Law Offices of Rachelle Chong

345 West Portal Avenue, Suite 110

San Francisco, California 94127
rachelle@chonglaw.net

July 19, 2018

Via Email with Hard Copy Via US Mail

Cynthia Walker
Director, Communications Division
California Public Utilities Commission
505 Van Ness Avenue
San Francisco, CA 94102

RE: Reply to Protests and Responses of Race Telecommunications, Inc. (U-7060-C)

Tier 2 Advice Letter No 6 for Approval to Transfer Control of Bright Fiber
Network, Inc (U-7287-C) to Race Telecommunications, Inc.

Dear Director Walker:

In compliance with General Order (GO) 96-B, Rule 7.4.3, Race Telecommunications, Inc. (Race) hereby
responds to protests and responses to its Advice Letter No 6, which requests Commission approval of a
stock purchase agreement to transfer control of Bright Fiber Network, Inc. (BFN) to Race. Race hereby
responds to the protests and responses (including support letters) received on July 10, 2018 from Cindy
Russell, Jeff Barton, ColfaxNet, LLC (ColfaxNet) filed by Lynele Juchau, Smarter Broadband, Inc.
(SBB) and ColfaxNet (filed by its Washington D.C. attorneys), David C. White, Reinette Senum, Paula
Orloff, Barbara and Don Rivenes, Johanna Finney, Pamela Hall, David Adams, Heidi Hall, Andrew
Collins-Anderson, Michael P. Anderson, Paul N. Anderson, Sierra Business Council, Gold Country
Broadband Consortia, County of Nevada (State of California) Supervisor Heidi Hall (District I), and
Alison Lehman, Assistant CEO, County Executive Office of the County of Nevada, attaching a
Resolution from the Nevada County Board of Supervisors supporting the project.

I. Background

BFN holds a Certificate of Public Convenience & Necessity (CPCN) to provide limited facilities-based
local exchange and access services in certain territories of incumbent local exchange carriers pursuant to
Decision No. (D.) 15-05-028, issued May 12, 2015. BFN has not commenced voice service using its
CPCN, and thus it has no customers at this time. BFN is in good standing with the Commission and has
no decided or pending legal complaints against it in California or other states. Race has proposed to
purchase BFN and continue to operate it as a wholly owned subsidiary in the state.

The purchasing party, Race, also holds a CPCN to provide limited facilities-based and resale provider of
competitive local exchange, and interexchange telephone services within the service territories of AT&T
California, Verizon California, Citizens Telephone and SureWest Telephone local exchange areas,

1
pursuant to Decision No. (D.) 08-01-009, issued January 11, 2008. Race has initiated IP-enabled voice
service to its customer base in various parts of the state. Race is in good standing with this Commission
and has no decided or pending legal complaints against it in California or in other states. Race is the
grantee of ten California Advanced Services Fund (CASF) grants, and provides high speed broadband, IP-
enabled voice and video services to over 5,000 customers in the project areas that are completed.1 Thus,
both Race and BFN are Competitive Local Exchange Carriers (CLECs). They are not General Rate Case
local exchange carriers (GRC-LECs) or incumbent interexchange carriers subject to Uniform Rate
Flexibility (URF) regulation by the Commission.

II. Race Advice Letter 6 Complies Fully with Commission Decisions and General Order
96-B Rules and Is the Proper Vehicle to Obtain Approval of Its Stock Purchase
Agreement

A. Advice Letter 6 Complies with Commission Decisions and General Order 96-B
Race requests that the Communications Division reject the protests and expeditiously approve its stock
purchase agreement to acquire BFN. The straight forward Advice Letter should not be held up or derailed
by complaints by competitors and other speculation over the fate of the CASF grant held by BFN. The
fate of the CASF grant decision is properly before the Commission’s Communications Division staff in
the CASF process established by the Commission in its rules, which is set forth below. This Advice
Letter is a straightforward telecommunications CPCN transfer between qualified parties.

Race Advice Letter 6 fully complies with existing Commission law and General Order No. 96-B. Until
1994, all telecommunications utilities seeking Commission authority to transfer control or assets subject
to §§ 851 through 854 of the California Public Utilities Code were required to file an application. Under
Section 854(a):

(a) No person or corporation, whether or not organized under the laws of this state,
shall merge, acquire, or control either directly or indirectly any public utility organized and doing
business in this state without first securing authorization to do so from the commission.
The commission may establish by order or rule the definitions of what constitute
merger, acquisition, or control activities which are subject to this section.

Thus, this section provides that no public utility may transfer or encumber its property that is necessary or
useful in performing its duties to the public without first having secured the Commission’s authorization.

In 1994, Decision No. 94-05-051 simplified the approval process for Non-Dominant Interexchange
Carriers (NDIECs) by allowing long distance telecommunications providers of non-monopoly
telecommunication services to submit an advice letter instead of an application as long as the acquiring
entity is either an already certificated telecommunications carrier or the parent of a presently certificated
carrier, and none of the parties has gross annual California revenues in excess of $500 million, pursuant to

1
Race currently has over 5,000 customers as a result of its CASF grants and expects to double that number by the
end of 2019. Race’s CASF grants have been used to build broadband systems in unserved and underserved
communities with little to no access to broadband.

2
§§ 854 (b) and (c). 2 The advice letter procedure enables NDIECs to reduce the potential duration of the
approval process from several months to 40 days.

In 1998, Decision No. 98-07-094 further extended the advice letter procedure from NDIECs to
Competitive Local Exchange Carriers (CLECs) providing non-monopoly local exchange
telecommunications services. As noted above, Race and BFN are both CLECs.

In 2004, in Decision No. 04-10-038, the Commission changed its rules to allow a Tier 2 Advice Letter to
be filed with effectiveness in 40 days absent suspension:
1. A Nondominant Interexchange Carrier (NDIEC) or Competitive Local Exchange Carrier
(CLEC) certificated by the Commission may file an advice letter, instead of an application,
for authority to transfer control or assets, including a merger with another certificated NDIEC
or CLEC, pursuant to Pub. Util. Code §§ 851 through 854 if all of the conditions set forth in
this appendix are satisfied. The advice letter shall become effective 40 days after filing
absent Commission action to suspend the advice letter.
a. The advice letter shall (1) advise the Commission that the filing NDIEC or CLEC is a
party to a pending transaction for which Commission authority is required,
(2) provide the general terms of the transaction, and (3) identify any decided or
pending legal complaints against the involved entities, in California or other states.
b. The advice letter shall be served on the Director of the Consumer Protection and
Safety Division and those persons to whom the entity is already required to serve
tariff changes under General Order 96-A.
c. Requests for authority to transfer customers shall comply with the customer
notification requirements set forth in Decision 97-06-096.
d. Financial statements shall accompany the advice letter for any applicant that will
continue operations after the transaction has been completed. Financial statements
may be filed under seal, but doing so is subject to protest.
e. The advice letter text shall describe the terms of the transaction and indicate how any
surviving Commission certified entities would modify their tariffs, if at all.
f. The advice letter text shall attest that the transaction does not have a potential for
resulting in either a direct physical change in the environment or a reasonably
foreseeable indirect physical change in the environment pursuant to California
Environmental Quality Act (CEQA) Guideline 15378.
Thus, under Decision Nos. 94-05-051, 98-07-094 and 04-10-038, the Commission allows NDIECs and
CLECs to file a Tier 2 advice letter instead of an application for authority to transfer control or assets,
with effectiveness in forty days.

Under General Order (GO) 96-B, Telecom Industry Rules, Rule 1.13 defines a “transfer” as including a
transfer of control. Rule 7.2(4) specifically states that matters appropriate to a Tier 2 Advice Letter
includes, “A request to Transfer by a carrier other than a GRC-LEC or an URF Carrier that is an
incumbent local exchange carrier.” Thus, this transfer clearly qualifies for Tier 2 Advice Letter treatment,
and protests objecting to this advice letter on those grounds should be disregarded.
2
54 CPUC 2d 520 at 522, 523. Neither Race nor BFN have gross annual California revenues in excess of $500
million.

3
 B. Race and BFN Are Fully Complying with the Commission’s CASF Transfer Rules and
Suspending the Advice Letter on This Basis Was In Error.
Some parties argue that the Advice Letter process is an inappropriate way for the BFN CASF grant to
transfer. 3 This is contrary to well established Commission process as set forth above. Transfers of
CPCNs must be approved by the Commission in advance as discussed above, so filing the Advice Letter
was the appropriate first step under Commission’s own rules.

Further some protesters erroneously have argued that Race should have served the CASF distribution list
or the community. It is clear that as to this Advice Letter, no notice is required to any CASF service list
or the CASF project community, under the Commission’s own CASF rules governing transfers of grants.
In Resolution No. T-17433, the Commission put forward new CASF rules relating to Senate Bill 740. At
page 25 of the rules, the Commission established this current rule:

5. Sales and Transfers of Assets Non-telephone corporations: Construction Phase - Grantees must
notify the Commission within five days of determining that the grantee is planning to sell or
transfer its assets. The grantee shall notify the Director of the Commission’s Communications
Division in writing of their intent to sale or transfer company assets within five days of becoming
aware of these plans. The grantee shall also provide documentation, including an affidavit, stating
that the new entity will take full responsibility and ownership to comply with all the requirements
of the CASF award. The new entity shall agree in writing to such. The grantee shall provide the
Commission with any necessary documents requested in its review of the transfer. This will
include all documents that are generally required of all entities applying for the CASF grants and
loans. The grantee shall not transfer CASF funds or the built out portion of the project to the new
entity prior to Commission approval via a Resolution. If the Commission does not provide
approval, the grant or loan will be rescinded.

BFN and Race gave the appropriate notice to Communications Division Director Cynthia Walker by
serving her via Email with Advice Letter 6 on June 20, 2018. Race’s counsel followed this procedure
after review of relevant CASF decisions and this single rule relating to transfers of grants, and informal
consultation with the CASF Legal staff. CASF Grantee BFN and Race are gathering the required
documentation and affidavits relating to the CASF grant, and will supply any required information to the
Communications Division shortly. Race and BFN look forward to the Communications Division review
of the transfer of the grant, and following the process set forth in the Commission’s rules. However, there
is no required notice in this CASF rule to any third party. Thus, assertions that there was a lack of notice
as to the CASF grant must be dismissed as matter of the Commission’s own policy.

Allegations that BFN has taken the CASF grant money and used it improperly must be disregarded as
factually incorrect. 4 BFN has not received any CASF Grant funds to date. The CASF rules provide that
a grantee only receives CASF monies once it confirms its matching funds and begins construction.
Reimbursements are only provided for actual costs incurred; grantees must provide receipts and other
evidence of its spending on the project, which are subject to audit by the Commission for a number of

3
See for example, SBB and ColfaxNet at 1-2. ColfaxNet (L. Juchau) at 2.
4
See for example, protests by Reinette Senum at 1 (alleging $17 million was paid to BFN by taxpayer money,
which is untrue), David Adams, at 1 (alleging state public funds of $16 million was given to Bright Fiber and that
BFN has already charged the public for something that will not be built), Pamela Hall, at 1, Barbara and Don
Rivenes at 1.

4
years. Further, protesters attempt to characterize the transaction “as an effort to sell the right to CASF
grant funds at a discount” and obtaining a “windfall.” 5 These allegations are based on a false premise that
BFN obtained the CASF grant monies already. The current CASF payment process is succinctly
described by the Commission’s CASF staff in a recent Assigned Commissioner Scoping Memo in the
CASF Rulemaking docket, R.12-10-012.

1.18. Payment Requests for payments are on a progress billing basis. The first payment requires
that a progress report be submitted to the Commission showing that at least 25% of the project
has been completed. Subsequent payments are made in 25% increments, after demonstrating
completion of at least 50%, 75%, and 100%. The grantee must submit a project completion report
before full payment will be issued. Payments are based on submitted receipts, invoices and other
supporting documentation showing expenditures incurred for the project in accordance with the
CASF funding budget submitted by the CASF grantee’s application. 6

As set forth above, grantees only obtain its first payment after 25% of the project has been completed.
Further payments require receipts, invoices and other supporting documentation incurred for the project.
Thus, speculation about waste, fraud or abuse of CASF funds are unwarranted and constitute false
allegations intended to harm the business reputation of BFN’s owner.

Most of the protests -- especially those from consumers -- express concerns about what will happen to the
BFN Bright Fiber Project. They seek additional information about whether construction methods will
change from all underground to aerial, if the stock purchase agreement is approved. SBB and ColfaxNet
go further and request suspension of Advice Letter due to network changes, changes in cost estimates, and
changes in consumer expectations. 7

Race and BFN assure the residents in the project area that their mutual foremost goal is to ensure the
Bright Fiber project is built out by BFN as outlined in the project grant resolution. BFN’s construction
plan was to primarily (but not exclusively) bury the fiber underground in conduits. In challenging terrain,
this technique can be expensive, time-consuming and more intrusive on the environment. In other areas
of the state, Race’s construction methods consist of aerial and aerial/underground hybrid systems. This
means that while Race does place some of the fiber (through which the Internet signal travels at light
speed along glass strands) on existing poles in existing rights-of-ways, it does so in conjunction with
underground fiber deployment. This technique is safe, reliable and cost-effective. If approved, Race will
assess whether there may be some areas in the Bright Fiber project where aerial construction may be
preferred given the unique topography of the Bright Fiber project area. However, its main commitment is
to ensure the fiber project build is reliable and provides the promised speeds in the project area.

5
SBB and ColfaxNet at 2-3.
6
Amended Scoping Memo and Ruling of Assigned Commissioner, Order Instituting Rulemaking to Consider
Modifications to the California Advanced Services Fund, R. 12-10-012, filed February 14, 2018, Appendix C, at
page 21, Section 1.18 Payment (explaining current CASF grantee requests for payment are on a “progress billing
basis”).
7
SBB and ColfaxNet at 4.

5
Some protestors express concerns about fire dangers posed by wireless towers. The aerial construction
technique to string fiber along poles used by Race elsewhere is to be distinguished from wireless voice
services regulated by the FCC under the Commercial Mobile Radio Services (CMRS) rules. 8 CMRS
propagates electromagnetic frequency from antennas to carry the voice signal to mobile telephone
handsets. It is these wireless antennas owned by Verizon and AT&T Wireless that were burned in the
Wine Country fires; however it is notable that those fires were so catastrophic as all landline
telecommunications and Internet facilities, not to mention electric and underground gas utility lines, were
destroyed as well as the wireless towers and facilities.

Race and BFN will provide any necessary changes to the project to the Commission CASF staff in
advance for its approval as the state regulatory agency in charge of the CASF program.

C. No Valid Protest Grounds Exist For Race AL 6 as to the Transfer

1. Advice Letter 6 Gave the Required Notice to the Appropriate

Telecommunications Advice Letter Service List

There are narrow grounds on which an advice letter may be protested as set forth in GO 96-B at Rule
7.4.2. One is the failure to serve or give notice of an advice letter. Race served Advice Letter 6 to the
relevant Advice Letter Service List currently on the Commission website that is appropriate for telecom
transfers. The impacted “customers” of the CPCN are the future voice customers of BFN, and there are
currently no such customers. As background, in Decision No. 15-05-028, issued May 12, 2015, BFN
obtained its CPCN for voice services, because at the time it applied for its CASF grant, it was a
requirement of the CASF program that applicants hold CPCNs. Initially when it filed for its CPCN for
voice services, BFN stated it would not provide voice services in the CASF project grant area. On
October 15, 2013, it amended its CPCN application and stated it would provide voice services in the
project area, but it would not offer it initially at start up but only once it developed a sufficient customer
base and put in place the necessary voice switch and interconnection to the Public Switched Telephone
Network. See D.15-05-028, at 2. As the Bright Fiber network is not yet constructed, there are no voice
customers of BFN to be transferred and thus there is no customer notice of the Advice Letter required.

Various protesters complain of lack of notice relating to the CASF grant. 9 For example SBB and
ColfaxNet allege that BFN has Internet customers, relying on a press article to assert that 580 households
have signed up for Internet service by putting down a refundable payment of $119 to have service brought
to their homes, and that the payment will be applied to the first month of service. 10 This assertion
mischaracterizes the refundable payment which is how households show online interest in signing up for
future BFN broadband service, prior to construction in their area. 11 BFN makes clear that the goal “has

8
47 Code of Federal Regulations, Part 20. See 47 CFR Part 20.9, referencing the Cellular RadioTelephone Service
rules at Part 22, subpart H, and Personal Communications Service rules at Part 24.
9
See protests of SmarterBroadband, Inc. (SBB) and ColfaxNet, LLC (ColfaxNet), at fn 10, ColfaxNet (L. Juchau) at
1, Andrew Collins-Andersen at 1, David C. White at 1, Michael Anderson at 1, and Paul Anderson at 1.
10
SBB/ColfaxNet protest at footnotes 6 and 10.
11
No one is a “customer” until the network is constructed; once built, the households who gave the payment
indicating interest will be the first houses to be connected if they initiate a customer relationship with BFN. The
$119 will be applied to the first month’s bill of such customers. 512 households have provided a $119 payment

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always been to get the network built.” No changes are anticipated of the proposed BFN rates, broadband
service speed, or households served.

2. No Commission Statute or Order Will Be Violated by Grant of the Advice

Letter; Advice Letter Approval Will Provide an Opportunity for BFN to
Obtain Necessary Funding for the Matching Funds to Build the Network
and Construct It.

Second, an advice letter may be protested if the relief requested would violate a statute or Commission
order or is not authorized by statute or Commission order on which the utility relies. SBB and ColfaxNet
claim that “unreasonable relief” is requested via the Advice Letter because (1) BFN has not yet begun
construction on the project and (2) Race is going to “dramatically change” the network construction. 12
The former is not a dispositive factor because many CASF projects have taken more time than the 24
months to obtain environmental review and approvals, and BFN in fact has made significant progress
since its December 2015 grant in Resolution T-17495, with the completion of CEQA approval of a
categorical exemption, 13 and its significant efforts to secure over $10 million in the financing for the
matching funds. Further, the Commission has in place an explicit CASF grant transfer process and so the
relief requested is not unreasonable.

The latter is pure speculation. Quite simply, there is no statute or order violated by this transfer of
CPCNs. On the contrary, a major benefit will occur to bring to fruition the broadband system approved
by the Commission in Resolution T-17495. 14 Approval of the stock purchase agreement will allow Race
to finance BFN’s eagerly-awaited construction of the Bright Fiber Project for the rural Nevada County
communities and public safety institutions that urgently need and desire high speed broadband. The
project area will be served consistent with the grant with a fiber network at the promised speeds. The
Commission staff will review any changes to the project in its CASF review in its normal course, but this
transfer should not be held hostage to that orderly CASF process.

3. The Advice Letter Has No Material Errors or Omissions.

Third, advice letters may be rejected if it contains material errors and omissions. SBB and ColfaxNet
allege there are “undisclosed changes” to the BFN proposed network architecture which they term a

which is fully refundable by BFN upon request. Only 8 of these households have asked for and received refunds,
the majority because they are moving out of the area. The 512 households did receive notice of the proposed Race
transfer. On July 2, 2018, BFN sent an email to the 512 households who paid the $119 to share the news that BFN
intended to be acquired by Race, and that Race would honor their $119 payment for the first month of BFN service.
Race unequivocally asserts that should the transfer be approved, BFN will honor the commitment to connect the
households who provided the deposits first and to apply a $119 credit to the first bill.
12
SBB and ColfaxNet Protest at 1.
13
Resolution No. T-17565, Approving Categorical Exemption prepared in Compliance with the California
Environmental Quality Act for the Bright Fiber Project, et al, issued May 16, 2017.
14
Resolution No. T-17495, Approval of funding for the grant and loan application of Bright Fiber Network, Inc. (U-
7287C) from the California Advanced Services Fund (CASF) in the amount of $16,156,323 from the Broadband
Infrastructure Grant Account and $500,000 from the Broadband Infrastructure Revolving Loan Account (total
funding request of $16,656,323) for a fiber-to-the-premise project in rural Nevada County, issued Dec. 7, 2015. The
project will bring for the first time gigabit high speed Internet service to an estimated 1,941 households spread
across 21 square miles in underserved Nevada County communities, including the communities of Chicago Park and
Peardale, which are CASF “priority areas” as declared in Commission Resolution No. 17443.

7
material omission. 15 This is highly speculative and quite inaccurate. There is nothing that compels BFN
or Race to disclose this level of information in this Advice Letter involving a stock purchase approval.

Further, SBB and ColfaxNet note that the law has changed with the passage of AB1665, and thus, the
Commission should suspend the Advice Letter, and rescind the CASF grant for the Bright Fiber Project.
Alternatively, they request the Commission require Race to reapply for the CASF grant, but then allege
that given new expansion of SBB, Colfax and other providers’ service areas at served broadband speeds,
any new project would be smaller. 16

None of these actions are appropriate under the CASF transfer rules cited above. The CASF rules provide
a specific process for the Communications Division staff to review a transfer of a grant and gather
information which Race and BFN will provide in due course. Thus, there is no basis for a rescission of
the CASF grant; in fact, it would be counter-productive to the goal of the program which is to bring
broadband to communities. BFN began its journey to bring broadband to this underserved community in
2012, filing its CASF application on February 1, 2013. The 1,941 households that live in the project area
have waited over five years to get to this point where BFN has found its $10 million+ CASF match
financing by having Race become its parent, and provide its financial backing and technical expertise.
Stripping the CASF grant away from the households in the project area at this late date would be
unprecedented and unfair, and not serve the purpose of the CASF program.

This unfair result would suit protesting companies SBB and ColfaxNet. SBB and ColfaxNet are fixed
wireless providers that are competitive in portions of the Bright Fiber project area. They timely
challenged the BFN CASF application. Households where served speeds were found by both these
wireless providers were removed from the BFN project area. 17 Yet this was not enough. These
competitors continued to fight and object to the BFN grant every step of the way, filing comments to have
the project denied at the draft resolution stage. Their arguments were considered by this Commission in
Resolution T-17495 and rejected. 18 Finally they each filed an unsuccessful Application for Rehearing,
both of which were rejected by this Commission in D.16-05-052. 19 Thus this is now SBB and
ColfaxNet’s fourth bite at the apple to try and prevent this gigabit fiber network from being built.

4. The Relief Requested in the Advice Letter is Not Pending Before the
Commission in a Formal Proceeding.

An advice letter may be rejected if the relief requested is pending before the Commission in a formal
proceeding. There is nothing pending before the Commission relevant to the approval of the stock

15
SBB and ColfaxNet Protest at 1. These two competitors greatly exaggerate that construction changes will be
“dramatic” and will place “fiber primarily above ground on aerial connections rather than underground.” This is
highly speculative and inaccurate.
16
SBB and ColfaxNet Protest at 2.
17
193 households were removed from the BFN project as a result of the SBB challenge and 138 households were
removed as a result of the ColfaxNet challenge. See Resolution T-17495, at pp. 4-5.
18
See Resolution T-17495, at pp. 4-5, 23-29.
19
Decision No. 16-05-052, Order Modifying Resolution T-17495 and Denying Rehearing of Resolution T-17495, as
Modified, Issued May 31, 2016, in A.16-01-001 (Application of ColfaxNet for Rehearing of Resolution T-17495)
and A. 16-01-004 (Application for Rehearing of Resolution T-17495 by SmarterBroadband, Inc.).

8
purchase agreement sought in Advice Letter 6. As noted above, Commission decisions and CASF policy
dictate that the process followed by Race and BFN comply with Commission procedures.

5. There Is No Requirement that this Matter Be Considered in a Formal

Hearing.

Another ground to reject an advice letter is that the relief requires consideration in a formal hearing, or is
otherwise inappropriate for an advice letter process. Here, there is no need for an evidentiary hearing to
determine Race’s qualifications to purchase BFN. The required information has been filed with this
Commission using the proper Tier 2 Advice Letter Process under GO 96-B. An evidentiary hearing is
unnecessary as it would bring delay to a routine transfer and there are no objections to the qualifications
and financial ability of Race.

6. There Is No Grounds to Find that the Approval of the Stock Transfer Will
Result in Any Unjust, Unreasonable or Discriminatory Result.

Sixth, an advice letter may be protested if the relief requested in the Advice Letter is unjust, unreasonable
or discriminatory, provided that such a protest may not be made where it would require re-litigating a
prior order of the Commission. As noted above, SBB and ColfaxNet request that the grant to BFN be
rescinded and reconsidered under CASF rule changes imposed by AB1665. In summary this would re-
litigate the prior grant of the CASF grant to BFN in Resolution T-17495. There is no basis for such a
draconian result which would only delay broadband service to the project area for another two to three
years. This community has already been waiting five years since the CASF grant application was filed.

ColfaxNet (filed via Lynele Juchau) further alleges that the proposed stock purchase agreement is anti-
competitive and discriminatory “due to the enormous government contribution of $16,700,000 that was
given to our competitor creating a government-sponsored monopoly that will compete with us in our
already-served areas in direct contradiction to the spirit of the CASF fund.” 20 These allegations of anti-
competitive and discriminatory behavior already have already been raised and considered by the
Commission in ColfaxNet’s Application for Rehearing and rejected. The Bright Fiber Resolution T-
17495 found that wireless Internet Service Providers like SBB and ColfaxNet may claim to serve much of
the Bright Fiber project area, but line-of-site considerations (in the geographically challenging
mountainous area) and staff’s inability to independently verify service levels leave the claims
unsupported. 21 Thus, there is no basis for the Race Advice Letter 6 not to be immediately approved, and
suspension was unwarranted.

7. Approval of the Stock Purchase Agreement Will Be in the Public Interest,

and the Race Acquisition of BFN Would Bring the Long-awaited Fiber
Project for Nevada County to Fruition by Providing Financing and
Expertise.

The primary question to be determined in a transfer of control proceeding under Section 854(a) is whether
the proposed transfer will be adverse to the public interest, and it is not to re-litigate the underlying grant

20
ColfaxNet (filed by L. Juchau) at 1.
21
Resolution T-17495 at 9.

9
of the certificate based on the public convenience and necessity which would allow competitors to destroy
or harass the certificate holder via the Commission’s processes. 22 This legal principle is important
because in this case two protesters are trying to collaterally attack a CASF grant held by BFN. Among
the factors that are considered by the Commission is whether the transaction is adverse to the public
interest and any antitrust issues. The Applicant should demonstrate that the proposed utility operation
will be economically and financially feasible, that efficiencies and operating cost savings will result from
the proposed merger, and that it will produce a broader base for financing with more resultant
flexibility. 23

Thus in reviewing Advice Letter 6, the focus should properly be on whether the proposed stock purchase
agreement by Race of BFN is adverse to the public interest. Clearly the transaction will have many key
benefits to the Bright Fiber project. First and most importantly, it will provide BFN with the $10 million
in required matching funds for the CASF grant to allow the project to go forward to construction and
completion. To rescind the grant now will mean after ten years of planning and five years of application
activity, the rural Nevada County communities will continue to be underserved and economically
disadvantaged compared to other communities with broadband. The community qualified at the time of
the BFN application date and grant as “underserved” under the CASF rules, and the strong community
and local leader support must be considered. Further, allowing this grant to move to construction and
completion serves the AB1665 statutory goal of 98% coverage by broadband in every consortia region of
the state. 24 To rescind the CASF grant as requested by some protesters would be not only procedurally
incorrect under the CASF’s own transfer rules, but would be contrary to statutory goals of the CASF
program. It would deny these rural communities from their economic opportunity to become a gigabit
community.

22
See D.00-05-023, In the Matter of the Joint Application of AT&T Corp., Meteor Acquisition Inc., and MediaOne
Group, Inc. for Approval of the Change in Control of MediaOne Telecommunications of California, Inc. (U-5549-C)
that Will Occur Indirectly as a Result of the Merger of AT&T Corp and Media One Group, Inc., in A. 99-08-013,
issued May 4, 2000, 2000 Cal. PUC LEXIS 355, at p. 8 (“The primary question to be determined in a transfer of
control proceeding under Section 854(a) is whether the proposed transfer would be adverse to the public interest.
Questions relating to public convenience and necessity usually are not relevant to the transfer proceeding because
they were determined in the proceeding when the certificate was granted. . . Thus we carry out our responsibility to
insure that our proceedings are not abused by regulated companies as a means to destroy or harass competitors.”)
See also D. 00-06-079, issued July 3, 2000, in A.99-09-039, In the Matter of Qwest Communications Corporation,
LCI International Telecom Corp, USLD Communications, Inc., Phoenix Network, Inc. and US West Long
Distance, Inc. and US West Interprise America Inc. at 13-14 (The Commission looks at whether the new owner is
experienced, financially responsible, and adequately equipped to continue the business sought to be acquired. It also
looks at technical and managerial competence of the acquiring entity.) See also D.07-03-047, in Application 06-05-
033, at 4-5 (“the applicable standard of review for a transaction under section 854(a) is whether the transaction will
be adverse to the public interest”).
23
Id. at 2000 Cal. PUC LEXIS 355 at 9.
24
Assembly Bill 1665 (Garcia, Internet for All Act, approved by the Governor and chaptered on October 15, 2017)
provides that Public Utilities Code 281(b)(1)(A) be revised to now read, “The goal of the program is, no later than
December 31, 2022, to approve funding for infrastructure projects that will provide broadband access to no less than
98 percent of California households in each consortia region, as identified by the commission on or before January
1, 2017. The commission shall be responsible for achieving the goals of the program.”
https://leginfo.legislature.ca.gov/faces/billTextClient.xhtml?bill_id=201720180AB1665

10
Second, there are no antitrust issues. The CASF program does not grant government-sponsored
monopolies as asserted by ColfaxNet. 25 In areas where no Internet provider provides broadband speeds at
the minimum speed set by the Commission, Internet companies have an opportunity to apply for CASF
infrastructure grants, but bear 40% of the infrastructure costs plus operating and maintenance costs
thereafter. There is no “monopoly” because any Internet provider can enter to compete in this area and
any resident is free to take service from any provider it desires. Two fixed wireless competitors SBB and
ColfaxNet have protested for the fourth time, and their complaints must be taken in that context of a
desire to quash the BFN project for competitive reasons.

Third, Race showed that it is financially able to provide the BFN matching funds for the construction of
the BFN project. Fourth, Race is an experienced broadband provider in all parts of California, and will be
able to assess the most cost efficient and reliable method to deliver the fiber system to the project area.
Already, Race feels optimistic about potential cost savings such that the $500,000 CASF Infrastructure
Loan may be cancelled should the transfer go through. Thus, the Commission should find that the
approval by this Advice Letter is not adverse to the public interest for all these reasons.

III. CASF Grant Changes Will Be Provided to the Commission’s CASF Staff for Approval.

Using the above described CASF transfer process, Race and BFN will provide the Commission’s CASF
staff with any changed information on the CASF grant. Some of the protests, particularly consumers,
express various concerns over the statement in the Advice Letter about Race’s intention to “primarily”
use “aerial delivery on existing poles in existing rights-of-ways.” Some protesters mistakenly think this
means that instead of a fiber network, the services will be delivered via FCC-regulated Commercial
Mobile Radio Services, such as cellular or personal communications services. 26 This is incorrect.

In retrospect, Race acknowledges the confusion that this sentence may have caused. To explain, if
approved, parent Race intends to fund subsidiary BFN so BFN may build the fiber network described in
BFN’s grant. Some assert that the entire BFN project was to be built with underground fiber, but this is
not true. See Resolution No. T-17495, at page 7 where the Commission describes the project as
“primarily underground for resiliency” (emphasis added). Consistent with the grant Resolution, the bulk
of the project built will be underground for the positive benefit of resiliency cited in the BFN resolution.
However, the Resolution did note many unique characteristics of the project area including tree density,
unorthodox pole attachments (utility wires attached to trees) and the obsolescence of existing poles. 27
These characteristics pose significant challenges that may require a hybrid underground/aerial approach.
The Commission has the flexibility to consider this as it reviews the CASF transfer in its separate process.

In a fiber network, fiber optic cables to carry the Internet signals along thin cables. This technology uses
glass threads (fibers) inside the cable to transmit data. A fiber optic cable consists of a bundle of glass
threats, each of which is capable of transmitting messages modulated onto light waves at the speed of
light. A fiber network is “future proof” and underground installation is typical. However, in certain
cases, underground placement becomes more difficult and costly due to terrain challenges and

25
ColfaxNet (Juchau) at 1.
26
See for example Reinette Senum at 2-3 (protesting change from a fiber optic network to a “wireless network”).
27
Resolution No. T-17495 at 7.

11
geographical features. In these cases, Race has found that stringing the fiber along existing poles instead
of digging trenches underground is more cost and time effective. As noted above, some of the network
paths of the BFN project follow narrow mountain roads with several turns. Underground trenching in
these types of situations can be challenging, costly, and limited to the work being done in warm weather
conditions. Using an aerial method to string the fiber along existing poles on these particular paths may
be faster and cost-efficient. Further, the aerial deployment method is used by Race for the last mile path
from the street to the customer’s house to avoid digging up a customer’s yard and the potential of cutting
water or underground gas lines on the customer’s private property. The use of aerial construction is a
proven, successful method Race has used in its ten CASF grants, with thousands of satisfied customers.
If approved, Race is considering to what extent a limited amount of aerial construction might address
unique terrain, foliage and geographic characteristics of the project area, while ensuring reliable service
delivery and staying within the project budget. Race intends to fully disclose its construction plans and
any financial and environmental impacts of such changes to the Commission’s CASF staff for its
consideration. The CASF staff has experience with Race’s construction methods and is in the best
position to decide whether these changes are in the best interest of the BFN project.

Some protesters assert that aerial installations on existing poles trigger new CEQA review. This is not
true. Installation of fiber optic cable and related equipment on existing poles do not require further
environmental review or approval by the Commission because this construction is within the limited-
facilities based (LFB) authority previously granted by the Commission. 28

Some consumers express health and safety concerns regarding whether fiber strung along poles will emit
electromagnetic frequency similar to Commercial Mobile Radio Services (CMRS, known commonly as
wireless cellular or personal communications services). 29 These concerns are entirely misplaced. CMRS
is not the technology that fiber broadband projects use and no such wireless emissions will occur. Under
the CASF process, environmental issues will be reviewed by the Commission as to any minor changes to
the project build.

IV. Race Is Qualified to Purchase Bright Fiber Network and the Advice Letter Should Be
Approved to Bring the Benefits of Broadband to the Project Area in Nevada County.

No party has taken the position that Race Communications is unqualified or financially unable to
purchase BFN. In fact, many parties state their strong support for BFN to be acquired by Race in order
for the project to be built by BFN, backed by an experienced and financially able broadband provider. 30
For example, Sierra Business Council and Gold Country Broadband Consortia express their support for
the transfer because Race is a proven entity with financial capacity and extensive experience in gigabit
fiber optic networks in rural California. They note that in the project area there is pent up demand for
broadband and strong community support of the project. They further note that the topography presents

28
See Environmental Assessment for the Bright Fiber Project, December 2016, at 2. Project Summary, page 2,
footnote 1. This Proponent’s Environmental Assessment was accepted by the Commission.
29
See protests filed by Renette Senum at 3, David Adams at 2, Pamela Hall at 2, Dr. Cindy Russell at 2, and
Johanna Finney at 2.
30
See protests/responses filed by Michael Anderson at 1-2, David C. White at 1, Jeff Barton at 1, Sierra Business
Council and Gold Country Broadband Consortia at 1, Supervisor Heidi Hall at 1, and Alison Lehman, County of
Nevada, County Executive Office at 1-2.

12
unique challenges and they believe Race can achieve the build with utmost speed and quality. Finally
they note there are no discriminatory or anti-competitive impacts because any person can sign up with any
provider, including the fixed wireless providers, SBB and ColfaxNet. 31

Supervisor Heidi Hall (District I County of Nevada Board of Supervisors) supports the transfer also,
stating as follows:

My constituents are seriously impacted by the severe lack of broadband access and would benefit
from the ability of Race Communications, Inc. to provide fast and reliable internet access. I
regularly receive calls and emails about sub-standard internet service or service that has been
eliminated. My District has very limited cable internet service (and in the case of the project
area, no cable service); limited DSL service due to the District’s split between AT&T’s “end of
the line” network of DSL plus Verizon’s (now Frontier’s) non deployment of DSL; and only
some service from fixed wireless providers due to the terrain and tall tree growth. The Bright
Fiber Network Project area includes designated high areas of need that were identified by the
Gold Country Broadband Consortia. The transfer of the project to Race Communications Inc.
would greatly benefit Nevada County and District I without taking business from other entities
which have been unable or unwilling to provide this same service to this area.32

Alison Lehman, CEO of County of Nevada, County Executive Office, states in her letter of support, “The
delays in the project due to existing provider challenges and the difficulty of raising the private matching
investment funds has been frustrating and detrimental to our community’s economic development. I was
pleased, earlier this year, to hear that this local company was considering offers from existing
telecommunications providers to move the Bright Fiber project forward. I ascertain that the delays of this
important project have already been harmful enough for Nevada County, and ask the CPUC to approve
the transfer as soon as possible.” 33

For all the reasons stated above, Race respectfully requests its Advice Letter 6 be approved.

Respectfully submitted,

/s/ Rachelle Chong

Rachelle Chong
Outside Counsel for Race

cc: TD PAL Coordinator (via Email)

Rob Wullenjohn, Communications Division (via email)
Sent to those who filed protests and responses via email:
Stephen Coran
David Keir
Heidi Hall
Kristin York

31
Sierra Business Council and Gold Country Broadband Consortia at 1.
32
Supervisor Heidi Hall (District I, County of Nevada) at 1.
33
CEO Alison Lehman, County of Nevada, County Executive Office at 1-2.

13
Lynele Juchau
Andrew Collins-Anderson
David C. White
Pamela Hall
David Adams
Cindy Russell
Jeff Barton
Johanna Finney
Barbara Rivenes
Reinette Senum
Michael Anderson
Paul Anderson
Alison Lehman

14