California VoIP Bill Underscores National Telecom Deregulation Strategy, Detractors Say
California’s VoIP bill has become wrapped up in the larger deregulation push of U.S. telcos. Several industry statements have increasingly worried consumer advocates in recent months. But an AT&T senior vice president argued the transition away from copper is a natural extension of federal policy and promotes deeper conversation on how to develop new, appropriate regulations. The state bill would cause “irreparable harm” if passed into law, The Utility Reform Network (TURN) wrote Gov. Jerry Brown. SB-1161 would prohibit the California Public Utilities Commission from regulating VoIP unless allowed by state or federal statute.
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"The large telephone companies have not bothered to hide their true ambitions,” TURN said. “They wish to allow their copper networks to deteriorate, force urban business and residential telephone customers to move to IP-enabled networks, and push rural customers to wireless service.” Verizon and AT&T have voiced a retreat from legacy networks in recent months. Brown received the bill, passed by the Legislature, Aug. 27 and needs to act one way or another by Sept. 30, said the office of bill sponsor Sen. Alex Padilla, a Democrat like Brown.
"The vision I have is we are going into the copper plant areas and every place we have FiOS, we are going to kill the copper,” Verizon Chairman and CEO Lowell McAdam said June 21 (http://xrl.us/bnpb7g). “We are going to just take it out of service and we are going to move those services onto FiOS .... And then in other areas that are more rural and more sparsely populated, we have got LTE built that will handle all of those services and so we are going to cut the copper off there ... and do it over wireless.” TURN spotlighted this quote in its Monday letter to Brown. It disturbed New York’s attorney general, who sent his public service commission a July 30 letter asserting Verizon contradicts public support of landline networks and “avowedly intends to abandon substantial portion of existing copper plant, rather than maintain it” (CD Aug 1 p6). The idea that Verizon will abandon copper “is simply not true,” a Verizon spokesman told us Wednesday. “In fact, we invested six and a half billion dollars in our wireline networks last year.” McAdam’s remarks, in context, refer to transferring customers as an “upgrade,” from an economic and technological standpoint, the spokesman said.
AT&T also has plans to transition to Internet Protocol networks from what some call the plain old telephone network. FCC Commissioner Ajit Pai requested and received an AT&T checklist, which plans for deregulation. An Aug. 30 ex parte filing said the company eyes “retirement of legacy TDM-based networks and services and transition to an IP-based Network/Ecosystem” (http://xrl.us/bnpb8j). The FCC should establish a sunset date “after which no carrier would be required to establish and maintain TDM-based services/networks, and purchasers of such services (including circuit-switched and dedicated transmission services) would have to switch to IP or other packet-based services,” AT&T said. Existing eligible telecom carrier designations should terminate upon a certain date and the FCC should “limit ETC status and obligations only to carriers that voluntarily accept ETC status, and only to those services and geographic areas that are supported by federal universal service broadband funding,” AT&T said. The FCC should preempt any state request that AT&T maintain such legacy networks or offer intrastate services, the telco requested. The government should “classify such services as information services, subject to minimal regulation only at the federal level,” it said.
Behold “the AT&T/Verizon plan,” TURN Executive Director Mark Toney said in the letter. Both Verizon and AT&T denied any such formal strategy exists. TURN Telecom Director Regina Costa hopes AT&T’s statements “will make people pause,” she told us. SB-1161 advanced this far because legislators “believed what the bill’s sponsor said,” Costa told us. Verizon and AT&T are powerful, she added. Interest groups that support the bill contributed 11 times as much to California politicians as interest groups opposing, $2.37 million versus just under $217,000, according to contribution-tracking organization MapLight (http://xrl.us/bnpcbg). Telecom has donated the most -- over a million dollars, the site said. Padilla has called such allegations of influence “insulting” (CD June 25 p6).
AT&T’s check list is not “controversial” or “surprising” but consistent with federal policy and economic trends, Senior Vice President Bob Quinn told us. It begins a necessary conversation and “it doesn’t make sense to have that discussion in 50 state commissions,” he said, echoing a vice president’s summer remarks (CD July 21 p17). Only three in 10 customers choose TDM and the number will soon drop even lower, Quinn said. The cost of maintaining these legacy networks “is going to grow enormously,” he said. Competition will drive consumer protections and reliability rather than old state regulations designed for monopolistic service, he said, adding “and that doesn’t mean we're going to leave anyone behind.”
AT&T’s proposal seeks to “evade all existing regulations pertaining to telephone service, including service quality, universally available service and consumer protections,” such as Lifeline, TURN said. It has a “status quo mentality” on these issues and it’s time to “reset the way we look at regulation,” Quinn said.
"TURN has mischaracterized SB 1161,” Verizon West Region President Tim McCallion told us in a statement. “TURN has argued that this bill would eliminate CPUC regulation of traditional, basic telephone service. This claim simply is not true, and was soundly rejected by the Legislature.” The bill “does not affect existing laws and regulations governing the provision and offering of basic service as defined by the CPUC” and thus the “Legislature overwhelming rejected TURN’s argument and overwhelming approved SB 1161” with bipartisan support, he said.
The California Association of Competitive Telecommunications Companies “recognized” the bill was “an important part of this broad wholesale deregulation strategy, and consequently dropped its support for the bill,” Executive Director Sarah De Young told Brown in an Aug. 24 letter requesting his veto. The association includes VoIP providers, she added. “But the regulatory certainty envisioned by AT&T and Verizon is one which would completely foreclose the ability of California regulators to protect wholesale broadband competition in this state once the ILECs transition from circuit switched to IP technology,” which will “eliminate the state’s ability to protect a competitive marketplace and consumer choice” and “risk the loss of hundreds of CLECs,” she said. The bill is “the nearly complete abdication of state authority for a functional telecommunications system,” TURN said.
Tech industry heavyweights like TechNet and TechAmerica have lent great support to the bill. “The really weird thing about this is the tech people,” Costa said. “The tech people say just give this to us because it helps the Internet. But what’s the Internet?” Functionally, VoIP won’t differ from traditional copper networks, the bill’s detractors have argued (CD Aug 10 p9), contrary to the Internet references filling supporters’ words. AT&T is “content to muddy the water” and “the tech people don’t know they're sitting down and shaking hands with their worst enemy,” Costa said.