PUC Concludes Carrier of Last Resort Investigation: Oregon’s Digital Divide Persists

In 2019, with CUB’s advocacy, the Oregon Legislature passed HB 3065, requiring the Oregon Public Utility Commission (PUC) to investigate the continuing relevance of “carrier of last resort” (COLR) obligations for incumbent telecommunications utilities to provide basic telephone service. On September 15, 2020, the PUC submitted a report to the Oregon Legislature outlining its findings from that process.

When passing HB 3065, the Legislature could not have anticipated how just a year later the COVID-19 pandemic would highlight the importance of internet access. Nor could they foresee how it would expose national and Oregon public policy failures to ensure affordable and equitable access to all the tools customers need to participate in the digital age. Thousands of Oregon families cannot access and do not use the Internet. Barriers include cost and availability of highspeed internet access service (broadband) and internet-enabled devices (phones, tablets, computers, etc.), as well as literacy training and other education resources.

Case in point: The 2020 “Oregon Broadband and Best Practices Study” reveals that: “Oregon’s broadband landscape has distinct splits between urban and rural areas…[in that]...areas with low population density and difficult terrain still remain unserved, or even unconnected.” The study concludes that only 64 percent of urban and suburban Oregon households use broadband compared to just 42 percent of rural households. Though urban and suburban areas are generally well-served in terms of broadband access, tens of thousands of customers cannot afford service. Affordability concerns disproportionately affect people with disabilities, older adults, and Black, Indigenous, and other People of Color.

The unequal regulatory treatment of “incumbent” telecommunication utilities (e.g. CenturyLink, Ziply Fiber, or any of the smaller telecommunications utilities and cooperatives serving communities throughout rural Oregon) versus “competitive” broadband and cellular voice service providers (e.g. Comcast or Charter Communications for broadband, Verizon or AT&T for cellular voice service) exacerbates Oregon’s urban-rural digital divide.

In this context, a “COLR” is an incumbent telecommunications utility with an allocated service territory. The PUC allocates service territories in exchange for a commitment to serve all customers. The PUC further assigns price and service quality regulations to telecommunications utilities depending on whether the utility is larger like CenturyLink or smaller like Monitor Telecom, which serves parts of the mid-Willamette valley. The PUC does not regulate the provision of broadband or cellular voice service because the Federal Communications Commission (FCC) preempts state authority in this regard.

Before broadband and more advanced cellular voice service offerings, Oregon’s regulatory scheme ensured that most Oregonians had access to high-quality and affordable basic telephone service, early “dial-up” internet access service, and (eventually) higher-speed Direct Service Line internet access service.

Of course, with technological innovation in the telecommunications industry having improved steadily, particularly over the past 20 years, many customers have come to prefer broadband and cellular voice service over basic telephone service. Yet because the FCC has historically taken a “light touch” regulatory approach for broadband and cellular voice services, as opposed to the stronger state-level regulatory oversight of basic telephone service, Oregonians have not experienced equitable technological gains. This dynamic is not unique to Oregon. It has played out across the country, with competitive broadband and cellular voice service providers choosing to invest heavily in areas with a relatively high concentration of captive customers, while largely ignoring everywhere else.

Sadly, the lack of reliable data on broadband and cellular voice service inequities is a thorn in the side of customer advocates and policy makers. For instance, the FCC does not currently require providers to report data showing the strong relationship between affordability and adoption.

Nevertheless, Oregon continues to ensure widespread availability and adoption of at least basic telephone service by allocating service territories to incumbent telecommunications utilities in exchange for their commitment to serve as COLRs. But as competitive broadband and cellular voice companies encroach into some of these territories, many incumbent telecommunications utility customers have discontinued their basic telephone service, though largely in areas where these competitive service offerings are more concentrated.

But while urban and suburban communities do generally enjoy more access to broadband and cellular voice service offerings than rural communities, income remains an important factor in determining a family’s ability to actually use broadband and/or cellular voice service. Once again, in Oregon, people with disabilities, older adults, Black, Indigenous, and other People of Color have disproportionately lower incomes. And these same communities have been hit hardest by both the ongoing COVID-19 pandemic and recent wildfires.

But what does this all mean for the incumbent, PUC-regulated telecommunications utilities with COLR obligations? For the smaller utilities that serve rural and remote communities: They function as the COLR for basic telephone service and, as a result, for broadband service because they face much less encroachment from competitive broadband and cellular voice service providers. For the larger telecommunications utilities that serve rural, urban, and suburban communities: They too function as the COLR for basic telephone service in more competitive markets and increasingly balk at their regulatory obligations.

Roughly 250,000 households in Oregon today have held onto their basic telephone service. They live in larger cities like Portland, Salem, and Medford, but also smaller communities like Monitor, Nehalem, and Scio. Whether due to health and safety concerns, affordability, lack of familiarity with technology or access to a digital device, or even personal preference, these one-quarter-million Oregon households still rely in some way on a service that only incumbent telecommunications utilities provide.

Circling back to the PUC’s “HB 3065 COLR Report”: CUB believes it accurately reflects the PUC-led process that began in January and ended with a final public workshop on August 13. CUB agrees with many of its principle conclusions distilled below:

• Communications are vital to Oregonians, particularly in light of the COVID-19 pandemic and recent wildfires.
• Basic telephone service remains important to Oregonians mainly due to safety and security concerns, relative affordability, and a lack of other options.
• obligations for telecommunications utilities to provide basic telephone service are relevant because technological innovation is inequitable.
• COLR policies for basic telephone service could potentially be relaxed in certain areas to reflect increased competition from competitive providers.
• COLR policy reform is particularly challenging due a lack of quality data, particularly from competitive broadband and cellular voice service providers.
• The Legislature should be cautious if and when contemplating COLR policy reform because Oregonians relying on basic telephone service will be affected by any such policy change.
• Program changes to Oregon Lifeline and the Oregon Universal Service Fund should be considered as an extension of possible COLR policy reform.
• Universal broadband would ensure universal voice service because broadband can deliver voice service potentially equivalent to basic telephone as defined by PUC administrative rule.
• Achieving universal broadband is extremely difficult due to Oregon’s inability to directly regulate the provision of broadband service.

CUB’s major takeaway is that Oregon must prioritize universal broadband availability and adoption for all state residents. Achieving this goal will be extremely challenging. But CUB is committed to using our deep familiarity with the regulatory landscape and our policy development capacity to work with advocates, communities, policy makers, and industry. We will keep you informed as these efforts progress.

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