Hurricane Michael A Wake Up Call On Why Total Dereg of Telecom A Very Bad Idea.

Readers of Harry Potter should be familiar with Cornelius Fudge, the Minister of Magic who refuses to believe Voldemort will return because believing that would require taking precautions and generally upsetting lots of powerful and important people. Instead of preparing for Voldemort’s return, Fudge runs a smear campaign to discredit Potter and Dumbledore, delaying the Wizarding World from preparing to resist Voldemort until too late.


I was reminded of this when I read Federal Communications Commission (FCC) Chairman Ajit Pai’s statement of frustration with the slow pace of restoring communications in the Florida in the wake of Hurricane Michael. Pai explicitly echoes similar sentiments of Florida Governor Rick Scott, that carriers are not moving quickly enough to restore vital communications services. Pai is calling on carriers not to charge customers for October and to allow customers to switch to rival carriers without early termination fees.


What neither Pai nor Scott mention is their own roll in creating this sorry state of affairs. Their radical deregulation of the telephone industry, despite the lessons of previous natural disasters such as Hurricane Sandy, guaranteed that providers would chose to cut costs and increase profits rather than invest in hardening networks or emergency preparedness. That is how markets actually work in the real world (as opposed to in the delightful dereg fantasy land dreamed up by hired economists). But rather than take precautions that might annoy or upset powerful special interests, they chose to mock the warnings as the panic of “Chicken Little, Ducky Lucky and Loosey Goosey proclaiming that the sky was falling.”


Now, however, the Chicken Littles come home to roost and, as predicted, private market incentives have not prompted carriers to prepare adequately for a massive natural disaster. This result was not only predictable, it was predicted — and mocked. So now, like Cornelius Fudge, Chairman Pai and Governor Scott find themselves confronted with the disaster scenario they stubbornly refused to believe in or safeguard against. And while I do not expect this to change Pai’s mind, this ought to be a wake up call to the 37 states that have eliminated direct regulatory oversight of their communications industry that they might want to reconsider.


Still, as Public Knowledge is both suing the FCC to reverse its November 2017 deregulation Order, and has Petitioned the FCC to reconsider its June 2018 further deregulation Order, perhaps the FCC will take this opportunity to rethink the certainty with which it proclaimed that carrier’s have so much incentive to keep their customers that they would never cut corners and risk service going down. Or perhaps Congress will now pay attention and decide that their constituents need enforceable rights and real protections rather than promises and platitudes.


I provide a lot more detail below.


The History of Florida Deregulation

Incumbent telecom companies (assisted by their buddies at the American Legislative Exchange Commission (ALEC)), have pushed state level deregulation of telecommunications services from traditional copper line voice service to various Internet related services for about a decade. They have enjoyed various levels of success, especially in the wake of the Tea Party takeover of the Republican Party and its militant anti-government agenda. As a result, regulations long enjoying bipartisan support for ensuring access to affordable, reliable telephone service (or, as we used to say, public utility regulation), got swept away to varying degrees. All states have deregulated to some degree, but in 37 states legislatures have pretty much eliminated most direct oversight of residential telecommunications services.


Few states, however, have gone as far as Florida has in completely eliminating even the most fundamental safeguards to ensure some sort of basic voice service availability. In 2011, Rick Scott signed into law the Florida Regulatory Reform Act of 2011. This eliminated nearly all regulatory oversight for residential telephone service by the Florida Public Service Commission (PSC). The deregulation was so thorough that the Florida PSC is not even allowed to take consumer complaints about residential phone service, which conveniently prevents the collection of any data that might show deregulation has costs in terms of consumer welfare. This deregulation eliminated any obligation to maintain service, deadlines for restoration of service following a communications blackout, or anything else that would prompt telephone companies to spend money on maintenance or emergency preparedness.


In particular, Florida eliminated what is called the “carrier of last resort” (COLR) requirement. Most states retain some sort of formal process for discontinuing service designed to ensure that everyone in the state, no matter where they live, has access to at least one reliable landline provider (wireless has never been required to build out so that everyone can get cell phone signal — in part because wireline was presumed to cover everyone). From what I can determine based on a quick read of the statute and the National Regulatory Research Institute 2017 Report On Telecommunications Deregulation, a carrier in Florida can simply decide “hey, it costs too much to maintain or rebuild a network here. We quit. Sorry local residents.” Nor does Florida have any requirement to restore service in some sort of timely manner or face penalties, or any requirement to take precautions to prepare for emergency outages. I mean, it’s not like natural disasters ever hit Florida, right?


This elimination of even the most basic COLR requirements distinguishes Florida from Georgia and North Carolina (also impacted by Michael). Although both states have substantially deregulated, North Carolina has one incumbent carrier designated as COLR, and Georgia retains direct oversight of discontinuances through its PSC. While Florida is not alone in eliminating COLR, it is the only one of the three Michael devastated states that has.


As a result, when Floridians actually need carriers to restore service in a hurry, they can’t. Not because carriers don’t want to, but because nothing made them prepare for this kind of devastation and there are no consequences for the current mess beyond customers with no choices getting mad and finger wagging by now powerless officials.  I’m not saying Governor Scott intended to leave Floridians with absolutely no recourse if a hurricane eliminated telephone service in rural areas where carriers really don’t like to spend money, such as the Florida Panhandle. Then again, people who don’t have fire insurance for their homes don’t intend to have fires. But unlike the individual who decides to gamble on not needing fire insurance, Governor Scott decided to gamble with the entire state of Florida that they wouldn’t need regulation to protect reliable phone service. This, it turns out, is an extraordinarily bad bet.


Unfortunately for the people of Florida, the suckage does not stop there. As I mentioned above, Florida law does not permit the Public Service Commission to accept complaints about phone service. Those have to go to the Department of Agriculture. So once the cameras are off and everything settles down, there will be absolutely no way to make sure that these companies keep their promises. And if any customers or communities get overlooked, we’ll never know — since there is no way to report it.


So, once again, we see what happens when we decide we don’t like enforceable rights because the only way to have enforceable rights is with regulation. Instead of a citizen with the right to demand that those responsible for providing essential services do their job, you get to be a peasant begging your corporate overlords for whatever charity they care to bestow. But who wants rights when you can have ffffrrrrrreeeeeeeeedddddoooooommmmmmmmmm!!!!!!


Ajit Pai Dismantles Protections Put In Place After Superstorm Sandy.


But Scott’s shrugging off the warnings of consumer advocates in Florida does not even begin to compare to the full on Cornelius Fudge treatment advocates have gotten from Chairman Pai. As regular readers may recall, in the wake of Superstorm Sandy, phone companies were maddeningly slow to restore service. In isolated communities such as Fire Island, NY and the Barrier Islands of NJ, Verizon simply decided it would not restore landline service at all. This prompted a five year proceeding at the FCC to put safeguards in place to protect communities from losing reliable phone service. You can see a bunch of bog posts of mine and my colleagues from public knowledge on the subject here, here, here, here, and here. You can see our Congressional testimony making this point here and here. You can find multiple FCC Orders discussing the link between copper loop retirement, service discontinuance rules, and restoring service to impacted areas after disruption by Hurricanes and other natural events here, here, here and here.


In particular, I (and my colleagues at Public Knowledge) have had a real bug in our bonnets about the potential impact of deregulation on restoring service after hurricanes. You can see this 2013 blog post from my colleague Chris Lewis on the subject here. That includes restoring wireless as well as wireline. For one thing, as we kept saying at the time, wireless is not a substitute for wireline. That’s what the Voicelink fight was all about. Even at its best, wireless has a lot of limitations. That’s why we have traditionally regulated wireline as a public utility, requiring “five 9s” reliability (99.999% reliable) with state level penalties for failure to restore service in a timely manner, maintenance requirements, and so forth. Because if you want to be able to restore communications after a disaster, you need to have a healthy network in place to start with.


Additionally, as we kept pointing out, the wireless network rides on and depends on the wireline network. Failure to maintain that wireline network because the rules don’t make you and there are no consequences for failing to invest money to maintain it means that even if you don’t care about wireline and only want wireless, you are going to have spend a lot more money and spend a lot more time restoring the wireline component in order to have reliable wireless service.


As an aside, this is why the argument “our deregulation has nothing to do with this because we are complaining about the lack of wireless services” is meaningless. First of all, the whole point of maintaining a reliable well regulated wireline system is precisely to have reliable back up when wireless fails. This is not supposed to be a single point of failure problem. But second, if we are going to rely on wireless, then we have to harden that system and make it as reliable as the wireline system. As we’ve been arguing for 6 years now, if you phase out the reliability regulations on the old network without requiring reliability on any replacement, then you are going to have a communications disaster when natural disaster strikes.


But to return to our story. Then-Commissioner Pai was openly contemptuous of the post-Sandy rulemaking. He derided those of us who pushed for enforceable protections as “Chicken Little, Loosey Goosey” alarmists whose “mother may I” regulations would stifle innovation and prevent the roll out of awesome new broadband services to rural America and the nation at large. Private companies didn’t need regulation to take proper precautions, according to Pai, because they have no incentive to have their network go down. (True, but as I keep pointing out, they have lots of incentive to save money by cutting expenditures that do not immediately contribute to the bottom line.)


Unsurprisingly, no sooner was Pai appointed Chairman when he set about reversing the Obama-era Tech Transition rules. Since it is kind of hard to maintain that providers won’t abandon their wireline networks after a hurricane when Verizon did exactly that after Sandy, the rulemaking manages to complete ignore the entire history on which the previous orders were based. You can scan the Notice of Proposed Rulemaking/Notice of Inquiry/Request For Comment, and the subsequent Report & Order and Further Notice of Proposed Rulemaking, and never know that Fire Island actually happened. (This decision to utterly ignore reality being one of the grounds for our court challenge.) In case you are wondering if I drew the connection between repeal of these rules and post-Hurricane recovery for Pai once he became Chairman, here is my ex parte from my meeting with Pai’s staff talking about this very subject after Hurricane Harvey. Of most significance here, Pai eliminated the de facto copper loop retirement rules. These rules allowed customers to complain to the FCC that a carrier has neither filed for permission to discontinue service nor repaired the network (de facto discontinuing service). As the repeal Order stated at the time, it would be wrong for the FCC to dictate maintenance and repair schedules to private carriers who have strong business incentive to maintain the network to avoid losing customers.


Nor did Pai stop there. Just a few months ago, in June 2018, he continued to make it even easier for carriers to discontinue service, and harder for people to get notice about it or organize to stop it. That was so bad that the federal government, wearing its hat as a consumer of telecommunications, politely asked Pai to remember that the federal government actually needs access to telephone service to function so even if you are throwing everyone else under the bus please make sure federal users have service. (Letter here.) We have a pending Petition for Reconsideration on this. Perhaps this will prompt the FCC to actually reconsider (but I’m inclined to doubt it).




I’ve been going for more than 6 years now about how deregulation of basic telecom service, without providing for any kind of substitute with the same kind of resilience and reliability, is going to result in people losing service when they need it most. Worse, some of them won’t get it back, because there is no business model that makes serving them profitable. And Lo! It has indeed come to pass. Much as I would love to believe that this is now a turning point and people will wake up and recognize that we regulate communications as a public utility because it is critical infrastructure and even more essential for recovery in a disaster than just plain phone service was. But just as the crash of 2008 did not persuade those determined to worship the gods of the marketplace, I do not expect predictions of disaster coming true in telecom to persuade true believers either. I’ve read Jeremiah Chapter 44, and I’m aware that when prophecies come true it prompts the sinner to double down.


Stay tuned . . .

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