Tag: carrier of last resort

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Regulation - What is it Good For?

Old Regulation Rears its Head

The way that we regulate telecom services is interesting. The FCC has effectively eliminated federal regulation of broadband, the service that over 90% of households now use. Meanwhile, landline telephone service, the telecom product that is used by an ever-decreasing number of homes is still heavily regulated.

The target of much of the remaining regulation are the big telephone companies that still operate large copper networks. It’s easy to bash the big telephone companies because of the poor quality of services offered on those copper networks, and I’ve done so many times in this blog.

When you stop and think about it, those companies are still using copper networks built in the 50s, 60s, and 70s. If the telcos had been good stewards of those networks and maintained them meticulously those networks would still be 50 to 70 years old, and older than the 35-40 year expected life for the networks. The big telcos largely ignored maintenance of copper for the last 30 years or more, and frankly, it’s a miracle that the old copper networks are still working.

Perhaps the oddest aspect of telephone regulation is that a regulatory body will occasionally punish a big telco for still being in the copper business. A good example is a proceeding in New Mexico last fall where CenturyLink asked to be deregulated for landline telephone services. This doesn’t mean that they would stop offering the services, but rather that many of the old regulations put in place at the heyday of the telephone monopolies would be excused. Most states have deregulated the big telcos from a lot of the old telephone rules.

The New Mexico Public Regulations Commission (NMPRC) rejected the request and said that CenturyLink had not demonstrated that there was ‘effective competition’ for residential telephone service. It’s hard to find any way to defend that decision. First, in many states, there are now more residential telephone customers using cable company telephone services than the old telephone company copper. Interestingly, cable companies face almost no regulation in providing telephone service and any cable company in New Mexico does not live under the same rules that CenturyLink must follow.

Further, the latest surveys I’ve seen show that 96% of US adults now have a cell phone. It’s hard to say with a straight face that cellular service is not a direct competitor to landline telephone service. Considering the big recent stir at the FCC where cellular 4G coverage maps were shown to be largely fictional, perhaps a lot of rural New Mexico doesn’t have cellular coverage – and perhaps that’s what drove the Commission’s decision. It’s worth noting  that cellular companies are also not as heavily regulated as landline telephone providers.

The regulation that is most relevant in this case is the obligation to be the carrier of last resort. The telcos like CenturyLink are still expected, within some regulatory exceptions, to provide service to anybody who asks for service. That obligation doesn’t extend to the cable companies, to the cellular companies, or even to rural broadband – just to telephone service.

I have no doubt that there are rural homes in the state for which CenturyLink is the only communications link to the world. In areas where there is no cellular service and where the cable companies refuse to build networks, there are rural homes that rely on CenturyLink and other telcos to keep them connected. The regulatory question that must be asked is if such homes are sufficient reason to still strongly regulate telephone service in a state. Hopefully, the number of homes without cellular service will decrease significantly when the FCC awards the $9 billion in the 5G Fund program to extend cellular service to more remote communities.

It’s not an easy question to answer. We know CenturyLink could have done a better job of taking care of their copper. In this country, the smaller independent telephone companies did the needed maintenance to keep copper in the best shape possible. We saw the same thing in Germany where the copper networks were built at the same time as US copper, but which have been maintained better.

But in this country, most of the smaller telcos have already replaced, or have plans to replace the old copper with fiber. In Germany, there are vigorous public debates on the topic, with engineers saying that the copper networks are not likely to last more than another decade. Where copper remains the Germans have invested in the fastest DSL possible – something the big telcos here inexplicably have not done.

To some degree the decision in New Mexico is meaningless. No regulatory decision can make the old copper perform better or last longer, so there are not many practical ramifications of the Commission’s decision. CenturyLink didn’t even own these networks for most of the years when the maintenance wasn’t done – although they have likely cut back further on maintenance in recent years, as have the other big telcos.

I’m not highlighting New Mexico for this issue because many other states have made similar regulatory decisions. Regulators are rightfully mad at the big telcos for neglecting copper, and even madder that there are no plans to upgrade the copper to something better. But the time for regulators to do something about this was twenty and thirty years ago. The copper wires in New Mexico are going to die, and at some future date the networks will go dark. The regulators can choose to regulate copper down to the last day of the last customer – but to a large degree, the remaining regulations don’t mean a whole lot.

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Regulation - What is it Good For?

Should Rural Fiber be a Utility?

I’ve heard or read half a dozen people in the last month say that the way we get rural fiber everywhere is to make fiber a regulated utility. This idea certainly has appeal for the many rural places that don’t have fiber today. On the surface this sounds like a way to possibly get fiber everywhere, and it’s hard to see a downside to that.

However, I can think of a number of hurdles and roadblocks to this concept that might be hard to overcome. This blog is too short to properly explore most of these ideas and it would require a 40-page whitepaper to give this topic justice. With that caveat, here are some of the big issues to be solved if we wanted to create rural fiber utilities.

What About Existing Fiber? What would we do about all of those who have already built rural fiber? There are small telcos, cooperatives, and rural communities that have already acted and found a way to fund a rural fiber network. Would we force someone who has already taken the commercial risk to somehow convert those existing fiber properties into a utility? Most small companies that have built rural fiber took on a huge debt burden to do so. Rural communities that have built fiber likely put tax revenues on the line to do so. It seems unfair to somehow force those with vision to already tackle this to somehow transform into a regulated utility.

What About Choice? One of the most important goals of almost every community I have worked with is to have broadband choice. One of the key aspects of a fiber utility is that it will almost certainly be a monopoly. Are we going to kick out WISPs in favor of a fiber utility? Would a fiber monopoly be able to block satellite broadband? .

The Definition of Rural. What areas are eligible to be part of a regulated fiber utility? If the definition is defined by customer density, then we could end up with farms with fiber and county seats without fiber. There’s also the more global consideration that most urban areas don’t have fiber today. Do we ask cities that don’t have fiber to help subsidize rural broadband? It’s impractical to think that you could force city networks to become a utility because that would financially confiscate networks from the big cable companies.

Who Pays for It? Building fiber in rural America would probably require low-interest loans from the government for the initial construction – we did this before when we built rural electric grids, so this can be made to work. But what about keeping fiber utilities solvent for the long run? The rural telephone network functioned so well because revenues from urban customers were used to subsidize service in rural places. When the big telcos were deregulated the first thing they did was to stop the internal subsidies. Who would pay to keep fiber networks running in rural America? Would urban ISPs have to help pay for rural broadband? Alternatively, might this require a tax on urban broadband customers to subsidize rural broadband customers?

Who Operates It?  This might be the stickiest question of all. Do we hand utility authority to local government, even those who are reluctant to take on the responsibility? Would people favor a fiber utility if the government handed over the operations to AT&T, Verizon, CenturyLink or Frontier? What do we do about cooperatives where the customers want to own their fiber network? Do we force existing fiber owners to somehow sell or give their networks to a new utility?

What About Carrier of Last Resort? One of the premises of being a utility is the idea that everybody in the monopoly service area can get service. Would we force fiber utilities to serve everybody? What about a customer who is so remote that it takes hundreds of thousands of dollars of construction to reach them? Who gets to decide who gets service? Does a fiber utility have to build to reach every new home?

What About Innovation? Technology never sits still. How do force fiber utilities to upgrade over time to stay current and relevant? Upgrading infrastructure is an expensive problem for existing utilities – as I found out recently when a water problem uncovered the fact that my local water utility still has some of the original main feeder pipes built out of wood. The common wisdom is that fiber will last a long time – but who pays to replace it eventually like we are now doing with the wooden water pipes? And what about electronics upgrades that happen far more often?

Government’s Role. None of this can be done without strong rules set by and enforced by the government. For example, the long-term funding mechanisms can only be created by the government. This almost certainly would require a new telecom act from Congress. Considering how lobbyists can sideline almost any legislative effort, is it even possible to create fiber utility that would work? Fiber utilities would also require a strong FCC that agrees to take back and strongly regulate and enforce broadband regulations.

Summary. I’ve only described a partial list of the hurdles faced in creating rural fiber utilities. There is no issue on this list that can’t be solved – but collectively they create huge hurdles. My biggest fear is that politics and lobbying would intervene, and we’d do it poorly. I suspect that similar hurdles faced those who created the rural electric and telephone companies – and they found a way to get it done. But done poorly, fiber utilities could be a disaster.

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The Industry

Rural America Deserved Better

I’ve often contended that the large telcos have made their money back several times over in rural America and could have comfortably rolled those profits back into rural networks. If they had done so then by now most of rural America would have at least 25/3 Mbps DSL and an upgrade to rural fiber would be underway.

Since the big telcos haven’t modernized rural networks for decades we are now faced with making the leap from poorly maintained copper straight to fiber. Sadly, the big telcos could have copied what smaller telcos have done – continually build a little fiber each year deeper into the rural areas to reduce the length of the copper loops. I’ve watched small telco clients over the last twenty years that have upgraded rural DSL from 1 Mbps to 6 Mbps to 15 Mbps and then to 25 Mbps or faster.

Instead, the big telcos built DSL in county seats and some other small towns in their service areas. Where the small telcos might have upgraded electronics three or four times since the late 1990s, the big telcos have likely upgraded the DSL in towns once, and perhaps in some lucky towns twice. This is why it’s still easy to go to rural towns all over the US and find maximum DSL speeds of 6 Mbps or 12 Mbps. The DSL electronics in many of these towns are now over ten or fifteen years old. The big telcos also rarely extended DSL outside of the town hubs. Customers that lived within a few miles of town were given DSL of perhaps 1 Mbps or 2 Mbps and customers further out were offered DSL that is often barely faster than dial-up.

This was all a deliberate decision. Upper management of the big telcos decided before 2000 that they weren’t going to extend DSL into the rural areas surrounding towns and they’ve made zero effort to do so since then. The big telcos failed their rural customers when they walked away from upgrading the copper and regulators mostly let them get away with it. The telcos had collected telephone revenues from the rural areas for decades before 2000. The telcos were all still regulated in 2000 and were all still considered as the carrier of last resort for telephone service. I think the FCC and state regulators screwed up when they didn’t also make them the carrier of last resort for broadband.

Some states tried to force the telcos to provide rural broadband. Pennsylvania is a famous example of bad behavior by the big telcos. In 1993 Bell Atlantic promised state regulators that they would bring universal broadband to cover over two million rural homes in the state. The state rewarded the telco by allowing a major rate increase, supposedly to help pay for the upgrades. It’s now 26 years later and the company that renamed itself as Verizon never made any of the promised upgrades. The rural valleys of central and western Pennsylvania have some of the worse rural broadband in America due to this broken promise.

The sad thing is that states like Pennsylvania had to try to bribe the telco to do the right thing. As regulated telcos, the companies should have routinely spent annual capital to improve the rural networks, a little each year. They were collecting the revenues to make it happen. What I find shortsighted about this decision by the telcos is that, if they had upgraded to decent rural broadband they likely would enjoy 80%+ broadband penetration rates in rural areas – all with zero competition. The telcos passed on the opportunity to make a lot of money.

It’s a lot harder today to make a business case to leap from copper to fiber – mostly because little rural fiber has already been built in many counties. If the big telcos had built fiber deep into the last mile, then the upgrade to fiber could have been gradually introduced over time. Instead, the big telcos simply all decided that they were quietly going to walk away from rural America without making any announcement they were doing so. For years they have talked about their commitment to rural America. They are putting out press releases even today patting themselves on the back for the CAF II upgrades – which was funded by the FCC but which should all have been funded over past decades using the revenues collected from rural customers.

If the big telcos had done what they were supposed to have done as regulated carriers, then the CAF II subsidies could have been used to aid them in upgrading to fiber in the last mile. We know this could work because most small rural telcos are making upgrades to fiber from the ACAM funds, which is equivalent to the CAF II funds, but for smaller telcos.

I lay a lot of blame on the regulators. Everybody in the industry understood what the big telcos were doing (and not doing). Regulators could have been a lot tougher and threatened to yank the big telco franchises in rural America. In the perfect world, regulators would have handed the rural service areas of the big telcos to somebody else twenty years ago when it was clear the telcos had all but abandoned the properties.

Telco regulation helped to build the copper networks that reach to rural homes and regulation should have been used to expand broadband. The sad part of all of this is that, if the telcos had done the right thing, then millions of homes in rural America would have decent broadband today, provided by the telcos, and the telcos would be benefitting from the revenues from those customers. Rural America deserved better.

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The Industry

Verizon to Retire Copper

Verizon is asking the FCC for permission to retire copper networks throughout its service territory in New York, Massachusetts, Maryland, Virginia, Rhode Island and Pennsylvania. In recent months the company has asked to kill copper in hundreds of exchanges in those states. These range from urban exchanges in New York City to exchanges scattered all over the outer suburbs of Washington DC and Baltimore. Some of these filings can be found at this site.

The filings ask to retire the copper wires. Verizon will no longer support copper in these exchanges and will stop doing any maintenance on copper. The company intends to move people who still are served by copper over to fiber and is not waiting for the FCC notice period to make such conversions. Verizon is also retiring the older DMS telephone switches, purchased years ago from the long-defunct Northern Telecom. Telephone service will be moved to more modern softs switches that Verizon uses for fiber customers.

The FCC process requires Verizon to notify the public about plans to retire copper and if no objections are filed in a given exchange the retirement takes place 90 days after the FCC’s release of the public notice to retire. Verizon has been announcing copper retirements since February 2017 and was forced to respond to intervention in some locations, but eventually refiled most retirement notices a second time.

Interestingly, much of the FiOS fiber network was built by overlashing fiber onto the copper wires, so the copper wires on poles are likely to remain in place for a long time to come.

From a technical perspective, these changes were inevitable. Verizon is the only big telco to widely build fiber plan in residential neighborhoods and it makes no sense to ask them to maintain two technologies in neighborhoods with fiber.

I have to wonder what took them so long to get around to retiring the copper. Perhaps we have that answer in language that is in each FCC request where Verizon says it “has deployed or plans to deploy fiber-to-the-premises in these areas”. When Verizon first deployed FiOS they deployed it in a helter-skelter manner, mostly sticking to neighborhoods which had the lowest deployment cost, usually where they could overlash on aerial copper. At the time they bypassed places where other utilities were buried unless the neighborhood already had empty conduit in place. Perhaps Verizon has quietly added fiber to fill in these gaps or is now prepared to finally do so.

That is the one area of concern raised by these notices. What happens to customers who still only have a copper alternative? If they have a maintenance issue will Verizon refuse to fix it? While Verizon says they are prepared to deploy fiber everywhere, what happens to customers until the fiber is in front of their home or business? What happens to their telephone service if their voice switch is suddenly turned off?

I have to hope that Verizon has considered these situations and that they won’t let customers go dead. While many of the affected exchanges are mostly urban, many of them include rural areas that are not covered by a cable company competitor, so if customers lose Verizon service, they could find themselves with no communications alternative. Is Verizon really going to build FiOS fiber in all of the rural areas around the cities they serve?

AT&T is also working towards eliminating copper and offers fixed cellular as the alternative to copper in rural places. Is that being considered by Verizon but not mentioned in these filings?

I also wonder what happens to new customers. Will Verizon build a fiber drop to a customer who only wants to buy a single telephone line? Will Verizon build fiber to new houses, particularly those in rural areas? In many states the level of telephone regulation has been reduced or eliminated and I have to wonder if Verizon still sees themselves as the carrier of last resort that is required to provide telephone service upon request.

Verizon probably has an answer to all of these questions, but the FCC request to retire copper doesn’t force the company to get specific. All of the questions I’ve asked wouldn’t exist if Verizon built fiber everywhere in an exchange before exiting the copper business. As somebody who has seen the big telcos fail to meet promises many times, I’d be nervous if I was a Verizon customer still served by copper and had to rely on Verizon’s assurance that they have ‘plans’ to bring fiber.

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The Industry

Windstream Turns Focus to Wireless

Windstream CEO Tony Thomas recently told investors that the company plans to stress wireless technology over copper going into the future. The company has been using point-to-point wireless to serve large businesses for several years. The company has more recently been using fixed point-to-multipoint wireless technology to satisfy some of it’s CAF II build-out requirements.

Thomas says that the fixed wireless technology blows away what could be provided over the old copper plant with DSL. In places with flat and open terrain like Iowa and Nebraska the company is seeing rural residential broadband speeds as fast as 100 Mbps with wireless – far faster than can be obtained with DSL.

Thomas also said that the company is also interested in fixed 5G deployments, similar to what Verizon is now starting to deploy – putting 5G transmitters on poles to serve nearby homes. He says the company is interested in the technology in places where they are ‘fiber rich’. While Windstream serves a lot of extremely rural locations, there also serve a significant number of towns and small cities in their incumbent service areas that might be good candidates for 5G.

The emphasis on wireless deployments puts Windstream on the same trajectory as AT&T. AT&T has made it clear numerous times to the FCC that they company would like to tear down rural copper wherever it can to serve customers with wireless. AT&T’s approach differs in that AT&T will be using its licensed cellular spectrum and 4G LTE in rural markets while Windstream would use unlicensed spectrum like various WISPs.

This leads me to wonder if Windstream will join the list of big telcos that will largely ignore its existing copper plant moving into the future. Verizon has done it’s best to sell rural copper to Frontier and seems to be largely ignoring its remaining copper plant – it’s the only big telcos that didn’t even bother to chase the CAF II money that could have been used to upgrade rural copper.

The new CenturyLink CEO made it clear that the company has no desire to make any additional investments that will earn ‘infrastructure returns’, meaning investing in last mile networks, both copper and fiber. You can’t say that Frontier doesn’t want to continue to support copper, but the company is clearly cash-stressed and is widely reported to be ignoring needed upgrades and repairs to rural copper networks.

The transition from copper to wireless is always scary for a rural area. It’s great that Windstream can now deliver speeds up to 100 Mbps to some customers. However, the reality of wireless networks are that there are always some customers who are out of reach of the transmitters. These customers may have physical impediments such as being in a valley or behind a hill and out of line-of-sight from towers. Or customers might just live to far away from a tower since all of the wireless technologies only work for some fixed distance from a tower, depending upon the specific spectrum being used.

It makes no sense for a rural telco to operate two networks, and one has to wonder what happens to the customers that can’t get the wireless service when the day comes when the copper network gets torn down. This has certainly been one of the concerns at the FCC when considering AT&T’s requests to tear down copper. The current FCC has relaxed the hurdles needed to tear down copper and so this situation is bound to arise. In the past the telcos had carrier of last-resort obligations for anybody living in the service area. Will they be required to somehow get wireless signal to those customers that fall between the cracks? I doubt that anybody will force them to do so. It’s not far-fetched to imagine customers living within a regulated telcos service area who can’t get telephone or broadband service from the telco.

Customers in these areas also have to be concerned with the future. We have wide experience that the current wireless technologies don’t last very long. We’ve seen electronics wear out and become functionally obsolete within seven years. Will Windstream and the other telcos chasing the wireless technology path dedicate enough capital to constantly replace electronics? We’ll have to wait for that answer – but experience says that they will cut corners to save money.

I also have to wonder what happens to the many parts of the Windstream service areas that are too hilly or too wooded for the wireless technology. As the company becomes wireless-oriented will they ignore the parts of the company stuck with copper? I just recently visited some rural counties that are heavily wooded, and which were told by local Windstream staff that the upgrades they’ve already seen on copper (which did not seem to make much difference) were the last upgrades they might ever see. If Windstream joins the other list of big telcos that will ignore rural copper, then these networks will die a natural death from neglect. The copper networks of all of the big telcos are already old and it won’t take much neglect to push these networks into the final death spiral.

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Regulation - What is it Good For?

Carrier of Last Resort

Every once in a while I see a regulatory requirement that makes me scratch my head. One of the requirements of the current CAF II reverse auction is that every winner must become an Eligible Telecommunications Carrier (ETC) before receiving the funding – and I wonder why this is needed? This requirement is coupled with another puzzling requirement that anybody taking this funding must provide telephone service in addition to broadband. Since the purpose of the CAF II program is to expand rural broadband these requirements seem incongruous with the purpose of the program.

The ETC regulatory status was created by the Telecommunications Act of 1996. Congress created this new class of carriers to mean any carrier that is willing to provide basic services within a specified geographic area (and in 1996 this was specified as providing voice service) and for that willingness to serve would be eligible to receive any available subsidies.

While this is not in writing anywhere, I’m guessing that these requirements are part of the ongoing plan to erode the rural carrier of last resort obligation (COLR) for the big telcos. Carrier of last resort is a regulatory concept that is applied by regulators to utility infrastructure providers including telco incumbents, electric, gas and water providers. The textbook definition of carrier of last resort is a utility provider that is required by law to serve customers within a defined service area, even if serving that customer is not economically viable. Further a COLR is required to charge just and reasonable prices and generally has legal hurdles that make it difficult to withdraw from serving within the defined service area.

We are seeing rural carrier of last resort obligations eroding all over the place. For example, the FCC is proposing rules that will allow copper providers to tear down copper networks with no obligation to replace them with some alternate technology.

I think this requirement in the CAF II reverse auction is along the same vein. All of the areas covered by this auction are within the historic regulated footprint of one of the large telcos. Except for the Verizon service areas, where Verizon did not accept the original CAF II funding, these are the most remote customers in this auction are in very rural areas. These are the customers at the far end of long copper lines who have no broadband, and likely no quality telephone service.

Anybody accepting the CAF II reverse funding must file for ETC status for those census blocks where they are getting funding. This is a requirement even if the auction winner is only going to be serving one or two people within that census block. Census blocks are areas that generally include 600 – 800 homes. In cities a census block might be as small as a block or two, but in rural areas a census block can be large.

My bet is that the large telcos are going to claim that they no longer have carrier of last resort in any rural area where there is now a second ETC. They will ask regulators why they need to serve a new home built in one of these areas if there is another carrier with similar obligations. If that’s the case, then this reverse auction is going to remove huge chunks of rural America from having a carrier of last resort provider. It’s likely that incumbent telcos will use the existence of a second ETC to avoid having to bring service to new homes.

I have an even more nagging worry. ETC status is something that is granted by state regulatory commissions. In granting this status it’s possible that some states are going to interpret this to mean that a new ETC might have some carrier of last resort obligations. If the incumbent telco tears down the copper network, it’s not unreasonable to think that state regulators might turn to the new ETC in an area to serve newly constructed homes and businesses.

I would caution anybody seeking ETC status as part of getting this funding to make sure they are not unknowingly picking up carrier of last resort obligations along with that status. If I was making such a filing myself I would query the regulators directly to get their response on the record.

I will be the first to tell you that I could be off base on this – but this feels like one of those regulatory requirements that could have hidden consequences. I can’t think of any reason why this program would require a new provider to supply telephone service other than for letting the large telcos off the hook to do so. I know that many companies going after this funding would think twice about taking it if it means they become the carrier of last resort.

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Regulation - What is it Good For?

Carrier-of-Last-Resort Obligations

Earlier this month the U.S. District Court for the District of Columbia upheld FCC orders that still require large telcos to be the carrier-of-last-resort provider of telephone service for at least some of their service territory. The ruling is the result of appeals made by CenturyLink and AT&T that required them to provide telephone service to new rural households.

The idea of carrier of last resort has been part of the telephone industry for nearly as long as the FCC has been regulating the industry. The concept was a key component of spreading the telephone network to all corners of the country – the Congress and the early FCC understood that the whole country was better off if everybody was connected.

Over the years the FCC and various state regulatory commissions ruled that telcos had to make a reasonable effort to connect rural customers. Telcos always had the option to petition against adding customers in really hard to reach places like mountaintops, but for the most part telcos routinely added new homes to the telephone network.

Carrier-of-last-resort started to weaken with the introduction of competition from the Telecommunications Act of 1996. Since that time the big telcos have been able to walk away from carrier-of-last-resort obligations in most of their territory. This court order ruled that in areas where the telcos are still receiving federal high cost support that the telcos are still obligated to connect homes that request service.

I worked for Ma Bell pre-divestiture and there was a real pride in the telephone industry that the network reached out to everybody. Telcos then also deployed huge numbers of pay telephones throughout the network to reach those that couldn’t afford phone service – even though they lost money on many of the payphones. The Bell company and the smaller independent telcos made it their mission to extend the network to everybody.

This order made a few comments, though, that puzzled me. They point out that many of the high-cost areas served by the big telcos are up for new funding from the upcoming CAF II auctions. Any winners of that auction are required to file to become the Eligible Telecommunications Carrier (ETC) for any areas they receive funding. The discussion in the court order implies that these new ETCs will become the carrier-of-last-resort in these areas.

That surprised me because there are plenty of carriers that have ETC status and yet are not the obligated carrier-of-last-resort. The best example is the same big telcos examined in this case who are the ETC of record for their whole footprints but now only have carrier-of-last-resort obligations for the last most rural areas covered by this case. There have been stories for years of people who built new homes, even in urban areas, and are refused service by both the telco and cable company. The cable companies have no carrier-of-last-resort obligations, but it’s clear that in many places the telcos have been able to walk away from the obligation.

I think that companies seeking the CAF II reverse auction funding might be surprised by this interpretation of the rules. Being carrier-of-last-resort means that a carrier is obligated to build to reach anybody in the covered area that requests telephone service. The reverse auction doesn’t even require total coverage of the covered census blocks and that seems to be in conflict with the court’s interpretation. The reverse auction census blocks are some of the most sparsely populated areas of the country and building to even one remote customer in some of these areas could be extremely expensive.

Unfortunately, the carrier-of-last-resort obligation only applies to telephone service and not to broadband. It would be nice to see this concept applied to broadband and the FCC missed a good opportunity to do this when they handed out billions of federal dollars in the CAF II plan. With that plan the big telcos are only required to make their best effort to reach customers with broadband in the areas that got the CAF II funding – I’m hearing from rural people all over the country that a lot of the CAF II areas aren’t seeing any upgrades. For the most part the idea of carrier-of-last resort and universal coverage are becoming quaint concepts of our past.

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Regulation - What is it Good For? What Customers Want

When Customers Use Their Data

In a recent disturbing announcement ,Verizon Wireless will be disconnecting service to 8,500 rural customers this month for using too much data on their cellphones. The customers are scattered around 13 states and are a mix those with both unlimited and limited data plans.

Verizon justifies this because these customers are using data where Verizon has no direct cell towers, meaning that these customers are roaming on cellular data networks owned by somebody else. Since Verizon pays for roaming the company say that these customers are costing them more in roaming charges than what the company collects in monthly subscription fees.

Verizon may well have a good business case for discontinuing these particular data customers if they are losing money on each customer. But the act of disconnecting them opens up a lot of questions and ought to be a concern to cellular customers everywhere.

This immediately raises the question of ‘carrier of last resort’. This is a basic principle of utility regulation that says that utilities, such as traditional incumbent telephone companies, must reasonably connect to everybody within their service territory. Obviously cellular customers don’t fall under this umbrella since the industry is competitive and none of the cellular companies have assigned territories.

But the lines between cellular companies and telcos are blurring. As AT&T and Verizon take down rural copper they are offering customers a wireless alternative. But in doing so they are shifting these customers from being served by a regulated telco to a cellular company that doesn’t have any carrier of last resort obligations. And that means that once converted to cellular that Verizon or AT&T would be free to then cut these customers loose at any time and for any reason. That should scare anybody that loses their rural copper lines.

Secondly, this raises the whole issue of Title II regulation. In 2015 the FCC declared that broadband is a regulated service, and that includes cellular data. This ruling brought cable companies and wireless companies under the jurisdiction of the FCC as common carriers. And that means that customers in this situation might have grounds for fighting back against what Verizon is doing. The FCC has the jurisdiction to regulate and to intervene in these kinds of situations if they regulate the ISPs as common carriers. But the current FCC is working hard to reverse that ruling and it’s doubtful they would tackle this case even if it was brought before them.

Probably the most disturbing thing about this is that it’s scary for these folks being disconnected. Rural homes do not want to use cellular data as their only broadband connection because it’s some of the most expensive broadband in the world. But many rural homes have no choice since this is their only broadband alternative to do the things they need to do with broadband. While satellite data is available almost everywhere, the incredibly high latency on satellite data means that it can’t be used for things like maintaining a connection to a school server to do homework or to connect to a work server to work at home.

One only has to look at rural cellular networks to understand the dilemma many of these 8,500 households might face. The usable distance for a data connection from a cellular tower is only a few miles at best, much like the circles around a DSL hub. It is not hard to imagine that many of these customers actually live within range of a Verizon tower but still roam on other networks.

Cellular roaming is an interesting thing. Every time you pick up your cellphone to make a voice or data connection, your phone searches for the strongest signal available and grabs it. This means that the phones of rural customers that don’t live right next to a tower must choose between competing weaker signals. Customers in this situation might be connected to a non-Verizon tower without it being obvious to them. Most cellphones have a tiny symbol that warns when users are roaming, but since voice roaming stopped being an issue most of us ignore it. And it’s difficult or impossible on most phones to choose which tower to connect to. Many of these customers being disconnected might have always assumed they actually were using the Verizon network. But largely it’s not something that customers have much control over.

I just discussed yesterday how we are now in limbo when it comes to regulating the broadband practices of the big ISPs. This is a perfect example of that situation because it’s doubtful that the customers being disconnected have any regulatory recourse to what is happening to them. And that bodes poorly to rural broadband customers in general – just one more reason why being a rural broadband customer is scary.

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Regulation - What is it Good For? The Industry

Retiring the Copper Networks

Attached is a copy of FCC Docket DA-14-1272 where Verizon is asking to discontinue copper service in the towns of Lynnfield, MA, Farmingdale, NJ, Belle Harbor, NY, Orchard Park, NY, Hummelstown, PA and Ocean View, VA. In this docket the FCC is asking for public comments before it will consider the request.

In these particular towns Verizon is claiming that almost all of the households are already served by fiber and they are seeking to move the remaining households to fiber so they can disconnect and discontinue the use of the copper networks there. And perhaps if there are only five percent of lines left on copper in these towns that might be a reasonable request by Verizon. But this does prompt me to talk about the whole idea of discontinuing older copper networks, because both Verizon and AT&T have said that they would like to eliminate most of their copper by 2020.

In the case of Verizon it’s a tall order to get rid of all copper because they still have 4.9 million customers on copper with 5.5 million customers that have been moved to fiber. AT&T has a much larger problem since they don’t use fiber to serve residential customers except in a few rare cases. But both big carriers have made it a priority to get people off copper.

Many customers are unhappy with the idea of losing their copper and many have complained that they are getting a lot of pressure from the big telcos to drop their copper. There are numerous Verizon customers who say they are contacted monthly to get off the copper and they feel like they are being harassed. There are a few different issues to consider when talking about this topic.

Not everybody that loses copper will get fiber. Of the big telcos only Verizon even owns a residential fiber network. But even the Verizon FiOS network doesn’t go everywhere and they are not expanding the fiber network to new neighborhoods. For customers that live where there is no fiber, the goal is to move them to a DSL-based service or, in the case of AT&T to cellular phones.

Interestingly when a telco moves a customer from POTs (Plain Old Telephone Service) on copper to VoIP on DSL the telco will keep using the identical old copper wires. They will have changed the technology being used from analog to digital. But more importantly in most cases they will have changed the customers from being on a regulated product to an unregulated one. And that is one of the primary thrusts to get people off POTs.

POTs service is fully covered by a slew of regulations that are aimed at protecting consumers, such as carrier-of-last-resort obligations that require telcos to connect anybody who asks for service.  But in most states those same protections don’t apply to VoIP or fiber service. The most important right that customers lose with VoIP are the capped prices, meaning that the prices for VoIP or fiber service could be raised at any time by any amount. And the carrier-of-last-resort obligations have real-life impact even for existing customers. If a customer is late paying their bill on a VoIP network, Verizon would be within their rights to refuse to connect them back to service when they pay.

There are customers who want to stay on POTs on copper for various reasons. One reason is that POTs phones are powered by the copper network and so they keep working when the power goes out. There are still parts of the country where the power goes out regularly or where there is a reasonable expectation of hurricanes or ice storms. For example, houses that still had copper could make calls for up to a week after hurricane Sandy.

Another reason to keep copper is for security and medical monitoring. The copper POTs network has always been very reliable. But it is much more common for households to lose Internet service. Once a phone is converted to VoIP, then any time the Internet is down for a customer then their security and medical monitoring services that use those phones don’t work.

The FCC is going to be flooded with requests like this one to disconnect people from POTs. Certainly the copper networks are getting old. There might be merit for disconnecting copper in towns that are almost entirely fiber and where the customer losing POTs will move to fiber. In most cases fiber seems to be as reliable as copper, although it cannot power the phones when the electricity goes out.

But it seems somewhat ludicrous for the FCC to approve shuttling people from POTs to DSL while still using the same old copper lines. That clearly is being done as way to avoid regulation and customer protections and not for the carrier to save money. And it is clearly not in the customer’s best interest to move customers from POTs to cellular.

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