Tag Archives: COLR

AT&T v. California

AT&T filed several petitions at the FCC asking the Commission to override regulations from the State of California. The State is forcing AT&T to maintain copper networks until such time that AT&T can offer the same services to customers using some alternate technology.

The FCC reacted by issuing two requests for public comments related to the AT&T petitions. In the first, the FCC asks for comments related to its ability to preempt California’s regulations related to copper networks. The second asks for public comments related to AT&T being able to walk away from carrier-of-last-resort responsibilities in California as it tears down copper networks.

These proceedings ask some interesting questions, although my hunch is that the FCC already plans to preempt California on these issues and is only going through the formalities first.

One interesting issue raised is whether the FCC can grab regulatory authority from a State. The historic framework for telecom regulation has always been that States are free to regulate anything that the FCC elects not to directly regulate. Back when AT&T was the primary telephone company, every state had numerous regulations related to telephone companies. The FCC established the big nationwide rules, often dictated by Congress, but the States were free to regulate anything the FCC didn’t directly regulate. This usually meant issues like consumer rates and customer service practices. As competition was introduced into the telecom market, AT&T and the various Bell companies were successful in convincing most states to relax regulations, and in some case telcos became almost totally unregulated. California eased some regulations, but still maintains a lot of regulation of telcos. It will be interesting to see how hard California will fight back if the FCC overrides the state’s regulatory authority.

Another interesting request is for AT&T to get out of carrier-of-last resort (COLR) obligations. The petition describes this as AT&T being relieved of ETC status (Eligible Communications Carrier), which is the formal process where states certified companies with COLR status. COLR is an obligation originally created by the Communications Act of 1934, and expanded by the Telecommunications Act of 1996, which said that regulated telcos are required to serve customers located inside their regulated service areas, with only a few exceptions related to customers in remote locations. Telcos have been obligated to connect new customers to the existing networks and to build new networks to meet new homes and businesses. This feels like a quaint concept today, and it’s one of the first things that disappeared as states deregulated telephone companies. I find it interesting that many telcos still have ETC designations and use that status to receive various kinds of universal service funding while only playing lip service, at best, to carrier-of-last-resort obligations. The real question being asked in the FCC proceeding is whether the agency has the authority to override any COLR obligation required by California.

I have to think that AT&T has already been ignoring this obligation for years in California. I recall news stories of AT&T discontinuing rural copper services in rural California with little or no notification to customers. I have to think that it’s been a long time since AT&T has built any new copper infrastructure to reach newly constructed homes and neighborhoods. But there are other obligations related to COLR and ETC status that AT&T would like to have preempted.

It’s going to be interesting to see who, other than regulators in California, responds to these dockets. These particular issues are largely already dead in most of the rest of the country, although some states still maintain greater levels of regulation over telcos than others.

These dockets don’t address the even bigger question, which is whether the state or federal government should be regulating telephone service at all. I think everybody is in favor of the FCC’s efforts to tamp down on robocalls and texts, but how much other regulation of traditional telephone companies is still needed?

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.

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.