Minnesota Broadband Funding and Deregulation: Time to call broadband a utility and regulate uniformly?

At the Industry Broadband conference in February, Representative Kresha said he thought House Republicans would be more willing to negotiate on increasing their recommendation of $35 million for the border to border broadband funds if the Legislature could also tackle the issue of telecom deregulation.

Deregulation has been on the industry shortlist for a while (SH736/HF1066 – Competitive market regulation for local exchange carriers provided). I haven’t seen any updates since last year but a push is coming.

The telecom industry talks about wanting to level the playing field. That’s because not all broadband providers are treated equally. Telecom regulation only impacts telephone companies – not cable, not wireless. Only telephones were regulated as a utility, which means there are more consumer protections. Historically each provided a very different service, but increasingly those services are all provided via broadband – voice, data and video can all be served via broadband. The lines are blurring – in fact even a cell phone call only travels via the cellular network 2 percent of the route. Telephone service was lifeline for the last century – broadband is becoming (became) the lifeline of today.

The question for me is how can we level the playing field while still preserving consumer protection? Maybe the answer isn’t to simply deregulate telecom but to look at all three industries to figure out a fair way to address the inequities and put the consumer in the driver seat. Especially for an industry, such as telecom, that has received (continues to receive) so many Government subsidies (Universal service Funds, Connect America Funds, RUS loans, ARRA grants).

Last year the Brainerd Dispatch offered a quick and dirty synopsis of what the bill would mean to customers…

  • Price protections would end. Telephone companies would be able to charge and raise prices as they desire.
  • Quality would be unregulated. Service quality — such as how often people get a “busy” signal, how long the telephone company has to repair outages and how quickly operators answer calls for assistance — would no longer be regulated.
  • Companies could drop or refuse to take customers, for any reason. This would be especially tough on rural residents, since it costs phone companies more to serve these customers.

Pricing

Deregulation has led to higher rates in other places. California deregulated phone service in 2006 and since then basic phone service has gone from $10.69 (Sep 2006) to $24 (Jan 2015) – added services have increased even more as they have measured services, which means you pay a base and pay per use.

It would be nice to look at telecom pricing and find a way to align other providers with it – especially looking at data cap issues with wireless providers (and increasingly with wired providers).

Quality

As the graph from Forbes below shows – people are dropping landlines and going with cell phones. (Hands up – who has dropped their landline at home?) Cell phones do not have the same quality requirements. My cell phone doesn’t work in my house in St Paul. Imagine you’re in a rural area and you see a house on fire. You have a chance to make one phone call – do you grab for a cell phone or a landline? You grab for a landline because it always works.

landline decline

Some readers might say – well I could text the fire department. You can’t; e-911 is still in development. And frankly I’ve been in plenty of places across the state where text doesn’t work either. So I have sympathy for the telecom industry and gratitude for developing a system that works everywhere. I’m just not sure we can give that up. Maybe instead of lowering expectations for telecom this is an opportunity to ask the other industries to step up. (I understand that’s not an State issue.) It would sure be nice to be able to trust my cell phone the same way I trust a landline. There just aren’t the same quality regulations and it shows.

Dropped Customers

Finally the issue of refusing customers. Just last month I spoke to a cable provider in the Cities that wanted my business. When I asked too many questions about upload speeds the guy (at my door) put me on the phone with a specialist who knew about upload because she deals with the people who use too much broadband. She told me if I was pegged as an over-user that I’d be dropped as a customer – but probably I wouldn’t get pegged. As a customer that’s not very comforting. Where are the protections for me? I want access to services I buy. The YMCA rewards their best customers; broadband industry penalizes them. Consumers need protection especially since the YMCA is a more elective resource than broadband.

It’s all Broadband

Part of the problem is that we’re regulating for telephone and it is getting increasingly difficult to separate telephone from broadband and broadband from telephone. From a technology perspective it’s all becoming broadband (again even a cell call is transmitted largely via fiber). We’re in an odd space where we’re living with legacy technologies and moving forward with new solutions. But this is also a space where consumer protection still matters – giving up regulation will change the equation. And I get it, it’s not fair that telecom plays with different ruleslief than cable and wireless. But the answer isn’t to level the playing field by taking customer protection out of the equation. That may work in urban areas where the market can make demands but it doesn’t work in rural area where the customer voice isn’t as loud. That is where customer protection is required.

$100 million could go a long way toward building better broadband and Rep Kresha is saying that Republicans in the House might be willing to fund at that level in exchange for deregulation. I’m just not sure it’s worth it. Looks like that quid pro quo has a real cost in terms of consumer protection, and people weighing those trade-offs need to be aware of what that really means.

This entry was posted in MN, Policy by Ann Treacy. Bookmark the permalink.

About Ann Treacy

I have a Master’s Degree in Library and Information Science. I have been interested or involved in providing access to information through the Internet since 1994, when I worked for Minnesota’s first Internet service provider. I am pleased to be a part of the Blandin on Broadband Team. I also work with MN Coalition on Government Information, Minnesota Rural Partners, and the American Society for Information Science and Technology.

7 thoughts on “Minnesota Broadband Funding and Deregulation: Time to call broadband a utility and regulate uniformly?

  1. Consumer protections are contained in the proposed reform measures. I just don’t understand why wireless, with its constant call quality failures, unfettered rates and data caps, gets a free pass, while wireline is stuck in the era when Model T’s ruled the roadways.

  2. I don’t either. But it’s not enough to just look at deregulation of telecom – we also need to look at consumer protections with wireless (and cable). A huge difficulty is the difference in jurisdiction but if once telecom changes, consumers lose a potential advocate in helping address inequities in the playing field. Perhaps the answer lies in asking the wireless industry be held to a higher standard too.

  3. As always, Ann, I enjoy reading the blogs that you put out. In this case, I vastly differ from your opinions and believe information contained in your blog are inaccurate and do not represent what is truly being proposed in this deregulation bill.

    HF1066/SF736 is a bill that allows companies, like CTC, to be regulated like our competitors. Many regulations that exist at a state and federal level today are archaic and do not recognize the vast amount of competition that exists in our markets today. This bill simply allows telecommunications companies to be regulated the same way and that rules would apply to all land-line providers, and not just the incumbents.

    The statement that price protection would end and telephone companies would be able to charge and raise prices as they desire is a misnomer. CTC and other incumbent carriers are governed by the FCC. In 2011 the FCC’s Transformation Order forced telephone companies, like ours, to raise rates to our landline telephone service. This was not a choice that CTC made, nor a choice CTC supported. This was governance and regulation that increased the national “rate floor.” Likewise, this is the same situation that happened in all states, including Illinois, Texas and California. Deregulation is not the cause of the rate hikes, yet it was the 2011 Transformation Order that implemented increases.

    CTC has been active in pursuing this bill that has bipartisan support. CTC also has the clear understanding that we would be subject to the same governance from the Minnesota Public Utilities Commission, as we have been for decades. These bills would simply make it an even playing field for all landline providers while ALL consumer protections are still in place.

    Thank you for considering our opinion, Ann.

    Sincerely,
    Kristi Westbrock
    Chief Operating Officer
    CTC

  4. Wireless not subject to state regulatory authority on these issues. And I’m positive that if the state attempted to do so, an administrative or court battle would ensue based on federal pre-emption.

  5. I would be interested in hearing more about the consumer protections in the latest version of legislation in MN.

    Undoubtedly telecom providers have had it rough with the merging of industries. Wireless is not held to the same standards. The uncertainty of phased CAF has made it difficult to plan, which is really tricky with a business so dependent on infrastructure expansion. (Never mind fairly recent loss of revenue streams such as payphones or long distance.)

    BUT instead of leveling the playing field to the lowest common regulatory denominator I think it serves consumer to ask other industries to meet broadband where telecom is. I know that jurisdiction is different – that makes it much more difficult. But from a consumer perspective I think it would be beneficial. And broadband is a make or break technology for a business, residence or community so I think it merits a deeper look.

    Losing the utility-focused legislation moves the policy farther away from broadband being seen as a utility where on a practical basis as commerce, education and healthcare move increasingly more online broadband is more like a utility. I’m not sure what that will mean for hardest and most expensive to serve.

  6. The consumers continue to be protected under complaint resolution and investigation by the PUC. Specifics can be found in Minnesota Rules 7812.2210 Subparts 8 and 17 and in Minnesota Rules 7810. The governance we have today with the PUC will remain intact.

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