California Public Utilities Commission Issues Decision in Rulemaking on Retirement of Copper Loops by Incumbent Local Exchange Carriers
On November 13, 2008, the California Public Utilities Commission (CPUC) issued a final decision adopting a notice and negotiation process that Incumbent Local Exchange Carriers (ILECs) must comply with prior to replacing existing copper wiring with fiber optic cable and permanently retiring those copper facilities. Several CPUC Commissioners noted that new technologies have allowed Competitive Local Exchange Carriers to provide high-speed broadband to small and medium business customers over these copper wires. Commissioner John Bohn put ILECs "on notice" that a failure to negotiate in good faith or anticompetitive behavior that unfairly forecloses CLEC access to copper wires may result in future Commission intervention or regulation.
San Francisco, CA (PRWEB) November 14, 2008 -- Yesterday, the California Public Utilities Commission (CPUC) issued a final decision in the Copper Retirement Rulemaking, a proceeding that was opened last January in response to a Petition for Rulemaking filed by the California Association of Competitive Telecommunications Companies (CALTEL) in July, 2007. The third revision of Commissioner Rachelle Chong's Proposed Decision was adopted by a vote of 4-1 at the CPUC meeting on November 6.
While this order declines to adopt the rules that CALTEL proposed, it does obligate Incumbent Local Exchange Carriers (ILECs) like AT&T and Verizon to provide notice and to negotiate in good faith with Competitive Local Exchange Carriers (CLECs) interested in buying or leasing copper facilities before retiring those assets. The Commission determined that it had jurisdiction to adopt rules based on the requirements of California PUC Code Sections 709 (promotion of widespread deployment of broadband) and 851 (utility disposal of necessary and useful assets), but also decided in the last revision to exercise its authority under Section 853 to exempt the ILECs from seeking 851 approval before disposing of copper loops and related copper facilities.
CALTEL agrees with the dissent of Commissioner Dian Grueneich that "by relying on 'good faith negotiations' by the ILECs, the Decision establishes a one-sided approach to address this issue - favoring the ILECs and their plan to build out fiber networks, yet leaving little assurance for the continued use of copper loops by CLECs...The Decision recognizes that copper facilities are another viable alternative in the competitive marketplace and are, therefore, another way to meet the obligations to advance broadband deployment. Thus, preservation of copper facilities is beneficial to the telecommunications industry, the Commission, and, because of the resulting competition, beneficial to California customers."
Commissioner Timothy Simon, although he voted for the decision, noted the importance of access to copper facilities to competitors serving small and medium business customers. "Since the FCC's TRO decision, new technologies unleash the existing copper network--that the FCC had written off--(which) are capable of broadband speeds of 20 Mbps to 100 Mbps and support state of the art services such as video-conferencing and video on demand. These new emerging broadband technologies, such as VDSL2, ADSL2, and Ethernet over Copper speeds are critical to small and medium sized business customers typically located in buildings not served by fiber and or cable. Wireless is often not practical to meet the high data communications volume needs of these business customers."
Finally, Commissioner John Bohn, voted for the decision but put the ILECs on notice that additional future regulation, and reversal of the Section 853 exemption, would be the result of anticompetitive behavior. "While the Commission will not be involved in the negotiation process approved by this decision, ILECs and CLECs should bring to the Commission any claims that a party failed to negotiate in good faith…In this way, the Commission will be able to monitor whether anti-competitive behavior is occurring with regard to the sale or lease of copper loops. Anti-competitive behavior includes unreasonable prices and terms. In its review of any complaints, the Commission will consider whether negotiations were not made in good faith and whether unreasonable terms were proposed in negotiations, as these are hallmarks of anti-competitive behavior."
I recognize that the Commission may need to revisit its grant of a Section 853(b) exemption. If CLECs assert or demonstrate that ILECs are engaging in anti-competitive behavior with regard to copper loop retirements, then this Commission will reconsider whether to continue granting ILECs an exemption to the requirements of Section 851. A showing that ILECs are retiring copper loops in order to drive competitors out of the marketplace, for example, would be a persuasive argument in demonstrating that a Section 853(b) exemption is not in the public interest. I want to be very clear to the ILECs and put them on notice: while you are exempted from the requirements of Section 851 for the time being (subject to the notice and negotiation process adopted in this decision), in the future the Commission may find that an exemption is no longer appropriate, and may require you to file Section 851 advice letters to retire copper loops. The Commission has determined in this decision that it is not necessary to regulate copper loop retirement now. But it may find that more regulation is necessary in the future to ensure that there is sufficient competition."
The CPUC's Division of Ratepayer Advocates (DRA), The Utility Reform Network (TURN), and the Department of Defense/Federal Executive Agencies (DOD/FEA) all supported CALTEL's Petition, citing the importance of not depriving consumers of competitive alternatives, the need for sufficient customer notice when a customer is moved from copper to fiber facilities, and the need for a reliable telecommunications option for consumers in the event of power disruptions.
BACKGROUND
Most California homes and businesses are linked to the networks of telecommunications providers (which includes incumbents like AT&T and Verizon, as well as competitive providers that lease the incumbent's embedded copper wiring to deliver traditional and advanced services to customers) by "last mile" copper wiring. Even those customers who receive service from a cable company such as Comcast or Cox Communications (who use their own coaxial cable for access to the customer's premise) are currently able to "switch back" to an incumbent or competitive carrier via these existing copper wires.
But, as a result of regulations adopted by the FCC in 2003, when an incumbent like Verizon deploys high-bandwidth fiber lines it is also permitted to remove existing copper loops, even though removal is not necessary to deploy fiber. Once the copper is removed, the customer (and future owners and tenants) are no longer able to obtain service from a competitive carrier, and may even be unable to "switch back" to less expensive phone and DSL service from Verizon. In essence, existing rules permit incumbents to needlessly destroy existing broadband infrastructure to maximize their own competitive position, at the expense of competition and consumer choice. In a time when all agree that more and better broadband is a key public need, it does not make sense to allow the incumbent LEC to degrade or to eliminate existing copper facilities that have been built and paid for over the last several decades.
Advancing the Competitive Telecommunications Industry
CALTEL - the California Association of Competitive Telecommunications Companies - is a non-profit trade association working to advance the interests of fair and open competition and customer-focused service in California telecommunications.
CALTEL members are entrepreneurial companies building and deploying next-generation networks to provide competitive voice, data, and video services. The majority of CALTEL members are small businesses who help to fuel the California economy through technological innovation, new services, affordable prices and customer choice. A list of CALTEL members is available at www.caltel.org.
Since its inception in 1983, CALTEL has represented the interests of competitive telecommunications companies at the California State legislature, Public Utilities Commission and Governor's Office.
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