California like rest of nation suffers from poor advanced telecom service

The Social Cost of Weak Broadband Competition in California: Over the last 8 years, California has spent more than $200M funding projects and subsidizing service to close the broadband digital divide. While the intent is good, the results are limited given that home broadband subscriptions are unchanged today from 2010. It is clear that California cannot subsidize its way out of the digital divide. Despite the claims of Sosa and the Big 5, California’s uncompetitive fixed broadband service hurts everyone. The answer is to either promote retail competition or regulate the Big 5’s monopolies like we do in the energy sector.

California like the rest of the nation has the worst of all worlds: a naturally monopolistic advanced telecommunications market but no monopoly regulation as is done for electric power and natural gas utilities. The U.S. Federal Communications Commission nominally recognized advanced telecommunications as a natural monopoly utility in 2015, placing it under Title II of the Communications Act that regulated basic telephone service before it with rate regulation and a universal service requirement. "Nominally" because this regulatory scheme was put in place on paper only and not enforced.

The author is correct in noting we cannot extricate ourselves from this unfortunate circumstance with subsidies because they don't fundamentally alter it.

Riverside County, California: A microcosm of telecom infrastructure modernization challenge facing nation

$4 billion gigabit-for-all project in California makes its case with data: As one of the nation's largest counties plans a gigabit fiber network that could cost as much as $4 billion, project organizers are publishing data-rich stories they hope will catch the attention of companies that can build it. Riverside County, California, the 10th-most-populous county in the nation, recently extended its deadline for companies to submit proposals for its RivCoConnect initiative, a plan to bring gigabit internet to all of its 2.4 million residents. Now open to responses until Sept. 28, the county published three new web pages last week to showcase its vision and illustrate the character and demographic makeup of the people whom the new connectivity would serve.

This county is a microcosm of the challenge facing the entire nation when it comes to modernizing its legacy metallic telecommunications infrastructure built for the 20th century to fiber to the premise for the 21st. Extrapolate that single digit billion dollar project cost for Riverside County to the more than 3,000 counties in the county and it's easy to see why the United States needs a major federal initiative to fiber the nation, funded to the tune of $200 billion or more.

Investor owned players like legacy telephone and cable companies as well as new entrants like Google Fiber aren't going to take on this monumental task for the foreseeable because the numbers don't pencil out for their shareholders. State and local governments don't have money to bring to the table, already strapped with other aging infrastructure obligations as well as enormous and growing costs for health services and public pensions. Only the federal government is in a position to step up and fund this vital infrastructure.

Potential game changer: PG&E could alter California telecom landscape

An application by Pacific Gas & Electric to the California Public Utilities Commission to become a wholesale operator of fiber optic telecommunications infrastructure could be game changer in California where many customer premises nominally in the service territory of AT&T lack landline Internet connections or are limited to slow first generation DSL service over deteriorating copper cable plant.

PG&E’s vast 70,000 square mile northern and central California electric service territory overlaps regions of the Golden State where telecom infrastructure deficiencies are most prevalent: in and around the Central Valley municipalities of Modesto and Fresno, in the Sierra Nevada foothills east and northeast of the state capital of Sacramento in Placer and El Dorado counties and up the Interstate 5 corridor in Sutter, Butte and Yuba counties to the Shasta County seat of Redding in far northern part of the state. In addition to AT&T, PG&E’s electric service territory encompasses the telecom service territories of Frontier, Consolidated Communications and Citizens Telecommunications Company of California. All of these telcos could be customers of PG&E’s planned wholesale fiber as well as mobile wireless operators seeking backhaul bandwidth.

If approved by regulators, PG&E’s application could also attract new players who would like to provide fiber-based premise telecommunications service in areas lacking robust landline connections but can’t make the numbers work due to the high cost of building new fiber infrastructure. Having PG&E build it and lease it to them as competitive local exchange carriers (CLECs) would solve that problem. PG&E would also be spared considerable deployment expense and delay since it owns utility poles that would provide the backbone for aerial fiber plant, the optimal infrastructure architecture to serve such a large and geographically diverse area, much of it with rugged terrain.

PG&E’s move holds the potential promise of universal service for northern and central California, which for many years has been a crazy quilt checkerboard of served, underserved and unserved areas, leaving many consumers to struggle with substandard, poor value dialup, legacy DSL, fixed and mobile wireless and satellite service.

For more background on PG&E’s application, Steve Blum’s Blog has more details here and here.

Gov. Brown sets California's priorities for U.S. infrastructure bill -- but telecom not on list

Brown Sets California's Priorities For Trump Infrastructure Bill - capradio.org: Gov. Jerry Brown’s administration has released its list of California priorities for a potential federal infrastructure funding package backed by President Trump. The list is noteworthy not only for the projects it includes but for the ones left off. On the list? Highway projects throughout the state, including new carpool and toll-charging express lanes. California’s earthquake early warning system. And, of course, Brown’s legacy projects: high-speed rail and the Delta tunnels. “Mostly, the projects that we have submitted all have a request of $100 million or more,“ says the governor's transportation secretary, Brian Kelly. “So we really did focus on larger projects with clear, long-term and short-term benefits to the state.” Notably absent? Two prominent water storage projects backed strongly by California Republicans: Sites Reservoir northeast of Sacramento and Temperance Flat Dam northeast of Fresno.

Also missing from the list: telecommunications infrastructure. This in a state regarded as a leader in information and communications technology and home to Silicon Valley as surrounding communities continue to lack modern fiber optic service. Telecom infrastructure deficiencies are most pronounced in the Golden State's Central Valley municipalities of Modesto and Fresno, in the Sierra Nevada foothills east and northeast of the state capital of Sacramento in Placer and El Dorado counties, and up the Interstate 5 corridor in Sutter, Butte and Yuba counties to the Shasta County seat of Redding. (See related post here). Is is truly good public policy to finance 20th century infrastructure while neglecting vital infrastructure for the 21st?

AT&T seeks state sanction to exit residential premise service, transition customers to mobile wireless

Fellow blogger Steve Blum of Tellus Venture Associates calls bullshit on AT&T for sponsoring California legislation that would relieve it from its premise landline universal service obligations under Title II of the federal Communications Act. Blum has the same problem with the bill as I do. It's dressed up as enabling AT&T to transition from copper POTS service to Internet protocol-based service. As Blum points out, AT&T can do that without the need for enabling legislation. It has chosen not to make an orderly transition over the past two decades. That's a business issue, not one of regulatory policy.

The bill is essentially seeking state sanction to transition AT&T residential landline customers to its mobile wireless service. The thing is, that's not premise service under Title II's universal service obligation. However, with the U.S. Federal Communications Commission not enforcing its 2015 Open Internet rulemaking bringing IP-based services under Title II's universal service requirement, AT&T faces no regulatory consequence for "mobilizing the world" of its residential customers with service not engineered or priced for residential premise service.

California telecom infrastructure deficiencies concentrated in metro central, north valley counties

The large bulk of California’s deficient access to landline advanced telecommunications infrastructure manifests in the state’s central and north valley regions, concentrated in counties designated by the U.S. Office of Management and Budget (OMB) as urban metro counties.

Source: U.S. Department of Agriculture Economic Research Service. http://www.ers.usda.gov/datafiles/Rural_Definitions/StateLevel_Maps/CA.pdf

The below state map produced by the Central Coast Broadband Consortium (h/t to Steve Blum of Tellus Venture Associates) shows areas designated by the California Public Utilities Commission as unserved and underserved for landline advanced telecommunications infrastructure are concentrated in and around the Central Valley municipalities of Modesto and Fresno, in the Sierra Nevada foothills east and northeast of the state capital of Sacramento in Placer and El Dorado counties, and up the Interstate 5 corridor in Sutter, Butte and Yuba counties to the Shasta County seat of Redding in far northern part of the state.

These are not sparsely populated areas as shown by the map’s legend, which indicates a large presence of census blocks with populations of 150 to 300 people per square mile (designated as orange) and more than 300 per square mile (designated as red). By definition, a portion of these census block areas is not even considered rural (population density of less than 250 per square mile) by the California Healthcare Workforce Policy Commission relative to the availability of medical services.

Source: Central Coast Broadband Consortium. http://map.centralcoastbroadbandconsortium.org/
Accessed February 14, 2016

 

The takeaway is America’s telecommunications infrastructure deficits and disparate access cannot be necessarily be described as a “rural broadband” issue, particularly when looking at the nation’s most populous state. The operative "R" word here is these areas have been redlined for telecom infrastructure modernization as have similar areas throughout the United States.

Misunderstanding of market economics underlies U.S. telecom infrastructure deficiencies

Fiber-Optic Network Construction Highlights Widespread Lack of Broadband in Salinas Valley, Calif.: Joel Staker of the Central Coast Broadband Consortium estimated the project would cost between $20 million and $30 million, half of which the group was hoping the USDA would be capable of funding.

After quietly listening throughout the entire discussion, Mensah thanked the stakeholders for their time and commitment. She also said that the USDA no longer had grant money available for such projects, but a long-term loan was not out of the question.

“I can see that the scale of need and gaps in service are severe in your region,” Mensah said. “However, I am concerned that if government steps in to accomplish this we would be displacing private industry, which is something we are very careful not to do.”

This story illustrates the circular thinking and poor grasp of market economics impeding the construction of badly needed telecommunications infrastructure in the United States. Areas such as this one near California's Silicon Valley suffer from last mile infrastructure gaps due to a lack of investment by the private sector. Consequently, those adversely affected look to the public sector for help.

Public officials however are reluctant to provide funding, concerned as the USDA official quoted that doing so would deter private sector investment. However, if private sector interest in building last mile infrastructure was there, the "last mile problem" wouldn't exist in the first place and the locals wouldn't be looking to the federal government for assistance.

This story also points up the misguided thinking that once middle mile fiber is in place and anchor institutions such as government offices and schools are connected, the private sector will step in to build fiber to the premise to serve the rest of the community. That typically doesn't happen because the ROI doesn't pencil out quickly enough. That economic reality goes to the heart of the problem. Many people including public officials have difficulty understanding that market failure can and most often does occur for telecommunications infrastructure due to its high costs and lengthy wait for ROI.