California legislation would adopt definition of digital discrimination

Proposed California legislation would codify in state law a definition of “digital discrimination of access.” AB 2239 would define it as “policies or practices, not justified by genuine issues of technical or economic feasibility, that differentially impact consumers’ access to broadband internet access service based on their income level, race, ethnicity, color, religion, or national origin, or that are intended to have a differential impact.”

That mirrors the Federal Communications Commission’s Preventing Digital Discrimination rulemaking adopted in November as mandated by section 60506 of the Infrastructure Investment and Jobs Act of 2021 (IIJA). Section 60506 defines equal access as “the equal opportunity to subscribe to an offered service that provides comparable speeds, capacities, latency, and other quality of service metrics in a given area, for comparable terms and conditions.”

The FCC’s Preventing Digital Discrimination rulemaking is predicated on the notion that business decisions on where to deploy infrastructure and offer advanced telecommunications services can disadvantage households based on these demographic factors, even if not intentional. But Section 60506 gives deployers the ability to defend their infrastructure and service offerings based on technical and economic feasibility. That can easily trump any claim of discriminatory impact -- intentional or not -- in the nation’s market-based and predominately investor owned advanced telecommunications infrastructure.

Since IP telecom is currently classified as lightly regulated optional information service under Title I of the Communications Act and not as a common carrier utility, providers are free to deploy delivery infrastructure wherever they wish and at rates of their choosing. Naturally, they are going to prefer denser, higher income neighborhoods that will produce faster return on capital investment (ROI) and where households are less price sensitive and more inclined to subscribe to higher priced services, thereby maximizing average revenue per unit (ARPU).

Notably, California’s Digital Equity Bill of Rights that took effect in January, states public policy that “to the extent technically feasible, broadband internet subscribers benefit from equal access to broadband internet service within the service area of a broadband provider.”(Emphasis added) Notably, that omits the economic feasibility defense of the FCC’s Preventing Digital Discrimination rulemaking and proposed by AB 2239. 

That's an important difference from AB 2239 because technical feasibility is a far broader term comparable to the federal government's definition of a "broadband serviceable location" as “a business or residential location in the United States at which fixed broadband Internet access service is, or can be, installed." That definition is used in the National Telecommunications and Information Administration's Broadband Equity, Access, and Deployment (BEAD) subsidy program. A location may be serviceable. But building infrastructure to serve it may not be economically feasible if the business case justifying deployment isn't present.

Coalition of California civic, advocacy groups accuse AT&T of cherry picking, gaming federal subsidy program

A broad-based coalition of civic and advocacy groups led by the California Alliance for Digital Equity are accusing AT&T of gaming a California state advanced telecommunications infrastructure subsidy grant program. The accusation was detailed in a December 11, 2023 letter to the California Public Utilities Commission (CPUC). The letter also complains the CPUC has not provided an appropriate and transparent process to comment on the projects proposed by AT&T under the CPUC’s Federal Funding Account (FFA) program. Nearly 900 objections to proposed builds were filed with the CPUC on 484 grant applications for projects in each of the state’s 58 counties totaling more than $4.6 billion -- more than double the $2 billion available.

The funding is authorized by 2021 California legislation allocating federal funding appropriated by the federal American Rescue Plan Act (ARPA). Similar to the federal Broadband Equity, Access and Deployment (BEAD) program funded under the Infrastructure Investment and Jobs Act (IIJA) of 2021, eligibility is limited to “unserved” areas for which no landline service is offered to “an entire community” of at least 25 Mbps downstream and 3 Mbps upstream. The FFA program rules also take into consideration whether proposed projects would target areas prioritized by the CPUC based on demographic and digital equity information and analysis of the number of low-income households, median household income, disadvantaged community status, and digital equity.

“After careful review of the limited information available in FFA project summaries, it is abundantly clear that incumbent ISPs, particularly AT&T, have manipulated the grant process to secure funding for projects that are inconsistent with FFA goals and are attempting to prevent potential competitors from receiving FFA funds,” the letter states.

Every AT&T application advocates reviewed includes a map of a large potential project area with tens, and in some cases dozens, of very small and widely geographically dispersed (sometimes 50 miles or more in largely urban and suburban areas) extremely small service areas. These very small service areas form no coherent whole, and in most cases, these extremely small service areas border or overlap with similarly extremely small service areas inexplicably included in separate AT&T applications. Broadly, this approach is ‘cherry picking,’ wherein a provider delineates a sizable boundary but proposes to serve a small fraction of households within it. This approach also makes collaboration or coordination with local interests impossible.”

Like the Golden State Connect Authority (GSCA), a joint powers authority of 40 counties authorized by the 2021 California legislation to build open access fiber to the premise distribution infrastructure, the groups allege the large number of projects proposed by AT&T calls into question has the financial, technical, or operational capacity to complete all the proposed projects within the timeframe required by program. The GSCA filed objections to 50 proposed AT&T projects.

Notably, Jeff Luong, AT&T’s vice president of network engineering, reportedly said at the recent Fierce Telecom U.S. Broadband Summit that even with AT&T spending about $20 billion per year on infrastructure, “we cannot build out in all the areas we deem as economical.”

The groups expressed concern that AT&T may be gaming the program rules with the numerous small projects in hopes of winning quick approval of each and then rejecting grant funding in order to delay or exclude other applicants from receiving grants.

“We wish to emphasize that it is standard industry practice for providers to claim that they intend to deploy infrastructure in specific areas (thereby preventing other entities from receiving state or federal funding to deploy infrastructure) but never actually do,” the groups wrote.

A potential point of contention suggested by the groups but not explicitly stated in their letter is since FFA program rules limit grant funding eligibility to “an entire (unserved) community,” the disparate proposed AT&T projects cannot reasonably be construed to be serving an “entire community.” The term is not specifically defined in the rules. In a footnote, the rules suggest the CPUC reserves broad discretion to make that determination using “data from a variety of services, including broadband deployment data, subscriber data, crowdsourced data, service quality data, and qualitative data.”

Nearly 900 objections filed in California subsidy program

Nearly 900 objections have been filed with the California Public Utilities Commission (CPUC) protesting proposed projects requesting subsidies to construct advanced telecommunications distribution infrastructure. Under the FFA program rules, an objection must be based on an error of fact, or policy or statutory law. (Click here for a list of objections: PDF / Excel)

The CPUC’s Federal Funding Account (FFA) program received 484 grant applications for projects in every county totaling more than $4.6 billion -- more than double the $2 billion available. The funding is authorized by 2021 California legislation allocating federal funding appropriated by the federal American Rescue Plan Act (ARPA). The ARPA was enacted amid the COVID-19 public health emergency to provide support to state, local, and tribal governments including infrastructure investment.

Similar to the federal Broadband Equity, Access and Deployment (BEAD) program funded under the Infrastructure Investment and Jobs Act (IIJA) of 2021, eligibility is limited to “unserved” areas for which no landline service is offered to “an entire community” of at least 25 Mbps downstream and 3 Mbps upstream. The FFA program rules also take into consideration whether proposed projects would target areas prioritized by the CPUC based on demographic and digital equity information and analysis of the number of low-income households, median household income, disadvantaged community status, and digital equity.

The Golden State Connect Authority (GSCA), a joint powers authority of 40 counties authorized by the 2021 California legislation to build open access fiber to the premise distribution infrastructure, filed objections to 50 projects proposed by AT&T California. The GSCA contends the projects contravene FFA program guidance because they would merely upgrade its existing footprint of landline infrastructure without expanding to outlying locations.

“Additionally, in examination of the sheer number of projects proposed by AT&T statewide and commensurate funding requests, the cumulative request by AT&T for all its projects statewide indicates that the applicant will not have the financial, technical, or operational capacity to complete all the proposed projects within the timeframe required by the Last Mile FFA grant program,” wrote GSCA General Counsel Arthur J. Wylene. “This directly contravenes Last Mile FFA program requirements that an applicant must have the ‘financial, technical, and operational capacity’ to execute the projects for which it has applied within the required timeframes,” i.e. by 2027.

Notably, Jeff Luong, AT&T’s vice president of network engineering, reportedly said at last week’s Fierce Telecom U.S. Broadband Summit that even with AT&T spending about $20 billion per year on infrastructure, “we cannot build out in all the areas we deem as economical.”

According to the CPUC, staff will analyze applications, objections, and their responses and work with applicants and local stakeholders to select the applications most deserving of funding. No awards are expected until first quarter 2024 at the earliest.

California proposes to regard areas served by DSL and FWA as potentially eligible for BEAD subgrants

The California Public Utilities Commission (CPUC) has developed a framework to guide eligibility for the state’s $1.86 billion allocation under the federal government’s Broadband Equity, Access and Deployment (BEAD) program. The framework would regard areas served by DSL and fixed wireless service as potentially eligible for BEAD subgrants. The framework is part of a proposed rulemaking issued November 7.

Under BEAD and its authorizing legislation, the Infrastructure Investment and Jobs Act (IIJA), the primary scope of proposed projects eligible for state subgrants is where at least 80 percent of serviceable addresses are not offered service with throughput greater than 25Mbs for downloads and 3Mbps for uploads at latency of less than 100ms, designated “unserved.” Those where at least 80 percent are not offered 100Mbps/20Mbps are deemed “underserved.” 

“The CPUC will treat locations that the National Broadband Map shows to have available qualifying broadband service (i.e., a location that is “served”) delivered via DSL as ‘underserved.’" The CPUC's proposed framework is consistent with BEAD program guidance that acknowledges that in some cases, DSL does not provide consistent access to advertised speeds. "To the extent a particular location is identified on the Broadband DATA Maps as served by DSL at speeds that warrant treatment of that location as 'served' or 'underserved' but is not in fact reliably served at such speeds, this would be a proper basis for challenging the relevant location’s service status during the challenge process created by the Eligible Entity," the guidance states.

The CPUC notes this "will better reflect the locations eligible for BEAD funding because it will facilitate the phase-out of legacy copper facilities and ensure the delivery of ‘future-proof’ broadband service, the proposed framework states. “This designation cannot be challenged or rebutted by the provider.”

Additionally, the CPUC will presume 5,829 locations the National Broadband Map shows “underserved” by DSL as “unserved” for reported speeds that are lower than 30/5, for which there is supporting evidence that speeds consistently deliver below 25/3 service. “Considering the low prospects of providers investing in maintenance of legacy copper plant, low speed DSL should be replaced as soon as feasible with more future-proof infrastructure. This modification will better reflect the locations eligible for BEAD funding because it will facilitate the phase-out of legacy copper facilities and ensure the delivery of ‘future-proof’ broadband service,” the CPUC concluded.

“Due to the possibility of California’s BEAD allocation being fully committed to deploying service to unserved locations, this modification will also ensure that locations served by low-speed DSL are not excluded from eligibility for this critical investment,” citing AT&T’s application for relief from its landline voice telephone service carrier of last resort obligation in rural areas of the Golden State under Title II of the federal Communications Act.

The proposed rulemaking would also regard 36,887 locations that the National Broadband Map shows as “underserved” delivered over Licensed Fixed Wireless (LFW) as “unserved” for reported speeds that are lower than or equal to 30/5 Mbps:

"As a technical matter, fixed wireless speeds fluctuate heavily,” the framework notes. “Given this, speeds that barely qualify as underserved will likely be below 25/3 service during peak usage times. This is especially true of older fixed wireless deployments that struggle to reach higher speeds and mitigate interference and line of sight issues. In fixed wireless networks, service performance can be affected by a customer’s proximity to a base station, the capacity of the cell site, the number of other users connected to the same cell site, the surrounding terrain, and radio frequency interference. Additionally, fixed wireless networks require a clear line-of-sight. Therefore, obstructions, such as trees, can block radio signals and impact the reliability of fixed wireless networks. Poor weather conditions, including rain, can affect the availability and quality of a customer’s fixed wireless service.”

Cellular fixed wireless will similarly undergo critical scrutiny when determining whether an area is deemed eligible as underserved:

“The CPUC has observed that some fixed wireless operators report 25/3 or 100/20 speeds on the National Broadband Map even where their networks frequently reach those speeds only under optimal circumstances and have not been replicated in other testing environments, such as the CPUC’s own CalSPEED process. User agreements for leading providers of cellular fixed wireless indicate that users will be deprioritized during periods of network congestion, decreasing the likelihood that service delivered to consumers will meet the claimed thresholds, especially in future years as network utilization increases.”

The CPUC explained its rationale as due to the possibility of California’s BEAD allocation being fully committed to deploying service to unserved locations. “This modification will also ensure that locations served by low-speed and unreliable cellular fixed wireless are not excluded from eligibility for this critical investment.”

The CPUC said it will treat locations that the National Broadband Map shows to be “underserved” or “served” as “unserved” if rigorous speed test methodologies show otherwise. “This modification will better reflect the locations eligible for BEAD funding because it will consider the actual speeds of locations, leveraging the extensive data collection already conducted by the CPUC and reducing the administrative burden on challengers, providers, and CPUC staff to process challenges for locations already successfully challenged using equivalent evidence to that required for BEAD challenges.”

How open access model disrupts, offers potential to more rapidly scale FTTP infrastructure.

Open access infrastructure, wherein service providers lease the access layer of fiber to the premises (FTTP) networks to gain access to subscribers, offers substantial potential to alter the economics of deploying FTTP. FTTP deployment has lagged in the United States – currently passing less than half of all homes – because the business case for its deployment is based on recovering capital investment in a short term time horizon of 5-7 years from residential subscription fees. These deployers sell both access to its proprietary delivery infrastructure and bundled services delivered over a vertically integrated offering of web, email, as well as video channels and voice over internet protocol (VOIP).

Their business case analysis considers internal rate of return standards, the number of homes likely to purchase known as “take rate,” and projected average revenue per household unit or ARPU. That calculus has historically favored household density and income with the former carrying the most weight since the cost of deployment would be spread across more homes.

Open access infrastructure changes this revenue structure. Instead of solely relying on end user revenues, it derives some from leases to service providers. In the case of Utah’s UTOPIA Fiber open access network, fully 70 percent comes from service providers and the balance from end users. Open access infrastructure must attain significant scale to reach a lot of end users in order to offer an attractive market to service providers to lease access to the network.

The open access model also lengthens the investment time horizon allowing deployers to attract more patient capital that doesn’t need to hit ROI over the short term. It’s in it for the long game. The demand for FTTP is there – owing in large part to the fact that more than half of U.S. households lack access to it - and will continue to be. It’s also a long term asset with a life span of 30 to 50 years. And it’s sticky, affording deployers first mover advantage. Whoever deploys first is likely to own that end user premise customer for decades.

As one of the first open access networks formed in the early 2000s, UTOPIA Fiber has achieved the scale necessary to make the model work, serving 20 Utah municipalities that collectively own the network. The financial appeal of the open access model has also attracted private players including SiFi Networks, which according to its website is now in 11 American cities. More recently, AT&T is getting in on the open access action, forming a joint venture with BlackRock to deploy open access FTTP outside of AT&T’s existing service area.

Northern California could potentially host the nation’s largest regional open access network in terms of scale and geography, serving 40 member counties of the Rural County Representatives of California (RCRC) with the RCRC’s nascent Golden State Connect Authority, formed in 2021 as a joint powers authority. There, the open access model could provide FTTP in less densely populated areas passed over by the large, investor owned telephone and cable companies under the traditional closed access bundled services business model. Many households there are forced to rely on substandard, expensive wireless services.

California, Vermont on the right path prioritizing FTTP

The California Public Utilities Commission (CPUC) presented its draft 5-year plan to connect the state’s unserved with broadband using the $1.86 billion BEAD funding it received, and at the same time warned the total $4 billion available in state and federal funding won't be enough.

Critics of “the fiber-above all” approach have called the CPUC’s concerns “unsurprising.”

“The fiber lobby has done a great job of pitching itself as kind of the end-all, be-all, and it does have a lot of great case study for it. But there are other opportunities that can come along,” said the Wireless Internet Service Provider Association’s (WISPA) state advocacy manager for California, Steve Schwerbel.

Colorado BEAD plan is ‘agnostic’ to fiber versus fixed wireless

Wireless Internet Service Providers (WISPs) have been a valuable stopgap for widespread deficits in landline advanced telecommunications infrastructure, first coming on the scene about two decades ago when telephone companies instead of fiber deployed digital subscriber line (DSL) technology that couldn't reach many customer locations over their aging copper delivery infrastructure.

But federal policy should regard them as just that and not subsidize them going forward, particularly in any major federal infrastructure improvement initiative such as the Infrastructure Investment and Jobs Act (IIJA).

They grapple with a difficult business model in which they must purchase landline backhaul at high cost or use microwave. That forces them to offer service at high monthly rates in limited areas in order to profitably operate, hindering affordable access to even what the federal government deems basic access. They also face technical challenges of terrain and foliage growth that blocks wireless signals from reliably reaching end user premises, limiting their potential customer base and promoting churn off. And most importantly, limitations on bandwidth imposed by radio spectrum physics that does not allow them to feasibly accommodate growing bandwidth demand.

California and other states such as Vermont are demonstrating the correct, forward looking approach to set fiber to the premises (FTTP) as the standard for advanced telecommunications delivery infrastructure.

California BEAD Five Year Action Plan: Substantially greater funding needed for universal FTTP.

California is unable to assure the timely construction of universal fiber to the premises (FTTP) infrastructure – estimated to cost $9.78 billion including infrastructure hardening in areas with high wildfire risk – because less than half that amount is available as federal and state subsidy funding.

That’s according to the state’s draft Five Year Action Plan required by the National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program. BEAD requires states to file “a comprehensive, high-level plan for providing reliable, affordable, high-speed internet service throughout the (state) including the estimated timeline and cost for universal service.” Additionally, the plans must include an estimated timeline and cost for universal service and planned utilization of federal, state, and local funding sources to pay for it.

“This estimate assumes no re-use of existing infrastructure (e.g., poles, conduit, manholes, etc.) in the total investment,” the draft plan prepared by the California Public Utilities Commission states. “The timeline for universal service with fiber-to-the-premises would extend beyond the BEAD funding timeline and require additional federal and state funding.”

The draft plan cautions given the Golden State’s large size, it may be challenging for BEAD-funded subgrantees to deploy infrastructure within the required five-year timeline. Additionally, “the CPUC recognizes that developing sufficient capacity may be a challenge for some potential subgrantees, including small ISPs and localities and other entities” as well as permitting challenges.

Oregon’s draft Five Year Action Plan similarly concluded that state’s BEAD funding allocation would not sufficiently subsidize universal FTTP. Like Oregon, California’s draft plan calls for the possible use of alternatives funded by the state’s $1.86 billion BEAD allocation. Those deemed “reliable” by the NTIA include hybrid fiber-coaxial cable, digital subscriber line (DSL) technology and terrestrial fixed wireless utilizing entirely licensed spectrum or using a hybrid of licensed and unlicensed spectrum.

California legislation imposing universal service mandate on commercial providers founders

Two California bills that would establish a statutory requirement on commercial providers of advanced telecommunications to provide service to all addresses in their service areas have foundered. AB 1714 would effectively do so by defining such providers as common carrier public utilities. The bill has not been set for hearing since it was introduced in February.

The second measure, AB 41, would have required providers issued franchises under the state’s video franchise law by the California Public Utilities Commission to make service available to all residences in its service area within five years following renewal of a franchise. That requirement was deleted from the bill in a July 13 amendment. The bill includes a legislative finding that “Thousands of California households still lack access to video or broadband service, including households that are within the existing service territories of state video franchise holders.”

Federal, state legislation that would regulate Internet as common carrier telecom utility stalls

H.R. 8573, proposed legislation that would subject internet service to regulation as a common carrier telecom utility under Title II of the Communications Act has stalled in Congress. A similar measure introduced in the California legislature, AB 1714, is also not advancing. Neither bill has been set to be heard in committee.

Amid fading federalism in U.S. telecommunications policy, states on deck to regulate

For Plain Old Telephone Service (POTS), federalism underpins a scheme of shared regulatory oversight between the federal government (the Federal Communications Commission specifically) and state public utility commissions. It operates under the framework of Title II of the Communications Act of 1934 that regards telecommunications networks as a natural monopoly. Accordingly, voice telephone service is regulated as a common carrier utility to ensure it is accessible (universal service) and affordable (rate regulation by state PUCs) given the absence of market forces and buy side market power to assure that it is.

This federalist regulatory scheme does not exist for advanced, internet protocol (IP) telecommunications. Since 2018, federal policy promulgated by FCC administrative law regards it as a lightly regulated information service under Title I of the Communications Act similar to dialup services like CompuServe and America Online that were widely used in the early 1990s. Congress has not weighed in on the matter of how IP telecom is to be regulated since the 1996 Telecommunications Act, which similarly adopted a light touch, wait and see stance. Recent court rulings have cleared the path for states to move forward.

In the absence of regulatory federalism for IP-based telecommunications, one leader state is considering legislation that would regard IP telecommunications as a common carrier utility. AB 1714 would amend California’s Public Utility Act to include “broadband service” offered by a corporation (defined in the statute as including a corporation, company, an association, and a joint stock association) within the definition of a public utility. “Broadband Internet access service is defined at California Civil Code Section 3100(b) as “a mass-market retail service by wire or radio provided to customers in California that provides the capability to transmit data to, and receive data from, all or substantially all Internet endpoints, including, but not limited to, any capabilities that are incidental to and enable the operation of the communications service, but excluding dial-up Internet access service.”

“Just as the infrastructure of water and electricity grew at the end of the 19th century and led to the creation of regulation to make sure that these technologies were available to everyone, the internet has grown to a point that demands it be regulated as a public utility subject to the same regulatory process to make sure that everyone has access to this technology, moving us closer to digital equity,” said the bill’s author, Assemblymember Jim Wood in a news release. 

The proposed legislation comes as AT&T California petitioned the California Public Utilities Commission to relieve it of its POTS universal service obligations as carrier of last resort in parts of the state where there are alternatives such as VOIP (Voice Over Internet Protocol) or mobile wireless.

States could designate ISPs as public utilities as strategy to attain universal service

The National Telecommunications and Information Administration’s (NTIA) Broadband Equity, Access and Deployment (BEAD) program guidance spelled out in its Notice of Funding Opportunity (NOFO) requires states as part of their Five Year Action Plans to develop “a comprehensive, high-level plan for providing reliable, affordable, high-speed internet service throughout the (state) including the estimated timeline and cost for universal service.”

A potential component of these plans could be legislation deeming companies providing advanced telecommunications as common carrier public utilities and thus mandated to offer universal service to all of a state’s serviceable addresses. These are defined in the BEAD NOFO as “a business or residential location in the United States at which fixed broadband Internet access service is, or can be, installed.”

California legislation introduced this month (AB 1714) would designate these providers as common carrier public utilities. Other states could take a similar route in developing the universal service component of their Five Year Plans due to the NTIA this year.

Voice telephone service is regulated as a common carrier public utility under Title II of the Communications Act of 1934. Per the law, "It shall be the duty of every common carrier engaged in interstate or foreign communication by wire or radio to furnish such communication service upon reasonable request therefor..." It also bars them from “unjust or unreasonable discrimination” in “charges, practices, classifications, regulations, facilities, or services.”

The federal government has declined to regulate providers of advanced telecommunications as such, instead opting to regulate them as “information services” under Title I of the statute. Since information services are not classified as common carrier utilities, they are not subject to the universal service and non-discrimination mandates. That has led to substantial problems with access and affordability with advanced telecommunications that BEAD aims to remedy.

Regional open access fiber as the telecom regional airports of the 21st century

As the U.S. continues to debate the role of public and private ownership and operation of advanced telecommunications infrastructure, a California local government official offers simple aeronautical analogy to progress beyond the debate and bring ubiquitous connectivity to nearly every American doorstep.

Just as local governments own and operate regional airports, regional open access fiber infrastructure can serve as the airports for internet service providers operating as the airlines. Like airlines that rent terminal space at airports, the ISPs would rent access to the infrastructure to deliver service to their customers.

Calaveras County, California Supervisor Jack Garamendi’s concept makes a lot of sense. Investor owned vertically integrated providers cannot afford to bring fiber connections serve all homes, businesses and institutions in their nominal service areas. That’s because their investors expect relatively short term returns on capital investments incompatible with the long term investment horizon for infrastructure. Hence, the nation is handicapped with partially deployed infrastructure with only about a third of all homes having access to fiber connections that should have reached nearly all of them by 2010 with better policy and planning.

Now Garamendi is working to build what amounts to a regional airport system serving 38 California counties as president of the Golden State Connect Authority (GSCA). As a joint powers authority and governmental entity, the GSCA plans to access the public bond markets to finance the fiber. That’s more patient capital that’s compatible with fiber infrastructure serviceable for decades – much like airports. California legislation enacted in 2021 appropriates continuous funding to help secure the bond debt.

The GSCA is modeling itself on and working with the State of Utah’s Telecommunication Open Infrastructure Agency (UTOPIA), a group of 11 Utah cities that joined together in 2004 to build, deploy, and operate fiber infrastructure connecting all homes and businesses.

According to Garamendi, the GSCA plans to ramp up deployment of fiber rapidly, starting with more densely settled areas. “We’ll go fast and we’ll pick up speed,” he said at an Electronic Frontier Foundation event this week.

Let’s hope so. The GSCA must avoid only partially deploying like the large corporate investor-owned telephone companies that serve limited, more densely developed areas. Great numbers of residents and small businesses in GSCA counties have coped with lack of landline connections for many years – even in not so thinly populated exurban areas at the outlying edges of metro counties, forced to rely on high cost, low value wireless services.

The GSCA won’t be able to bring fiber to every location, Garamendi noted, given some are in very remote rural areas of the Golden State. But access to patient capital will allow it to go much farther than the far less patient capital of investor-owned providers that naturally cherry pick areas conforming to their stringent rate of return and profitability standards. 

State and regional public telecom entities like UTOPIA and the GSCA offer the nation a badly needed self sustaining model to build and operate fiber networks to provide near universal service and affordable access. Such self sustaining business structures are particularly needed in the absence of coordinated, sustained federal policy and funding designed to ensure fiber connections reach all American homes and small businesses.

Regionalism isn't new for telecom infrastructure. Telephone companies were structured as interstate regional bell operating companies formed upon the divestiture of AT&T in 1982.

PG&E undergrounding project could potentially benefit with co-location of distribution fiber conduit

Planting wires underground is one of the most expensive wildfire-risk strategies any utility can undertake — and it remains to be seen if the $25 billion estimate is high enough to cover the entire 10,000 miles that are to be placed underground in the areas deemed at most risk to wildfire across PG&E’s territory. The price tag is based on PG&E’s belief that it can do the job for $2.5 million per mile. Yet PG&E plans to spend $3.75 million per mile this year, when it expects to complete 175 miles of work. And in a white paper published four years ago, PG&E said underground work costs $3 million per mile.

Nonetheless, Chief Executive Patti Poppe said she’s confident that as the project ramps up, economies of scale and new technologies will bring costs into line. The utility expects to be planting 1,200 miles a year underground by 2026. “We can dramatically reduce our costs every year,” she said on a conference call with Wall Street investment analysts. “With scale, we can improve the unit costs.” 

CA utility PG&E says underground wire project will cost $25B | The Sacramento Bee

PG&E could potentially gain additional economies of scale by partnering with local governments, utility districts and consumer utility cooperatives to co-locate fiber conduit as it buries its electric lines. PG&E is prioritizing areas of its mostly Northern California service territory where wildfire risk is the highest. 

These areas also have major telecommunications infrastructure deficiencies. Residents and businesses would doubly benefit from both reduced risk of wildfires sparked by overhead electrical distribution lines as well as access to fiber delivered advanced telecom services.

Such a partnership would also potentially benefit PG&E by speeding up its burial of electric distribution lines, demonstrating good faith effort to regulators. The partners could also potentially tap into funding in the recently enacted federal Infrastructure Investment and Jobs Act that appropriates funds for electrical infrastructure improvements as well as advanced telecommunications infrastructure.

Private and public financing schemes emerge to finance fiber telecom infrastructure

In the absence of an aggressive federal initiative to timely replace obsolete, decades-old copper telephone lines that reach every doorstep with fiber, local U.S. governments are looking to connect homes, schools and small businesses lacking fiber connections or unable to afford them and to promote economic development.

A major stumbling block is they lack the financial resources to build their own networks. Despite low interest rates, they are reluctant to issue bonds to cover construction costs and more specifically, to secure the debt. With taxpayers reluctant to support new tax levies, politicians are leery of asking voters to approve them. In addition, local government officials -- still scarred by the penury of the 2008 financial crisis -- aren’t inclined to pledge their general funds as security.

Private and public financing schemes have emerged to try to help localities secure fiber construction bonds. One private scheme is being utilized by a telephone company, Consolidated Communications. The local government issues a bond and retains full or majority ownership of the network infrastructure. The telco secures the bond until it’s retired in 20 to 30 years and then assumes control of the network assets. By which time equipment replacement and updates will likely be needed. But the telco gets network revenues both during the bond term and afterwards and doesn’t have to commit as much capex up front, offset by the muni bond proceeds. That meets telcos’ need to avoid capex that suppresses earnings as well as incurring more debt load given already overburdened balance sheets among investor-owned telcos.

Another private financing method utilizes European pension fund investment capital. Under that scheme, the local government does not own the network, which remains under the control of a private sector operator. The model provides more patient capital than shareholder owned telephone and cable companies. But like the investment capital of those companies, it is risk averse and aimed at densely populated urban areas.

A public bond securitization method is under development in California. Legislation enacted in 2021 authorizes the California Public Utilities Commission (CPUC) to annually loan funds from its advanced telecommunications infrastructure subsidy program to a loan loss reserve fund. The current state budget appropriated $750 million to seed the fund. It will cover costs of debt issuance, obtaining credit enhancement and funding of reserves for the payment of principal and interest on debt incurred by local government and nonprofit organization projects.

The CPUC is in the process of developing eligibility requirements, financing terms and conditions and allocation criteria for advanced telecommunications infrastructure projects as mandated by the legislation. According to the Golden State Connect Authority, a multi-county joint powers authority formed in 2021 to construct advanced telecommunications infrastructure and provide technical assistance, the legislation authorizes a joint powers authority to issue revenue bonds supported by the loan loss reserve fund.

States should use IIJA advanced telecommunications infrastructure funding for government owned networks

Starting in 2022, state governments are in line to receive $43.45 billion in grants earmarked for advanced telecommunications infrastructure appropriated under the Infrastructure Investment and Jobs Act (IIJA). As California recently opted to do by appropriating $2 billion for state-owned middle mile transmission infrastructure, states should use the funds to build their own projects with telecom authorities (instead of so-called "broadband offices.")

Doing so avoids a fundamental conflict of interest and gives states more control over what infrastructure gets built and how quickly. As experience over the past two decades has shown, investor-owned legacy telephone and cable companies must naturally place the interests of their investors first and ahead of the public interest. The result has been a Swiss cheese pattern of infrastructure deployment in cherry picked neighborhoods that meet the rapid return on investment their shareholders demand. That leaves many others without the possibility of being connected, particularly less densely developed areas.

State and local governments are far better situated to build advanced telecommunications infrastructure with the public benefit goal of increasing access and affordability. By virtue of their public service mission, they can focus on attaining these benefits as well as the concomitant positive externalities such as enabling virtual knowledge work, distance learning and telehealth visits. They can also make the federal dollars go farther since they don't need to produce profits for investors.

States should also fund public utility districts and consumer owned utility cooperatives. They too are free of the conflict of interest between shareholders and end users since the latter are also the former.

In potential model for nation, California poised to scale up open access fiber

California is poised to adopt a model of open access fiber infrastructure. The state is initially focusing on “middle mile” transmission infrastructure but could later extend the model that structurally separates end user services from the fiber that delivers them to “last mile” distribution infrastructure connecting customer premises.

The model, financed by a current state budget allocation of $3.5 billion for state owned transmission infrastructure and a similar amount for distribution infrastructure in the form of grants and loan securitization, dovetails with the current federal regulatory regime put in place in 2018 that regards the service layer as distinct from infrastructure, regulating IP services as information services under Title I of the Communications Act of 1934.

It also emerges one year after the U.S. Federal Communications Commission conditionally repealed rules put in place by the 1996 amendment to the act requiring incumbent telephone companies to sell wholesale access to its proprietary infrastructure to competitive local exchange carriers -- CLECs. That heightens the need for open access transmission infrastructure such as that being planned in California.

Both federal policies also pave the way for non-incumbents/CLECs including public sector entities and consumer telecom cooperatives to more widely build out and operate open access fiber distribution networks. Incumbent telcos and CLECs are limited by their business models requiring rapid returns on investment and relatively high ARPU. Consequently, these investor-owned companies offer limited distribution fiber in select neighborhoods most likely to meet those requirements, leaving the majority of homes without fiber connections as legacy copper telephone infrastructure has become obsolete as demand for quality, reliable connectivity rises rapidly.

Instead of mitigating risk by cherry picking select neighborhoods, the open access model separates end user services from infrastructure. It thus spreads the risk of areas that are costlier to build fiber to all doorsteps by aggregating demand across a broad customer base, cross subsidizing the high-cost areas from revenues generated by businesses and institutions. That’s how the Electronic Frontier Foundation (EFF) explained it in comments filed with the California Public Utilities Commission (CPUC) this month. In addition, the EFF recommends the CPUC develop a new license category for transmission infrastructure. In order to obtain licensure, the infrastructure would have to be offered on an open access basis to distribution infrastructure operators at affordable rates and offering sufficient capacity.

Report: Draft legislation implementing telecom component of Biden administration infrastructure initiative shuns fiber infra standard

 — The draft is likely to fuel renewed advocacy from consumer groups and anyone else hoping for ultra-fast fiber optic buildout, as it instead opts for lower minimum broadband speed thresholds (100 Megabits per second download over 20 Mbps upload would count as "underserved" for the $40 billion tentatively slated to go to the Commerce Department’s state grants, less than the fiber-focused minimums some Democrats wanted). 

https://www.politico.com/newsletters/morning-tech/2021/07/21/bidens-trustbuster-streak-continues-with-kanter-pick-796632?utm_source=sendgrid&utm_medium=email&utm_campaign=Newsletters

The asymmetrical 100/20 throughput vs. fiber distribution infrastructure standard is mirrored in a California budget bill enacted this week appropriating $2 billion in grant funding.

Revised California state budget proposes $7 billion investment over 3 years to enhance advanced telecom access and affordability

A revised budget for the State of California’s fiscal year beginning July 1 calls for spending $7 billion over three years to enhance advanced telecom access and affordability. According to a budget summary issued today, slightly more than half of state residents have access to infrastructure providing fiber level service. “Service at speeds below 100 Mbps is not enough for households who are juggling the demands of distance learning, telework, and accessing health care on-line,” the summary states. “These numbers are an indication of lack of access, lack of quality infrastructure, and lack of affordability.”

The budget would also appropriate state funds to supplement federal American Rescue Act funds to construct a statewide transmission network. “The statewide network will incentivize providers to expand service to unserved and underserved areas by substantially reducing their upfront infrastructure costs, creating new opportunities for municipal fiber networks, and promoting affordability for consumers,” the summary states. “This essential backbone infrastructure is a foundational step towards the entire state having access to broadband. Moreover, the generational investment will create tens of thousands of quality jobs to help the state’s economy recover from the pandemic.”

The proposed budget would also establish a $500 million Loan Loss Reserve Account to help local governments, tribes and non-profits secure private financing for fiber infrastructure. “These last-mile networks require large upfront investments but the return to customers, communities, and California is significant,” the summary notes. The budget also proposes to supplement an existing high-cost area subsidy program managed by the state public utility commission with $500 million in federal American Rescue Act funds.

The state Legislature must approve the proposed budget by June 15. Separately, lawmakers are considering submitting a bond measure (AB 34) to state voters that would raise $10 billion for grants to local governmental entities and Indian tribes for advanced telecommunications infrastructure and services.

California panel: Filling in fiber advanced telecommunications infrastructure gaps would cost $6.8 billion

An expert panel directed by California Gov. Gavin Newsom to develop a strategy to attain affordable universal access to advanced telecommunications estimates it would cost $6.8 billion to build passive optical fiber network infrastructure in support of that goal in areas of the Golden State where fiber hasn’t been deployed. The California Broadband Council’s Broadband Action Plan for 2020 – the first year of an iterative five year plan – notes America’s largest state has faced longstanding advanced telecommunications infrastructure deficits, which it terms a “complex and deep rooted” challenge.

“Providing fiber connectivity across California will take a long time, and require considerable investment from the state and the federal government,” the plan notes. It calls for Identifying alternative financing opportunities with government and philanthropic partners to maximize funding for new infrastructure. These include working with local governments to explore opportunities for public financing, including but not limited to bond instruments and alternative financial models and strategies such as making public infrastructure available for lease.

California bill would use existing phone surcharge to secure bonds for local government and cooperative-owned fiber to the premise infrastructure

Proposed legislation introduced this month in the California state Senate offers a potentially viable means of financing fiber to the premise (FTTP) advanced telecommunications infrastructure builds owned by local governments and nonprofits such as consumer telecom cooperatives. It does so by creating a financing mechanism to secure bonds to fund FTTP construction with proceeds from an existing California Public Utilities Commission (CPUC) surcharge on voice lines to subsidize advanced telecom projects in high cost areas of the state not served by incumbent landline and wireless internet service providers.

Debt service for the bonds could also be provided by project sponsors since the proposed legislation authorizes the CPUC to require they demonstrate the ability to reasonably finance and implement the projects utilizing the proposed bond financing.

The measure is proposed as an urgency measure that would take effect immediately upon enactment.