Calif. Middle-Mile Construction Costs 40% Higher Than Forecast, Says Official

California faces higher-than-expected construction costs as it works to complete the state’s middle-mile network, said Mark Monroe, deputy director-California Technology Department (CDT) Broadband Middle-Mile Initiative, at a partly virtual California Broadband Council meeting Thursday. And many more miles of fiber will be needed than originally planned, he said. Other state broadband officials said it’s important to keep funding the federal affordable connectivity program (ACP) as California makes gains enrolling households.

After sifting through bids received last year covering more than half the planned middle-mile network, CDT found “that construction costs appear to be more than 40% higher than what was originally envisioned back in 2021,” Monroe told the council. Inflation drove higher-than-expected bids, said an accompanying presentation slide. Another challenge is the state’s 10,000-mile map for the middle-mile network, which is 26% longer than originally estimated, said Monroe.

With $3.87 billion in current funding, including a $73 million middle-mile grant from NTIA, California expects to develop 8,300 of 10,000 miles needed in a first phase, Monroe said. That includes 4,500 miles through leases, 3,300 miles of construction and 500 miles through purchases, he said. CDT hasn’t identified resources yet for phase two, which will include the remaining 1,700 miles, said Monroe. The state is searching for savings, such as reducing the number of conduits or limiting the depth of trenches, he said. Also, the state is considering how last-mile funding from the California Public Utilities Commission might be used to build or connect to middle-mile network as part of a last-mile project, he said. CDT also will watch for future funding sources, he said.

“Our goal really is to have an equitable network across the state,” whether fiber is leased or new construction, said Monroe, answering a question by Sunne Wright-McPeak, a council member and California Emerging Technology Fund CEO. When negotiating to use legacy fiber, CDT makes a point to “largely achieve” the same performance standards it applies to new fiber, Monroe said.

California has signed up 40% of eligible households for ACP, which is an increase of 19 percentage points from 15 months ago, said Wright-McPeak. However, California’s stated goal is to connect 90% by the end of next year, she said. It would help if the FCC could provide a list of households that enrolled “because then we wouldn't have to communicate with 100%” of eligible households to reach the remaining 60%, said Wright-McPeak: Focusing on those left would be a better use of resources.

Council members are all thinking about ACP funding, which could run out in 2024, said Wright-McPeak. CETF is working with others to send research to Congress and the Biden administration about ACP’s importance, she said. Wright-McPeak sees “sincere” focus from FCC commissioners to continue ACP, she said, but “there is no substitute for the California legislature and the California governor to communicate that and reinforce that message to our [congressional] delegation and to the Biden administration.” Scott Adams, CDT deputy director-broadband and digital literacy, said he sees strong desire from those who need ACP most to see it continue. The main reason people don’t sign up for ACP is that they don’t know the program exists, he said.

Digital equity and broadband, equity, access and deployment (BEAD) programs mark the next chapters of California’s Broadband for All program, said Adams. NTIA announced a $1.86 billion BEAD allocation for California last month. “This is yet another really significant tool for the state to bring to closing the digital divide and providing last mile connections to all Californians,” said CPUC Deputy Director-Broadband Maria Ellis.

The CPUC released a draft five-year action plan for BEAD last week, with comments due Aug. 7 and replies Aug. 11 (see 2307180013). The CPUC is developing proposed BEAD rules and will take comment on them between August and December before submitting the proposal to NTIA, said Ellis. Once NTIA approves the state’s initial plan, expected in early 2024, the CPUC will conduct its challenge process, solicit applications and select subgrantees, she said. California’s final proposal will be due 365 days after its initial plan is approved.

The CPUC must use the federal broadband map for BEAD, but the state agency’s challenge process “may provide us some additional flexibility,” Commissioner Darcie Houck said later that afternoon at a partially virtual Statewide Digital Equity Planning Group meeting. The CPUC will talk with NTIA about where there’s “flexibility within their rules,” she said. Ellis said the CPUC will develop a map specifically for the BEAD program. “While we have to start with the FCC fabric,” the CPUC has “some flexibility in how we validate some of that information and treat some of that information to get further refinements for California.”

In the meantime, applications are due Sept. 29 for $2 billion in last-mile grants through the CPUC’s federal funding account, Houck said earlier. The agency opened applications June 30 and expects to announce awards in Q1 2024, said the commissioner, and a second application window will open that quarter.