Can competition ensure low prices and sufficient quality for basic telephone service?
It’s the ultimate test of the free market, and the test could be on its way to about two dozen Maine towns and cities.
A legislative committee is putting the final touches on legislation that would relieve FairPoint Communications of some of its last remaining regulatory requirements in up to 24 of the state’s most populous communities where FairPoint isn’t the only telecommunications provider.
Since lawmakers started deregulating the state’s telecommunications market in 2011, they have kept one major service requirement in place for FairPoint and a number of small, regional phone companies — an obligation to maintain a basic level of affordable, local telephone service in the communities where they’re the incumbent phone carrier.
FairPoint has been open about its desire to shed that requirement — and the issue presents a policy dilemma.
As a “provider of last resort,” FairPoint must serve and maintain its network in remote areas of Maine even if it can’t break even financially doing so. Competitors — including wireless, cable and broadband providers — don’t have that obligation, and they can choose to serve only areas where they can make a profit.
At the same time, Maine has chosen to ensure that every resident has access to basic phone service. But fewer and fewer are subscribing to the benchmark service FairPoint must provide. Between 2008 and 2015, the FairPoint network shed more than 58 percent of its landlines, according to the Maine Public Utilities Commission.
The bill that will soon advance to the full Legislature, LD 466, offers a reasonable compromise between acknowledging the fading importance of landline service and strengthening the state’s current obligation to landline customers in rural areas.
The legislation — largely the result of negotiations between FairPoint and the office of the public advocate — paves the way to end FairPoint’s provider of last resort obligation in two dozen communities where there’s competition among telecommunications companies.
A Republican-favored version allows FairPoint to drop the obligation in six communities every six months over a two-year period, but only after FairPoint meets service quality requirements it has consistently failed to meet. (The requirements have to do with FairPoint’s resolution of network troubles, numbers of tardy installations and other factors.) Starting in 2018, FairPoint could seek permission to drop other communities from its provider of last resort portfolio, as long as they have sufficient telecommunications competition. But the bill doesn’t allow FairPoint to simply stop serving those areas — the company would need express approval from regulators to do that.
Democrats’ favored version of the bill allows FairPoint to drop its provider of last resort obligations, but over the next four years rather than two. Theirs would also provide a one-year transition period for current basic service customers in the affected areas.
What FairPoint would ultimately gain from the arrangement is price flexibility and relief from the requirement that it file reports tracking service quality in those areas. The idea is that competition will keep prices in check in those 24 towns and that regulatory relief will allow FairPoint to offer more competitive service packages.
“The concern from our office has always been, we’re not so much worried in places where there are competitive options,” Maine Public Advocate Timothy Schneider said, “but there are large swaths of the state where there aren’t competitive options.”
And LD 466 is a win for those areas.
The Democrats’ version of the bill changes nothing about FairPoint’s service requirements there (Republicans favor some relaxation of those requirements). But it changes state law to require the Public Utilities Commission demand corrective action if FairPoint violates service quality benchmarks. State law currently allows the Public Utilities Commission the option of imposing penalties and requiring corrective action. Indeed, the commission hasn’t used its authority yet to fine FairPoint for poor service quality during its strike last year.
“This isn’t the final word” on the provider of last resort debate, Schneider said. And it can’t be.
Maine can’t settle for ubiquitous landline phone service as its telecommunications baseline in 2016. Instead, universal access to high-speed Internet service is a must wherever it’s practical.
To that end, FairPoint will receive $13.3 million annually over the next six years in federal money in exchange for building out its broadband infrastructure to parts of its network where it otherwise isn’t economical.
That’s a positive step — and an example of where policymakers and telecommunications companies should focus their energy.
