Regulation - What is it Good For?

Is Carrier of Last Resort Dead?

The concept of common carrier stretches back to the 14th century in English law, where businesses were granted the exclusive right to be in business as long as they were willing to serve everybody. The term common carrier came into use to describe the obligation of businesses like coaches, ferries, etc. that were required to serve anybody who asked to be transported. The concept was carried over to businesses that were given a franchise to serve a local area, and businesses like blacksmiths and innkeepers were required to serve anybody who wanted service. This concept still applies to businesses today, like railroads, which are not allowed to selectively refuse to carry freight.

Carrier of last resort (COLR) is a version of common carriage that has been applied to businesses that operate large networks like telephone companies, electric companies, water companies, and gas companies. Federal or State rules have always required such businesses to serve anybody inside of the franchise area who requests service.

In exchange for being granted a franchise area, COLR for telephone companies has always come with specific obligations. A COLR is expected to serve everybody in the franchise area, even if that means extending facilities. A COLR needs regulatory approval to withdraw from serving customers. A COLR is expected to operate the business with care, skill, and honesty and to charge fair and reasonable prices.

The concept of carrier of last resort for telephone companies started to weaken with the passage of the Telecommunications Act of 1996. This Act allowed for local telephone competition, and some legislators or regulators granted relief for telephone companies from some of the carrier of last resort obligations. For example, some states have eliminated COLR obligations as part of deregulation. Some regulators have eliminated most COLR obligations for specific telephone companies for the same reason. But even in most cases where the COLR obligations have been weakened, regulators still usually require a telco to ask for permission to withdraw from a market.

While some COLR obligations were weakened, others were expanded. For example, some states have required CLECs (competitive telephone companies) to accept COLR obligations in exchange for participating in subsidy programs. Cities have often only agreed to give a franchise agreement to CLEC or ISP that agrees to serve everybody. In many cases, this obligation is no longer explicitly called COLR, but uses terms like “duty to serve” or “obligation to serve” but refers to obligations similar to COLR.

The COLR issue has come to the forefront for broadband because of broadband grants and subsidies. Some state and local broadband grants have included an obligation to serve everybody in a grant area. The largest subsidy program to require 100% coverage is the Rural Digital Opportunity Fund (RDOF). ISPs that accept this funding are expected to offer service to 100% of homes and businesses in the covered Census blocks by the end of the six-year deployment period. It’s not entirely clear if the upcoming BEAD grants will require 100% coverage, and that final determination will likely be included in each State’s final grant rules.

Is the agreement to serve customers that is obligated through a grant or subsidy program the same as a carrier of last resort obligation? I expect not. For example, will an RDOF winner be expected in the future to extend the network to newly constructed homes?

There are clearly going to be households in RDOF areas that are not offered service. For example, many of the RDOF winners use fixed wireless technology, and there are always homes in any area that can’t be reached with the technology for some reason. In hilly and heavily wooded areas, this might be a large percentage of households.

Does a home that is not covered by RDOF have a reasonable remedy to get service? In the past, a customer could complain to State regulators if a telco was refusing to serve them. It’s hard to imagine an individual homeowner opening an expensive and complicated FCC proceeding to complain about being missed by RFOF.

Technology is also creating havoc in rural areas for traditional telephone company obligations. When I was recently upgrading my cellphone in an AT&T store, I overheard the AT&T representative tell a customer that they would soon be losing their telephone copper and would be moved to FWA cellular wireless.  My county is extremely hilly and wooded, and there is a major lack of rural cell towers. There is a good chance that this customer is not within reach of the offered cellular broadband. It sounds like the end of carrier of last resort obligations if a telco can cut the copper wires and move customers to a cellular service that doesn’t work at their home.

In circling back to the question asked at the beginning of this blog, are there many places left where a regulator will step in and demand that an ISP built infrastructure to reach an unserved household? I think the chances of that happening are getting increasingly remote.

4 replies on “Is Carrier of Last Resort Dead?”

sure, but there are a lot of conditions for what would make a common carrier type scenario. Basically so-called monopolies where the government needs to fund some build out but needs to hire a company to do all the work. They are common carrier as a sort of ‘private business that operates like a government beureau’ in a sense. Common carrier can remain in a competative environment when the government continues to fund a necessary service at some base line.

Phone services are really good conceptual models of this. It’s not economically feasable to run phone lines to every house for a business, and there are sophisticated phone systems that can be used for fancy stuff, so the government makes common carriers to deliver the basic but not the fancy stuff.

Companies that receive government funds to build out fiber networks should have some common-carrier type rules for the fiber built with that government money. Self funded builds should not be subject to that IMO. If the government primarily funded the primary fiber runs and set them with a common carrier status and then companies did last-mile out of pocket, you’d have a system where the big carriers are common carrier into areas and then where they put their PON or DSLAM or CMTS that’s the common carrier demarcation. All primary fiber grant money etc should be approved and explicitly designed so that ‘common carrier’ can’t find inconveniences to build in.

At least that’s how I see things.

“The concept of carrier of last resort for telephone companies started to weaken with the passage of the Telecommunications Act of 1996. This Act allowed for local telephone competition, and some legislators or regulators granted relief for telephone companies from some of the carrier of last resort obligations.”

It should be noted the envisioned competition was to be achieved by requiring telcos to lease access to their networks to ISPs. Also, vague notions that delivery technologies would compete to ensure all Americans would have access to advanced telecommunications services, the wisdom of which Gigi Sohn recently questioned as “facilities-based competition.”

The truly competitive technology vs. twisted pair copper that existed at the time the law was enacted was — and still is — fiber to the prem (FTTP). But as history has shown, there isn’t going to be meaningful market competition because telecom like other utilities functions as a terminating natural monopoly market, something the drafters of the act couldn’t or wouldn’t comprehend.

The IRREGULATORS just wrote comments for the AT&T California proceeding to get rid of their COLR requirements, but we’ve been tracking Pac Bell since the 1980’s, and all of the Bell companies. This is the wrong fight, and AT&T has played the Commission, politicians, advocates, and the public for decades,

First, Pacific Bell CA was supposed to be upgrading their telecommunications state-franchised public utility since 1993, replacing the existing copper wires with fiber to 5.5 million homes by 2000 and spend $16 billion. Then it merged with SBC; who took a hatchet to deployment. prior to that Pac Bell offered, ISDN, which became known as It Still Does Nothing, and later offered DSL, Then AT&T announced U-Verse, a copper to the home service.– and lied to the FCC, states and told everyone it was ‘fiber-based’. These were ALL based on the existing aging copper wires.
Then AT&T merged with BellSouth and again, upgrades to broadband were committed in 21 states– 25% or more was left undone. And then from Direct TV, then Gigapower and then the VIP transition, it was a massive bait and switch to take the construction budgets and divert them to wireless.

There is now a hidden network, as the accounting of lines leaves out 80% of lines; none of the backhaul, special access, and other lines are counted in these ‘loss’ of lines’, And most of the revenue generated in the state by AT&T is also ‘hidden’ and not paying market prices for use of the utility. But, it has been local phone subscribers and wired customers, who have been attacked with major harvesting of customers; continuous price increases, done to drive customers off the remaining wires so they can make more money using wireless.

All of this was never about those rural copper lines but the failure of the utility to upgrade and replace the copper infrastructure starting in 1993 — and the billions collected to do the upgrades, including high-cost, USF, CASF, and XSXSSXSS — current and future new stuff. — and worse, the funding that was diverted to fund the wireless subsidiary’s roll out-appears to also be charged to customers, -This is the Digital Divide 101.

This same fiber optic fiasco happened in every state, multiple times, and yet not one state broadband office, in their 5 year plans has even mention there still state utilities.

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