AT&T Inc. CEO Randall Stephenson. Reuters/Brendan McDermid
Since 2010, AT&T has been waging a deregulation campaign in several states across the country while aiming to move its traditional, wired telephone services to Internet Protocol (IP)-based services, which transmit voice communications digitally. With the help of corporate “bill mill” the American Legislative Exchange Council (ALEC), and support from companies like AT&T, state legislators have introduced a series of “model” bills aimed at preventing regulation of IP-based services in more than thirty states across the country, from Idaho to Georgia, Texas to New Hampshire. As the country moves to an IP-based telephone network, AT&T wants to completely retire its wired services and shed critical regulatory obligations that currently apply to legacy services. Now AT&T has taken that mission to the federal level.
Last November, AT&T filed a petition with the Federal Communications Commission (FCC) requesting regulatory relief in order to move its traditional wireline telephone services to IP-based services. The petition reflects many of the same principles as the state-level model bills, which strip states of any enforcement power over service quality and prices, and has been endorsed by ALEC. It would set a dangerous policy precedent at the FCC, as IP-based telephone services do not fall under any clear regulatory framework, and could have a dramatic impact on the future of basic telephone services. Public interest advocates say these changes would affect low-income people, people of color and rural communities most.
Although people are increasingly moving to wireless-only telephone services, roughly 17.5 million Americans depend on only landline service, according to the most recent statistics from the FCC released in 2010. Both the FCC and state Public Utilities Commissions regulate landlines: the FCC oversees interstate service and state commissions oversee intrastate service. This regulatory authority dates back to the early twentieth century and government efforts to foster competition in a telephone market that AT&T dominated. Since then, the federal and state regulation of wired telephone service requires companies like AT&T to offer basic services, such as emergency calling and directory assistance, and to ensure that customers have access to affordable, quality phone service. This set of “legacy” regulations has expanded telephone service to 96 percent of Americans at relatively affordable rates, but none of these landline regulations currently apply to IP-based service.
AT&T’s petition to move its traditional telephone services to IP-based services seems benign enough, but a closer look reveals troubling ramifications. In its petition, AT&T is asking the FCC to run tests of IP-based networks in certain, currently undetermined areas where it will phase out its landline services. In exchange for testing these networks and expanding its IP-based service, AT&T is asking the FCC for regulatory relief, claiming that the “burden” of these regulations is so costly as to prevent it from investing in next generation of networks.
“The trials we propose are intended to ensure that this transition takes place as smoothly as possible,” wrote Michael Balmoris, an AT&T spokesperson, in an e-mail to The Nation “They will allow consumers, service providers, and policy makers to identify issues that are raised by this transition, determine the best course to proceed going forward, and ensure that no consumer gets left behind in this transition.”
But the petition threatens to shed the very regulations that would protect consumers, say public interest advocates. Those “monopoly-era regulatory obligations,” AT&T argues, make “no sense” because they treat incumbents, like AT&T, as dominant providers in an IP-based broadband market that others lead. True, AT&T is not leading the broadband market, but it’s hardly struggling. Just last year AT&T was listed as the top Fortune 500 telecommunications company, with annual revenue of more than $126 billion.
“Nothing is stopping them from investing in the infrastructure,” says Edyael Casaperalta, program and research associate at the Center for Rural Strategies, an advocacy group that has been critical of the petition. “They certainly have the money to.”
In fact, the petition was filed just as the company announced a $14 billion dollar three-year plan to expand “U-Verse,” its brand of IP services, and its wireless and business networks. In a press release, the company said that the project would provide “high-speed IP Internet access via IP wireline and/or 4G LTE” to 99 percent of customer locations by 2014.
Many public interest advocates fear that the petition is a way to avoid regulating IP-based telephone services. “They are trying to start with a blank state,” says Olivia Wein, an attorney with the National Consumer Law Center. “That makes me nervous to flush all the rules.” Wein doubts that the company will accept regulation of these services after relaxing them during the test trials.
Given AT&T’s track record of providing slower broadband speeds to rural areas and tribal lands, many are skeptical that the company will act on its pledge to improve services for the entire country. Across the country, nearly 25 percent of rural Americans lack access to basic broadband, according to the FCC’s Eighth Broadband Progress Report. Fewer than 10 percent of Native Americans have access to broadband, according to a report by Native Public Media and the Open Technology Initiative at the New America Foundation. “We think the onus is on the FCC to ensure the focus is on consumers and competition, and to ensure the next generation of technology provides people access to reliable and affordable telephone service,” says Jessica Gonzalez, vice president of policy and legal affairs with the National Hispanic Media Coalition. “It’s important for poor people and people in rural areas who are often difficult to reach, where the business case to reach them isn’t as strong.” In a conference call last year, Randall L. Stephenson, president and CEO of AT&T, admitted that the company has yet to find an “economically viable” solution to bring broadband into rural America.
Infrastructure access issues aren’t the only aspects of the petition that concern public interest advocates. Another major issue is AT&T’s request to waive its obligation to provide universal service, a fundamental principle in the Communications Act of 1934, which extends communications services to rural and low-income areas. To implement this, the FCC established a set of policies and a Universal Service Fund, which is paid for by contributions from companies like AT&T. That fund supports several programs, two of which provide subsidized telephone installation and service. But in its petition to the FCC, rather than being obligated to provide universal service, the company is asking to move to a “procurement model,” in which companies would volunteer to provide services to rural and low-income areas, and therefore access universal service funds.
Without a universal service obligation, public interest advocates are concerned the company will have no incentive to serve rural and low-income areas. “Although AT&T argues that deregulation is a way to increase investment and build out,” writes the National Hispanic Media Coalition in its filed comments, “it is often the underserved and hardest to reach that are left out when profit maximization is the only consideration driving investment decisions.” The loss of the universal service obligation would affect a significant portion of the roughly 12 million households who reported receiving these universal service fund benefits in 2012, according to the Universal Service Administrative Company’s annual report.
Even households above the poverty threshold could be potentially priced out. Though an increasing number of people are using cellphones as their main telephone line, many low-income people and people of color choose landline phone service because it is “more reliable, affordable, and offers better service quality,” according to comments from the Greenlining Institute, a racial justice policy and advocacy group. About 90 percent of those age 65 and over live in a household with landline service, according to a 2012 report from the Center for Disease Control. Roughly 22 percent of Asians, 18 percent of blacks and 16 percent of Latinos have both wireless and landline telephone service, according to the same report. The price difference is rather stark. The least expensive AT&T family plan for cellphone service costs at least $59.99 a month for two lines with 550 voice minutes and no data, while a standard AT&T landline service with unlimited local calling costs about $30 a month, according to the company’s website.
Low-income communities wouldn’t be the only ones facing steeper prices, less protection and fewer options without these legacy regulations. Rural people who have historically been redlined out of reliable service from the telecommunications companies would also be impacted. “By requesting to retire [basic phone] services, AT&T is essentially asking the FCC to shut down the most accessible and reliable communications tool in rural America,” the Rural Broadband Policy Group wrote in their comments to the FCC. At least 14.5 million rural residents lack the broadband connection required for IP-based services, which means “millions of rural people risk an absolute loss of communication.”
The regulatory “relief” that AT&T wants to accompany its full IP transition could also impact basic rules and services that most people take for granted, like truth-in-billing, privacy, service reliability, protection from price gouging and protections from unauthorized charges. These regulations are covered only under Title II of the Communications Act, which ensures that telecommunications service providers like AT&T adhere to basic consumer protections. But IP-based services are not yet protected under Title II of the Act, which makes users vulnerable to exploitative corporate practices.
As AT&T fights this battle at the FCC, many of the ALEC-approved model bills with similar aims have been passed into law. One of the most recent victories for AT&T was in California, where last year legislators passed SB 1161, a bill that mirrors the FCC petition. Just as AT&T’s petition to the FCC seeks to do nationally, the passage of SB 1161 approved the deregulation of IP-based phone services in the state, eliminating any state role in regulating Voice over Internet Protocol (VoIP) and IP-based telephone services. This removed the California Public Utilities Commission’s authority to ensure service quality and require companies like AT&T to provide reliable service to rural areas.
SB 1161 was just another blow to the state’s already bruised communication landscape. In 2006, the California Public Utilities Commission voted unanimously to allow companies like AT&T to raise telephone prices at will. Since then, AT&T’s price for landline phone service has leaped from $10.69 to $23 per month, and the monthly price for measured service, which charges a fixed rate for a limited number of calls, has skyrocketed 222 percent—from $5.70 to $18.35, according to the San Francisco Chronicle.
Advocates say it’s too soon to tell how SB 1161 will shake out and are waiting to see how the bill will affect service reliability and prices. “Enforcement is going to be the biggest issue,” explains Ana Montes, director of organizing at the Utility Reform Network, a statewide utilities consumer protection group based in San Francisco. Montes says she has already received complaints from callers who say they were forced to move to VoIP-based telephone services, which are largely unregulated.
As advocates wait to see the long-term costs of deregulation in states around the country, it seems some of the FCC’s commissioners are already smitten with AT&T’s plan. In a speech at conservative think tank the Hudson Institute in March, FCC Commissioner Ajit Pai praised the idea of an All-IP Pilot Program and criticized twentieth-century regulations that hinder innovation and investment. He continued, explaining that a path that “clings to the past” would lead us to “a less competitive future” where “innovative companies would avoid the voice business because of regulatory barriers.”
In February, during a speech at the Rural Telecom Industry Meeting and Expo, FCC Commissioner Jessica Rosenworcel echoed this, saying, “We are all wrestling with applying the laws of the present to the networks of the future, and we must make choices that inspire confidence and private investment in our nation’s infrastructure.”
For public interest advocates, the petition skirts the basic tenets of the 1996 Telecommunications Act’s universal service provision, an update from the 1934 Act, which guarantees nondiscriminatory, reliable and affordable communications access across the country. “Is what they’re asking for going to get us ubiquitous, uniform service? Will people be left behind in this picture?” asks the National Consumer Law Center’s Wein. “If there’s no duty to serve with some affordable connectivity, you will have people who are left out of this great transformation. Once again we will have a communications network that will need help reaching everyone and be ubiquitous. I think that should be the goal for the nation. You need people to be connected.”
On May 10, the FCC responded to the petition with a call for more comments from stakeholders on potential trials of landline to IP-based network transitions, a move that “disappointed” AT&T according to its public policy blog. The FCC will continue to take public comments on the petition until it reaches a decision, but there’s no definitive date by when it needs to decide. You can submit comments on the FCC’s public comment page at fcc.gov/comments.
For more on corporations and on new media, read about the fight for a people’s “terms of service.”