The core issue is whether carriers will be required to pay for backup batteries at users’ homes to make sure that phone service remains available during a power outage. Old style phone service – copper – was self powered and remained operational during power failures. VoIP and fiber-based systems need back up power, though.
So far, the California Public Utilities Commission has mostly gone along with what the FCC is doing, which is only requiring carriers to educate consumers about the need to buy back up batteries and info on how to do it. That was part of the Frontier settlement, for example.
Personally, I try to stay away from these issues – it’s about consumer advocacy and not about broadband deployment, which how I make my living. Arguably, putting additional requirements on carriers that want to upgrade infrastructure is counter-productive. Given the complexity/diversity of home networks, it would be very complicated at best for carriers to provide a solution that would eliminate the need for consumers to think, which is the real problem. Batteries are cheap and if it was just about money, it would be easy to solve. Also, mobile phones are already battery powered, which is one way to ensure back up/emergency capability, but to be fair that’s not a universal solution.
Kicking down barriers to competition, progressively.
There’s always a danger of reading too much into a single, seemingly routine decision by the California Public Utilities Commission, but I’ll risk it. Earlier this month, the CPUC granted a certificate of public convenience and necessity to Schat Communications LLC, which is a sister company of Schat.net, an Internet service provider in eastern California. In doing so, the commission determined that Schat is a “telephone corporation” under Californian law and can be regulated as such.
Schat isn’t offering traditional voice or other consumer services that the commission is allowed to regulate. Its retail offerings are all Internet protocol (IP) based – i.e. VoIP and plain vanilla Internet access – which are specifically exempted from commission oversight by state law. In technical jargon, those belong to the network layer – Layer 3 – or higher of the standard Open Systems Interconnection (OSI) model, which provides clear and globally recognised definitions of the roles and the relationship between the technologies that make digital communications possible. The CPUC did not specifically reference the OSI model, but the language it used in the Schat decision usefully parallels those definitions.
Schat Communications’ proposed middle-mile network will consist of conduits, ducts, poles, wires, cables and other property over which Schat Communications will offer transmission services to other certificated carriers (i.e., telephone corporations) as well as to business customers. Carriers purchasing Schat Communications’ transmission will then be able to offer telephone services to their customers. As such, Schat Communications’ middle mile network will be comprised of “telephone lines” and by such offering, Schat Communications will be a “telephone corporation” pursuant to the [Public Utilities] Code.
The commission is clearly saying that Layer 1 infrastructure is still within its regulatory domain, whether or not IP-based Layer 3 services are riding on it. If it follows this line of thinking to the logical conclusion, physical plant – all the way down to last mile copper – will remain regulated, even if telecoms companies completely convert to IP technology.
More broadly, the decision bridges a 100-year philosophical divide. The modern CPUC’s roots lie in California’s early 20th century Progressive Era, which brought regulation of natural monopolies and dismemberment of purposeful ones. Cyberspace may be limitless, but the physical dimensions of our world haven’t changed. The cost and difficulty of building public utility infrastructure – the defining hurdle of a natural monopoly – remain. By establishing a clear framework, based on objective technical standards, for keeping static physical infrastructure in a traditional regulatory regime, the commission is creating neutral ground where vigorous competition and the Internet’s libertarian ethos can flourish in the 21st century.
CASF rules are different now, but back in February, an applicant either needed a CPCN or the mobile telephone equivalent or at least have an active application in front of the commission. Golden Bear, Bright Fiber, Surfnet and Viasat were in the same boat, with CPCN applications pending. If a telecoms company has a CPCN, it means that it is a “telephone corporation” and can be regulated as such by the CPUC.
To one extent or another, all five applications were held up as the CPUC struggled with an institutional history of regulating telephone companies rather than ISPs and a state law, passed last year that expressly forbids the CPUC from exercising control over Internet protocol services, including VoIP as well as pretty much any other broadband-based content or service.
Schat Communications argues that its intention to provide “middle-mile transport service” and manage a network consisting of “conduits, ducts, poles, wires, cables and other property” qualifies it as a telephone corporation, and therefore a public utility. Public Utilities Code §710 does not preclude our regulation of “non-VoIP and other non-IP enabled” services such as the middle-mile transport intended by Schat Communications. Therefore, we agree with Schat Communications that it is a telephone corporation, and therefore a public utility subject to our jurisdiction.
It’s good news for the other applicants. Even though the law has since changed, a CASF applicant with a CPCN still has considerable advantages. It also opens up some interesting questions about middle mile service providers – say, AT&T or Verizon – that are moving toward IP-based networks, partly for technical reasons but also partly to escape regulation. It might not be as easy as they seem to think.
Tellus Venture Associates assisted with several CASF proposals in the current round, including Surfnet and Bright Fiber, so I’m not a disinterested commentator. Take it for what it’s worth.