NRRI 15-07 Telecommunications Regulation

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By: Sherry Lichtenberg, Ph.D., Principal Researcher, NRRI

This paper examines the status of deregulation across the country in 2015 and explores
the safeguards put in place by state regulators to ensure that communications users continue to
have access to affordable and reliable service, including basic telephone service, regardless of
where they live or the technology they select. The paper addresses the question of how state
regulators can continue to support the public interest mandate of ensuring that consumers receive
the service they need, at prices they can afford, and with the reliability and resiliency necessary
to meet public safety goals in an unregulated environment. It focuses on four key areas of
commission concern: carrier of last resort obligations, service availability and reliability, the
definition of "substitutable services," and the way in which states are addressing the question of
withdrawing traditional landline service as technology transition moves forward. By July, 2015, 36 states had passed legislation deregulating retail telecommunications in all or in part. After two earlier attempts, Kentucky passed a deregulation bill in 2015. The passage of Kentucky House Bill 152 completed the deregulation of all of the states where AT&T was the primary incumbent provider when the Telecommunications Act was passed in 1996. Deregulation has proceeded more slowly in the states where Verizon is the primary incumbent carrier. In some of these states, the public utility commission has taken the initiative to continue oversight only in areas where a lack of competition or other conditions require it to do so. In 2015, public utility commissions in Pennsylvania and New Jersey reduced regulation on Verizon where services or geographic areas were found to be competitive. These actions
have brought the total number of states eliminating or limiting oversight of retail telecommunications to 38. In the CenturyLink footprint, bills limiting the regulation of incumbent carriers failed in
Iowa, Minnesota, and New Mexico. Finally, although the deregulatory trend has continued for nearly 10 years, no state has yet attempted to reinstitute or increase regulation once legislation limiting oversight has been passed.
Other legislation passed in 2015 further insulated IP-enabled services from regulation,
reduced COLR requirements in areas with effective competition, reduced commission oversight
of rates for basic local service, and directed state commissions to review the process for
withdrawing traditional wireline copper service as the technology transition continues. Idaho,
North Dakota, and West Virginia passed legislation prohibiting the oversight of VoIP.
1 We use the term technology transition throughout this paper to refer to the move away from
traditional time division multiplexed (TDM) voice service and to newer technologies such as VoIP,
texting, over the top voice applications, and fixed wireless.
State legislatures in Maine and Texas took an opposite approach to the oversight of IPenabled
services, proposing bills that would redefine VoIP as a telecommunications service. The
Minnesota Public Service Commission also addressed the status of VoIP telephony, ruling that
cable VoIP is a "telecommunications service", and may be regulated as such. Although neither
bill passed, their introduction and the Minnesota decision may provide early evidence that state
legislatures may consider bringing VoIP under the same regulatory umbrella as other retail
services as the technology transition continues.
To that end, legislation in Maryland and Ohio directed the state commissions to
determine how to manage the transition to IP and wireless services, including identifying areas
where customers without access to competitive providers must be protected. Michigan will also
review the process for transitioning customers from traditional services to IP-based and wireless
services. These studies will result in guidelines for the withdrawal of traditional services,
including identifying and protecting those areas where consumer choice is so limited that it will
continue to require oversight.
As deregulation continues, the role of State public utility commissions in ensuring the
universal availability and reliability of basic telecommunications services has become
increasingly challenging. In the deregulated states, public utility commission oversight is
generally limited to intrastate access, wholesale services, and, to some extent, the availability and
reliability of emergency services. Despite these limitations, state commissions have identified
ways to use their remaining regulatory tools to protect consumers and ensure a smooth transition
to new services. California, Colorado, the District of Columbia, and New York began or
continued studies to evaluate the state of competition, service quality, the status of the traditional
copper network, and the availability of competitive suppliers. Colorado continued the process of
identifying specific areas of the state where competition may substitute for regulation.
As New York staff's 2015 telecommunications status study points out,
The challenge of future regulatory oversight [in the 21st century] will be to
accommodate new technologies, support industry investment and [the] expansion
of advanced networks, and incent competition where possible, while maintaining
consumer protections as network transitions take place.2
State public utility commissions may meet this goal by focusing their efforts in four key
1. Participate actively in the technology transition
2. Define and identify products that may substitute for traditional services
3. Evaluate the true extent of competition in the state by location, service type, and
transition requirements
2 New York Public Service Commission, Case 14-C-0370 - In the Matter of a Study on the State
of Telecommunications in New York State, Staff Assessment of Telecommunications Services, June 23,
2015 available at
4. Take the initiative to propose legislation, where states have the authority to do so.
The role of the state public utility commission has changed but not necessarily
diminished as deregulation has removed traditional oversight. By working together with carriers,
consumers, and the FCC, state regulators may continue to ensure the availability of reliable,
affordable, and ubiquitous telecommunications services regardless of the technology used to
provide them.