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On March 27, 2014, the Commission held its regularly-scheduled agenda meeting.  On the consent agenda, staff was authorized to prepare comments to submit to the FCC regarding the rural broadband experiments and Time Warner Cable was designated as an ETC in AT&T, Verizon, and Frontier’s service territories.  During the meeting, the Commission discussed and held the Draft Resolution that would approve CASF funding for 60% of the project costs of Sunesys’ Central Coast Middle Mile project, and the Alternate that would grant and additional $3.6 million in order to fund 90% of the project cost, which is beyond the funding limits set by the CASF program rules.  These and other items of interest are discussed in further detail below:
 
CONSENT AGENDA
 
Staff Authorized to File Comments with the FCC Regarding Rural Broadband Experiments (Item 29, authorized on consent) – This item authorizes staff to submit comments in response to the Federal Communications Commission’s (“FCC”) Further Notice of Proposed Rulemaking (“FNPR”).  The FNPR seeks input on specific elements of the FCC’s initiative to establish a diverse set of rural broadband experiments and data collection processes with reference to specific broadband deployment projects that will allow the FCC to evaluate how customers are affected by transitions from circuit-switched to IP networks. 
 
The comments will address the National Telecommunications Carriers Association’s (“NTCA”) suggestion that the FCC should provide incumbent rate of return (“ROR”) carriers an initial window to submit applications for experiments in advance of soliciting applications from other parties.  The comments will also address NTCA’s recommendation that the  FCC allow incumbent ROR carriers the opportunity to undertake the same deployment proposed by a non-incumbent for the same or lesser amount of support. 
 
The comments would provide support for the FCC’s proposed criteria for selecting experiments to receive CAF subsidies, as follows: (1) cost effectiveness; (2) extent to which the applicant proposes to build robust, scalable networks; (3) the extent to which applicants propose innovative strategies to leverage non-Federal governmental sources of funding; and (4) whether applicants propose to offer high-capacity connectivity to Tribal lands.  The comments would also propose a fifth criterion, suggesting that the FCC should take into account the proportion of a State’s contributions to the Universal Service Fund.  Moreover, the comments would urge the FCC to ensure geographical and technological diversity by allowing the FCC the flexibility to deviate from the scoring system. 
 
The comments would express support for the FCC’s proposal to require applicants to include in their broadband experiment proposals the potential for deployment to anchor institutions.  The Commission would specifically recommend that the applicant identify the number of health care providers, schools, libraries, and other similar organizations that are physically located within the eligible census blocks.  Finally, the comments would express support the proposal to deploy rural experiments based on census block level rather than the tract level, noting that census tracks in rural areas of California are very large. 
 
A copy of the Staff Memorandum underlying this item is available at the following link
 
Time Warner Designated as an ETC in AT&T, Verizon, and Frontier Territories (Item 23, adopted on consent) – This Decision approves Time Warner Cable Information Services (California), LLC’s (“Time Warner California”) application for ETC designation in the areas served by AT&T, Verizon, and Frontier.  The Decision concludes that it is appropriate to grant Time Warner Cable’s request, explaining that it satisfies both federal and state requirements as a common carrier with a Commission-issued CPCN and because its service as an ETC will be consistent with the public interest.  The Decision also explains that “[a]lthough Time Warner California provides telecommunication service with VOIP [sic] technology, Time Warner California agrees that it is a common carrier by virtue of its CPCN and by offering services on a nondiscriminatory basis . . . Time Warner California is subject to the jurisdiction of [the] Commission, and [the] Commission may grant the ETC status.”  In addition, the Decision also notes that Time Warner California acknowledges that it is subject to regulation as a telecommunications carrier. 
 
A copy of the Proposed Decision underlying this item is available at the following link:  
 
Custom Teleconnect, Inc. Granted a CPCN (Item 22, adopted on consent) – This Decision approves a settlement agreement between Custom Teleconnect, Inc. (“CTI”) and the Commission’s Safety and Enforcement Division (“SED”) and grants CTI a CPCN to operate as a reseller of competitive local exchange carrier services.  CTI filed an application for a CPCN in April 2011 requesting authority to operate as a reseller of competitive local exchange carrier services in the territories served by AT&T, Verizon, SureWest, and Frontier.  CTI was and continues to be a registered NDIEC that provides interLATA and intraLATA services.  The CPCN application was protested by SED, who cited numerous customer complaints received by the Commission’s Consumer Affairs Branch, the Federal Trade Commission, and complaints contained in online forums, databases, and articles. 
 
CTI and SED ultimately entered settlement discussions, resulting in the settlement agreement approved by this Decision.  The settlement agreement requires CTI to: (1) file three reports to the Deputy Director of SED on a quarterly basis for approximately two years, which will include certain California consumer information and billing information; (2) within a year of the effective date of the settlement agreement, CTI will be required to complete a review and technical audit of its collect call acceptance and placing equipment, and will be obligated to report the findings to the Deputy Directory of the SED; and (3) amend existing pre-recorded rate disclosure telephone message that informs potential customers about the rates to which they will be subject. 
 
The Decision concludes that the settlement agreement is reasonable in light of the whole record, focusing on the review and disclosure requirements designed to address previous consumer complaints and to prevent future complaints.  The Decision also finds that the settlement agreement is in the public interest, as it will require CTI to be forthcoming with regard to its customer complaints and billing processes while avoiding the time, expense, and uncertainty of evidentiary hearings and further litigation.  Moreover, the Decision finds that CTI meets the environmental, financial, and technical qualifications required to be granted a CPCN. 
 
A copy of the Proposed Decision underlying this item is available at the following link:  
 
WTI Ordered to Refund $3,786.30 to XL Fire Protection (Item 16, adopted on consent) – This Decision modifies D.14-01-018 by requiring WTI Communications (“WTI”) to refund $3,786.30 to XL Fire Protection. 
 
D.14-01-018  resolved all issues related to a complaint filed by XL against WTI and authorized the disbursement of $3,659.41 to XL, which was being held by the Commission in the impound account to XL.  After the decision was issued, it was discovered that the funds on deposit with the Commission had been previously released to WTI.  Therefore, the Decision modifies D.14-01-018  to require WTI to refund the money to XL directly.
A copy of the Proposed Decision underlying this item is available at the following link

HELD ITEMS
 
Request for CASF Funding for Sunesys’ Connected Central Coast Project  (Item 28 and 28a, held until 4/10/14) – This Draft Resolution would grant $7,352,164 in CASF funding to Sunesys, LLC (“Sunesys”) for its Connected Central Coast Unserved and Underserved Broadband Project (“Sunesys Project”).  This amount represents 60% of the total project cost of $12,253,606.  The total project cost was pro-rated and adjusted from Sunesys’ original proposal of $13 million in order to address served segments of Sunesys’ proposed project area.  The project would build a 91.18 mile middle-mile backhaul network from Santa Cruz to Soledad, and extend high-speed internet service to 430 square miles covering Castroville and the California Highway 156.  The proposed network would pass through 68 unserved and 1,069 underserved census blocks.  It is expected that the Sunesys Project will have the potential to enable last-mile providers to serve up to 11,124 households in the Central Coast. 
 
The Sunesys Project would provide broadband backhaul access at speeds of up to 100 Gbs per second per fiber strand from the City of Santa Cruz to Soledad, the first major fiber point-of-presence in the Salinas Valley.  The project would also partner with regional Internet Service Providers who provide last mile service in its proposed project area.  The Draft Resolution explains that several last-mile service providers and local institutions have expressed interest in the project, and it is expected that last-mile service providers will lease connections from the network as bandwidth demands grow. 
 
An Alternate issued by President Peevey’s office, would grant Sunesys $11,028,245 in CASF funding for the Sunesys Project, an approximate increase of $3.6 million from the Draft Resolution.  The award would represent 90% of the pro-rated and adjusted total project cost, and exceeds the CASF program’s funding limitations of 70% of total costs in unserved areas and 60% of costs in underserved areas.  The Alternate concludes that it would be appropriate to grant this award, despite the CASF program constraints, because Sunesys has indicated that it could not and will not pursue the project if it only receives CASF funding for 60% of the project costs pursuant to the Draft Resolution prepared by staff.  The Alternate explains that Sunesys has proposed to charge a price of  $8.50 per mile per month to internet service providers.  At these rates and at 60% CASF funding, the projected payback period would be 19 years, whereas at 90% CASF funding, the projected payback period would be five years.  Sunesys has claimed that a payback period of longer than five years would not provide a sound business plan, but nevertheless agreed to terms that would allow a 8 year payback plan. 
 
The Communications Division introduced the item and explained that the specific issue was whether it was appropriate to grant funds that exceed program rules limiting the percentage of total project costs.  Staff explained that the Draft Resolution complies with the program rules, but that the applicant has stated that it would not pursue the project if the Draft Resolution is adopted.  Staff then explained that this project ranked very high based on the program’s scoring criteria because it would have the capability of bringing broadband to unserved areas of California and has significant community support.  Therefore, staff though that it was important to raise the issue with the Commissioners, rather than choosing to not pursue the project based on the program rules, which he dismissively described as “technicalities.”  
 
Commissioner Florio asked staff whether the funding limits have been exceeded in the past.  Staff explained that this would be the first time that a project that is only funded by the CASF program would exceed funding limits.  Staff noted however, that in the past, funding limits were exceeded by leveraging federal ARRA funds.  Commissioner Florio then stated he generally supported the program and that he understood that the funding cap means that Sunesys will not pursue the project because it is not economically feasible. 
 
He then inquired whether the Staff had looked into or verified Sunesys’ assertions about the economics of the project, suggesting that a five year payback period seemed too short.  Staff explained that the challenge with verifying the numbers stems from forecasts uncertainties.  Staff walked the Commissioners through the analysis justifying the program elements, first explaining that if Sunesys charged last mile service providers the currently proposed $8.50 per mile, per month, it would result in monthly costs to end users of less than $60-65.  If rates were increased to $11, then it would result in end user costs of $60-65.  However, if rates were increased to $34, then end user prices would be over $100.  Since increases to end user rates would naturally negatively impact customer demand, it was important to set rates in a manner that would ensure that the business would remain viable.  Commissioner Florio agreed that a $34 rate would not be workable, and suggested that a compromise be developed that is “not quite as rich but gets the job done.”  Staff further clarified that the forecasts also indicated that Sunesys will not turn a profit until Year 12, assuming the best case scenario that all potential last-mile service providers will participate in the first year.
 
President Peevey responded to Commissioner Florio as the author of the Alternate and noted that he was open to modest changes.  However, he emphasized that the staff’s proposal would not “get the job done,” especially given that Sunesys has already said that they would not pursue the project at 60% CASF funding. 
 
Commissioner Sandoval generally expressed support for the Alternate, explaining that middle mile infrastructure is critical.  She reminded the other Commissioners that two last-mile projects are also on the agenda, and are dependent on the Sunesys project.  She urged the Commissioners to look beyond the cost of the project itself, but to look at the other projects that are enabled by the Sunesys project.
 
Commissioner Peterman expressed an interest in Suneys’ commitment to pricing plan for five years rather than the standard two year commitment, and asked whether there was any enforcement provisions to ensure that Sunesys meets this commitment.  Staff explained a contract beyond a Resolution would not exist, but that Sunesys has indicated that it will commit to the pricing plan for any subscribers that enter a contract during those five years, allowing prices set by the pricing plan to extend beyond the five years. 
 
During the public session, several parties spoke out in favor of the Alternate, including the Mayor of the City of Gonzalez. 
 
A copy of the Draft Resolution underlying this item is available at the following link
 
A copy of the alternate is available at the following link:  
 
Request for CASF Funding for Surfnet’s Two CASF Projects (Items 3 and 4, held until 4/10/14) – These items address California Advanced Services Fund (“CASF”) funding requests for two Surfnet Communications, Inc. (“Surfnet”) projects, the Monterey Dunes Last Mile Underserved Broadband Project (“Monterey Dunes Project”) and the Paradise Road Last Mile Underserved Broadband Project (“Paradise Road Project”).  These Resolutions would approve $105,437 for the Monterey Dunes Project ($79,078 in grant funding and $26,359 in loan funding) and $237,272 for the Paradise Road Project ($177,954 in grant funding and $59,318 in loan funding).  
 
The Monterey Dunes Project is a last mile project that proposes to connect existing copper wire infrastructure and upgrade broadband facilities in the project area.  It is estimated that the project would reach 120 households.  The project would extend high-speed broadband service to 0.58 square miles in the Monterey Dunes area by deploying high speed fiber to the home.  It is expected that the deployment would result in broadband service that is capable of reaching speeds of 100 Mbps up and 100 Mbps down using HPNA 3.0 technologies or ADSL 2. 
 
The Paradise Road Project proposes to extend high-speed broadband service to 3.30 square miles in the Paradise Road area, located in Northern Monterey County.  If the project is approved, it is estimated that it would reach 278 underserved households, including one anchor institution.  This project would also deploy high speed fiber to the home that is capable of reaching symmetrical speeds of 100 Mbps up and 100 Mbps down. 
 
Both projects would be dependent on the completion of the Sunesys middle mile project, which would provide backhaul facilities and enable last mile connections in the areas.  Funding for the Sunesys project will be addressed at the Commission’s April 10, 2014 agenda meeting.  The Draft Resolutions explain that both projects are financially and technically infeasible without completion of the Sunesys project.  Given that the projects are dependent on Sunesys’s projects, Surfnet would be ordered to discuss interim plans and solutions for the Monterey Dunes Project with CASF staff should Sunesys not complete its project in time.  Surfnet would be further ordered to hold off on construction for the Paradise Road Project until the Sunesys project is complete. 
 
A copy of the Draft Resolution underlying the Monterey Dunes Project is available at the following link
 
A copy of the Draft Resolution underlying the Paradise Road Project is available at the following link
 
Boomerang Wireless, LLC Conditionally Granted ETC Designation (Item 9, held by Sandoval until 4/10/14) — This Draft Resolution would conditionally designate Boomerang Wireless, LLC (“Boomerang”) as Eligible Telecommunications Carriers (“ETC”) to provide federal Lifeline service in the Uniform Regulatory Framework carrier service territories and exclude the Small Local Exchange Carriers’ service areas.  The Draft Resolution would also determine that granting Boomerang’s request for ETC designation would be in the public interest and that Boomerang meets all applicable environmental, technical, and financial requirements in Resolution T-17002 and the ETC rules recently adopted in the Lifeline Reform Order (FCC 12-11). 
 
Additionally, the Draft Resolution would find that Boomerang’s Lifeline service would allow consumers to receive both federal and state subsidized wireline service and would not have an adverse effect on the state LifeLine fund.  Boomerang would also be required to file annual ETC reports and information with USAC demonstrating the terms and conditions of any voice telephony service plans offered to Lifeline subscribers.  

A copy of the Draft Resolution underlying this item is available at the following link

COMMISSIONER REPORTS
 
Commissioner Sandoval noted that she attended several LifeLine-related events involving the rollout of wireless LifeLine, including a community meeting in Los Angeles where they discussed the implementation of the new LifeLine program.  She highlighted that the Commission approved Time Warner Cable’s application for ETC designation, and stated that she looked forward to the services that they would provide in the network.  She also encouraged Time Warner to apply for authority to provide California LifeLine, noting that the LifeLine decision allows a subscriber to apply LifeLine to text and data and that she believed that Time Warner provides high speeds that would be a tremendous benefit to potential LifeLine subscribers.  She also noted that she has given several interviews regarding LifeLine on Univision, Spanish Language Radio Station, and Comcast Newsmakers, and that there is great interest by the public in what the Commission is doing with LifeLine.
 
Commissioner Sandoval also noted her opportunity to speak at the FCC’s Rural Broadband Hearing last week.  She noted that there was great interest in the Commission’s data that was obtained from broadband mapping showing difference between advertised speeds and actual speeds, as well as measurements of latency.  She suggested that the FCC examine whether the 3/1 standard they havechose for CAF is adequate, which is far lower than what the Commission has adopted as adequate.  She also spoke on state panel regarding broadband adoption and noted that both California and New York’s lowest level of broadband adoption rates were in mountainous regions and large metropolitans.  She explained that in California, infrastructure problems in mountainous areas and low-income concentrations in metropolitan areas accounted for the low adoption rates. 

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