State Regulators Grapple with Role Over Service Quality and Reliability, Reports Say

The papers posted online Thursday directly face the idea that state regulators don’t oversee IP-based service, as California codified into law this fall in a decision hailed by FCC Commissioner Ajit Pai (CD Oct 2 p7). About half of U.S. states restrict their commissions from regulating VoIP now. Both papers offer steps state regulators should take in light of these changes.

The transition to IP is “well underway,” NRRI Principal Sherry Lichtenberg wrote in her 44-page paper (http://xrl.us/bnyocw). She said 31 percent of 87 million residential phone lines used interconnected VoIP service in 2010. The VoIP base of customers will “grow rapidly, as the large wireline carriers decommission their embedded base of copper circuits,” she said. That echoes a growing recognition of these changes among consumer advocates and in statements from Verizon and AT&T executives (CD Sept 13 p11). But there’s the “open question of VoIP’s classification” and subsequent regulation, which raises the possibilities for state action, Lichtenberg said.

"When there’s a problem, the citizen with the problem does not call the FCC,” NARUC Telecom Committee Chair John Burke told us. “The citizen with the problem does not call Verizon. The citizen calls their local public utility commission."

Two economists dug into the transition implications in their 61-page paper (http://xrl.us/bnyodg). Consumers don’t realize it’s happening, wrote Professor David Gabel, a telecom-focused economist working at the City University of New York, and economist Steven Burns, who has advised state commissions in Maine, New Mexico and Washington. Consumer ignorance has produced a “mismatch,” they said, between systems’ reliability and the perception of their reliability. People assume the reliability of the traditional phone system will “transition seamlessly” to IP, the paper said, largely because IP services are “faster, offer more functionality, and, in many cases, are provided by the same brands” as legacy ones. Consumers are even less aware of telecom regulation and don’t realize that states don’t oversee the service quality of VoIP, the economists said. They encourage commissions to start public education campaigns.

The change in infrastructure means “identifying the standards needed to measure and ensure the quality of service provided by these new networks will become increasingly important,” Lichtenberg said. State regulators should ask six questions, she said: Should these new voice services be held to the same standard as the old ones? Do states need their own standards for how companies report the frequency and degree of outages, or have the FCC’s rules and Connect America requirements covered that? Should standards differ depending on certain factors -- between say interconnected VoIP providers and over-the-top providers? What tools do states have to ensure “baseline quality standards"? What about the development and implementation of new standards? Will the consumer protections “against slamming, cramming, and the release of customer proprietary network information” be enough as people transition to IP? Lichtenberg recommended a general culture of service quality. To ensure consumer access, state commissions could potentially mandate performance standards, “work with providers” on baseline quality standards and investigating service failures, and work with providers on establishing service-level agreements with performance minimums, the paper said. A collaborative effort of states, the FCC and industry should ensure the IP-based service “meets or exceeds” that of legacy offerings, Lichtenberg said.

Commercial power grid failures affect telecom services differently, mainly due to the differing levels of regulation applied and backup power available, the economists said. Many VoIP customers don’t purchase backup batteries when it’s a paid extra offering because they “simply do not understand the dilemma (or the risk) involved,” the paper said. Different state laws barring commission regulation of VoIP aren’t “an impediment to addressing this public-safety issue,” they added. These restricted state commissions “retain their mission to ensure that consumers and first responders have immediate and reliable access to emergency services,” Lichtenberg said, noting it’s a technology-neutral role with crucial focus on 911 access. Back-up power is important during commercial outages because it permits consumers to access 911, the economists said. Service-quality oversight may “provide [commissions] the authority to investigate, propose, and establish power-backup requirements, at least for some eligible telecommunications carriers,” they said. Commissioners could ask their state legislators for “explicit authority” to investigate back-up power, which they would report back to the lawmakers with recommendations, the economists proposed.

"Modern telecommunications network technology has reduced or completely severed the end users’ link to the common battery by driving a wedge between the facilities that provided a communications path and the facilities that provided the power to make communication possible,” the economists said. These developments may “reduce network reliability during an emergency,” they said, recommending state commissions take action before any potential dangers.

Portions of the public switched telephone network (PSTN) should be maintained even as the country transitions away from it as the national standard, the economists said. They cite the importance of wired connections for data transmission and the “explosion in the demand for data over fixed access lines,” which suggest some copper will have use for “the foreseeable future.” The economists include projected costs for shutting down the legacy networks and various other potential costs and said that shutting it down won’t be profitable or what they expect incumbent providers to actually do. “It is fair to say that shutting down the legacy PSTN is a strawman,” they said. They predict a strategy of providers “slowly shutting down the circuit-switched facilities and using a combination of copper and fiber-optic cables to reach customers regardless of whether they are served by IP or circuit switching.”

State commissions “remain in the best position to work with all parties to develop, implement, and potentially enforce quality of service for broadband networks,” Lichtenberg said. Commissions should track service quality and pay attention to complaints, she said. It’s important for commissions to act now due to the speed of the IP transition, she said.