More Competition, Consolidation, State Deregulation Sought

Regardless of technology, telecom services have to be reliable, said Regina Costa, research director of the Utility Reform Network. The jurisdictional issues surrounding VoIP and services provided using Internet Protocol are critical for consumers, she said, noting carriers are pushing to have federal and state regulators deem anything that can be labeled “IP” as not telecom services and therefore not subject to oversight. It’s important to distinguish between telecom networks and services vs. applications, she said. Regulators and policy makers will have to address the need to ensure service continuity during power outages for services that rely on the grid to function, Costa said. The efforts have already begun to some degree, with the FCC and the California Public Utilities Commission looking at backup power in carrier networks and, in California, the backup batteries necessary for voice service provided with Verizon’s FiOS network and cable voice, she said.

Absent FCC action, perhaps state commissions can act on their own to clarify jurisdiction on services like VoIP, said Massachusetts Department of Telecom and Cable Commissioner Geoffrey Why. Despite the change of technology and the trend of deregulation in states, state commissions have a definite role of protecting consumers, he said. Regarding wireless substitution, Why said wireless is still somewhat a complementary service to wireline in Massachusetts. He noted the majority of the residents in the state still have wireline phones. Nonetheless, he said, state regulators have recognized the importance of wireless and the need for oversight over those services. Regulators should recognize the different characteristics of different services, said Dave Conn, vice president of state regulatory affairs at T-Mobile USA. Regulators “shouldn’t put them in the same box,” he said. The first step is to figure out consumer needs and formulate policies that cater to consumer preference, he said.

A roadblock for state commissions for dealing with quality and reliability issues is deregulation, Costa said. Now isn’t the time to further deregulate, she said. The lack of data and oversight is particularly problematic given the increasing consolidation, she said. Some 20 state legislatures passed deregulation bills between 2010 and the end of 2011, according to Sherry Lichtenberg, principal for telecom at NRRI. That leaves the states’ regulatory oversight limited to basic services and left no oversight of competitive services, she said. Quality of service oversight has been reduced or eliminated while carrier-of-last-resort responsibilities have been reduced or eliminated in competitive areas, Lichtenberg said. State commissioners should track the impacts of new legislation this year and work with state legislators to ensure that new laws expand rather than reduce competition, she said.

Tremendous consolidation has led to high concentration in the wireline and wireless market, said Cathy Sloan, vice president at the Computer and Communications Industry Association. That could lead to forced return to regulation, a long-term concern, she said. Key factors affecting the wireless industry include bandwidth, the need for spectrum, operating system providers and device manufacturers, Conn said. Companies like Google and Apple are working to integrate their operating systems with the ecosystem, making customers “sticky” to the operating system, not necessarily the service provider, he said. Lower-band spectrum is more desirable than high-band spectrum because of better propagation and better building penetration, he said. Eventually, more bandwidth to the end-user requires that more spectrum be made available, he said.