Confronting Tough Questions About Carriers of Last Resort

1. Confronting Tough Questions About Carriers of Last Resort Ellen Blackler February 20, 2008

2. The Context for AT&T:AT&T is a Major Provider of Service to Rural America • AT&T serves 25% of all rural lines in the United States – 7.5 million lines. • AT&T serves more rural customers than any other company. • AT&T’s commitment to rural America is strong, but regulatory policy must be reformed to allow us to transform that commitment into a modern communications network.

3. Traditional COLR is No Longer the Best Way to Ensure Ubiquitous Service • Existing rules can act to constrain a provider’s ability to use new technologies to serve hard to reach customers, driving up costs. • Two Prong Approach to Change • COLR should be transformed to a flexible, technology neutral service obligation allowing providers to use all available technology tools to provide access. • Eliminate it where there is competition. • Support it where it is high cost. • Promote network investment by – you guessed it – finally addressing implicit subsidies in access, and reforming universal service policies.

4. Flexible Service Obligation OBJECTIVE:Transform the existing COLR requirements to a flexible service obligation to provide core functionality with the most efficient technology. Where robust competition exists, eliminate COLR entirely • Most consumers today have a variety of choices over a variety of technologies – cable, DSL, wireless, POTS, etc. • Regulators have recognized the competitiveness and established the competitive classification process to determine when regulation is no longer necessary to protect consumers from price increases. • Those same competitive forces mean that COLR is no longer necessary – providers have every incentive to make sure consumers have ample offerings to meet the range of consumer needs.

5. Flexible Service Obligation • Define service obligation in terms of the core functionality (access to the PSTN, emergency service, operator service, directory assistance, and 711, 8YY, directory listing, lifeline). • Eliminate it where there is competition. • Where costs of meeting the obligation are high, support to a SINGLE provider should be made available. • There could well be pockets of high cost areas in a region otherwise competitive. For these areas, an optional service obligation, supported by universal service, would be created and offered to a single provider who would guarantee service in exchange for the support.

6. Promote Network Investment • Funding mechanisms need to promote network evolution and the deployment of advanced services that consumers increasingly rely on without jeopardizing access to basic voice services. • Programs to provide one time subsidies to a single provider to deploy infrastructure where it is inadequate should be considered. • Subsidies in intrastate access need to be removed. • Need to provide rate flexibility for rates in high cost areas.

7. Current State Developments • Laws amended to allow COLR obligation to be met with any technology, and protects that technology from the full range of state regulation. • Texas, Nevada • Adjust line extension obligations to reflect presence of competitors. • Mississippi Legislation – line extension requirements do not apply when there is an alternative provider to the premise, or where the incumbent is prohibited from serving. • Activity related untangling the damage caused by exclusive access arrangements. • Exclusive access arrangements are bad for competition and customer choice – for video, internet or voice. • Sticky problems arise where exclusive access arrangements exist for some services like internet access, but COLR for voice remains.