How do We Bridge the State-Federal Regulatory Divide?

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ICORE has long been in favor of the FCC’s light touch regulatory regime for the “information services” provided by large, powerful and multi-service national and international corporations. Freeing them from outdated and restrictive regulations only seems right in this era of ever-expanding and vital services.

But the universal service provided by – and required of – local telephone companies is equally important to their customers. Many of these smaller, local companies provide the same advanced services locally as their huge competitors, but they are governed by federal telecommunications law and state regulatory commissions with heavy-handed service rules crafted many years ago, when POTS, i.e., plain old telephone service, was the one and only service available.

The problem now is that the traditional local telephone company cannot fairly compete, when its competitors can cherry-pick its larger and wealthier customers, while it must, by universal service rules, provide basic telephone service to everyone in its franchised area. The huge companies, through the FCC’s Restoring Internet Freedom Order, have lighter regulation and the major advantage of choosing their customers without regulatory constraints.

Assuming that the large corporate competitors will continue to be allowed to have their pick of customers for all broadband, internet, TV and telephone services, while the traditional local company must provide basic telephone service universally to all its customers, how do our regulators bridge this regulatory gap?

Increasing High Cost Loop settlements to the smaller companies would help, but does not seem particularly practical, sustainable or – more importantly – popular or do-able with regulators. It probably wouldn’t help too much, anyway.

On the other hand, changing and improving the Interconnection Agreements made between mammoth competitors and traditional local telephone companies would. These agreements could be made to better recognize the higher costs, including indirect and overheads costs, of providing equipment; the lost revenues experienced by a local carrier when a powerful competitor enters its service area; and the significant value to the competitor of having the choice – not available to the local carrier– of just which customers to serve.

We would urge affected RLECs to begin discussions with their state commission or the FCC about more equitable interconnection compensation.