How an Innovative Tech Fund Is Helping to Expand Internet Access in California’s Low-Income Communities

Over the past 10 years, a remarkable institution in California has been fueling sustained progress in closing the digital divide, bringing many thousands of low-income households the benefits of broadband internet services.

Now, with its original source of funding at an end, the California Emerging Technology Fund is working to find new partners to bring an added 500,000 households online in the next five years.

That is a number that would look huge in most every other state, and even in populous California it represents a big challenge. But CETF and the state government have set a goal of wiring 90 percent of the state’s households by 2023. Today, connections are in place for between 84 percent and 87 percent, though close to a fifth are connected only through smartphones. Each percentage point in the huge states represents 130,000 homes.

Bringing internet access to struggling urban and suburban neighborhoods plus isolated rural areas is seen as a prerequisite to giving residents there a better chance to improve their lives. In particular, school children need these services to stay connected with the world, to complete homework assignments and to gain skills needed to advance in the fast-changing modern world. So federal, state and local governments and philanthropic institutions have been working to address the divide for well more than a decade.

Funding for a significant part of these efforts have come from the big telecom companies. As a condition for regulatory approval of mergers and other deals, the companies agreed to offer low-cost service—$10 to $15 a month—to people of modest means, and to fund nonprofits that would help introduce the internet and its benefits to communities isolated by income, language and geography.

“The digital divide is just another manifestation of the economic divide and the opportunity divide,” wrote activist John Gamboa in a foreword to a report just released by CETF and titled “Catalyst for Action: 10 Years of Achievement in Closing the Digital Divide, 2007-2017.” Gamboa continued: “Understanding the nature of concentrated, persistent poverty is in the DNA of CETF, which has gone way beyond grantmaking to advance public policy in legislative forums and to forge public benefit agreements in the regulatory arena.”

Attacking the Problem

Gamboa has been a leader in the The Greenlining Institute and the Latino Issues Forum, both of which were legal parties before the California Public Utilities Commission when it was considering two big telecom acquisition proposals, one involving AT&T and the other Verizon, in 2005. The CPUC agreed with the nonprofits that the two companies should, as a condition of approval of their deals, contribute $60 million to establish the California Emerging Technology Fund.”

That was a substantial sum, but not enough to make much progress without the active participation of community-based organizations positioned to communicate effectively with people the CETF hoped would get interested in the internet.

As CETF was getting underway, two developments helped kickstart broadband deployment in the state. First, the CPUC created the California Advanced Services Fund in 2008, and then in 2009, the American Recovery and Reinvestment Act, or stimulus program, was enacted by the federal government. The CASF generated $315 million that was used to cut rates for consumers and to support broadband deployment, and the Federal Communications Commission provided millions more.

The FCC under then-chairman Julius Genakowski at the same time was requiring internet service providers to provide inexpensive connections to low-income residents as a condition of merger approvals. Such a condition was attached to FCC approval of Comcast’s purchase of NBC Universal in 2011. In September of that year, Genakowski and Comcast executive vice president David L. Cohen jointly announced the company’s Internet Essentials program, promising service at a cost of just $10 a month. They said the program would address three primary barriers to broadband adoption:

• A lack of understanding of how the Internet is relevant and useful;
• The cost of a home computer;
• The cost of internet service.

Cohen said at the time: "Internet Essentials helps level the playing field for low-income families by connecting students online with their teachers and their schools' educational resources. The program will enable parents to receive digital literacy training so they can do things like apply for jobs online or use the Internet to learn more about healthcare and government services available where they live."

In 2016, the merger of AT&T and DirectTV carried similar conditions, and now AT&T is offering packages costing $5 to $10 a month for families who are signed up for the federal food stamps program. Comcast offers its service to any household with one or more children receiving free or reduced-price lunches at school. (Download speeds remain a challenge; they are slower than the FCC’s aspirational standard.)

Two other major players, Frontier Communications and Charter Communications, as a condition of corporate consolidations, agreed to help low-income communities with, among other steps, a donation of some 50,000 internet devices.

According to HighSpeedInternet.com, AT&T service is available to 65 percent of Californians, trailed by Comcast (29 percent), Frontier (12 percent), Charter (10.5 percent) and Cox (8.4 percent).

Pushing for Adoption

From the start, the driving force behind CETF and its mission has been its president and CEO, Sunne Wright McPeak. She served in then-Gov. Arnold Schwarzenegger’s cabinet as secretary of the California’s huge Business, Transportation and Housing Agency. Tapped to head the new nonprofit, she got it up and running in 2007 and has been there ever since.

In a recent interview, she talked about the work that has made her a recognized national leader on issues of the digital divide, emphasizing in particular the importance of community-based organizations and “trusted messengers” in persuading people in hard-to-reach communities that they should take the time, and devote scarce resources, to learning about and using the internet.

The CETF 10-year report lists five “overarching strategies” to close the digital divide:

• Engaging civic leaders
• “Venture philanthropy” grantmaking
• Public awareness and education
• Public policy initiatives
• Strategic partnerships

McPeak said that all of these must be pursued simultaneously to make a dent in the problem. Because “there is no silver bullet,” she said, CETF is pursuing a “silver buckshot” approach. The biggest job is to reach behind what CETF labels the “wall of poverty” to find people who want to learn about the internet. “We haven’t nailed” solutions to poverty, McPeak said, “and those who escape it today are pretty lucky. We need to enable people to get out of poverty by their own bootstraps, and they can’t do it without technology.”

Civic Leadership: Believing that local civic leadership was essential to its coals, CETF leadership began by convening leaders in rural counties and funded regional consortia to work on aggregation of

demand in rural areas. Then, it turned to the cities, helping to create urban regional roundtables to plan integration of broadband applications in key initiatives in economic development, education, workforce training and health care.

“Today,” according to the CETF report, “there are 15 Regional Consortia across California engaging the spectrum of stakeholders—local elected officials, government agencies, employers, community organizations and broadband providers—to collaborate to close the digital divide.”

Venture Philanthropy: McPeak seems most excited about her organization’s grantmaking to local groups. It has followed the precepts of so-called “venture philanthropy,” applying venture capital finance and business management techniques to achieving social goals.

Over the years, CETF committed $30.4 million, just over half of its original seed capital, to grants to more than 100 nonprofit community-based organizations. “Grantees were selected because of their capacity to deliver outcomes and their credibility as ‘trusted messengers and honest brokers’ for” communities on the wrong side of the digital divide, says the CETF report. Grantees were chosen from a broad spectrum of nonprofits; they included, for example, the California Dental Association Foundation, Goodwill Industries in several cities, the Latino Community Foundation, Radio Bilingue and the California Foundation for Independent Living Centers. A full list is found here.

McPeak said she has held grantees’ feet to the fire to deliver results. “We give them one quarter of the grant to get started, and then a second quarter a few months later if they are showing signs of progress,” she said. The third quarter’s payment comes only on the basis of performance against goals established in each of the grants.

“You have to be bad-assed with people you love,” McPeak continued.” If they don’t perform, it’s my ass that’s on the line with my board.” One requirement of grantees is to meet together with other grantees in learning communities. That has proved effective in concentrating their minds on the digital divide issue, which is most often outside of their core missions and competencies.

The CETF report says that cumulative results over the program’s first decade has exceeded objectives—training more than 800,000 people in digital literacy, and achieving more than 250,000 broadband adoptions by low-income households.

Public Policy Initiatives: At both the state and the federal levels, public policy has supported measures to narrow the digital divide over the past decade or more.

Digital literacy has been one thrust of policy, as leaders have recognized that more and more jobs require it and that, in the schools, adoption of Common Core curricula and computerized assessments require that students be familiar with computers to do their homework and take tests.

One signature program in California is called School2Home, which has sought to integrate broadband into teaching and learning in low-performing middle schools, with, as the CETF report puts it, “an intense focus on parent engagement.” In collaboration with the state Department of Education and others, the program has engaged 12 school districts and 35 schools over the decade, reaching more than 600 teachers and 14,000 children and their parents in high-poverty communities. The cost has been about $1,000 per student, CETF calculates.

Health-care has been another priority, as CETF has worked with state agencies, health care providers and foundations to establish the California Telehealth Network. Broadband connections between institutions promises increases in quality of care, and also the ability to monitor patients in their homes.

McPeak’s organization also is supporting a “smart housing” initiative aimed at providing connections for people living in the 300,000 public housing units in California. Although the legislature in 2013 authorized $25 milion to this end, there’s still a long way to go.

And CETF is active in supporting development of “smart communities”—encouraging integration of broadband in major public facilities and to increase the reach and efficiency of public services.

Public Awareness and Education: Raising public awareness of the benefits of the internet has been among CETF’s goals from the beginning. Its multilingual website, GetConnectedToday.com, has helped increase broadband usage among Latino and low-income households by about one sixth. The organization has reached out to hispanic and other media and helped organized social media campaigns and “Community Connect” fairs to help spread the word.

Strategic Partnerships: In the fifth and final element of its strategy, CETF has sought partnerships with large institutions that can help with broadband adoption. Genakowski’s challenge to the technology industry to do more about the digital divide spawned a national nonprofit called EveyroneOn whose program has been promoted by many leading public figures, including the mayors of Chicago and New York. CETF provided initial funding and office space to kickstart the program in California.

Seeing opportunity in the ubiquity of energy utility connections, McPeak has been working with two private utilities, San Diego Gas and Electric Co. and Southern California Gas Co. to get all of their customers online. She has also been urging the CPUC’s Low Income Oversight Board to bet behind the effort to engage California utilities.

And CETF has also developed memoranda of understanding with two of the smaller broadband providers in the state—Frontier and Charter—to help them meet the digital divide commitments they made during negotiations for corporate consolidations. McPeak hopes to work out similar arrangements with other providers as well. “We have been adversaries” in proceedings before the CPUC, McPeak remarked, “but now we want deep and abiding public-private partnerships with them.”

The companies may be offering low-cost plans to needy people, but they are not doing enough to promote these offerings, McPeak believes, nor have they done an adequate job of reporting on results. Frontier, she said, “does report results to us, is in many ways a model company.” But its offering has been “terrible,” she said, requiring people to sign up as part of a $13.99-a-month plan that bundles the internet with landline telephone service. “Many people don’t want landlines,” said McPeak. But she’s told the company: “Let’s try it your way, and we’ll come back at you if it doesn’t work.” So far, fewer than 5,000 households have signed up for the Frontier offer, McPeak said.

The Long Road Ahead

Building out the infrastructure to deliver broadband is an unfinished task, especially in rural areas of California.

McPeak said that “we need a commitment that it will be ubiquitous, available everywhere. We need to expand fiber to every corner, and when that is not possible, we need wireless broadband that can extend into farmer’s fields to make them more efficient and competitive.”

She says a relatively modest investment of about $1 billion over the next five years could get the job done. The 2017 Internet for All Now Act sets aside $300 million for infrastructure, collected from the providers. McPeak predicts that this will be matched to another $300 million in money from the private companies. To line up the rest of the financing, she says the CETF board will lobby for legislation that would fund specific high-priority installations that need public subsidies: for tribal areas, for agriculture, and for emergency response, running infrastructure to county fairgrounds where first responders gather before they’re deployed.

McPeak’s organization has reached something of a turning point, having now used up the $60-million fund over its first decade. There’s no comparable pot of money on the horizon. Indeed, the legislature chose, in the 2017 law, to give the CPUC the task of promoting broadband among community organizations, allocating $20 million over a five-year period. That is just a fifth of the $100 million CETF had documented as needed to get to the goal of 90 percent adoption among low-income households by 2023. It also gives the assignment to a bureaucratic organization whose creativity doubtless is constrained by internal rules.

But McPeak remains one of the most persuasive advocates trying to bridge the digital divide. She has agreements with Frontier and Charter to continue her work in their service areas, and is also working with Cox in San Diego. Charter has committed $32.5 over the next five years for work by CETF to promote broadband adoption by low-income families, particularly in low-performing schools and among people with disabilities.

All of this and more will be needed to meet the goals of the 2017 law. As the CETF report says, “there remain sobering challenges that compel action for new public policy and additional resources.”