Comcast games expiring VoIP regulation ban to win CPUC permission to cherry pick suburbs

by Steve Blum • , , , , ,

Tesoro viejo 25aug2019

Comcast’s sideways pleading for permission to compete against a subsidised rural telephone company demonstrates why it was wise to allow California’s ban on voice over Internet protocol (VoIP) service regulation to expire. And why Comcast, along with Charter Communications, AT&T and Frontier Communications, handed so much cash offered highly intellectual arguments to California legislators in their failed (so far) attempt to extend the ban.

Ponderosa Telephone Company offers service in the foothills and the Sierra generally north and east of Fresno. It’s one of 13 small telephone companies that serve rural California, and that depend on state and federal universal service subsidies to survive. As Fresno grows, suburban development is creeping into Ponderosa’s service territory. Tesoro Viejo is one such subdivision under construction along State Route 41, just beyond Fresno’s current development limit.

Comcast offers cable television and Internet service in Tesoro Viejo – households and disposable income are now dense enough to meet its return-on-investment objectives in an area it previously ignored. To offer phone service, though, it needs to connect its currently unregulated VoIP facilities to the traditional public telephone network. Comcast wants to do that via a legally isolated subsidiary that was specifically created to operate in that regulated environment, without creating any regulatory inconvenience for the rest of the company.

But that legally isolated subsidiary needs permission to set up shop in Ponderosa’s territory. The California Public Utilities Commission generally doesn’t allow competitors to cherry pick rural phone companies’ most lucrative customers, because it’s worried that doing so would result in ever increasing public subsidies to deliver retail service to poorer and more isolated people that don’t interest the likes of Comcast.

Nevertheless, Comcast asked for special permission to enter Ponderosa’s territory, and the CPUC is considering it. In support, Comcast is now citing the still current ban on VoIP regulation by the CPUC (it doesn’t expire until January) and disingenuously arguing that its regulated subsidiary only provides wholesale phone service, which doesn’t compete against Ponderosa’s retail offerings. The fact that its retail VoIP subsidiary would use that wholesale service to wholeheartedly compete against Ponderosa is irrelevant, Comcast’s argument goes, because it’s unregulated. At least for the present.

The CPUC has an inquiry under way that, eventually, could decide how it will protect, or not, California’s small telephone companies: should it allow competition, and the consumer benefits it brings, in affluent exurbs while spending more subsidy dollars to maintain service in communities with fewer people with less money to spend, or continue to try to maintain economic feasibility and baseline service availability, and minimise public subsidies by fencing off rural service territories?

It’s an important and timely question, not least because the telecoms industry is in the middle of a major, analog-to-digital shift. It’s the sort of technological revolution that only comes along every century or so. The answer should not come in bits and pieces, as major incumbents like Comcast (and AT&T, Charter and the rest) try to game the system with political and legal maneuvers based on irrelevant technological distinctions between otherwise identical services, and with falsehoods and evasions regarding their true intentions.