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Industry Issues

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Broadband Development May Be Better Than Some Suggest

            At least one broadband group believes that the United States is getting better at broadband deployment.  The National Telephone and Information Administration (NTIA) released an optimistic report of the level of affordable broadband access in the United States.  The report concludes that, “a reasonable assessment of the available data indicates that the objective of affordable access for all has been realized to a very great degree.”  However Richard Russell, Deputy Director for Technology in the Executive Offices of the President admits, “There’s still a lot more that needs to be done.”

            Broadband access has been a sore point for the United States, as it lags behind other nations according to international surveys.  However, the FCC reported that by the end of 2006, ninety-nine percent (99%) of zip codes received broadband service by at least one provider.  According to the study, the broadband environment is growing increasingly competitive, and many of the government’s policies, including clearing away regulatory obstacles and freezing state and local taxes on Internet access, have contributed to this growth

            In the past six years broadband lines have grown nationally from 6.8 million to 82.5 million.  The difficultly in these surveys is defining broadband access.  For example, the FCC defines broadband as a 200 kilobit connection.  Some people believe that this definition is too low.  However, even those who disagree admit broadband access has greatly improved.

          Although work remains to be done, North Carolina has made significant progress.

The E-NC Authority has reported that 83% of North Carolinians now have the capability to obtain broadband service, which is a significant achievement.   

          Fortunately, for our North Carolina customers, CarolinaLink member companies have set the pace for broadband deployment.  Although our service areas are among the most rural in the State, virtually all of our members have access to broadband services.  That is an enviable achievement.

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The Problem With Pole Attachments

The issue of pole attachment rates seems to keep recurring.  The current version impacts telephone, cable, and other companies that need to attach facilities to poles owned by electric membership corporations and perhaps municipalities.  In some cases, the use of underground facilities is also affected.  The issue concerns pole attachment rates and efforts by electric membership cooperatives (EMCs) and perhaps others who are seeking, apparently on the advice of consultants that stand to benefit from increased commission payments, to increase significantly the charges assessed against telephone companies, CATV companies and broadband providers.  Unlike traditional investor owned electric utilities that are subject to the FCC’s pole attachment formula, there are no regulations concerning electric membership corporations and their pole attachment rates.  The FCC set a formula for establishing rates, but statutes excluded cooperatives.   Many companies have expressed concerns that EMCs are seeking significant price increases for these attachments.  In several instances, EMCs are terminating existing pole attachment agreements and seeking new rates as much as 300% higher than current rates.  These rates are for pole lines, which EMCs sometimes locate along highway rights of way with the permission of the State.

            One reason for recurrence of this problem may be a 4th circuit Court of Appeals case, Time Warner v. Carteret-Craven Electric Membership Corporation.  In this case, the 4th circuit found no controlling authority in federal regulations or state statutory or state common law to regulate the prices that cooperatives may charge for attachments.  In this case, Carteret-Craven terminated a 1997 agreement, which charged $6 per pole and demanded that Time Warner increase its payment.  This case should cause major concern for other companies seeking to attach facilities to existing lines.

            This problem should be a concern for all companies, which have or may in the future have pole attachment agreements with EMCs.  As stated, there are currently no regulations concerning these rates, and often times in rural areas, the EMCs own the vast majority of the poles in their territory.  This is a problem that could become very expensive for utility companies in North Carolina.  It is also a deterrent to the deployment of broadband technology into un-served and under served rural areas.

             Certainly, no party should object to paying its fair share for its use of the pole.  However, pole lines are granted by easements either through the right of eminent domain or the threat of eminent domain.  The lines should not be used as private “fiefdoms” to exact unreasonable tolls from other parties that are likewise providing essential services to the public.  If the problem continues, the General Assembly, as other states have done, should consider legislation for providers not covered by existing rules that assures that the public rights of way are available to all providers of essential services on fair and reasonable terms.

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Federal District Court to Review NCREA Decision

           An affiliate of Time Warner has filed a lawsuit in the Federal District Court of Eastern North Carolina.  The lawsuit challenges a decision of the NCREA, which found that the Time Warner affiliate was acting (sometimes through an intermediary) as an information service provider rather than a telecommunications service provider.  Traditional telephone companies are generally required to interconnect and provide number portability to telecommunications services providers.  The same obligation does not extend to information service providers.  The issue is one that is playing out in regulatory agencies, legislatures and courts around the country.  An information service provider ordinarily refers to an entity that provides Internet service.  As technologies converge, information service providers are usually capable of providing some type of telephone service.  The telephone service might be traditional landline service, telephone service over the Internet or wireless service.  The problem results because companies that provide service over the Internet do not have the same legal restrictions and status as telephone companies.  In essence, they seemingly want to be an Information Service provider when it suits their needs but claim the status (without the same obligations) of a telephone company when that works best.  The NCREA recognized the distinction and ruled that three Coalition member companies are not obligated to provide number portability to what the NCREA recognized as an entity that did not meet the requirements of being a telecommunications service provider.

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Wireless Interconnection Rules Still Unsettled

           For many years, wireless companies and small telephone companies were part of  three-party agreements with large telephone companies in which traffic was originated at one end, transited over the network of a larger telephone company and terminated at the other end.  The larger company compensated the company that terminated the traffic.  As the industry changed, larger companies abandoned that responsibility and new processes had to be developed so that traffic could continue to be delivered between wireless companies and small telephone companies.  Clearly, it is impractical in all cases for facilities to be built to connect all wireless companies and all small, rural telephone companies.  For that reason, the N.C. Utilities Commission ruled that large companies still have an obligation to transit traffic between companies.  The Commission also noted, quite correctly, that is virtually impossible for all companies to have a specific interconnection agreement with all other companies. 

           However, in many cases, individual interconnection agreements are being pursued and the process seems endless.  Cases are still pending before the Utilities Commission and the NCREA, which will ultimately determine how and where the networks will be interconnected and the price for such interconnection.  In the meantime, companies still continue to deal with uncertainties related how and when the outstanding interconnection issues will be resolved.

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Commission Issues Arbitration Order

           On December 12, 2007, the North Carolina Utilities Commission issued a lengthy, complex Order  in an arbitration proceeding between some small, rural local telephone companies and certain wireless providers.  In the Order, the Commission decided more than 25 unresolved issues remaining between the parties.  Although it is impossible to discuss all of those issues in this article, two issues are of particular importance.

          First, the Commission approved reciprocal compensation rates that are applicable for calls placed between the companies.  Although many companies were able to settle the reciprocal compensation issues, the companies involved in the proceeding were unable to reach agreement and submitted the compensation issue to the Commission for final resolution.  The second issue deals with the point of interconnection between the companies.  In resolving this issue, the Commission affirmed an earlier ruling that the point of interconnection can be at any reasonable point within the service area of the local telephone company.  The ruling  followed established Commission precedent, which recognized the adverse impact and impracticality of small companies having to haul traffic over long distances outside of the company’s own network.

          Commission Chairman Edward Finley departed from Commission precedent and dissented on the interconnection issue citing a case issued by the 10th Circuit Court of Appeals.   The 10th Circuit decision is not  binding legal precedent on the Commission.  Fortunately, the majority of the Commission recognized the hardship and impracticality of such a policy on small, rural companies and upheld previous Commission decisions. 

            While the Commission has issued an order in this case, the final outcome is far from certain.  Several parties have issued comments and objections to the proposed order. Further action by the Commission is anticipated and this controversy is likely to continue for some time.

          Anyone wishing to learn more about the issues addressed in the case should visit the Commission’s website at www.ncuc.commerce.state.nc.us.  The information can be accessed by searching for Docket No. 61, Sub 95 under Docket Information.

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