Ohio Joins the Ranks of States Looking to Cut the Cord

AARP Responds: “Don’t Hang Up on Grandma!”

Ohio has joined a growing list of states that includes Indiana, Mississippi, Colorado, Georgia and Kentucky, where recent legislative initiatives have attempted to deregulate or drastically alter the states' regulation of basic phone service. Kentucky’s Senate Bill 135, dubbed the “AT&T Bill,” was especially worrisome, as it proposed to dismiss large ILECs of COLR obligations. AT&T lobbied hard for an excuse to stop providing basic phone service to unprofitable customers (assuming the customers were served by a competitive provider, even if the competing options were barely usable or too expensive for consumers), but as of March 15 this bill was scrapped due to “terrible public feedback.”

Now Ohio telephone consumers face a very similar situation. According to the Dayton Daily News, “Senate Bill 271 would allow companies to discontinue basic landline service beginning in 2013 if the area is deemed ‘competitive’ by the Public Utilities Commission of Ohio (PUCO).” SB 271 is sponsored by Senator Frank LaRose (R), and like Kentucky SB 135, AT&T loves it. AT&T director of public affairs for Ohio Sarah Briggs commented to the Dayton Daily News, “This bill is about unlocking investment and allowing us to invest in growing areas of our business, which is primarily the wireless side.” Just like in Kentucky, AT&T gives no logical explanation of why it cannot invest in wireless infrastructure and abide by COLR landline obligations.

Akron Legal News further reported an extensive list of comments by AT&T Ohio president Tom Pelto. According to Pelto, “SB 271 is an attempt to further modernize the telecom laws in Ohio and level the playing field in response to rampant competition and the development of new technologies.” Pelto indicated that AT&T no longer wants to invest in landline service because AT&T has lost 64% of its landline customers in Ohio since 2000, and the company would rather invest in wireless and broadband, “the networks of the future.”  Pelto believes that COLR obligations are no longer necessary, but “Even with the advent of competition, and previous legislative reforms, the COLR obligation is still placed on ILECs in state law and in the PUCO’s rules. It is one of the last vestiges of monopoly telecom regulation.”

SB 271, called the Telephone Service Deregulation Act, has reportedly passed in the Senate and will move to the House. The text of SB 271 explains that the bill would “establish certain exemptions, including permitting the withdrawal of services, for incumbent local exchange carriers determined to be fully competitive, and, regarding the provision of basic local exchange service, for other telephone companies in the same areas.” To be a “fully competitive” carrier in Ohio, a company must be deemed such by the PUCO—“Only a handful of companies have been deemed competitive—AT&T, Conneaut, Cincinnati Bell and part of CenturyTel,” according to the Dayton Daily News. On the surface, this appears to mean that RLECs would not be able to wiggle out of COLR obligations, even though their costs to provide landlines in rural and unprofitable areas are likely much greater than AT&T’s. Why can’t RLEC’s escape COLR in order to invest in broadband and wireless, too? Surely, AT&T’s logic for supporting this legislation (that they need to focus on the networks of the future, not “vintage services customers are walking away from”) applies to the small ILECs as well…

So far, no Ohio media outlet has reported on backlash from the independent telecom industry. However, the AARP is fiercely swinging at SB 271 with a web campaign appropriately titled “Don’t Hang Up on Grandma.” The AARP urges concerned citizens to tell their state representative to “Vote NO on SB 271, save basic local phone service.” According to the AARP, “The anti-consumer bill will wipe out important consumer protections that have defended adequate service quality and ensured that everyone who wants a basic, no frills phone line could afford to have one.” Of particular concern, AARP points out that “SB 271 fails to establish an evidence-based standard for determining market competitiveness within phone service territories.” Like the Kentucky legislation, Ohio carriers would just have to show that there are two wireless carriers serving a customer, “even if the reception is spotty or unavailable across the exchange,” according to the Dayton Daily News.

This legislation and its counterparts in other states certainly bring up several issues. First, are the large ILECs right about wanting to end COLR? They have market forces and numbers on their side: customers are indeed abandoning landline service, and it is indeed expensive to maintain a landline network that is rapidly becoming a ghost town. However, has AT&T provided any studies showing how the cost of abiding by COLR obligations is so tremendous that it cannot feasibly invest in wireless and broadband networks? Actually, if AT&T provided such a study, we can probably guess what it would say.

There is also the issue of regulatory parity. Why would the COLR-escape laws only apply to large ILECs? RLECs also serve customers who may have access to at least two wireless carriers and RLECs spend a great deal of money maintaining landline networks, but we don’t see them begging to be released from COLR obligations. If the USF/ICC reform docket is any indication, the opposite is true.

Finally, if passed, this legislation breaks the telecom regulation cardinal rule of picking technology winners and losers (something the FCC has also been forgetting recently). It allows the large ILECs to cherry-pick profitable customers, and it favors wireless networks even if they are sub-par in quality. Senator LaRose argues that the bill is “about making sure Ohio is competitive when it comes to those high-tech jobs that rely on reliable high speed Internet access. We won’t want to leave Ohio in the twentieth century while everyone else is in the twenty-first.” This statement comes nowhere close to answering the question of why providing landline phones to people who want them is a barrier to high-tech job growth and broadband investment.

What do you think of Ohio’s Telecom Service Deregulation Act? How would this legislation play out for rural independent providers?