Colorado Deregulation Order Disappoints CenturyLink, State Telecom Association

CenturyLink also reacted with “disappointment” to the order because “it still creates a lot of open questions,” Regional Vice President of Regulatory and Legislative Affairs Jim Campbell told us. He’s not sure how the PUC will determine effective competition, he said, pointing to concerns with making these rulings on an exchange level rather than a wire-center level. He cited the potential for rural customers who might need support but not receive it: “What happens to those rural customers?” Effective competition rulings, reviewed triennially, will also presumably include wireless, which won’t provide “adequate” voice service, especially in mountainous regions, Kirchhof said. Wireline, wireless, cable-telephony and interconnected VoIP will all be considered in basic service adjudications in the second phase of the PUC’s deregulation proceeding, the order said (http://bit.ly/UMLLdB). These effective competition rulings will reduce the amount of USF support but don’t kill provider-of-last-resort obligations, he added: “It appears like they want to use it both ways.” Companies in effectively competitive areas can petition the PUC to “relinquish” these obligations, the order said.

Another question is how the order’s “status quo” abstention on IP services regulation will affect 911 oversight, despite the PUC’s insistence it'll keep regulating 911. The Boulder Regional Emergency Telephone Service Authority (BRETSA) is “concerned with the PUC’s decision not to affirmatively exercise its jurisdiction over IP-enabled services in the area of 9-1-1, and particularly with respect to Next Generation 9-1-1,” the authority told us in a statement submitted through its attorney Joseph Benkert. “BRETSA believes the state should continue to assure that NG9-1-1 providers possess adequate technical and financial qualifications to provide the mission critical service of routing 9-1-1 calls from customers of the various telephone service providers to the appropriate 9-1-1 Call Center, regardless of the technology employed.” The authority supports state regulatory oversight and said even “unfettered competition” wouldn’t be able to hold back service costs. The PUC’s order said it will “continue to exercise authority to ensure high quality basic emergency services and require contributions to vital state support funds from carriers on a technologically-neutral basis” when discussing IP (http://bit.ly/UMLLdB).

Money worries both RLECs and CenturyLink. “There has been concern that CenturyLink is getting too much money,” Kirchhof added, noting that the ILEC receives about $50 million of the $54 million in Colorado’s high-cost support fund. Campbell acknowledged this but said CenturyLink is the state’s largest rural provider by far. The PUC raises “logistical” questions with its new order, Kirchhof said -- the commission will have to go through hundreds of wire centers to determine effective competition during the first six months of next year. Future broadband investment is “at risk” due to the PUC order, Campbell said, a sentiment Kirchhof echoed. The new telecom rules also create a “quagmire of costly legal proceedings for each of CTA’s members that could last up to three years,” Kirchhof added in a statement following the order’s release, and in an interview discussed the “prohibitive” potential costs of appealing for more high-cost support. “Today we pool our resources through our association” but that couldn’t happen so easily amid all the potential appeals, he said.

CTA sees its ability to provide reliable, affordable service to rural Colorado “in serious jeopardy,” Kirchhof said in the statement, referring to a “perfect storm” coming together for small telcos: “At nearly the same time, the FCC and PUC are reducing funding for networks used to provide voice and broadband service, while EAGLE-Net continually ‘cherry picks’ local community customers from our members.”

Kirchhof’s perfect storm includes EAGLE-Net and the FCC. EAGLE-Net is the recipient of more than $100 million in federal stimulus funds and has been accused of overbuilding on Rural Utilities Service-funded territory (CD Sept 27 p6). NTIA suspended the project’s deployment in December, citing its noncompliance with environmental and cultural resources requirements -- independent of the overbuilding claims (CD Dec 10 p6). The grantee “absolutely” overbuilds on CenturyLink’s territory as well and violates the “spirit and intent” of its original mission to “fill in the gaps” of broadband coverage in Colorado, Campbell said: “It certainly doesn’t seem to be the best use of taxpayer dollars.” EAGLE-Net disputes the overbuilding claims and says it has a statewide mission. EAGLE-Net knew of Kirchhof’s concerns but was “not aware” CenturyLink had any, said Executive Vice President Chip White. CenturyLink hasn’t come to EAGLE-Net but “we'd be happy to discuss,” he said, noting the entity is “sticking to the parameters” of the stimulus grant. “They have a different definition of overbuilding than we do -- they have a creative definition,” Kirchhof told us when asked about EAGLE-Net’s defense. The FCC will reduce high-cost support long-term, Kirchhof said. His member companies haven’t seen “direct reductions” in federal support revenue yet but foresee reductions looking ahead three to four years, he said, referring to the “problematic” quantile regression analysis used to calculate the federal support and its likely effect on investment and telcos’ loans. The FCC has defended its methods while noting it’s addressing concerns (CD Oct 9 p2).

A website called Protect Rural Colorado (http://xrl.us/bn67jg) has encouraged people to write to the PUC, legislators and the governor to slam the telecom reform. The site doesn’t identify its creators, however, and hired a proxy firm to register the Web address. The entity’s fact sheet (http://xrl.us/bn67ji), tweeted after the order was adopted, said the state risks “elimination of high cost support for rural consumers,” although the PUC said it'll maintain high-cost support for regions without effective competition. Kirchhof said his telcos may adopt similar strategies to raise awareness, though, and described various options being discussed, from possible eventual court challenges to short-term appeals in the PUC. “Once the money goes away, it’s gone forever,” he told us, doubting that there will ever be the “political will” to get it back.

The PUC declined comment on the order’s interpretations, a spokesman said -- the order stands for itself. The PUC considered all stakeholders’ opinions during the rulemaking and will do so in the 2013 follow-up proceeding, he said.