Is Carrier of Last Resort Dead?

The concept of common carrier stretches back to the 14^th century in English law, where businesses were granted the exclusive right to be in business as long as they were willing to serve everybody. The term common carrier came into use to describe the obligation of businesses like coaches, ferries, etc. that were required to serve anybody who asked to be transported. The concept was carried over to businesses that were given a franchise to serve a local area, and businesses like blacksmiths and innkeepers were required to serve anybody who wanted service. This concept still applies to businesses today, like railroads, which are not allowed to selectively refuse to carry freight.

Carrier of last resort (COLR) is a version of common carriage that has been applied to businesses that operate large networks like telephone companies, electric companies, water companies, and gas companies. Federal or State rules have always required such businesses to serve anybody inside of the franchise area who requests service.

In exchange for being granted a franchise area, COLR for telephone companies has always come with specific obligations. A COLR is expected to serve everybody in the franchise area, even if that means extending facilities. A COLR needs regulatory approval to withdraw from serving customers. A COLR is expected to operate the business with care, skill, and honesty and to charge fair and reasonable prices.

The concept of carrier of last resort for telephone companies started to weaken with the passage of the Telecommunications Act of 1996. This Act allowed for local telephone competition, and some legislators or regulators granted relief for telephone companies from some of the carrier of last resort obligations. For example, some states have eliminated COLR obligations as part of deregulation. Some regulators have eliminated most COLR obligations for specific telephone companies for the same reason. But even in most cases where the COLR obligations have been weakened, regulators still usually require a telco to ask for permission to withdraw from a market.

While some COLR obligations were weakened, others were expanded. For example, some states have required CLECs (competitive telephone companies) to accept COLR obligations in exchange for participating in subsidy programs. Cities have often only agreed to give a franchise agreement to CLEC or ISP that agrees to serve everybody. In many cases, this obligation is no longer explicitly called COLR, but uses terms like “duty to serve” or “obligation to serve” but refers to obligations similar to COLR.

The COLR issue has come to the forefront for broadband because of broadband grants and subsidies. Some state and local broadband grants have included an obligation to serve everybody in a grant area. The largest subsidy program to require 100% coverage is the Rural Digital Opportunity Fund (RDOF). ISPs that accept this funding are expected to offer service to 100% of homes and businesses in the covered Census blocks by the end of the six-year deployment period. It’s not entirely clear if the upcoming BEAD grants will require 100% coverage, and that final determination will likely be included in each State’s final grant rules.

Is the agreement to serve customers that is obligated through a grant or subsidy program the same as a carrier of last resort obligation? I expect not. For example, will an RDOF winner be expected in the future to extend the network to newly constructed homes?

There are clearly going to be households in RDOF areas that are not offered service. For example, many of the RDOF winners use fixed wireless technology, and there are always homes in any area that can’t be reached with the technology for some reason. In hilly and heavily wooded areas, this might be a large percentage of households.

Does a home that is not covered by RDOF have a reasonable remedy to get service? In the past, a customer could complain to State regulators if a telco was refusing to serve them. It’s hard to imagine an individual homeowner opening an expensive and complicated FCC proceeding to complain about being missed by RFOF.

Technology is also creating havoc in rural areas for traditional telephone company obligations. When I was recently upgrading my cellphone in an AT&T store, I overheard the AT&T representative tell a customer that they would soon be losing their telephone copper and would be moved to FWA cellular wireless. My county is extremely hilly and wooded, and there is a major lack of rural cell towers. There is a good chance that this customer is not within reach of the offered cellular broadband. It sounds like the end of carrier of last resort obligations if a telco can cut the copper wires and move customers to a cellular service that doesn’t work at their home.

In circling back to the question asked at the beginning of this blog, are there many places left where a regulator will step in and demand that an ISP built infrastructure to reach an unserved household? I think the chances of that happening are getting increasingly remote.