FCC Tariff Decision Is Not Consistent with the IP Transition, the National Broadband Plan, or the Law

Posted by | December 10, 2013 | Broadband Internet | No Comments

Yesterday’s decision requiring AT&T to continue offering seven-year term discounts on POTS lines while the FCC conducts a meritless investigation is more than a drag – it is a government shackle on the deployment of modern IP-based infrastructure to rural and low-income consumers.

In early 2010, the Federal Communications Commission (FCC) issued the National Broadband Plan (Plan) to ensure that all people of the United States have access to broadband Internet communications. The Plan concluded that “broadband is a foundation for economic growth, job creation, global competitiveness and a better way of life” and urged that everyone “must now act and rise to our era’s infrastructure challenge.” (Plan at XI, XV) Yesterday the FCC threatened to turn its back on this call to action when it suspended revisions to AT&T tariffs that sought to stop offering term discount plans of five to seven years for 1960s era “Plain Old Telephone Service” (POTS) technology using circuit switched “special access” lines. The FCC suspended the tariff revisions for five months to investigate their “lawfulness” (even though the remaining tariff rates have already been conclusively presumed to be just and reasonable).

Ironically, at the open Commission meeting on Thursday, the Technology Transitions Policy Task Force will provide a status update on the National Broadband Plan’s recommendation that the FCC eliminate—within the next five to seven years—the requirement that AT&T and other carriers offer POTS technologies using circuit-switched networks (known as the “IP transition”).

Why would the FCC open a five-month investigation on Monday to determine whether it is “lawful” for AT&T to stop providing long-term discounts for services using outdated technologies the FCC will discuss eliminating altogether at its meeting on Thursday?

The most plausible answer is that the FCC intends to use its regulatory leverage to pressure AT&T into renegotiating its tariffed rates for outdated special access services while the agency decides how to proceed with the IP transition. That might provide some short-term benefits to AT&T competitors who would prefer to avoid investing in their own infrastructure, but in the long-term, the uncertainty created by this regulatory overreach might also forestall investment in the IP infrastructure necessary to fulfill the goals of the National Broadband Plan.

Neither possibility would benefit residential consumers in rural and low-income areas that don’t have access to broadband. The transition from POTS circuit-switched networks to all Internet Protocol networks was a key recommendation of the National Broadband Plan for achieving universal broadband access. The Plan noted that legacy regulation requiring certain carriers to maintain POTS—a requirement the Plan concluded is not sustainable—leads to investments in stranded assets that siphon funding away from IP networks and services. (Plan at 59) Consistent with previous technology transitions, the Plan recommended that the FCC ensure that legacy regulations and services do not become a drag on the transition to a more modern and efficient communications infrastructure while ensuring that consumers don’t lose services they need and businesses can plan for and adjust to the new standards. (Id.) “The challenge for the country is to ensure that as IP-based services replace circuit-switched services, there is a smooth transition.” (Id.)

It’s been nearly four years since the FCC recognized the need to ensure that legacy regulations and services do not become a drag on the IP transition. Yesterday’s decision requiring AT&T to continue offering seven-year term discounts on POTS lines while the FCC conducts a meritless investigation is more than a drag – it is a government shackle on the deployment of modern IP-based infrastructure to rural and low-income consumers. Most special access lines are not capable of providing broadband Internet services, and they are almost never used to provide services to residential consumers. Other carriers typically lease special access lines from AT&T at government-regulated rates in order to provide phone lines and narrowband data services to businesses – a regressive policy framework that subsidizes corporate telephony at the expense of investment in high-speed broadband services for residential consumers.

In addition to being bad policy, suspending tariff revisions in order to protect competitors and shift costs from corporations to consumers is bad law. The current AT&T tariffs have already been “deemed lawful,” which means that AT&T’s tariffed rates for special access services offered for terms of three years or less have been conclusively presumed to be “just and reasonable” within the meaning of section 201(b) of the Communications Act. (See Virgin Islands Tele. Corp. v. FCC, 444 F.3d 666 (DC Circ. 2006)) Those rates cannot be deemed unjust and unreasonable merely because AT&T is no longer offering discounts for longer-term arrangements. The Communications Act does not require a carrier to offer any term discounts at all. (See BellSouth v. FCC, 469 F.3d 1052 (D.C. Cir. 2006))

Of course, as noted above, I suspect the FCC’s decision to suspend this tariff was not driven by concerns about the reasonableness of AT&T’s rates (which have already been deemed lawful). It was likely driven by the desire to obtain additional regulatory leverage over services that benefit particular competitors and to buy time for an express decision on the timeline for the IP transition. Even if those were appropriate regulatory goals (and the former certainly is not), bending tariff laws and procedures is not an appropriate means of achieving them.