California Governor Proposes $7 Billion Investment in Statewide Middle-Mile, Open Access Fiber Network

In his $100 billion “California Comeback Plan”, California Gov. Gavin Newsom is proposing to devote $7 billion to invest in expanding broadband access over the next three years, with $4 billion of that to be used for constructing a statewide middle-mile, open access fiber network.

The $7 billion earmarked for broadband in the budget proposal, referred to as the “May Revision” [pdf], specifically includes:

  • $4 billion for a statewide middle-mile, open access fiber network to connect Census Designated Places (CDP) which lack access to broadband service capable of providing 100 Megabit per second (Mbps) downstream 

  • $500 million for a Loan Loss Reserve Account, a public financing program to assist local governments, Tribes, and nonprofits financing new municipal fiber networks

  • $500 million for one-time payments to broadband providers serving rural areas where it is more costly to build community networks

  • $2 billion for the California Advanced Services Fund (CASF) to incent existing and new Internet Service Providers to build last-mile infrastructure

Gov. Newsom’s infrastructure plan now heads to the State Legislature, where it must be voted on by June 15.

Newsom’s plan is to allocate this funding over a period of several years, allotting $2 billion of federal Rescue Plan funds in Fiscal Year 2021-22, and $1.5 billion in state General Fund resources combined with $3.5 billion in Rescue Plans funds in Fiscal Year 2022-23. To fund the overall $100 billion budget proposal, if passed, the state would combine a total of $25 billion in federal relief funding with $75.7 billion from the state’s budget surplus.

“Let’s get this done once and for all, so that no future administration is talking about the scourge of the digital divide,” said Gov. Newsom, in a press conference on Friday. “This is what the federal stimulus from my perspective was all about: catalytic investments to make generational change. This is one of those investments.”

Newsom’s Plan Provides Technical Assistance Teams and Loans for Communities

More specifically, the “Comeback Plan” would construct a public backhaul network that connects cities and critical anchor institutions to one another, while leaving local communities, cooperatives, nonprofits, and private ISPs responsible for building out last-mile networks to connect subscribers. 

By building a statewide, open access network, the goal is to reduce upfront infrastructure costs to public and private broadband providers and encourage the expansion of high-speed networks in unserved and underserved regions of the state.

Critical to the success of Gov. Newsom’s strategy is the inclusion of state-funded technical assistance teams to provide guidance to communities designing last-mile plans, and a $500 million bond financing program so municipalities, cooperatives, and nonprofits can access long-term, low-interest financing to build out Fiber-to-the-Home (FTTH) networks. 

Ernesto Falcon, Senior Legislative Counsel at the Electronic Frontier Foundation, likened Newsom’s strategy to the National Electrification Program in the early 20th century.

“When the U.S. embarked upon a national electrification program, government agencies didn't simply announce the program and retire to the sidelines while local communities worked out the details for themselves,” Falcon said. “Instead, the government formed myriad partnerships with local communities to help plan out their electrical grids, create financial plans, and train local operators so they could keep their new electrical grids humming. Governor Newsom’s budget updates this proven strategy for local fiber broadband networks.”

The “Build It and They Will Come” Mentality Has Been Known to Disappoint

The Comeback Plan claims that “the statewide network will incentivize providers to expand service to unserved and underserved areas.”

While the middle-mile network is sure to reduce the startup costs incurred when building local fiber networks, it’s a mistake to think it will, in and of itself, motivate providers to build last-mile connections in areas previously overlooked.

The plan’s language endorses the sentiment that if you build a middle-mile network, you’ll get extensive last-mile investment. But, we have seen the necessity for communities to also develop robust plans and obtain reliable sources of funding in order to benefit from the backhaul fiber infrastructure. Moreover, it’s critical that the Newsom administration manage expectations and choose its rhetoric carefully. Otherwise, Californians may get the impression that the $7 billion allocation of funding for the middle-mile network will automatically lead to last-mile service.

Representatives for a middle-mile fiber network in southeastern Massachusetts, OpenCape, learned this lesson the hard way. The OpenCape network went live in January 2013.

Today, eight years later, “mention OpenCape to almost anyone [in Cape Cod] and the reaction is ‘Whatever happened with that?’” reports the Provincetown Independent. “Not a lot has changed since then. Despite the fact that it is a regionally owned resource, OpenCape broadband isn’t an option for most Cape Cod businesses or residents, including the vast majority of those on the Outer Cape.”

Teresa Martin, an OpenCape co-founder, said things could have gone differently on Cape Cod if there had been more preliminary planning. OpenCape’s website reiterates the critical role local communities play in improving Internet access: the “Residential Opportunities” page on the site says that getting high-speed broadband to end-users “will require a combined effort of towns, businesses and residents.”

Another middle-mile open access network that runs through western and central Massachusetts, MassBroadband 123, laid the foundation to build last-mile fiber networks in dozens of towns in the Berkshires, but only after local leaders and volunteers formed a cooperative and sent a clear message to state lawmakers that additional money needed to be funneled towards funding last-mile connections.

“In response to the desperate need for last-mile connections, community leaders in Western Mass realized they would have to act on their own. In 2010, they formed a cooperative called WiredWest,” reports Susan Crawford for Wired. “WiredWest developed its business plan…Most of the WiredWest towns authorized municipal borrowing to cover two-thirds of the cost of last-mile networks. Volunteers went around getting pre-subscription deposits; more than 7,000 businesses and homeowners signed up.”

In our experience, middle mile networks change the economics of the operating costs for municipal fiber networks, not the high upfront capital costs, which are what deter investments in last-mile connectivity. Unfortunately, middle mile networks do little to change that reality, which is why communities are advised to plan and look for ways to finance the necessary investments.

Access in California Currently

But as each state and community has different needs, California has its own set of unique challenges. According to Gov. Newsom’s budget proposal, “Only 52.4 percent of Californians are using broadband at the modern benchmark speed of 100 Mbps. Rural communities are hit the hardest with 51.3 percent of rural households without any broadband networks offering service at 100 Mbps. Tribal lands are also disproportionately impacted with 28.4 percent of homes lacking this essential broadband infrastructure. Urban communities are also impacted. Almost half of households without access to service at 100 Mbps are located in urban areas.”