Consumer service versus taxpayer costs: CPUC considers opening rural telco territory to competition

by Steve Blum • , , ,

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Small telephone companies that serve rural Californians will face direct competition from cable operators and other wireline telecoms companies if the California Public Utilities Commission approves a draft decision posted for review on Monday. Authored by commissioner Martha Guzman Aceves, the proposed new rules would allow competitive local exchange carriers (CLECs) to provide voice telephone service in territories that are reserved exclusively for heavily subsidised, small local exchange carriers (Small LECs).

Acknowledging that “wireline competition must be allowed in the service territories of the Small LECs as a matter of law”, the draft tries to balance the benefits of competition to consumers with the potential cost to taxpayers if cable companies skim off profitable neighborhoods, leaving Small LECs increasingly dependent on universal service subsidies to serve the rest.

To gain permission to enter protected territories, CLECs would “be required to serve customers requesting wireline voice service within their self-designated service territories on a non-discriminatory basis”, regardless of how difficult that might be. The proposed decision strikes an old rule that limits that obligation to customers within 300 feet of a CLEC’s existing facilities.

“Cream skimming” would be banned. CLECs wouldn’t be able to draw service boundaries to suit profit-maximising business models. The proposed decision directs that…

A CLEC shall avoid designing a discriminatory self-designated service territory by ensuring that the self-designated service territory represents the demographics of the Small LEC territory it is entering by making a good-faith effort to serve a proportional number of residential to commercial customers, and a proportional number of low-income and non-low-income customers…[to] guard against only sub-sets of wealthy customers being served by the CLEC.

Comcast, for example, wouldn’t be able to cut a deal in a new, upscale development, as it did near Fresno, while ignoring less profitable lower income rural customers in the surrounding area.

CLECs would also have to accept all emergency preparedness obligations that the CPUC has in the pipeline, and meet whatever “location-specific” requirements are imposed on a case by case basis. None of it makes cable companies happy – they’ve paid a lot of money to a lot of politicians to avoid traditional, telco-style regulation.

Guzman Aceves’ proposed decision is on track for a commission vote in August.