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Budget Change Proposal, Analysis Examine State Broadband Plans

A Budget Change Proposal from the California Public Utilities Commission and analysis of Gov. Gavin Newsom’s revised 2021-2022 budget proposal from the Legislative Analyst’s Office offer more information on how California could ramp up broadband work.

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A recent Budget Change Proposal from the California Public Utilities Commission (CPUC) and preliminary comments from the entity that provides fiscal and policy advice to the state Legislature shed new light on broadband expansion plans in Gov. Gavin Newsom’s revised budget proposal.

In the so-called “May revision” of his January proposed state budget for the 2021-2022 fiscal year, Newsom called for spending up to $7 billion in federal and state funds during two fiscal years to pay for state broadband infrastructure projects and programs. In a Budget Change Proposal (BCP) released May 26, the CPUC affirmed that the administration seeks $7 billion over two years “to address the internet connectivity needs of all Californians.” This includes $2 billion in FY 2021-22 from the American Rescue Plan Act (ARPA) of 2021 and $5 billion in FY 2022-23, $3.5 billion from the ARPA and $1.5 billion from the state General Fund. In a post last week, the Legislative Analyst’s Office (LAO) takes an early look at Newsom’s proposal in the May revision. Among the takeaways:

  • If it receives the funding sought, the state would spend $4 billion to build “a statewide, open access, middle mile network using California’s highway and utility rights of way,” according to the BCP. To coordinate the endeavor, the California Department of Technology’s Office of Broadband and Digital Literacy would be expanded. The state would also expand CPUC “universal service programs,” using $2 billion to build out “last-mile facilities to unserved locations” via the CPUC’s California Advanced Services Fund (CASF) program. The state would use $500 million to create a loan/loss reserve account for CASF that would “enhance the credit of local governments seeking private financing,” and modify the CPUC’s California High Cost Fund B (CHCF B) program to support new local government and broadband providers willing to provide service in high-cost areas. A new caseworker team would also offer technical assistance to local governments on closing the digital divide. The CPUC’s California High Cost Fund A (CHCF A) program would use $500 million in one-time monies to upgrade copper to fiber, “to transform the infrastructure of existing small independent telephone corporations” that are “carriers of last resort.” And, taking aim at broadband affordability, the CPUC’s California LifeLine Program would work to address service.

    “The proposed middle-mile network will expand access and capacity for service providers to build in unserved areas of the state, ultimately resulting in more areas with access, better service, and lower prices,” according to the BCP.
  • The state is “undergoing a shift in how critical communications are provided,” per the BCP, and its universal service programs, as originally designed, are unable to deliver “fast, reliable and affordable broadband and voice service to everyone.” Broadband Internet Access Service California has relied on subsidizing private companies to deliver broadband to unserved areas, but that approach no longer works because the remaining unserved communities lack either the population density or household income — or are simply too costly — to make such ventures profitable for service providers. Absent “significant public sector assistance,” such “important, high-cost” communities will be unable to get on the Internet. The state also has “vast gaps and inequities” in broadband access and use, which continue despite federal funding and merger commitments. According to the BCP, nearly 675,000 households statewide lack access to speeds of 100 (Mbps) download or faster. Additionally, 47.5 percent of homes statewide don’t subscribe to service of at least 100 Mbps download.
  • Changes presented via the BCP, the CPUC said, are intended as “enablers of success” that drive economic recovery and development “by funding jobs for broadband infrastructure projects in communities that vitally need high-speed broadband, increasing economic expansion, and allowing for distance learning and telemedicine.” More residents are disconnected in California than in any other state, the CPUC said, and even where Internet service is available, broadband may still be unaffordable. California Lifeline, the state’s low-income subsidy program, has 1.6 million households as subscribers, but its mobile data requirements aren’t sufficient to support teleworking or studying. Meanwhile, the state’s “largest internet service providers offer reduced cost programs for low-income individuals,” but have only 400,000 users subscribed. The lack of “available middle-mile broadband infrastructure” is a major impediment to connecting the unserved and underserved, in part because that lack in turn impacts last-mile infrastructure. The CPUC indicates changes to four programs — CASF, CHCS A and B and California Lifeline — will update the state’s universal service programs to confront challenges.
  • In its comments on Newsom’s revised budget, the LAO pointed out that his proposal doesn’t account for the possibility that federal proposals could “appropriate between $65 billion and $100 billion to fund broadband infrastructure projects and programs,” and called its cost estimate on middle-mile network improvements “very preliminary.” That cost estimate was based on “a statewide average cost per mile ($350,000) that was calculated using a small set of Caltrans projects,” with costs per mile that the LAO said “varied significantly.” Newsom’s administration also added another 30 percent, or $105,000, to the cost per mile to account for “pre-construction, construction inspection, and contracting,” the LAO said. However, while new projects may take three to four years to finish construction, the timeline could be “much shorter” on existing projects that are modified, the LAO said. The LAO indicated it may provide additional analyses on the topic as more information is available.
Theo Douglas is Assistant Managing Editor of Industry Insider — California.