United States: Headin’ Down The Copperhead Road – The FCC Proposes New Rules For Legacy Infrastructure

Although it could be said that the FCC's recent focus has been firmly fixed on the future, in particular IP-based communications (see, e.g., high-visibility proceedings involving the Open Internet, possible merger conditions in the Time Warner Cable-Comcast merger, the ongoing TDM to IP transitions, and the $44 billion (and counting) of bidding in the AWS-3 auction), in November the FCC proposed regulations to ensure that the transition to this IP-based world does not betray core values of the Communications Act:  public safety, consumer protection, and competition.1

Reacting to perceptions that some would have these networks quietly fade to black, the FCC in its recent NPRM cuts back to the Granddaddy of the U.S. electronic communications industry:  TDM-carrying copper.  The NPRM also explores the practical effects that the looming retirement of copper networks will have on those traditional values of the Communications Act, and proposes new regulations to cushion the blow from the accelerating IP transition to copper-reliant competitors and consumers while preserving the ability of incumbents to move to new advanced infrastructure.  As a result, the following groups have the most at stake in the developing proceeding and should consider making their voices heard through the notice and comment process:

  • Incumbent/IP Providers;
  • Competitive Providers; and
  • Enterprise customers, particularly small to medium sized businesses.

Safety. For years, virtually anyone in the U.S. could use a landline telephone to dial 911 during an emergency, even if the caller also was experiencing a power outage.  This is because copper wire (unlike coaxial cable or optical fiber) carries its own line power – that is, the line is powered all the way from the carrier's hub (typically protected by backup generators) to the customer premises equipment ("CPE").  Although commercial electrical power may be out at the caller site (and up the holler) during a power failure, the line power carried by copper networks continues to provide electricity to phones and other equipment.  This is not the case with phones and equipment on coaxial or fiber networks and it has been a major concern to consumers, public safety interests and policymakers for years.  Recognizing both the importance of facilitating voice calls during emergencies and the reality that over 37 million Americans receive voice service via IP or interconnected voice over IP ("VoIP"), the Commission proposes to implement backup power requirements for CPE used to provide fixed voice services.

The FCC proposes backup power requirements to afford "sufficient power for minimally essential communications," although providers would assume responsibility for provisioning power for only the first eight hours of an outage.  Given the logistical challenges of issuing new CPE to millions of customers in order to comply with this proposed rule, cable and other providers of interconnected VoIP services may want to consider participating in the proceeding to provide input as to how long such backup power requirements should last, as well as what constitutes "minimally essential communications" required to be maintained during power outages.

Copper Retirement.  Recognizing the benefits of next-generation fiber networks and that maintaining two separate networks would be burdensome for carriers, the Commission seeks to balance incumbents' imperative to transition to IP while simultaneously protecting consumers and competitors who rely on access to legacy copper networks.  Currently, entities retiring copper loops must only provide notice to interconnecting carriers through the Commission's network change notification procedures – prior approval is not required.  Although the Commission does not propose to change this notice-only process, it does seek to expand the contents of the required notice.  To address the concerns voiced by competitive carriers, the Commission proposes that companies retiring copper must provide a description of the expected impact of the planned retirement, including the price, terms, or conditions that will accompany the planned changes, notice of which must be provided to each interconnecting exchange service and certified to the Commission.

In another nod to the concerns voiced by competitive providers, the Commission seeks to define what constitutes a  "copper retirement."  Specifically, the Commission proposes that the term also apply to the feeder and subloop portions of an incumbent's local loop (which respectively connect an incumbent's central office to a local distribution facility and the local distribution facility to a customer's premises).  Without access to these portions of incumbent loops, obtaining access to the remaining portion of the loop would foreclose competitive access.  Given the FCC's continued emphasis on promoting competition, this proposal is not surprising.

In the same spirit, the Commission also seeks comment on including the "de facto" retirement of copper in the scope of its larger retirement rules.  Essentially, the FCC – like the Sheriff coming round in the middle of the night – wants to know if nefarious activities are going on under the cover of darkness; in this case, if incumbent carriers are simply letting their aging copper facilities deteriorate to the point that it becomes "necessary" to replace the copper with fiber.  The Commission is clearly concerned about these allegations of anticompetitive behavior on the part of the incumbent providers.  If incumbents do not allow the competitive providers access to critical feeder loops, or they permit their copper to deteriorate, competitive providers' ability to reach their customers may be compromised.

Interestingly – based on a suggestion by AT&T –  the NPRM also suggests an alternative: that the Commission could facilitate a sale or auction (not at the Mason's Lodge) of retired copper directly to competitive providers, and seeks comment on exactly what role (if any) it should have in this process.   Given the opportunities presented by the possible mass sale of retired copper, competitive providers interested in acquiring these facilities should strongly consider commenting on this proposal to provide input on the possible conditions for such sale, as well as the extent of the role the FCC should play in such a transaction.

As with many important regulatory and policy initiatives, unintended and unforeseen consequences not raised in the NPRM seem likely.  For example, assuming that this renewed regulatory focus produces significant actual plant removal and retirements, one consequence would seem to be that space on ILEC and electric-company poles and in underground conduit networks would become available for new fiber installations and other current technologies.

As a result, multiple (and in some cases unused) bundles of thick twisted-pair, particularly that occupy two or three feet (or more) of usable pole space, or multiple ducts of underground conduit networks will become available for ILEC, and competitor use, lowering a potentially prohibitive entry barrier.  Indeed, the presence of long-dead copper on poles and in ILEC conduit networks over the years has been a boon to ILECs by preventing outright new competitive deployments or freighting them with higher entry costs.

Likewise, competitive stakeholders (such as cable operators and fiber-based competitors) should be attuned to possible ILEC incentives to shift or "back-door" to competitors copper network removal costs through make-ready, "safety audits" and similar measures.  Removal costs for non-trivial portions of these copper networks could be particularly high depending on their locations and even the materials.  For example, much legacy copper still is attached to poles enclosed in lead-jacketed bundles which raises worker-safety and environmental concerns, not to mention high removal costs.  Competitive providers reliant on access to these legacy copper networks – and the small to medium sized businesses that are the primary customers of these legacy, enterprise services – should consider filing comments highlighting the importance of securing continued access to all parts of an incumbent's copper network.

Consumer Protection.  Interconnecting parties are not the only group that the Commission believes require protection during the copper retirement process: the Commission proposes to require carriers retiring copper to directly notify their end-user, retail customers (via email or postal mail).  The proposed notice requirement also would extend to providing the retail customer with information as to whether or not the customer will still be able to purchase their existing service (with the same functionalities and features) from the provider, or if not, then the provider must identify the changes to the service that will be forthcoming.

Equivalent Wholesale Access.  The FCC's concern relating to the preservation of competitive providers' access to last-mile infrastructure pervades the NPRM.  Competitive providers often enter into long-term contracts to serve enterprise customers because they can rely on equivalent wholesale access to ILEC copper networks.  To address these concerns, the Commission proposes requiring incumbent carriers to provide competitive providers wholesale access on equivalent rates, terms, and conditions, although it also asks for comment on the seemingly less stringent (but undefined) "reasonably comparable" standard.  The FCC asks for comment on the specific services and functions to which this mandate should apply, as well as some basic ground rules to establish the guidelines that will govern the discontinuance of wholesale legacy services.

For example, the FCC asks for comment on adoption of the following six principles – advanced by Windstream – that would apply to the evaluation of any legacy-replacement service offered to wholesale customers:  (i) price per Mbps shall not increase; (ii) wholesale rates shall not exceed retail rates; (iii) basic service pricing shall not increase; (iv) bandwidth shall not be reduced; (v) no "backdoor" price increases; and (vi) no impairment of service delivery or quality.  The basis for the FCC's oversight of discontinued TDM services (and the transition to replacement IP-based services) will be rooted in the authority of Section 214 of the Communications Act, and grants of discontinuance applications made under Section 214 may be conditioned on providing such equivalent access to competitive providers.

Competitive providers' concerns stemming from legacy infrastructure retirements have the FCC's full attention – and the FCC is clearly concerned about maintaining and fostering competition and choices for the last-mile or network edge.  Given the continuing  importance of the last-mile, the FCC's retirement proceeding affirmatively puts into play a host of issues that will be of interest to a variety of stakeholders and is likely to produce a host of foreseen and unforeseen practical consequences for such stakeholders who may want to weigh in on the Commission's proposals.

Comments will be due on February 5th, with replies due on March 7th.  If you have any questions about these issues, please contact Sheppard Mullin's communications attorneys.

Footnote

1 In the Matter of Ensuring Customer Premises Equipment Backup Power for Continuity of Communications, Notice of Proposed Rulemaking and Declaratory Ruling, PS Docket No. 14-174, FCC 14-185, ¶49, (rel. Nov. 25, 2014) (the "NPRM"), a copy of which is available here.

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