The legislative session has ended and Governor Newsom is expected to sign into law S.B. 4 and A.B. 14. These bills stand as the final pieces of the state’s new broadband infrastructure program. With a now-estimated $7.5 billion assembled between federal and state funds, California has the resources it needs to largely close the digital divide in the coming years. This program allows local cities and counties to access infrastructure dollars to solve problems in their own communities along with empowering local private entities, rather than depend on large, private multi-nationals who aren’t willing to make the needed generational investment into infrastructure in most areas of the state.
EFF will explain below why local communities need to take charge, and how the new law will facilitate local choice in broadband. No state has taken this approach yet and departed from the old model of handing over all the subsidies to giant corporations. That’s why it’s important for Californians to understand the opportunity before them now.
Why it Has to be a Local Public, Private, or Public/Private Entity
If the bankruptcy of Frontier Communications has taught us anything, it is the following two lessons. First, large national private ISPs will forgo 21st-century fiber infrastructure in as many places they can to pad their short-term profits. Government subsidies to build in different areas do not change this behavior. Second, the future of broadband access depends on the placement of fiber optic wires. Fiber is an investment in long-term value over short-term profits. EFF’s technical analysis has also laid out why fiber optics is future-proof infrastructure by showing that no other transmission medium for broadband even comes close, which makes its deployment essential for a long-term solution.
AT&T and cable companies, such as Comcast and Charter, are going to try to take advantage of this program by making offers that sound nice. But they will leverage existing legacy infrastructure that is rapidly approaching obsolescence. While they may be able to offer connectivity that’s “good enough for today” at a cheaper price than delivering fiber, there is no future in those older connections. It’s clear that higher uploads are becoming the norm, and at ever-increasing speeds. As California’s tech sector begins to embrace distributed work, only communities with 21st-century fiber broadband access will be viable places for those workers to live. Fiber optics’ benefits are clear. The challenge of fiber optics is that its high upfront construction costs require very long-term financing models to deliver on its promise. Here is how the state’s new program makes that financing possible.
A Breakdown of the New Broadband Infrastructure Program
The infrastructure law has four mechanisms in place to help finance and plan new, local options: a grant program for the unserved; long-term financing designed around public, non-profit, and tribal entities; a state-run middle-mile program; and a state technical assistance program. Let’s get into the weeds on each of them.
Broadband Infrastructure Grant Account – The state is making more than $2 billion (and possibly up to $3.5 billion) available in grants, over the coming years, to finance (at 100% of the state’s cost) the construction of broadband networks in areas that need them. To qualify, such areas must lack the following three traits, premised on federal and state mapping data:
- Broadband service at speeds of at least 25 mbps downstream and 3 mbps upstream (this is mostly folks reliant on DSL copper access or less)
- Latency that is sufficiently low to allow real-time interactive applications
- Is not currently receiving money from, and is carrying out the objectives of, the Rural Digital Opportunity Fund
To focus the grant funds, priority is placed on areas that do not even have 10 mbps downstream and 1 mbps upstream—this is mostly areas that only have satellite internet. This program is focused on having the state paying the construction costs for people who have no internet access at all, as opposed to those with slow, useless, or inadequate access.
Loan Loss Reserve Fund – The State Treasury will establish this fund to enable long-term financing by cities, counties, community service districts, public utilities, municipal utility districts, joint powers authority, local educational agencies, tribal governments, electrical cooperatives, and non-profits. It will be designed to help these entities obtain very low interest rates with low debt obligations. Think of this program like our mortgage-lending system. 30-year fixed mortgages enable many people to purchase homes, even if they could never gather the cash necessary to make the purchase all at once. Fiber is well-suited for this type of financing vehicle; it will be able to deliver speeds useful for multiple decades and carries lower maintenance costs than other broadband options.
State Open-Access Middle-Mile – The state of California, overseen by the Department of Technology, will deploy fiber infrastructure on an open-access basis—meaning on non-discriminatory terms and accessible by ISPs— with an emphasis on developing rural exchange points. The goal behind this infrastructure is to deliver multi-gigabit capacity to areas building broadband access, and also to bring down the cost to affordable rates for obtaining backhaul capacity to the global internet. To use an analogy, the state is building the highways to connect communities to the airport—and the world. The option to connect to these internet highways will be made available to all comers. So, for example, small local businesses or local townships can connect a fiber line to these facilities to build a local broadband network.
Technical Assistance by the State – Fiber infrastructure is a game-changer on the ground. Echoing the way the federal government advised local governments and communities on the deployment a similarly revolutionary technology—electricity— the new broadband infrastructure law deputizes the California Public Utilities Commission to provide technical assistance for these plans. The CPUC will provide local governments and providers with assistance for grant applications to other federal programs and participate in the development of infrastructure plans with county governments.
How all These Programs Work Together and End the Reliance on AT&T and Comcast
Any small business, local government, or even a school district will soon have these tools to solve their own problems. As they look to use the programs listed above, it’s important for any local player seeking to build their own broadband solution to understand it will take multi-year effort to do it right. The loan-loss reserve program will focus on multi-decade repayment plans. This gives eligible entities access to billions of loan dollars for future-proof fiber infrastructure. The grants are meant to eliminate the construction burden of delivering access to the most difficult-to-serve populations in pockets throughout the state. But, any real effort to build a network will have to include their underserved neighbors. For those communities, the state will attempt to deliver the best-priced access to bandwidth capacity through its middle-mile program. Doing so will help keep prices as low as is feasible to enable the delivery of cheap, fast internet in areas that otherwise would never have seen access.
And for any of this to happen, every community needs someone at the local level who is well-versed in how to use the state’s program. That’s where the technical assistance by the state comes in, to help locals navigate the hardest parts of developing a local broadband solution.
Still, no state program can make folks on the ground do the work. That’s why we need people engaged in their communities. If you are tired of relying on big providers that prioritize Wall Street investors over your local community’s needs and are motivated to figure out a solution at home, this is your moment. This new law not only had you in mind, it’s counting on you to step up to the plate.
