The Beginning of the End for Copper

The FCC voted last Thursday to relax the rules for retiring copper wiring. This change was specifically aimed at Verizon and AT&T and is going to make it a lot easier for them to tear down old copper wiring.

The change eliminates some of the notification process to customers and also allows the telcos to eliminate old copper wholesale services like resale. But the big consequence of this change is that many customers will lose voice services. This change reverses rules put in place in 2014 that required that the telcos replace copper with service that is functionally as good as the copper facilities that are being removed.

Consider what this change will mean. If the telcos tear down copper in towns then customers will lose the option to buy DSL. While cable modems have clobbered DSL in the market there are still between 15% and 25% of broadband customers on DSL in most markets. DSL, while slower, also offers lower cost broadband options which many customers find attractive.

I don’t envision AT&T and Verizon tearing down huge amounts of copper in towns immediately. But there are plenty of neighborhoods where the copper is dreadful and the telcos can now walk away from that copper without offering an alternative to customers. This will give the cable companies a true monopoly in towns or neighborhoods where the copper is removed. Customers losing low-cost DSL will face a price increase if they want to keep broadband.

The rural areas are a different story. In most of rural America the copper network is used to deliver telephone service and there are still a lot of rural customers buying telephone service. You might think that people can just change to cellular service if they lose their landlines, but it’s not that simple. There are still plenty of rural places that have copper telephone service where there is no good cellular service. And there are a lot more places where the cellular service is too weak to work indoors and customers need to go outside to find the cellular sweet spots (something we all remember doing in airports a decade ago).

Of a bigger concern in rural areas will be losing access to 911. A lot of homes still keep landlines just for the 911 capabilities. Under the old rules the carriers had to demonstrate that customers would still have access to reliable 911, but it seems the carriers can now walk away without worrying about this.

The FCC seems to have accepted the big telcos arguments completely. For instance, Chairman Pai cited a big telco argument that carriers could save $40 to $50 per home per year by eliminating copper. That may be a real number, but the revenue from somebody buying voice service on copper is far greater than the savings. It seems clear that the big telcos want to eliminate what’s left of their rural work force and get out of the residential business.

This is a change that has been inevitable for years. The copper networks are deteriorating due to age and due even more to neglect. But the last FCC rules forced the telcos to work to find an alternative to copper for customers. Since AT&T and Verizon are cellular companies this largely meant guaranteeing adequate access to cellular service – and that meant beefing up the rural cellular networks where there aren’t a lot of customers. But without the functional equivalency requirement it’s unlikely that the carriers will beef up cellular service in the most remote rural places. And that means that many homes will go dark for voice.

This same ruling applies to other telcos, but I don’t think there will be any rush to tear down copper in the same manner as AT&T and Verizon. Telcos like Frontier and Windstream still rely heavily on their copper networks and don’t have a cellular product to replace landlines. And I don’t know any smaller telcos that would walk away from customers without first providing an alternative service.

It’s hard to think that the FCC is embracing a policy that will leave some households with no voice option. The FCC is purposefully turning a blind eye to the issue, but anybody who knows rural America knows this will happen. There are still a lot of rural places where copper is the only communications option today. Our regulators once prided themselves on the fact that we brought telephone service to every place that had electricity. We had a communications network that was the envy of the world, and connecting everybody was a huge boon to the economy. We could still keep those same universal service policies for cellular service if we had the will to do so. But this FCC clearly sides with the big carriers over the public and they are not going to impose any rules that the big telcos and cable companies don’t want.