California Legislators have turned on their constituents living in rural areas who want to participate in the 21st century online economy. What began as a move in the right direction – allocating substantial resources to funding high-speed Internet infrastructure – has become another opportunity to protect big incumbents. It’s twice as nice for Frontier and AT&T, because they will be paid big bucks to meet a low Internet access bar.

Discretionary Fund

Democrat Eduardo Garcia, the main author on Assembly Bill 1665, represents the Coachella Valley, a rural area in the southern area of the state near Palm Springs. Democrat Jim Wood coauthored with eight others. Wood represents coastal areas in the northern part of the state, which was passed during the eleventh hour of the 2017 legislative session. Wood’s district and region has obtained several grants from the California Advanced Services Fund (CASF) that have helped to improve local connectivity.

The CASF is much like CAF; both programs are funded through a surcharge on revenue collected by telecommunications carriers from subscribers. Since 2007, when California authorized the CASF, the legislature has amended the rules and requirements several times. Early on, CASF awards went primarily to smaller, local companies because large corporations such as AT&T and Frontier did not pursue the grants. Now that those behemoths have their eyes on CASF grants, they’ve found a way to push out the companies who need the funds and have shown that they want to provide better services to rural Californians.

AB 1665 allocates $300 million to Internet infrastructure investment and an additional $30 million to adoption and related local programs. Policy experts have criticized the legislation on several fronts. Consultant Steve Blum told CVIndependent:

The incumbents (large corporate ISPs) including AT&T, Frontier and the California Cable and Telecommunications Association jumped in and said, ‘We want the bill to be X, Y and Z.’ … Assemblymember Eduardo Garcia took it and started adding language that reflected the desires of these cable and telephone company incumbents.

“The bill went through three revisions, and each time, more perks were added for the incumbents. So as it’s written now, AB 1665 is going to put $300 million into a CASF infrastructure grant account and make it virtually impossible for independent projects to be funded. Essentially, then, it becomes a fund for AT&T and Frontier to use at their discretion.”

Sean McLaughlin from Access Humboldt said that AT&T and Frontier “‘perverted’ a simple funding bill ‘into a thoughtless gift to private interests’”.

De Facto Right Of First Refusal

If Governor Jerry Brown does not veto AB 1665, smaller ISPs will find themselves in a holding pattern, which will result in stalled investment in high-quality Internet access in rural California. Census blocks where AT&T and Frontier have accepted CAF II funding for deployment are not eligible for CASF grants under a provision in AB 1665. There is an exception: if AT&T or Frontier voluntarily informs the state before July 1, 2020, that they have completed deployment in those census blocks.

Connie Stewart from Redwood Coast Connect and executive director of the California Center for Rural Policy at Humboldt State University describes the situation:

Stewart said those companies have no incentive to do so. AT&T, she said, has 300,000 customers eligible for upgrades, but the company only needs to improve broadband for about half of them (151,000) to meet its obligations under the CAF II grant. And it doesn’t have to tell the state which half it plans to help. “So unless they voluntarily tell us they’re not going in” somewhere, she said, “no one can compete with them” — at least not until 2020 or later.

Slowing It Down

With another slap in the face, California lawmakers decided that rural premises don’t need the same speeds available to residents and businesses in urban areas. The FCC raised the definition of broadband to 25 Megabits per second (Mbps) download and 3 Mbps upload in 2015. When it came time to dispense CAF II funding, however, they allowed companies to deploy 10 Mbps download and 1 Mbps upload capacity infrastructure. The FCC compromised in response to lobbying from AT&T, Frontier, and other national companies who would only accept funding if they could deploy slow DSL.

AB 1665 repeats that mistake with an even darker twist. In census blocks that are now considered “unserved,” the minimum broadband speed will be 6 Mbps/1 Mbps. Such slow speeds don’t consider future needs and defeat the point of the legislation. Stewart told Lost Coast Outpost:

“With 10/1 [speeds] you’re not doing economic development. You’re not an architect; you’re not running a website business or a doctor’s office; your kids are not taking the competency test; your hotel is not offering open wireless to guests … .”

Economic development requires robust upload speeds. In addition to better job opportunities, rural areas need better upload speeds for telehealth when clinics are far away, distance learning when schools are too for daily travel, and K-12 education for homework assignments now completed online. Rural areas plagued by poor connectivity have struggled to maintain populations as residents and businesses have relocated for better Internet access. Precious CASF dollars would be better spent on connections that rural residents, businesses, and municipalities want and need to compete.

On To The Governor

AB 1665 passed with bipartisan support in both chambers with only eight nays in the Assembly and two nays in the Senate. It’s possible lawmakers didn’t understand the long-term consequences for rural constituents. Often policy makers are under extreme pressure from the typical army of corporate lobbyists, face tight deadlines, and pass legislation that has not been appropriately vetted. Now it’s up to Governor Brown. Experts hope he stops the state from adopting this poor policy that will send it in the wrong direction for many years to come.

Along with Stewart’s organization, other groups have expressed their opposition to AB 1665, some reaching out to the Governor asking him for a veto. The Central Coast Broadband Consortium wrote to Governor Brown:

The $300 million that AB 1665 puts into the California Advanced Services Fund would be effectively reserved for AT&T and Frontier Communications, to subsidize minimal upgrades that don’t meet California’s current broadband standard, that they would otherwise be obligated to finance themselves.

The North Bay/North Coast Broadband Consortium, originally funded by the California Public Utilities Commission, put in their letter:

Unfortunately, when the incumbents saw that they could not stop this bill, they were able to insert damaging amendments that skewed the original intent of the bill. As a result, if this bill is signed by you, our state broadband program will become a give-away to the large incumbent carriers. It will become virtually impossible for the independent providers to get funded through the state. And under this bill, 17 counties in northern California alone will be ineligible for CASF funding altogether. The loss of competition that will result from this bill will be extremely damaging to California’s future. [Emphasis their’s]

 Letter from the Central Coast Broadband Consortium to Governor Brown re AB 1665