Some 2018 Thoughts and 2019 Hopes

December 20, 2018 | by Andrew Regitsky

Some 2018 Thoughts and 2019 Hopes

As the year draws to a close, I can’t help thinking about the many ways the FCC and all our government institutions fell short in 2018, lost in constant partisan bickering with no one willing to compromise. All-in-all, for telecom regulation, it was a pretty lousy year! Here is my rundown of the many institutional failures in 2018 and my expectations (not especially high) for 2019.  

First, when it comes to ensuring the telecom industry has adequate guidance, Congress stands out as singularly worthless. It should be obvious to the dim bulbs there that there will be no permanent Internet regulation unless it creates a new law that won’t change from one administration to the next. Such rules would guarantee no blocking, throttling or paid prioritization of traffic. Instead, for the next few years, we’ll have a vacuum filled by the courts, at least until a Democratic administration (and FCC) changes the rules once again, possibly in 2021. 

Naturally, instead of the Democrats seeking a net neutrality compromise when they take control of the House of Representatives in January, they are already on record stating they will investigate Russian intervention in the filing of net neutrality comments and investigate the FCC overall. That is just what the public is clamoring for (not)! Republicans are no better. Their refusal to compromise on the (meaningless) classification of broadband Internet access service is just as frustrating. It does not seem there is a net neutrality solution in sight in 2019.

By picking up a phone and attempting to order broadband service in random parts of the country, the FCC could have realized its broadband maps are a sham. Numerous reports indicate that ISPs claim coverage in areas they are not serving or at transmission speeds they advertise but don’t provide. In 2019 the Commission ought to ensure that carriers file accurate Form 477 data and we get a true picture of where broadband is lacking, and more universal service is needed. Carriers that have deliberately fudged broadband information should be penalized severely.

The Commission wasted 2018 in separate proceedings designed to eliminate access stimulation and arbitrage schemes for 8YY calls and calls that transverse intermediate carriers. Instead, of continuing this piecemeal operation, the Commission should use 2019 to quantify switched access revenues that would be lost if originating access charges transition to bill-and-keep. This would ensure a revenue recovery program exists to adequately protect rural ILECs that continue to rely so heavily on switched access revenues. Then, once-and-for-all, the Commission should begin the multi-year transition to bill-and-keep for all remaining switched access charges.

The Commission must not allow ILECs to eliminate unbundled network elements (UNEs) priced on an incremental cost basis, or Total Service Resale (TSR) priced at avoided cost levels throughout the country as proposed by USTelecom. There are many small cities and rural areas in which there exists no adequate replacement for these local service entry methods. Moreover, ILECs have too much power to be trusted to offer UNEs and TSR at fair wholesale levels without section 251 pricing rules in place.

Please FCC, follow-up on your threats if carriers fail to put in place systems to fight illegal robocalls in 2019. And continue your massive fines for individuals and companies that continue to make these calls. There are just too many illegal robocalls for the public to continue to put up with.

2019 is a good time for the FCC to determine the effects of its Business Data Service Order (BDS) on ILEC special access rates. There are still counties in the country that are not competitive. Yet, the Commission has no institutional knowledge of how ILEC prices have varied since they received the ability to offer DS1 and DS3 contract tariffs in these areas.

Speaking of the BDS Order, it is hard to justify the FCC’s decision to impose only a 2 percent productivity factor for ILEC special access services in this thriving economy. A productivity factor is designed to account for the fact that ILECs are more productive than other industries, and access rates should decline each year to reflect this structural advantage. An annual 2 percent access decrease is a pittance!

Moving forward in 2019, the FCC should at least pretend to listen to public comments in various proceedings. Yes, most comments do not meaningfully advance the positions of one side or another. However, public sentiment is important. Certainly, it would have been worthwhile for the Commission to act like it was addressing the public’s net neutrality concerns rather than appearing to jam its non-regulation solution down the public’s throats. 

Related to that is, of course, the sad fact is that every telecom decision these days is preordained by politics. It would be great if the FCC used economics and compromise rather than politics and ideology to make decisions. We have never had a time in which so much rancor existed in every part of government including the courts. The big loser is, of course, the public.

Will 2019 get better? While we don’t know what is in store for the industry, we will do our best to catalog the changes and forecast the outcomes. Happy Holidays and a Happy and Safe New Year to all our readers!