The Expanding Arm of Regulation

Black phoneOne would be expecting the regulation of telcos in this country to be decreasing. For the most part the various state regulatory commissions regulate two things – telephone service (and related TDM based data service) and companies that own physical networks. But residential landlines usage has been dropping drastically over the last five years and is now under 50% in some states (something I will talk about in Monday’s blog).

States generally have regulated a few different areas having to do with telephone service. Years ago they regulated prices for both residential and business telephone products. But business telephony has generally been competitive for over a decade and most commissions stopped regulating business services. Most states still regulate the price of a residential landline although some have given up on that as well. States have given up on regulating long distance rates as well. States have regulated customer service policies such as how a company can disconnect a non-paying customer. States still actively regulate 911 services and other safety-related issues.

But the amount of regulation of telephone service has decreased drastically. With business services deregulated or detariffed and with residential landlines disappearing quickly, it seems like there is little left to regulate. Further, there are whole new ways of delivering voice services using IP, and most states do not regulate VoIP providers, except maybe in areas like 911.

States still are involved in regulating physical networks. For physical networks states regulate things like pole attachments and rights-of-ways. And states are the arbiter of disputes between carriers. States don’t specifically regulate interconnection agreements, but they are often called on to settle disputes between carriers on these issues.

Overall would expect the activity at state commissions to have decreased. But from what I can tell it has not. States seem to be holding more hearings and opening dockets to regulate those areas that are still under control. I once said that I thought that with all of the changes in the industry that state commissions might largely fade away from the telco world from lack of things to regulate. But a wiser friend reminded me that regulators will regulate and that they will find ways to justify their existence.

Today I actually see several areas where commissions are expanding their regulatory reach. For example, the California Public Service Commission just issued a certificate of public convenience and necessity (CPNC) to Schat Communications. Schat is a classic ISP, and to any extent that they offer telephone service it’s through VoIP. Schat has never needed a license from the state to operate before (like most ISPs and WISPs).

But California has established the California Advanced Services Fund (CASF) which is providing some funding to companies who will build last mile in very rural areas. Schat and a number of other ISPs have found themselves having to become regulated in order to apply for these funds. Once they have a CPNC they are regulated in California in the same manner as other telephone companies.

And the same thing is happening elsewhere. The FCC rules for getting funding from the various programs that are part of the Connect America Fund (formerly the USF Fund) must obtain status as an Eligible Telecommunications Carrier (ETC). This was a certification that telephone companies have always needed to get federal USF funds, and now the FCC has extended that requirement to anybody who wants funding from the CAF to build or extend last mile facilities. In most states a carrier has to be certified (meaning regulated) in order for the state to grant them ETC status.

While we have less and less historic telephony happening we are seeing a new wave of companies being required to become certified as telephone companies. I think my friend was right and regulators will regulate.

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