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Kentucky Resources Council, PO Box 1070, Frankfort, KY 40602 Phone [502] 875-2428

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PO Box 1070, Frankfort, KY 40602  Phone 502.875.2428, Fax 502.875.2845

KRC Communicates Concerns With Phone Deregulation Bill Draft To AT&T  Posted: January 17, 2014

January 6, 2014

Brad McLean
Director of External Affairs, AT&T
1535 Twilight Trail
Frankfort, Ky. 40601

Re: September 25, 2013 Bill Draft

Dear Brad:

As I promised I would, I’ve reviewed the most recent bill draft, and am writing to share my concerns with the bill.

As you know, current Kentucky law assures all Kentuckians access to “basic local exchange service” on a stand-alone basis. Basic local service means:

• Unlimited calls within the local exchange area
• 911 Emergency Service
• The ability to interconnect with other exchanges
• Directory Assistance
• Operator Services
• Relay Services
• A Directory Listing

The Public Service Commission currently has the power to require phone utilities to provide these services, to enforce prohibitions against “cramming” (unauthorized billing of services not ordered by a customer) and “slamming” (unauthorized change of service providers), and to require that performance objectives for quality of service meet standards set by the Commission.

As I read the new draft bill, it would allow “electing utilities,” (currently AT&T, Windstream, and Cincinnati Bell) to end the obligation to provide stand-alone basic telephone service in many areas of the Commonwealth.

For telephone exchanges with 15,000 or more housing units as of the date that the telephone utility “elects” to do so:

• The Public Service Commission would lose all authority to regulate the quality and reliability of basic telephone service,

• The right to continued access to stand-alone basic phone service would be eliminated,

• The obligation to provide service to any requesting customer on a non-discriminatory basis (known as the “Carrier of Last Resort” or COLR obligation) would be eliminated.

For all other exchanges:

• No person can request new stand-alone basic phone service unless there is already a landline at that location, and an electing utility can instead offer “voice service” to a new customer. The “voice service” could be a wireless service provided by the utility or an affiliate, and could be bundled with other services that the customer might not need or be able to afford. No aspect of the quality or reliability of the “voice service” would be regulated by the Public Service Commission.

• For all other new service requests, including those where a landline exists, the utility can at its option, offer the requesting customer an internet protocol (IP) based or wireless service. If the requesting customer does not order either, the Commission would retain jurisdiction to enforce the utility’s basic service obligation with respect to that customer at that location.

• If the customer requests an IP-enabled service or wireless service, the customer has 30 days in which to request to switch back to the regulated wireline basic local service, and if not, the obligation to provide basic local service is extinguished.

The Public Service Commission would lose regulatory power to investigate and resolve consumer complaints regarding wireless and broadband services, as well as the quality and reliability of landline phone service. The Public Service Commission would also lose regulatory authority over mergers, acquisitions, and consolidations.

Finally, while it is not stated, I am assuming that the intent of the bill is that in exchanges of less than 15,000 housing units, basic local exchange service as a stand-alone option will continue to be provided to existing customers under the jurisdiction of the Commission, regardless of the technology employed.

The current regulation of basic local exchange service reflects a judgment in 2006 by the General Assembly that, while other telephony services could be deregulated, basic local exchange service was an essential service that would remain regulated and available to all customers on a stand-alone basis, without the necessity of a contract commitment. The bill would end that obligation for new requests for service anywhere in the Commonwealth, and for new and existing service in those exchanges with over 15,000 housing units.

This is a time of transition in communications, and it is essential that as this transition occurs, the basic principles that have driven our communications policy for over 100 years be maintained and consumers protected. Those principles are universal service to all Americans, network reliability, competition, consumer protection, and public safety. I cannot support the bill as drafted because I believe it to be inconsistent with those principles in several regards:

1. Loss of universal access to basic, stand-alone phone service in larger exchanges.

The new bill assumes that in exchanges with over 15,000 housing units, the carrier of last resort obligation and the obligation to provide stand-alone basic local service is no longer needed, presumably because competition is sufficiently robust that basic local exchange service will continue to be available to all as an option without mandate, and that the quality and reliability of the service no longer needs regulatory oversight. There has been no demonstration that this is the case in and throughout all of these exchanges, and if it were the case, there already exists a mechanism in Kentucky law that would allow the Commission to approve deregulation of basic service on the basis of such a showing.

2. Replacement of highly-reliable landline service with less reliable and functional wireless service.

For new requests for service at locations where there is no current landline, the bill allows wireless service, such as the AT&T Home Phone Service, to be offered instead of traditional landline service. Access to stand-alone basic local service would be ended for such locations, as it would for those electing an IP-enabled or wireless service who do not request restoration of wireline service within 30 days after election.

While the functionality and reliability of wireless service will no doubt improve over time, such service is not comparable in quality and functionality to wireline service.

3. Loss of regulatory authority over mergers, acquisitions, and consolidations weaken consumer protections.

The current proposal by AT&T to divest itself of landlines in Connecticut highlights the importance of regulatory oversight to assure that the consumer will be protected and that basic local exchange service will continue to be available after these transactions occur.

4. Consumers are not protected against “slippage” in quality, functionality, and reliability of service during the transition from the TDM to IP-based network, and from wireline to wireless service.

There is nothing in current Kentucky law requiring the provision of stand-along basic service as an option, that inhibits the transition from the “publicly switched telephone network” to an IP-based network. Current law does not mandate that basic local exchange service be provided by a particular technology; only that it contain certain functionalities and meet certain reliability and safety standards. I am concerned that eliminating the obligation to provide basic local exchange service, and allowing the replacement of such service with “voice service,” could result in less reliable, less functional, service in areas that are more costly to serve with a wireline.

Irrespective of the technology used, customers should not be faced with a decline in the current standards of reliability, quality, and functionality of basic local exchange service that are the hallmark of the regulated utilities.

5. Nothing in the bill advances the extension of high-speed wired broadband in rural areas.

Kentucky has a significant digital divide between urban and rural areas, with high-speed internet access available in many urban markets but with little or no access in rural areas. Provision of 4G LTE wireless service in lieu of DSL service could result in rural users paying significantly more for broadband access through data plans than urban users who pay a basic monthly access fee.

I can appreciate the effort that you’ve made to narrow the reach of the former bill, and the conciliatory approach that you have taken in meeting with me and with other stakeholders who have expressed concern regarding past bills. An approach that would give the PSC a gatekeeper function, allowing it to relieve an incumbent phone utility of the COLR and basic local service obligations on the basis of a demonstration of availability of comparable service from other providers throughout an exchange, would help address the concern that sufficient competition exists at the basic service level to assure access for the most vulnerable consumers.

I look forward to working with you in the hopes that a path through this transition that assures no slippage in universal access to reliable, functional, and quality basic phone service for all Kentuckians.

Cordially,

/s/

Tom FitzGerald
Director

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