models instead of competing with them.

The problem is that CASF depends on a tax assessed on telephone calls made inside of California. That’s a dying business, as Frontier Communications’ chief lobbyist, Mark Nielsen, admitted in an unrelated CPUC filing last week…

The percentage of households served by ILEC regulated voice services has declined from 93% in 2003 to an estimated 8% in 2020. Just since 2016, the year Frontier acquired Verizon’s operations in California, the percentage of households service by ILEC regulated services had declined by one half – from 16% to 8% in 2020. Frontier’s subscribership experience across its footprint and in California is consistent with this trend. In line with this decline, the percentage of revenues derived from regulated voice services has also fallen, such that only approximately 24% of the Frontier’s California revenues are attributable to regulated voice services, with ongoing annual contraction of that percentage expected in 2020 and beyond.

One solution floated last week is “a long-term universal fiber Internet infrastructure bond”, issued by the State of California. That’s worthy of consideration if the policy for spending the money is 1. matched to the goal of universal fiber infrastructure, and 2. already in place. That’s what senate bill 1130, authored by senator Lena Gonzalez (D – Los Angeles), is all about.

I’ve advocated for SB 1130, and for other useful changes to CASF. I am involved and proud of it. I am not a disinterested commentator. Take it for what it’s worth.