California Communications Infrastructure Mid-Year Update

As predicted in our earlier post, here at the mid-way point of 2022 we have seen a number of significant regulatory developments related to communications infrastructure in California. In the first half of 2022, the California Public Utilities Commission (CPUC) has been particularly focused on efforts to close the digital divide, but we anticipate developments in the second half of the year to focus on improving access to utility poles. Below is our mid-year update:

Closing the Digital Divide

California Advanced Services Fund (CASF) – Federal Funding Account

In April 2022, the CPUC issued Decision 22-04-055, adopting rules for the Federal Funding Account (FFA) created by SB 156. The FFA will award $2 billion in public monies ($1 billion for urban counties and $1 billion for rural counties) allocated from the American Rescue Plan Act (ARPA) to applicants proposing to construct last-mile broadband infrastructure in areas "with an identified" need for additional investment. The statute targets unserved areas, defined in the FFA rules as locations that lack access to a wireline Internet service connection capable of reliably delivering minimum speeds of 25 Megabits per second (Mbps) downstream and 3 Mbps upstream.

The CPUC's Communications Division will award projects points for meeting certain criteria to determine how much funding an applicant will receive. All qualified projects must meet the following baseline requirements:

• Include a commitment to serving customers at a capped price for five years
• Offer plans with speeds of at least 100/100 Mbps or 100/20 Mbps if symmetrical speeds are impracticable
• Provide service with latency at no higher than 50 milliseconds
• Offer plans that include a minimum of 1000 GBs of data usage per month
• Participate in the federal Affordable Connectivity Program (ACP) or provide a commensurate affordability program for low-income consumers.

The CPUC is expected to release a map and list of priority project areas prior to opening its first application window, hopefully sometime before the end of 2022. ARPA requires that these funds must be allocated by 2024 and projects must be completed by the end of 2026. (Rulemaking 20-09-001)

CASF – Infrastructure Grant Account

On June 7, the CPUC proposed a set of "Revised CASF Program Guidelines" to implement Senate Bill 156, Senate Bill 4, and Assembly Bill 14. If adopted, the guidelines would significantly modify the rules of the CASF Infrastructure Grant Account (IGA). Notable among the proposed changes are the following:

• Updated definition of "unserved" area (changed from 6/1 Mbps to "reliable" 25/3 Mbps service "to the entire community")
• Tiered levels of funding, depending on whether the project area has no Internet connectivity (baseline 100% funding), existing speeds at or below 10/1 Mbps (baseline 60% funding), or between 10/1 Mbps and 25/3 Mbps (baseline 40% funding)
• Additional funding for projects that offer California LifeLine or federal LifeLine for a minimum of five years
• Five-year price cap on broadband service. All grantees must participate in the ACP or otherwise provide access to an affordability program for low-income customers commensurate with the ACP in the project service area
• Latency cap set at 50 milliseconds
• All challengers to a CASF project must participate in the CPUC's annual broadband data collection
• All challengers must demonstrate that they provide service at equivalent bandwidth at the same or lower price and must provide a low-income plan with equivalent benefits and prices

In June and July 2022, the CPUC received comments on its proposed new IGA rules. A proposed decision is expected in the third quarter of 2022. (Rulemaking 20-08-021)

Other CASF Accounts

On May 19, the CPUC adopted Decision 22-05-029, modifying the CPUC's rules for the CASF's Broadband Public Housing Account (Public Housing Account), Broadband Adoption Account (Adoption Account), and the Rural and Urban Regional Broadband Consortia Account (Consortia Account), and approving a total CASF program budget and subaccount budget allocations for the 2022-2023 fiscal year. Some notable changes to the CASF subaccounts are as follows:

Public Housing Account

• Eligibility for Public Housing Account grants is expanded to "farmworker housing," as defined in Cal. Health and Safety Code § 50199.7(h)
• Minimum speed delivery requirements increased to 25/3 Mbps
• Maximum per unit cost requirement eligible for ministerial review doubled to $1,200 per unit or less for projects connecting 50 or fewer publicly supported community (PSC) units; $900 per unit or less for projects connecting 51-100 PSC units; and $600 per unit or less for projects connecting 101 or more PSC units

Adoption Account

• Non-profit applicants must submit documentation confirming good standing with the Internal Revenue Service, the California Secretary of State, or the California Department of Justice
• A ramp-up period for a project may not exceed six months from the time the application is approved
• Project cap for ministerial review is increased to $150,000 per project; the project cost cap for digital literacy projects is $477 or less per participant; the project cost cap for broadband access projects is $42 or less per participant
• 85 percent reimbursement cap for eligible program costs is removed; the eligible program costs are expanded to include hotspots, modems, switches, and computer warranties
• For digital literacy projects, reimbursement cap for take-home computing devices is increased to $300 per device, up to two devices per eligible household, and $40,000 per project
• The cap for administrative costs is limited to 15 percent

Consortia Account

• The scope of reimbursable consortia activities is expanded to include activities related to and in support of broadband deployment projects related to the new programs created under SB 156 and AB 164
• The annual funding cap is increased to $200,000 per year per consortium
• Consortia boundaries no longer must comport with county boundaries

State-Owned Middle-Mile Network

SB 156 allocated $3.25 billion for the state of California to build, operate and maintain an open access, state-owned middle-mile network that provides equitable access to high-speed broadband service and prioritizes inclusion of unserved and underserved populations, anchor institutions (e.g., hospitals, universities, government entities, and community non-profits), tribal entities, and agricultural regions.

The CPUC, California Department of Technology (CDT) Office of Broadband and Digital Literacy, California Department of Transportation (Caltrans), and Golden State Net (GSN) – the third-party administrator – partnered together to make the Middle-Mile Broadband Initiative. These efforts are monitored by the Middle-Mile Advisory Committee, which is made up of nine members from various state agencies and legislative bodies and meets monthly to track progress.

As of early July, CDT approved a network map with approximately 10,000 miles of proposed middle-mile routes along major highways. The network will be a mixture of new construction projects, joint builds with other state projects or utilities, and leasing existing infrastructure from providers. CDT and GSN are still working to determine how much of the network will be built compared to leased. In concert with these efforts, Caltrans will spend the next two years doing preconstruction work, including preliminary engineering, environmental studies, issuing bids for construction contracts (June 2024) and awarding contracts (December 2024). Although there are select locations totaling 172 miles where construction has begun, construction for the majority of the network is not scheduled to begin until January 2025. Projects must be completed by the end of 2026.

Improving Access to Utility Poles

Pole and Conduit Database Proceeding

CPUC Decision 21-10-019 ("Track 2 Decision") required the five major pole owners (SCE, PG&E, SDG&E, AT&T, and Frontier) to create and manage pole databases that will contain pole attachment data submitted by attachers. In accordance with the Track 2 Decision, the major pole owners held a four-day workshop in January and in March filed Tier 2 advice letters with the Commission, detailing their plans to implement the Track 2 Decision. CPUC staff was expected to act on the advice letters by the end of May, but instead suspended the advice letters until August. The Commission could act prior to that time, but the 12-month period for attachers to submit Phase 1 data does not begin until the Commission approves the advice letters.

In June 2022, President Reynolds issued a Third Amended Scoping Memo and Ruling, which indicates that there will be a ruling on "Track 3" of the proceeding—addressing conduit data—in the fourth quarter of 2022 and a proposed decision in the first quarter of 2023. (Investigation 17-6-027)

Pole Access Rulemaking

As we previously discussed, the assigned Administrative Law Judge issued a ruling in March 2021 proposing One-Touch Make Ready (OTMR) requirements, which would implement new OTMR processes and mandatory make-ready timelines that align with the FCC's rules. The Third Amended Scoping Memo and Ruling issued in June indicates that a proposed decision will be released in the third quarter of 2022. (Rulemaking 17-06-028)

PG&E's 10,000-Mile Undergrounding

In July 2021, Pacific Gas & Electric Company (PG&E) announced plans to underground 10,000 miles of its power lines in high fire threat areas of the state to mitigate wildfire risk. As we previously explained, the undergrounding program is being addressed in PG&E's general rate case (GRC) proceeding with the CPUC and could cost PG&E's ratepayers more than $25 billion. Many questions remain about PG&E's undergrounding program, such as:

• Where and when PG&E will underground facilities under the program;
• Whether PG&E will underground only its primary (i.e., higher voltage) electric conductors, as this fact sheet implies, or underground all of its electric lines and remove its poles; and
• What the cost impact will be for communications companies and their customers.

In the GRC, parties filed opening testimony on June 13 and rebuttal testimony on July 11. Multiple witnesses expressed concern about PG&E's timing and cost projections and the lack of details regarding the locations for undergrounding. PG&E and other parties are directed to "meet and confer" four times by mid-August, and evidentiary hearings are scheduled for August 15-26. (Application 21-06-021)

Backup Power Requirements

Pursuant to Decision 21-02-029, by August 12, facilities-based wireline service providers must install equipment to provide 72-hours of backup power for all of their facilities in the Tier 2 and Tier 3 High Fire-Threat Districts (HTFDs), unless they secure a waiver for "facilities that do not need backup power, are unable to support backup power due to a safety risk, or are objectively impossible or infeasible to deploy backup power to." As we previously advised, by April 19, facilities-based wireline providers were required to file their Emergency Operations Plans. The CPUC also announced that facilities-based wireline providers also must file their Wireline Resiliency Plans by August 18. A Wireline Resiliency Plan is an advice letter in which providers may request waivers of the 72-hour backup power mandate for specific facilities. For 2022, CPUC staff made modest changes to the template for Wireline Resiliency Plans. (Rulemaking 18-03-011)

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This advisory is intended to serve as a high-level overview of the most significant developments related to communications infrastructure regulations in California in the first half of 2022. Please contact DWT for more detailed information.