CPUC Adopts Big Penalty Mechanism for Frontier

Undaunted by legal issues flagged by Frontier Communications, the California Public Utilities Commission greenlit a proposed program to enforce conditions in its order clearing the telco’s bankruptcy reorganization. Commissioners unanimously adopted the draft resolution T-17734 as part of its consent agenda at a virtual Thursday meeting. In another CPUC proceeding, telcos asked what disaster recovery rules have to do with the agency’s broadband rulemaking.

Raising concerns about excessive fines and due process, Frontier urged commissioners to delay the item for a third time. That request came in a Wednesday letter circulated on the docket’s service list. The CPUC’s second revised draft resolution on the Frontier enforcement program, released Monday, would include a maximum of $36 million in yearly fines for failing to quickly restore outages (see 2110060025). Frontier declined to comment after Thursday’s vote.

The revised draft “adopts yet another formulation of an augmented Out of Service (“OOS”) penalty mechanism that deviates from the decision” clearing reorganization, Frontier wrote. “If not corrected, the enforcement program will authorize extreme and disproportionate levels of potential liability for Frontier compared to the rest of the industry, even in situations when Frontier’s conformance with” California “service quality standards is better than other major industry participants.” Frontier said the proposed penalty scheme could be unconstitutional under the 8th and 14th amendments. “Frontier reserves all rights in connection with this matter, including all potential legal remedies as to all issues raised in its comments on the original draft resolution, and all additional problems created by the Revised Draft Resolution.”

Adding $36 million in yearly regulatory costs “would be a poor use of resources for the company and for California,” emailed New Street analyst Jonathan Chaplin. Frontier’s post-bankruptcy plan to deploy to 10 million homes “would eliminate the very issues that customers and the California regulators are frustrated with,” including old and neglected copper infrastructure, he said. Chaplin estimates the project will require about $8 billion. “Frontier will burn cash for the next five years while they make the investment. If California saps $36MM a year in fines, that will be $36MM a year that isn’t going into delivering better service to their customers.”

CPUC members didn’t speak about the item at Thursday’s meeting. The state commission didn’t comment.

Disaster Reporting

Telcos resisted more disaster reporting requirements, in comments Wednesday on a proposed decision in the CPUC’s broadband-for-all rulemaking (docket R.20-09-001). The proposal, which could get a vote Oct. 21, would encourage but not require investor-owned utilities (IOUs) to install fiber during service restoration (see 2109170017). If a state or national disaster is declared, IOUs and telecom providers would have to file an informational advice letter within 15 days of when they're allowed into an affected area to assess damage. Within 30 days, they would have to meet in person with affected communities to discuss rebuilding plans, especially fiber buildouts, it said.

Verizon is “unclear” what value post-disaster rules have for broadband deployment “given the Commission’s lack of authority to regulate construction of networks, the process of which is complicated, dependent on multiple factors, and often requires years to complete,” it commented. “These filings will impose unnecessary administrative burdens on network teams and detract limited resources from focusing on network restoration efforts.”

The proposed decision strays from the rulemaking's purpose to quickly spread broadband, and the CPUC has another docket on post-disaster recovery, said AT&T. CTIA also questioned if “mandating community engagement in the disaster restoration process will meaningfully achieve the original broadband deployment goals of this proceeding.”

Small telcos in wildfire-prone rural areas worry reporting and community engagement requirements “could be triggered every time there is a declared state of emergency ... even if there is only limited facility damage that has little or no impact on customers,” said CalTel and other RLECs. “The record does not support the need for this additional disaster-related requirement, especially given the existing requirements in this area and the costs and distractions that its implementation will entail.”

“While acknowledging the unresolved regulatory field in front of the Commission,” the Utility Consumers Action Network disagreed with stopping short of requiring IOUs to install fiber during restoration.

Telecom companies and IOUs sought more time for proposed reports and community meetings. “It may not always be possible or realistic to obtain an accurate report of what facilities and equipment has been damaged, to come up with a restoration plan, and to establish a timeline to make repairs ... all within 15 days of gaining access to a disaster area to assess the damage to facilities,” said AT&T. Reports should be information-only to avoid slowing network restoration, said the carrier: Requiring advice letters that may be protested by third parties and reviewed by the CPUC “unnecessarily creates an opportunity for third parties to micromanage and the Commission to potentially intervene in how communications providers design and rebuild their networks during post-disaster recovery.”

Set the reporting deadline 60 days after utilities can assess damage, or at least 60 days after they have full access to all damaged areas, suggested Southern California Edison. “The lengthy damage assessment process can be attributed to unsafe air quality, rugged terrain, the need to clear debris from roads, and limited visibility due to smoke which impeded attempts to assess the damage by air,” the electric company said, referencing previous fire recovery efforts. “Once public authorities grant permission to access damaged areas, the approval is typically limited to certain areas in the early days and weeks following a disaster, and access to all areas tends to open up incrementally.”