C. CPUC Seeks to Preserve Access and Choice for DSL Service
The CPUC's efforts to promote competition also includes advocacy before the FCC. The CPUC has recently taken positions in two key FCC dockets that will affect how broadband services are delivered to consumers. In February 2002, the FCC proposed reclassifying the regulatory framework for the transport portion of broadband access to the Internet from "common carriage" to "private carriage".144 This change of classification would remove the regulatory obligations of interconnection and unbundling for those providers of the transmission facilities for information services, including DSL service. In almost all cases, ILECs have monopoly control over of the "last mile" of transmission facilities, also known as the local loop, necessary to provide DSL service.
In light of the TA `96's goal of furthering the deployment of advanced telecommunications services to all Americans, the CPUC has urged the FCC to continue to include facilities-based DSL service as a common carrier transmission service subject to unbundling obligations. In Comments filed in May, the CPUC has pointed out that removing the interconnection and unbundling obligations from the ILECs would impair the potential for consumer choice and access to broadband services in California.145 As noted above, forty-five percent of California residents with broadband access live in areas where DSL is the only option for broadband Internet access. Cable modem, satellite, and wireless methods of broadband access are not comparable alternatives at this point. Therefore, allowing ILECs to control the transmission segment of DSL service would essentially pave the way for monopoly control of DSL service.
In a separate but related proceeding, the FCC has raised the question of deregulating the broadband services provided by the ILECs in order to spur investment, innovation, and lower prices.146 Some have suggested in the proceeding that cable modem, satellite and wireless methods of broadband access have become acceptable alternatives for the broadband offerings of the ILECs, typically DSL and ISDN.147
The CPUC has taken the position that deregulation of these broadband services would be premature. Because the ILECs are still the dominant provider of wireline broadband services, deregulation "would jeopardize the continued ability of the FCC and the States to ensure that services used for the transmission of voice telecommunications continue to be available at high quality and reasonable rates."148 The CPUC noted that cable modem, satellite, and wireless broadband options are not available to as many consumer groups as is DSL service. While it is true these options exist in the national market, it is the local market that matters for each consumer, since a local provider is necessary for broadband access. Until multiple broadband providers serve each of the local markets, deregulating the ILECs will stymie investment, innovation and competition.
D. Local Number Portability
i. Wireline Number Portability of Growing Importance to CLEC Local
Market Share
Switching Phone Numbers: A Barrier to Competition - In an openly competitive
telecommunications marketplace, consumers need to be able to choose and move freely among multiple telecommunications service providers. Especially in the local telephone market, consumers may be deterred from switching to a new service provider if switching requires consumers to assume a new phone number. Congress, the FCC and the CPUC addressed this problem by requiring most wireline phone companies to allow customers to switch between phone service providers while retaining their original telephone number.149 The process of switching is called number porting.
NUMBER PORTING IN CALIFORNIA - LOCAL PHONE NUMBER PORTING AMONG WIRELINE CARRIERS BEGAN IN CALIFORNIA IN MAY 1998. AT THE END OF 2000, 32 LOCAL SERVICE PROVIDERS WERE ON RECORD AS ACTIVE PARTICIPANTS IN NUMBER PORTING; EITHER HAVING LOST CUSTOMERS THAT HAD TAKEN THEIR NUMBERS TO A COMPETITIVE PROVIDER, OR HAVING GAINED CUSTOMERS THAT HAD BROUGHT THEIR NUMBER WITH THEM. ONLY A SMALL PERCENTAGE OF CALIFORNIA CUSTOMERS, HOWEVER, EXERCISE THE NUMBER PORTING OPTION. AFTER OVER THREE YEARS OF EXPERIENCE WITH NUMBER PORTABILITY (FROM MAY 1998 TO JULY 2001), ABOUT 5 PERCENT OF THE LOCAL MARKET150 HAD SWITCHED SERVICE PROVIDERS WHILE RETAINING THE ORIGINAL PHONE NUMBER AND REMAINING A CUSTOMER OF THE ALTERNATIVE PROVIDER AS OF JULY 2001.151
Based on the data, number porting is none-the-less more critical to CLECs than to ILECs competing in the state and, thus, the CPUC supports it continued use. Most number porting is used to enable customers to leave ILECs in order to take service from a CLEC. While ported customers account for a small net loss to ILECs, they constitute a significant share of the CLEC customer base. While less than 5 percent of ILEC customers ported to CLECs, this flow of customers contributes to at least one quarter of all CLEC business and is growing. At the end of 2000, the nearly 1.2 million numbers ported to CLECs accounted for 25 percent of CLEC assigned customers. By July 2001, the over 1.6 million numbers ported to CLECs comprised 29 percent of CLEC assigned customers. If number porting were not available, CLECs would presumably lose one quarter of their local market share.152 The percentage of the customer base that CLECs gain from those customers that do port numbers may be crucial to their survival.
Seven dominant CLECs operating in California benefit the most from porting. Of the numbers ported to CLECs at the end of 2000, 88 percent went to these CLECs. Of the numbers ported to CLECs by July 2001, 83 percent went to the same seven CLECs153.
II. WIRELESS NUMBER PORTABILITY COULD INCREASE COMPETITION
THE FCC HAS MANDATED THAT THE WIRELESS INDUSTRY IMPLEMENT NUMBER PORTABILITY BY NOVEMBER 24, 2002.154 MANY WIRELESS CARRIERS HAVE OPPOSED THE MANDATE. ON JULY 26, 2001, VERIZON WIRELESS PETITIONED THE FCC FOR RELIEF FROM THE REQUIREMENT TO DEPLOY NUMBER PORTABILITY ON THE BASIS THAT THE EXTENT OF COMPETITION IN THE WIRELESS INDUSTRY IS SUFFICIENT WITHOUT IT. A DECISION ON THIS PETITION IS PENDING WITH THE FCC.155
The CPUC believes that wireless number portability is crucial to enhancing competition in the wireless industry as well as between the wireline and wireless industry. The CPUC supports the FCC's previous conclusions that number portability is essential to a competitive marketplace. In response to the Verizon Wireless petition and in other filings before FCC, the Commission has argued in favor of retaining the November 24, 2002 deadline for wireless number portability, citing TA `96, "which evinced a Congressional intent for competition to develop among and within all telecommunications markets." 156
147 ISDN refers to Integrated Services Digital Network, an advanced service that was not discussed in this initial competition report. ISDN is essentially is a service provided by local telephone companies which modifies regular telephone lines so that they can transmit data almost five times as fast as the fastest analog modems. ISDN also allows the transmission of not only data, but a combination of data, voice, and video simultaneously on one line.
148 Comments of CPUC filed April 22, 2002 in FCC Common Carrier Docket No. 01-337 149 Section 251(b)(2) of the 1934 Communications Act as added by the 1996 Telecommunications Act, and First Report and Order and Further Notice of Proposed Rulemaking, 11 FCC Rcd. 8352, Paragraph 165. 150 Market share in this paragraph is determined by percentage of numbers assigned to customers. 151 The 5 percent accounts for those customers that were still with the competitive service provider as of July 2001. It does not account for customers that switched providers and then returned to the original provider before July 2001. 152 Assuming that these customers would not switch carriers if they had to change their telephone numbers. 153 The seven CLECs are: Allegiance Telecom of California, Inc., AT&T Communications of California, Inc., Cox California Telecom, LLC, Focal Communications Corporation, MPower Communications, Pac-West Telecommunications, Inc., and XO Communications.154 First Report and Order in the Matter of Telephone Number Portability, Docket No. 95-116, FCC 96-286,
Paragraph 4
156 Comments of the California Public Utilities Commission and of the People of the State of California filed with the FCC in CC Docket No. 99-200 and WT Docket No. 01-184 on September 21, 2001.
