Tag Archives: California

California’s Digital Equity Bill of Rights

In October, Governor Gavin Newsom signed legislative bill AB414, the Digital Equity Bill of Rights. This is an interesting law that guarantees that Californians have the right to:

  • Broadband that is sufficient and reliable and that can support basic digital needs like distance learning, telehealth, and remote working.
  • Ubiquitous broadband that is available everywhere in the State, including rural areas, tribal lands, and all low-income neighborhoods. The legislation requires public investments in broadband to connect entire communities and address digital redlining.
  • Affordable rates with broadband plans work for all Californians, regardless of geographic location or household income.
  • Access to opportunities to develop the needed digital skills.
  • Reliable broadband that ensures access to emergency services and functional emergency alert systems.
  • Broadband that provides access to educational opportunities, new job opportunities, and health care to improve the overall quality of life.
  • Broadband that supports economic prosperity by supporting all workers and employers, businesses and entrepreneurs, start-ups and enterprises, including agriculture.
  • Broadband that attracts capital investment to ensure that California attracts its fair share of global capital investment to support and enhance economic prosperity.
  • Broadband that supports innovation and research by connecting all research institutions.
  • Broadband that empowers and enables participation in democracy.

The legislation also explicitly prohibits ISPs from offering products across a broadband network that are intended to circumvent any of these principles.

That’s quite a list of requirements that now carry the weight of law – the list embodies just about everybody’s ideas of the benefits of broadband.

The big question for sweeping legislation of this scope is how the law translates into practical changes. I can think of several immediate consequences. First, any broadband grants or subsidies created by the State must be aimed at furthering these goals. The chances are that grants probably already did this to some extent, but after the passage of this law, the intent of grants will have to be more focused and specific.

More subtly, this legislation is a directive to the California Public Service Commission on how it should regulate broadband. Over time this will create some interesting regulatory battles as the CPUC tries to influence or force ISPs to adhere to these principles.

The historical framework for telecom regulation has been that the federal government can preempt states by claiming direct regulatory authority over an issue. However, States have always been free to tackle regulations that are not explicitly claimed by the federal government. We saw this in action when California implemented its own version of net neutrality after the Ajit Pai FCC decided to kill federal net neutrality.

This new legislation provides cover for the CPUC to consider creating regulations for a range of issues, such as prohibiting redlining, requiring affordable rates, mandating workable emergency alert systems, and the many other possible regulations that might be created under this new and broad umbrella. This law does not directly create any regulations, but it provides a framework for California regulators to tackle issues that they might have been cautious about tackling.

However, this legislation comes at about the same time as the FCC is likely going to consider new federal regulations for at least a few of the same issues. As the FCC does that, it probably supersedes anything the State will do – and I suspect that California won’t have any issue with federal regulations that cover the same issues.

Of course, it’s always possible that this kind of law won’t result in much change, but the history of California regulation would suggest that won’t happen. I have to imagine that State regulators and policymakers have been busy this fall figuring out how to turn this legislation into actionable regulations.

New Privacy Law in California

The State of California often leads the country in addressing regulatory issues. This makes sense since the State has a population of nearly 40 million and an economy that would be the fifth largest in the world if California were a separate country.

There was a new law enacted on the last day of the California Legislature was signed by Governor Gavin Newson this month. The bill makes it easier for people who want to scrub information about themselves from the Internet. The State passed privacy legislation in 2018 that gives people the right to ask companies to remove personal information from the Internet or databases. However, it turns out that the process of extracting one’s identity from the Internet is a lot of work, and in many cases is nearly impossible.

One of the main problems is that there is now a huge industry of companies that make a living selling and reselling personal data. One of the provisions of the California privacy law in 2018 was that data brokers had to register with the State if they sell information on California citizens. Over 500 companies are now registered as data brokers on the California Attorney General’s website. Some are well-known companies like credit bureaus, but most are companies that the public has never heard of. Many data brokers are specialists who work for marketing companies, politicians, large corporations, or law enforcement.

The new law is Senate Bill 362 – Data Broker Registration: Accessible Deletion Mechanism, and was sponsored by Senator Josh Becker of Menlo Park. The purpose of the law is to make it easier for folks to decouple from the Internet. The new law would allow consumers to make a single request to be removed from the Internet and databases – a web version of the Do Not Call List for telephone calling. Data brokers would have to respond quickly to such a request and would have to recheck their databases every month to make sure that personal information isn’t reposted.

Privacy advocates are calling this a landmark law that gives rights to the public to take control of their own data and to stop other companies from monetizing data about them.

Of course, the data brokers had a long list of reasons why the law shouldn’t be enacted. They say that this would slow down the process of people being verified when they go to a new website. They claim this would starve non-profits by cutting them off from databases of likely donors. They claim that it would make it harder for law enforcement to investigate people. They warn that people who ask to be removed from the lists won’t like the consequences.

Obviously, the legislators thought differently. In the discussions leading to the passage of the bill, there were discussions about how companies can now buy tracking data from our cellphones to keep track of where we are, what we do, and where we shop. They say that the databases allow people to stalk others, including the possibility that folks with strong political views can track their opponents.

Some data about all of us is already public. Things like voting registration, home ownership, and other interfaces with governments are public. What a lot of folks find troubling is that data brokers also buy information from credit card companies, ISPs, telephone companies, and other sources of information that most people do not want to be openly shared.

Generally, laws that start in California eventually get discussed and considered elsewhere. I’m guessing that this is something that the public will really like. I’ll be honest – just knowing that there are over 500 data brokers sharing our data makes me uneasy.

Filling a Regulatory Void

Earlier this year, the Ninth Circuit Court of Appeals upheld the net neutrality regulations enacted by California. The appeal case was filed on behalf of big ISPs by ACA Connect, CTIA, NCTA, and USTelecom.

The case stems from the California net naturality legislation passed in 2018. The California law was a direct reaction to the Ajit Pai FCC that not only killed federal net neutrality rules but also wiped out most federal regulation of broadband. The California legislation made it clear that the State doesn’t want ISPs to have an unfettered ability for bad behavior.

The California net neutrality rules are straightforward. The law applies to both landline and mobile broadband. Specifically, the California net neutrality law:

  • Prohibits ISPs from blocking lawful content.
  • Prohibits ISPs from impairing or degrading lawful Internet traffic except as is necessary for reasonable network management.
  • Prohibits ISPs from requiring compensation, monetary or otherwise, from edge providers (companies like Netflix or Google) for delivering Internet traffic or content.
  • Prohibits paid prioritization.
  • Prohibits zero-rating.
  • Prohibits interference with an end user’s ability to select content, applications, services, or devices.
  • Requires the full and accurate public disclosure of network management practices, performance, and clearly worded terms of service.
  • Prohibits ISPs from offering any product that evades any of the above prohibitions.

This is an interesting step in the battle to regulate ISPs. The big ISPs put a huge amount of money and effort into getting the FCC under Ajit Pai to kill federal broadband regulation. There has been a long-standing tradition in the telecom world that cedes that the FCC has the power to make federal rules, but states have always been free to regulate issues not mandated by the FCC. There have been some tussles over the years between states and the FCC, but courts have consistently sided with the FCC’s authority to make national rules. When the FCC walked away from most broadband regulation it created a regulatory void that tradition would imply that states are allowed to fill.

Losing this court case creates a huge dilemma for big ISPs. California is such a large part of the economy that it would be hard for ISPs to follow this law in California and not follow it elsewhere. It also seems likely that other states will now pass similar laws over the next few years, and that will create the worst possible nightmare for big ISPs – different regulations in different states.

I’ve always adhered to the belief that there is a regulatory pendulum. When regulations get too tough for a regulated industry, there is usually a big push to lighten the regulatory burden. But when the pendulum swings the other way and regulation gets too slack, there is inevitably a big push to put more restrictions on the industry being regulated. In this case, the ISPs and Ajit Pai went too far by eliminating most meaningful federal broadband regulation. There is nothing surprising about California and other states reacting to the lack of federal regulation.

With this court decision, there is nothing to stop a dozen states from creating net neutrality rules or tackling the other regulations that got voided by the Ajit Pai FCC. It’s also not hard to predict that the big ISPs will now push to create a watered-down federal version of net neutrality as a way to override a plethora of state rules.

I said earlier that this is a dilemma for large ISPs because it is extremely rare and not easy for a small ISP to violate net neutrality principles. The California rules will require ISPs to create more plain English terms of service, but otherwise, small ISPs in California will not likely be bothered by any of these rules.

For the big ISPs, this is a harsh reminder that the regulatory pendulum always swings back. It’s not hard to envision celebration behind the scenes at the big ISPs when they convinced the FCC to give them everything on their wish list. But when regulations get out of balance, there is inevitably pushback in the other direction.

There is still one piece of unfinished business in this case. There is still an open issue in the court examining if the California law impinges on interstate commerce. But the Ninth Circuit’s ruling made it clear that California is free to enforce its version of net neutrality within the state.

California’s New Privacy Law

If you use the web much you noticed a flurry of new privacy notices at the end of last year, either through pop-up notifications when you visited a website or by emails. These notifications were all due to the California Consumer Privacy Act, the new privacy laws that went into effect on January 1.

The law applies to companies that use the web and that have annual revenues over $25 million, companies that buy, sell or collect data on 50,000 or more consumers, and companies of any size that make more than 50% of their revenue by selling customer’s personal information.

The new law has a lot of requirements for web companies operating in California. Web companies must provide California consumers the ability to opt-out from having their personal information sold to others. Consumers must be given the option to have their data deleted. Consumers must be provided the opportunity to view the data collected about them. Consumers also must be shown the identity of third parties that have purchased their data.

The new law defines personal data broadly to include things like name, address, online identifiers, IP addresses, email addresses, purchasing history, geolocation data, audio/video data, biometric data, or any effort made to classify customers by personality type or trends.

The penalties for violating the law are severe. Consumers can sue web companies for up to $2,500 if they don’t offer these options by January 1 and up to $7,500 per violation if a company intentionally violates the law. It’s not too hard to anticipate the class action lawsuits already brewing that will result from this law.

While these new rules only apply to web companies and how they interact with California consumers, many web sites have taken the safe approach and are applying the new rules to everybody. That’s a safe approach because it’s difficult for web companies to always know where a web visitor is from, especially for people who use VPNs to hide their location.

California isn’t the only state with new privacy rules. Washington has new rules that are not as severe as the California ones but that still layer a lot of new requirements onto ISPs. New York is working on a privacy law that is said to be even tougher than the California one.

These state laws are only in place because Congress seems unable to pass a set of federal privacy rules. The issue has been debated over the last two years, and draft bills have been written, but no proposed law has come before the Senate for a vote, so the issue has gone nowhere. People are rightfully concerned that their data is being used and many people want the government to set some guidelines to protect them. The states are filling the legislative void in the absence of federal legislators taking action.

Web companies will face dilemmas with a proliferation of state privacy laws. Do they try to comply only with customers in a given state? What’s most concerning for web companies is that as more states pass privacy laws that some of the laws will inevitably conflict. There is also a big question about how these laws apply to foreign companies. The California law is written to apply to every company interfacing with California consumers. To complicate matters for web companies, European Union privacy rules are also tough and will inevitably conflict with parts of the California rules.

Like all new laws, this new law will be tested in court. The more interesting challenges will be how this law might impact companies from outside California. The $25 million of revenue is a low threshold and there are numerous companies across the country with revenues of that size that have likely done nothing in response to this law. If companies keep even the most rudimentary database of customer information, then theoretically they violate this law if anybody in the database resides in California. There are going to be lawyers trying to make a living from chasing companies that violate the law, and I doubt that it will take long for the lawsuit to surface.

Court Upholds Repeal of Net Neutrality

The DC Circuit Court of Appeals ruled on the last day of September that the FCC had the authority to kill Title II regulation and to repeal net neutrality. However, the ruling wasn’t entirely in the FCC’s favor. The agency was ordered to look again at how the repeal of Title II regulation affects public safety. In a more important ruling, the courts said that the FCC didn’t have the authority to stop states and municipalities from establishing their own rules for net neutrality.

This court was ruling on the appeal of the FCCs net neutrality order filed by Mozilla and joined by 22 states and a few other web companies like Reddit and Etsy. Those appeals centered on the FCC’s authority to kill Title II regulation and to hand broadband regulation to the Federal Trade Commission.

Net neutrality has been a roller coaster of an issue. Tom Wheeler’s FCC put the net neutrality rules in place in 2015. An appeal of that case got a court ruling that the FCC was within its power to implement net neutrality. After a change in administration, the Ajit Pai FCC killed net neutrality in 2017 by also killing Title II regulation. Now the courts have said that the FCC also has the authority to not regulate net neutrality.

The latest court order will set off another round of fighting about net neutrality. The FCC had quashed a law in California to introduce their version of net neutrality and this order effectively will allow those California rules to go into effect. That battle is far from over and there will be likely new appeals against the California rules and similar rules enacted in Washington. It wouldn’t be surprising to see other states enact rules in the coming year since the net neutrality issue is overwhelmingly popular with voters. It’s possibly the worst of all worlds for big ISPs if they have to follow different net neutrality rules in different states. I think they’d much prefer federal net neutrality rules rather than different rules in  a dozen states.

The reversal of net neutrality rules only went effect in June of 2018 and there have been no major violations of the old rules since then. The ISPs were likely waiting for the results of this court ruling and also are wary of a political and regulatory backlash if they start breaking net neutrality rules. The closest thing we had to a big issue was mentioned in this ruling. Verizon had cut off broadband for firemen in California who were working on wildfires after the firemen exceeded their monthly data caps. It turns out that wasn’t a net neutrality violation, but rather an enforcement issue on a corporate cellular account. But the press on that case was bad enough to prompt the courts to require the FCC to take another look at how ISPs treat public safety.

This issue is also far from over politically. Most of the democratic presidential candidates have come out in favor of net neutrality and if Democrats win the White House you can expect a pro-net neutrality chairman of the FCC. Chairman Pai believes that by killing Title II regulation that a future FCC will have a harder time putting the rules back in place. But the two court appeals have shown that the courts largely believe the FCC has the authority to implement or not implement net neutrality as they see fit.

While net neutrality is getting all of the press, the larger issue is that the FCC has washed its hands of broadband regulation. The US is the only major economy in the world to not regulate the broadband industry. This makes little sense in a country where are a large part of the country is still controlled by the cable/telco duopoly, which many argue is quickly becoming a cable monopoly. It’s easy to foresee bad behavior from the big ISPs if they aren’t regulated. We’ve seen the big ISPs increase broadband rates in the last few years and there is no regulatory authority in the country that can apply any brakes to the industry. The big ISPs are likely to demand more money out of Google, Facebook and the big web companies.

The FCC handed off the authority to regulate broadband to the Federal Trade Commission. That means practically no regulation because the FTC tackles a single corporation for bad behavior but does not establish permanent rules that apply to other similar businesses. The FTC might slam AT&T or Comcast from time to time, but that’s not likely to change the behavior of the rest of the industry very much.

There is only one clear path for dealing with net neutrality. Congress can stop future FCC actions and the ensuing lawsuits by passing a clear set of laws that either implements net neutrality or that forbids it. However, until there is a Congress and a White House willing to together implement such a law this is going to continue to bounce around.

The big ISPs and Chairman Pai argued that net neutrality was holding back broadband investments in the country – a claim that has no basis when looking at the numbers. However, there is definitely an impact in the industry from regulatory uncertainty, and nobody is benefitting from an environment where subsequent administrations alternately pass and repeal net neutrality. We need to resolve this once way or the other.

California’s Net Neutrality Bill

On the last day possible, Jerry Brown, the Governor of California passed SB 822, a state net neutrality bill into law. Within hours the US Justice Department filed a lawsuit against the California legislation.

As bill is relatively short and straightforward. The law applies to both landline and mobile broadband. The prohibitions against ISP behavior are detailed more clearly than in the old FCC net neutrality rules. Specifically, the California net neutrality law:

  • Prohibits ISPs from blocking lawful content;
  • Prohibits ISPs from impairing or degrading lawful Internet traffic except as is necessary for reasonable network management;
  • Prohibits ISPs from requiring compensation, monetary or otherwise, from edge providers (companies like Netflix or Facebook) for delivering Internet traffic or content;
  • Prohibits paid prioritization;
  • Prohibits zero-rating;
  • Prohibits interference with end user’s ability to select content, applications, services or devices;
  • Prohibits ISPs from offering any product that evades any of the above prohibitions;
  • Requires the full and accurate public disclosure of network management practices, performance, and clearly-worded terms of service.

As you would expect, the big ISPs in the state like AT&T and Comcast vehemently opposed the legislation and almost derailed its passage. Interestingly, the big edge providers like Google, Facebook and Netflix have remained quiet on the new law.

This is already shaping up to be one of the most interesting legal fights we’ve ever seen concerning the FCC. Chairman Pai and the other Republican FCC Commissioners immediately declared that the new law is invalid and that states can’t override FCC policy. The lawsuit filed by the Justice department says that California is “attempting to subvert the Federal Government’s deregulatory approach” to the Internet.

That’s where it gets interesting, because the FCC didn’t deregulate broadband. They instead took themselves out of the picture as a broadband regulator by cancelling Title II regulation of broadband, and passing regulation to the Federal Trade Commission.

The FCC could have chosen a different path, which would have been to continue to regulate broadband, but choosing to not require any specific regulatory requirements. That’s the tactic the agency has taken in the past when it decided to end some telephone regulations. The FCC still has the legal authority to re-regulate those telephone issues, but exercises its authority to not regulate – and maintaining the authority to authority is the key issue in this case. The FCC deliberately killed Title II regulation to make it harder for future a FCC to regulate broadband – but in doing so they literally wrote the agency out of the broadband regulation business.

The courts will have to decide if the federal government has any basis for overriding the California law. The FCC created a legal void when they walked away from regulating broadband. In regulatory terms broadband is not deregulated – it is not regulated, and while perhaps a subtle language difference, it’s a huge distinction.

The legal question is not if California is challenging the FCC’s authority to deregulate broadband, because the FCC themselves say they no longer have any authority over broadband. The courts will have to instead decide if a state can step into a regulatory void when the federal government walks away from regulating an industry. There are numerous lawyers saying that California has a strong legal position.

This is such a major decision that I’m guessing it’s going to have to eventually get resolved by the Supreme Court – and that’s going to take a while. The FCC created this situation by abrogating their responsibility to regulate broadband. It’s nearly unthinkable that one of the major industries in the country, operated mostly by a small number of giant companies should not be regulated. But the regulatory mess we have with broadband ultimately lies with Congress which has not passed an update to the telecom rules since 1996, when dial-up was our portal to the Internet.

A Tale of Two Grant Programs

It is the best of times, it is the worst of times (for broadband grants). The state of California just initiated a state broadband grant program that is likely to spend money without doing much actual good for rural broadband. This can be contrasted to the grant program in Minnesota that has already funded a lot of rural broadband networks in communities that would have otherwise not probably ever gotten it. Comparing the two programs shows that it’s not good enough to lobby for and get a state broadband grant program. It’s important to get the details right to make sure that any such program is effective and creates maximum public benefit.

The California grant program is called the California Advanced Broadband Services Fund (CASF) and was recently granted funding by Assembly act 1665 and signed into law by Governor Jerry Brown. The CASF program is not new, but this recent act changes some of the grant rules and infuses $100 million of new funding into the program.

Interestingly the new law takes effect immediately (which is not normal for this kind of legislation) and this leaves four existing open broadband grants under the older CASF open for question because while they were filed under the old rules it seems like they will be judged under the new rules.

The big problem with the grant program is that it allows first right of refusal to the incumbent telcos in any propose service area. Like with most of America, the rural areas with poor broadband service in California are mostly in areas where AT&T or Frontier Communications are the incumbent telephone company.

It is this right of refusal that is going kill any real value of the grant program. For example, somebody might file to build fiber to customers in a small town or farming area. The incumbent telephone company can block the grant application by filing one of their own. But they don’t have to match the speed or technology of the first grant and could instead ask to build something else, such as upgrading existing DSL or cellular broadband. This effectively gives the incumbent telcos veto power over any grant request.

I’ve been reading local California consultants like Steve Blum who expects the incumbents to kill most projects. It’s possible they might let a few through in areas that they don’t want to make investments, but their lobbyists were successful in changing this law to make it easy for them to grab all of the funding if they choose to do so.

This contrasts greatly with a grant program that is doing things the right way – the Border-to-Border grants in Minnesota. In that programs the legislature has set aside funding now for four straight years that provides grants up to a 50% matching for qualifying broadband projects. So far the state has provided over $85 million to the program.

The incumbent providers have the ability to challenge a grant request, but only on a very limited basis. One of the parameters used to judge a grant request is whether a particular area is unserved or underserved with broadband, with this determination made from broadband maps that were created using ISP-reported data. The incumbents can challenge a grant request if they believe that the proposed service area has better broadband than is claimed by the mapping process. They also can challenge a grant if they have near-term plans to build broadband that is fast or faster than that requested by a grant request.

Since most of the Minnesota grant requests are requesting money to build fiber directly to customers there have been no serious challenges by the incumbents. There have been a few challenges that disputed the available speeds in an area.

The net result of the Border-to-Border grants is that small towns and rural farm areas all over the state are getting a real permanent broadband solution due to the assistance provided by the grants. There are a number of independent telephone companies and small cable companies in the state that are competing with each other to grab new territories that are made feasible due to the grant program.

There is no telling if the Minnesota grant program will continue because it’s been funded during a period of state budget surpluses. It’s expected that the budget will be tighter in 2018 and we’ll have to see if they keep the grants going. But this has been, by far, the most effective state broadband grant program in the country. Other states like Ohio are looking to use the Minnesota model in developing a new grant program.

It’s my understanding that the California grant legislation started out with good intentions but got hijacked by the ever-present telecom lobbyists in the legislature. The original sponsors of the grant asked the governor to veto the bill, but for some reason it’s gone ahead. Instead of an effective grant program that will help rural areas get real broadband, the California CASF is instead going to be a state version of the FCC’s CAF II program that also funnel money to the large incumbent telcos to make marginal improvements to broadband. The new CASF is one of the worst uses of tax dollars that I can imagine – it will enrich the bottom line of the telcos without making any significant improvements in rural broadband.

Challenging the Net Neutrality Order

It looks like there are going to be a number of challenges to the FCC’s recent repeal of Title II regulation and net neutrality. Appealing FCC decisions is normal for controversial rulings and the big telcos and cable companies have routinely challenged almost every FCC decision they haven’t liked.

The FCC voted to repeal Title II regulation on December 14th, but just released the order on Friday. As expected, there were some wording changes made that the FCC hopes will help during the expected legal challenges. The time clock for any challenges will start when the order is published in the Federal Register. The FCC order goes into effect 60 days later and any court challenges must be filed within that two-month window.

When FCC rules are challenged, it’s not unusual for a court to put a stay on some parts, or even make an entire new ruling until the legal issues are sorted out. This happened a few years back when Verizon challenged the FCC’s first net neutrality order and the courts stayed all of the important parts of that ruling before eventually ruling that the FCC didn’t have the authority to make the rules as they did.

It appears that challenges are going to come from a number of different directions. First, there are states that have said they will challenge on procedural issues. This is a tactic often taken by the big ISPs, and generally if the courts agree that the FCC didn’t follow the right procedures in this docket they will then rule that the agency has to start the whole process over again. That alone would not change the outcome of the proceeding, but it could add another year until the FCC’s order goes into effect. I wonder if this kind of delay is meaningful because it’s likely that this FCC won’t enforce any net neutrality ‘violations’ during a reboot of the rules process.

The Attorney General of New York has an interesting appeal tactic. He is claiming that the FCC ignored the fact that there were millions of fake comments made in the docket – some for and others against the proposed rules. New York is suing the FCC over the issue and expects some other states to join in the lawsuit. This would be a unique procedural challenge and would be another way to have to reset and start the whole process over again.

Legislators in California, New York and Washington are planning to tackle the issue in a different way. Legislators are proposing to create a set of state net neutrality laws that basically mimic what was just repealed by the FCC. These states would not be directly challenging the FCC order and it would require some third party like a big ISP to challenge the state laws through the court system. Such a process might take a long time since it might have to go through several layers of courts, and might even end up at the US Supreme Court. State’s rights have been a common way to challenge FCC rulings ad there have been numerous fights between states and the FCC any time that Congress has created ambiguity in telecom laws.

The hope of these state legislators is that the state rules will be allowed to stand. They know that if ISPs and other tech companies have to follow net neutrality laws in large states like California that they are more likely to follow them in the whole country. A similar State / Federal battle is also underway on a different issue and twenty states are considering enactment of state privacy laws to replace ones preempted by Congress.

Another challenge to the FCC’s decision will come from democrats in Congress who are trying to use the Congressional Review Act (CRA) rules to challenge the FCC’s ruling. This is a set of rules that allow Congress to reverse rulings from administrative agencies like the FCC with a simple majority and has been used effectively recently by republicans in a number of ways. With a 51-49 Republican majority it would only take a few republican defections to maintain at least some aspects of net neutrality. The make-up of the Congress might also change with the elections later this year – meaning that Congress might change the rules in the middle of all of the various appeals.

One thing is for certain – this FCC ruling is not going to be easily implemented and I’m guessing that during the next sixty days we will see a number of creative challenges used to appeal the FCC’s ruling. It could easily be a few years before these issues are resolved through the courts.

California Lowers the Definition of Broadband

California Governor Jerry Brown just signed a bill into law that lowers the official definition of broadband in the state while also providing state funding to upgrade rural broadband. The bill, AB 1665, goes into effect immediately. It lowers the definition of broadband in the state to 10 Mbps down and 1 Mbps up. But it goes even further and lowers the definition of an unserved customer to somebody who can’t get speeds of 6 Mbps and 1 Mbps up.

The bill reinstates a telecom tax that will provide a $300 million fund intended to be used to improve rural broadband. The California press believes that the fund will largely go to AT&T and Frontier, which both lobbied hard for the bill. My reading of the bill is that the incumbent carriers have first shot at the funding and anybody else only gets it when they don’t take it. In practical terms, assuming those two companies take the funding, almost none of this money would be made available to anybody who wants to build something faster in unserved areas.

We know that state funding done the right way can be a tremendous boon to broadband expansion. Consider, for example, the Minnesota DEED grants that have coaxed dozens of telecom providers to expand fiber networks deep into unserved and underserved areas of the state. It’s commonly understood that it can be hard to justify bringing fiber to rural areas, but some grant funding can be an effective tool to attract private money to fund the rest.

We also understand today that there are huge economic benefits for areas that have good broadband. The farmers in Minnesota that benefit from the grant program there are going to have a competitive advantage over farmers elsewhere that have little or no broadband. I’ve been looking at the IOT and other fiber-based technologies on the horizon for farming that are going to vastly increase productivity.

We also know that having good broadband benefits the small communities in rural America as well. These communities have been experiencing brain drain and economic flight as people are forced to go to metropolitan areas to find work. But broadband opens up work-at-home opportunities that ought to make it possible for families to thrive in rural America.

This move by California is a poor decision on many levels. First, it funnels money to the incumbent providers to make tiny tweaks to the existing networks so that existing broadband is just a little better. The new 10/1 Mbps broadband definition is also nothing more than a legislative definition of broadband and has no relevance in the real world. Many homes need more broadband than that, and as household broadband demand grows, a 10/1 Mbps connection will become inadequate for every home.

Another reason this is a bad idea is that the incumbents there are already making improvements to increase broadband to the 10/1 Mbps level. AT&T took $361.4 million of FCC CAF II funding that is to be used to upgrade broadband to 141,500 homes in California. That works out to $2,554 per home passed. Frontier took another $36.6 million, or $2,853 per home passed to improve broadband to 12,800 homes. That federal money requires that speeds increase to the 10/1 Mbps speed. This state funding will be an additive to those large federal amounts that these two companies have already received from the government.

AT&T has also already said that it plans to meet its CAF II obligations by upgrading rural cellular speeds. Frontier is mostly going to improve DSL on ancient copper and also is now looking at using point-to-point wireless technology to meet the CAF II obligations.

I don’t know how much it’s going to cost these companies to upgrade their rural customers to 10/1 Mbps. But the federal funding might be enough to pay for all of it. Adding the state funding means it’s likely that these two companies will make an immediate profit from upgrading rural customers to barely adequate broadband speeds. As we’ve seen many times in the past, this bill is good evidence that the big companies get value out of their lobbying efforts. The losers in all of this are the homes that won’t get anything faster than CAF II broadband. This $300M could have been used as matching grants to bring much faster broadband to many of these homes.

 

State Contributions for Broadband

DEEDThe FCC has documented very well the lack of rural broadband. They gave out a tiny handful of ‘experimental’ broadband grants that were supposedly going to be the precursor to a large federal broadband grant program funded by the Universal Service Fund. But as usually happens with these things, politics took over and $9 billion was instead awarded through the CAF II program to the largest telcos to expand rural broadband to a paltry 10 Mbps download and 1 Mbps upload.

And this is a shame because $9 billion could have been used as seed money in matching grants to build a whole lot of last mile broadband. This money could have seeded perhaps $40 billion to $50 billion of fiber in rural areas which would have meant that a lot of areas would get real broadband solutions. What’s probably the saddest is that the CAF II program lasts for six years, so that money is going to be tied up for a long time.

There doesn’t look to be any other move to provide federal funding for fiber, but there are some states that have been looking at the issue. But, as you might imagine, politics comes into play in these efforts as well. There aren’t a whole lot of state programs that are trying to fund fiber, but consider these two that are:

Minnesota crated the Border-to-Border Broadband Development Grant Program, created by the Legislature in 2014 and administered by the Department of Employment and Economic Development (DEED). The grant provides dollar-for-dollar matching for constructing last mile fiber, although the money is likely to go to projects that contribute a higher percentage of the cost of a project. Minnesota is one of the lucky states that is running a budget surplus and this seemed like a good way to spend some of that money. There are numerous rural communities in the state that are actively seeking a broadband solution, so there is no lack of potential projects to be funded.

This was created in the 2014 legislature and the original bill asked to fund this with $100 million. The cable companies and carriers lobbied heavily against this funding, not wanting to have the state fund any competitors – although the funding was supposed to be used in areas where there is no broadband today. And the carriers were successful and chopped the grant pool down to $20 million.

When that money was awarded last year it went almost entirely to independent telephone companies and the only non-incumbent recipient of the grant was a new start-up cooperative. There were numerous applications from municipalities, but none were funded. The governor has recently recommended funding $200 million to this fund over the next two years, and we’ll have to wait and see how much of this makes it through the political gauntlet.

California has a program called the California Advanced Services Fund. Attempts to create funds within that program to build rural fiber have also been met with stiff opposition from the large incumbents.

Recently a bill was introduced to add $350 million to that fund, $150 million of which would go directly towards building last mile fiber in the form of matching grants. Past attempts to get infrastructure funding failed. The latest proposal has made it clear that any funding would only go to rural areas (in the last proposal it could have gone to urban areas). The new funding also has a significant pot of money allocated to broadband adoption efforts and for bringing broadband to public housing. Proponents of the bill are hoping that this will be more acceptable to the opponents, but if the past is any indicator the incumbents don’t want any competition of any kind.

It’s certainly laudable for the states to tackle broadband. There are obviously not going to be any federal programs aimed at the problem for now and anybody who understands broadband knows that help is needed in getting broadband to rural areas. But it seems that every attempt by states to tackle the problem gets killed or whittled down to the bare bones during the political process.