FCC Gleefully Embroidering Last Century’s Regulations

The transition from a copper telephone network to an all IP fiber network has been noteworthy. Already 30% of consumers use voice-over-Internet (VoIP) services instead of traditional copper-based telephone services, and another 44% are wireless-only. Only 25% of consumers still use old copper telephone services and that’s because their carriers have yet to transition to fiber. Carriers have replaced from 30% to 60% of their copper “special access” lines (a high capacity carrier to carrier circuit).

The transition to fiber is incomplete but it is welcomed because fiber is less costly to maintain, causes fewer outages, and is far, far faster. Indeed, the Federal Communications Commission (FCC) has been preaching that we need 25 Mbps Internet access for all consumers. You cannot get that speed with plain old telephone service (POTS) lines — they need to be cable or fiber.

Perversely, in a recent decision, the FCC insists on regulating each proposed transition from copper to fiber – no matter how small, no matter how vacuous the objections may be, no matter how transparently anticompetitive a commenter’s objections are.

The FCC offers a few lame excuses. Evidently, there are some consumers who love POTS and a fewer number who actually understand what VoIP is but don’t feel it covers their needs. There are some non-facilities-based telecom companies enjoying a very low price for bulk copper connections between some connection points, and they don’t want to let go of those bargains, even if the fiber replacing them could deliver fewer outages and easier expansions and be price competitive.

As with most regulations in Washington, the back story is more complex than the tortured legalese admits. Earlier this year, the FCC put Internet Service Providers (ISPs) under a Title II regulatory regime. Title II prevents ISPs from recovering costs related to capacity depletion by video streaming services and gaming. So, ISPs cannot charge someone who fills 95% of the capacity in his connection more than someone who fills just 5% of the capacity in his connection– i.e., Net Neutrality under Title II prevents charging by volume of bits. That disadvantages consumers who make modest or even moderate use of their connections – they are paying to subsidize people who stuff their connection to the max. When it imposed Title II on ISPs, the FCC promised it would not regulate Internet prices. However, with the FCC blocking zero-pricing plans and moving to impose tax and spend Universal Service plans, their promises will be broken.

Title II also imposes a Section 214 requirement on carriers. Commissioner Ajit Pai points out that Section 214 was originally adopted early last century by Congress to guard against the loss of service during wartime. But under the FCC’s newly engorged Section 214, carriers must seek permission before discontinuing almost every [network] feature no matter how little-used or old-fashionedthe FCC gets to micromanage each and every change that a carrier makes to its network, including… discontinuing “wholesale voice inputs” even if the carrier continues to serve that same community with the same service.

Where a service provider proposes to replace a copper-based service with the same service based in fiber, Commissioner O’Rielly notes that a single complaint could subject a provider to an enforcement action, further diverting resources away from fiber investment. The FCC can force a provider to maintain both service versions or to forget about transitioning to fiber. That would slow deployment of fiber and raise the cost of serving customers with fiber, an outcome that only the carrier’s competitor should like.

The FCC clearly relishes the opportunity to use its Title II throne, presiding over a slow, high-cost Section 214 proceeding in each instance of a proposed transition to fiber, followed by removal of the copper plant. It is not quite the price setting that the FCC promised it would avoid, but the authority to selectively impose dual network costs is the next best thing as far as competitors are concerned. Of course, the imposition of unnecessary cost does not help consumers, but these internecine fights between carriers seldom do.

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