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On July 12, 2018, the California Public Utilities Commission held its regularly scheduled agenda meeting in San Francisco. The principal items of interest were the Commission’s unanimous approval of California Advanced Services Fund grants for two Frontier California, Inc. fiber network projects in the communities of Lytle Creek and Desert Shores. The Commission also instituted a rulemaking on the affordability impacts of utility rate requests and Commission proceedings. All Legislative items on the agenda were held until future meetings. We provide further information about the matters covered at the meeting of interest to telecommunications providers below.

REGULAR AND CONSENT AGENDA ITEMS

Frontier’s CASF Grant in Lytle Creek Approved (Item 14, Adopted on Regular Agenda by 5-0 Vote)

The Commission unanimously approved $1,458,886 in grant funding from the California Advanced Services Fund (“CASF”) Broadband Infrastructure Grant Account for Frontier California, Inc. (“Frontier”)’s construction of a last-mile fiber-to-the-home (“FTTH”) network in the community of Lytle Creek, located in San Bernardino County. This project will make broadband (1 Gbps download/1Gbps upload speeds) with VoIP capabilities available to 339 CASF-eligible households, as well as to the U.S. Forest Service Lytle Creek Ranger Station, the Lytle Creek Community Center, the Lytle Creek Post Office, and several small businesses. The CASF Grant Application did not face any opposition and compares favorably to previously approved FTTH projects in terms of its relatively low cost per household ($4,304/household) and relatively high speeds. Communications Division Staff (“Staff”) granted funding at an 80% level, despite Frontier’s application for 100% level funding. Pursuant to Public Utilities Code Section 281(f) 100% grant proposals are now permitted provided that specified criteria are met.

To determine the appropriate level of funding for this grant, Staff relied upon statutory factors contained in Pub. Util. Code sections 281(f)(13) and 281(b)(2)(B)(i), and existing CASF rules memorialized in D.12-02-015, Appendix 1, Section VIII (Scoring Criteria), and considered the legislative committee’s recommendation to offer over 70% grant funding level, potentially up to 100% when warranted, to achieve the goals of the CASF program . Staff ultimately concluded that this project should qualify for 60% “Eligible Project Funding” (for an area where broadband is available, but no wireline or wireless facilities-based provider offers service at speeds that meet CASF standards) and 20% “Funding Level Factor Consideration” (10% for the location and inaccessibility of the area; another 10% for the project’s use of existing infrastructure to upgrade and deploy broadband), to reach the conclusion of 80% CASF funding. Notably, this project did not qualify for the remaining 10% “significant contribution to achievement of the [CASF] goal” adder or the 10% “Service Level Preference” adder, which “[g]ive[s] preference to projects in areas where Internet connectivity is available only through dial-up service that are not served by any form of wireless or wireless facility-based broadband service or areas with no Internet connectivity.” Lytle Creek did not qualify for the CASF goal adder because this community did not appear in either of two Commission documents establishing priority areas for broadband infrastructure deployment, Resolution T-17443 and the Staff High-Impact Analysis. Lytle Creek did not qualify for the Service Level Preference adder because nearly all of the households located within the project area were found to have at least some mobile data service.

The Commission also granted Frontier’s request that Energy Division send CEQA invoices reflecting all work related to the Proponent’s Environmental Assessment (“PEA”) directly to the CASF Infrastructure Grant Account, effectively bypassing CASF’s current Application Requirements and Guidelines, which require applicants to prepare and submit the PEA at their own cost prior to receipt of the first 25% installment payment from the CASF fund. As a result, the CASF will fund directly, out of this grant amount, costs related to the development and issuance of the PEA. The CASF will directly pay for the project’s CEQA costs, but those costs will be identified as costs associated with Frontier’s grant and will have no effect on the percentage split of total project costs between CASF and Frontier.

At the voting meeting, CASF program manager Rob Wullenjohn introduced the item and fielded questions from the Commissioners on the CASF projects addressed in Items 14 and 15. He characterized this project as a worthy, low-cost project. He also noted the superiority of the facilities to be installed via the project, as it is focused on installation of high-capacity fiber. Wullenjohn suggested that this difference could be due to the possibility of 100% funding for fiber to the home under the new CASF guidelines following AB 1665. When asked by Commissioner Rechtschaffen how this project was able to achieve half the cost of other CASF projects, Wullenjohn’s staff explained that Frontier already owned infrastructure in the area that would not need to be built to support the deployment of fiber and that larger companies like Frontier tend to have more in-house employees to dedicate to these types of projects. Commissioner Peterman noted Frontier’s participation in CASF, which she observed was not common for large, national carriers. She also noted the adequacy of Frontier’s returns on this project and the soundness of staff’s funding analysis.

The Adopted Resolution (T-17613) is available at the following link: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M218/K220/218220250.PDF

Frontier’s CASF Grant in Desert Shores Approved (Item 15, Adopted on Regular Agenda by 5-0 Vote)

The Commission unanimously approved a $1,262,567 CASF grant to Frontier California, Inc. for the Desert Shores last-mile broadband project. This project will provide gigabit-capacity infrastructure to the unserved communities of Desert Shores and Salton Sea Beach in Imperial County. Spread over 2.63 square miles in the unincorporated communities of Desert Shores and Salton Sea Beach, the Desert Shores Project fiber optic network will enable gigabit-capable Internet service access to 596 eligible households, at a cost of $2,118 per household, as well as VoIP services and a hotspot to at least one community anchor institution. CASF Staff’s White Paper previously identified this area as a “High Impact area” (areas with sufficient potential subscribers to maintain a network, relatively high household density, the presence of unserved households, the lack of significant competition and the lack of challenging terrain that would drive up development costs) for CASF funding. Frontier requested 100% funding for this project, as permitted under the new CASF rules. The Communications Division Staff (“Staff”) recommended 90 percent funding applying the existing CASF program rules and the new Section 281 statutory criteria. In line with Staff’s recommendation, this resolution provides the 60 percentage point “Eligible Project” funding and an additional 30 percentage point “Funding Level Factor Consideration” funding-10 percentage points each for “location and accessibility of the area, the existence of communication facilities that may be upgraded to deploy broadband, and whether the project makes a significant contribution to the achievement of the [CASF] goal.” Similar to the Lytle Creek project, Desert Shores did not qualify for the 10% Service Level Preference adder, which would apply only if mobile-based data service is unavailable. The funding granted through this resolution was adjusted downward in accordance with Staff’s recommendation based on a reduction in the number of designated occupied households from Frontier’s stated 791 to 596, consistent with the census data on the Broadband Map, thereby eliminating $76,050 of Optical Network Terminals costs.

During the voting meeting, CASF program manager Rob Wullenjohn noted that although Desert Shores has mobile broadband service above served speeds, Desert Shores is still eligible for CASF funding because D.16-12-025, the Commission’s decision in the “competition” proceeding, determined that mobile broadband is not a substitute for wireline broadband. Wullenjohn alerted the Commission that given the vast mobile service coverage in California, CASF broadband projects, such as Lytle Creek and Desert Shores, are highly unlikely to attain the 10% “Service Level Preference” adder under the current criteria.

The Adopted Resolution (T-17614) is available at the following link: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M218/K346/218346717.PDF

New Rulemaking Initiated to Assess the Affordability Impacts of Utility Rate Requests in Commission Proceedings (Item 49, Adopted on Regular Agenda by 5-0 Vote)

The Commission opened a rulemaking proceeding to develop a set of common understandings and tools to assess the impacts of individual commission proceedings and rate cases on affordability from the customer perspective. This Order Instituting Rulemaking (“OIR”) reflects the Commission’s desire to systematically address affordability, as well as recent trends that may exert long-term impacts on rates (for example, flattening or declining utility sales for landline and energy services). This OIR lays out two goals: (1) develop a framework and principles to identify and define affordability criteria for all utility services under CPUC jurisdiction; and (2) develop the methodologies, data sources, and processes necessary to comprehensively assess the impacts on affordability of individual CPUC proceedings and utility rate requests. While the Commission has considered issues of affordability in various proceedings, this effort has largely been driven by case-by-case determinations. This OIR aims to provide a working definition of what is meant by “affordable,” as well as a framework to consistently and comprehensively analyze affordability issues across a broad spectrum of individual regulatory proceedings involving the water, telecommunications, electricity, and gas utilities. Furthermore, this OIR seeks to broaden the Commission’s affordability metrics to address topics like affordability for populations at risk and service accessibility. This proceeding will also examine affordability in low-income programs like the California Lifeline Program and California Alternate Rates for Energy; however, it will not create new affordability programs, evaluate the effectiveness of current programs, or set new rates.

The adopted Order Instituting Rulemaking (R. 18-07-006) is available at: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M218/K186/218186836.PDF

Commission Comments Authorized In Response to NTIA Requests for Information Regarding Broadband Mapping Efforts (Item 50, Adopted on Consent Agenda)

The Commission approved the proposal of Communications Division (“CD”) and the Legal Division that the Commission file comments in response to the National Telecommunications and Industry Agency (“NTIA”)’s request for comment on how to improve the accuracy of broadband data the Federal Communications Commission (FCC) collects semi-annually from service providers. The Commission has experience collecting, mapping, and analyzing broadband data, and the comments will be designed to share its best practices with NTIA to improve map accuracy on the national level. Many of CD’s suggestions echo comments the Commission has already filed with the FCC on the same subject. The comments were submitted July 16, 2018, and a copy of those comments is provided at this link: https://www.ntia.doc.gov/files/ntia/publications/cal_cpuc_comments.pdf

The Communication Division Memorandum detailing its recommendations is available at the following link: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M217/K576/217576938.PDF

New Rulemaking Initiated to Address Electricity and Gas Disconnections (Item 44, Adopted on Regular Agenda by 5-0 Vote)

The Commission opened this Order Instituting Rulemaking (“OIR”) pursuant to Senate Bill 598 to address disconnection rates across California’s electric and gas investor-owned utilities and adopt policies and rules that will reduce disconnections and improve the processes and outcomes for reconnections. This OIR seeks to understand the root causes of (or events that correlate with) residential customer disconnections while evaluating the rules, processes and procedures regarding disconnections and reconnections at the statewide and individual utility levels. Although this proceeding is focused on the energy sector, some of the overall observations about consumer trends that come out of the proceeding may have ramifications for all utility sectors, including telecommunications.

The adopted Order Instituting Rulemaking (R. 18-07-005) is available at: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M218/K029/218029788.PDF

De-Energization Reasonableness, Notification, Mitigation and Reporting Requirements in Decision 12-04-024 Extended to All Electric Investor Owned Utilities (Item 6, Adopted on Consent Agenda)

The Commission extended the de-energization reasonableness, public notification, mitigation and reporting requirements in Decision (“D.”) 12-04-024 to all electric investor owned utilities (“IOUs”) and added new requirements. D.12-04-024 granted authority to San Diego Gas & Electric Company (“SDG&E”) to shut off power in emergency situations when necessary to protect public safety, provided guidance on SDG&E’s authority to shut off power under the Public Utilities Code, and established factors the Commission may consider to determine whether or not a decision by SDG&E to shut off power was reasonable. D.12-04-025 required SDG&E to make all feasible and appropriate attempts to notify customers of a de-energization event prior to performing de-energization and required notification to the Safety and Enforcement Division (“SED”) as soon as practicable after a decision to de-energize facilities and within 12 hours after the last service is restored.

The adopted resolution is available at the following link: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M218/K186/218186823.PDF

OpenFiber Inc.’s CPCN Application Approved (Item 33, Adopted on Consent Agenda)

The Commission granted OpenFiber Inc. (“OpenFiber”) a Certificate of Public Convenience and Necessity to provide full facilities-based and resold competitive local exchange telecommunication services in the territories of AT&T California, Frontier Communications of California, and Consolidated Communications, as well as full facilities-based and resold interexchange telecommunication services throughout California. In response to OpenFiber’s request for detariffed status in accordance with Industry Rule 5 of General Order 96-B, the Commission also exempted OpenFiber from the tariff filing requirement, as long as it complies with the consumer protection rules identified in D.98-08-031.

The adopted decision (D. 18-07-016) is available at the following link: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M217/K777/217777173.PDF

SIGNIFICANT HELD AND WITHDRAWN ITEMS

Proposed Decision to Grant Southern California Edison Company Lease of Fiber Optic Cables to Verizon Wireless and Allocates Revenues 25/75 to Shareholders/Ratepayers(Item 2, Held to August 9, 2018 Meeting pursuant to Public Utilities Code 311(e) requirements)

The Commission held a Proposed Decision (“PD”) that would grant authority to Southern California Edison Company (“SCE”) to lease fiber optic cables that it owns, operates and maintains to Verizon Wireless. Although SCE seeks a 90/10 shareholders-to-ratepayers split of the revenue from the Master Lease Agreement of this deal, the Proposed Decision would approve the Master Lease Agreement subject to a 25/75 shareholders-to-ratepayers revenue sharing allocation of revenues. Furthermore, this PD directs SCE to submit Lease Route Orders submitted by Verizon Wireless pursuant to the Master Lease Agreement to the Communications Division by informational letter in order to ensure safety, reliability, and competitive access.

The latest version of the Proposed Decision is available at the following link: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M216/K399/216399737.PDF

Proposed Fines for Telephone Service Providers that Failed to Meet Required Services Quality Performance Standards in Year 2017 Pursuant to General Order 133-D (Item 17, Held by Staff)

The Commission held this draft resolution until July 26, 2018. If adopted, it would approve General Order (“G.O.”) 133-D fines for 2017 totaling $13,061 from AT&T Corporation, Frontier Communications of the Southwest, Foresthill Telephone, and Volcano Telephone for failure to meet certain standards under G.O. 133-D. G.O. 133-D added fines to the established reporting requirements for communications providers, referred to as “Minimum Standard Reporting Levels,” in the areas of installation interval, installation commitments, customer trouble report, out of service repair interval, and answer time for facilities-based wireline telephone carriers. When the performance of a carrier subject to the reporting requirement falls below the Minimum Standard Reporting Levels for three consecutive months, fines are imposed pursuant to a schedule adjusted for the relative size of the carrier and the length of the time service fell below the reporting standard. The draft resolution would find that the Companies met the Customer Trouble Reports, Installation Interval, and Installation Commitments standards in 2017, but failed to meet the standards for Out of Service Repair Intervals, and, in some cases, Answer Time requirements. Consequently, this resolution would require the payment of fines of $7,875 from AT&T, $3,636 from Frontier, $500 from Foresthill, and $1,050 from Volcano.

The latest version of the proposed resolution is available at the following link: http://docs.cpuc.ca.gov/PublishedDocs/Published/G000/M215/K920/215920407.PDF

Proposed Decision to Dismiss California Cable & Telecommunications Association (“CCTA”)’s Complaint Against San Diego Gas & Electric Company (“SDG&E”) Concerning Their Pole Attachment Fee Dispute (Item 13, Held by Commissioner Rechtschaffen for Further Review)

The Commission held a Presiding Officer’s Decision (“POD”) that would dismiss California Cable & Telecommunications Association (“CCTA”)’s complaint against San Diego Gas & Electric Company (“SDG&E”) seeking Commission resolution of their dispute regarding pole attachment fees because the complaint process is an improper vehicle for resolving such dispute. CCTA and SDG&E entered into a settlement agreement that established a pole rate schedule for the years 2009-2016 that culminated in a 2016 attachment rate of $16.35. On September 16, 2016, SDG&E notified CCTA of a rate increase to $30.58. The parties could not agree on a 2017 attachment rate, and CCTA brought this complaint, pursuant to Section 767.5(c) to resolve the impasse. The POD would grant SDG&E’s motion to dismiss on the basis that the ROW decision’s expedited dispute resolution procedure, which resolves disputes relating to access to public utility right of way, rather than a complaint, is the appropriate vehicle to resolve this dispute.

The latest version of the this Draft POD is available here: http://docs.cpuc.ca.gov/PublishedDocs/Efile/g000/M212/K177/212177369.PDF

Legislative Items: Assembly Bills and Senate Bills (Items 53-58, Held by Staff)

Commission Staff held all legislative items on the May 31st agenda. Notable items include:

  • AB 1553 (Quirk-Silva, requiring utilities with gross annual revenues exceeding $25 million to pay an undisputed invoice by its required payment date, and penalties for failure to do so);
  • AB 1959 (Wood, extension of CHCF-A and CHCF-B program requirements to January 1, 2023);
  • AB 1999 (Chau, prohibiting a local agency authorized to provide broadband Internet access service in the state from taking certain actions regarding the access of Internet content by end users);
  • AB 2104 (Lackey, California Advanced Services Fund); AB 2148 (Chavez, extending the public review and comment period for CPUC decisions and resolutions from 30 days to 45 days); AB 2431 (Weber, intervenor compensation to small school districts for participating in the GRCs of electrical or gas corporations);
  • AB 2537 (Carillo, repealing language creating the Universal Lifeline Telephone Service Trust Administrative Committee and establishing in its place the Lifeline Oversight Board to advise the CPUC on the effective development, implementation, and administration of the lifeline program);
  • AB 2652 (Quirk, pushing back the Commission’s deadline to adopt a portability freeze rule for the lifeline program from January 15, 2017 to January 15, 2019, and to require the Commission to adopt a rule by June 30, 2019 to improve the cost-effectiveness of delivering the lifeline program);
  • AB 2910 (Wood, requiring the Commission to submit an annual natural disaster report on telecommunications service systems);
  • AB 2962 (Nazarian, nonsubstantive changes to the provision specifying conditions for renewal of a franchise under the Digital Infrastructure and Video Competition Act of 2006);
  • AB 3003 (Irwin, nonsubstantive revision of the definition of “broadband” in the Digital Infrastructure and Video Competition Act of 2006);
  • AB 3111 (Garcia; bar from lifeline service eligibility any member of a group of individuals who are living together with a lifeline subscriber at the same address and as one economic unit; allow multiple lifeline subscribers to maintain the same principal place of residence);
  • SB 460 (De Leon, prohibit specified actions by an Internet service provider that provides broadband Internet access service, and make a violation of those prohibition subject to remedies available pursuant to the act; prohibit a state agency from contracting with an Internet service provider for the provision of broadband Internet access service unless that provider certifies under penalty of perjury that it will not engage in specified activities);
  • SB 822 (Wiener, prohibit an Internet service provider from offering different levels of quality of service to end users as part of broadband Internet service unless specified conditions are met);
  • SB 1028 (Hill, require the Commission to evaluate the full effect of the enactment of federal House Resolution 1 upon the expenses and tax liabilities incurred by public utilities for payment of federal taxes; direct the Commission to adjust the rates of the utility to reflect the changes in projected expenses and tax liabilities, if material impact is found);
  • SB 1410 (Morrell, authorize the Commission to inspect and audit the books and records of utilities in accordance with the Commission authorized general rate case cycle, if that cycle provides for a rate case once every five years or less.

COMMISSIONER REPORTS

Commissioner Rechtschaffen – Reappointment of Robert Castaneda and Charlie Toledo to LIOB

During the Commissioner Reports segment of the voting meeting, Commissioner Rechtschaffen reported that the Low Income Oversight Board recently re-appointed Robert Castaneda and Charlie Toledo, two members of its board whose prior terms expired in June. Castaneda and Toledo were reappointed after the Board conducted a public solicitation of candidate applications. Another appointment on the Board will open in October and the Board will solicit public applications from interested members of the public once again.

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