JUNEAU — Alaska’s utility regulators are considering wide-ranging proposals to change the state’s telephone and internet laws, with the Legislature itself likely to tackle the issue in 2019.
Last week, the five commissioners of the Regulatory Commission of Alaska heard from the state’s leading telecom industry association and from regulatory staff as they consider how to meet a Feb. 19 deadline for proposed changes. Among the ideas presented to commissioners: a deregulation of Alaska’s landline telephone industry.
Rep. David Guttenberg, D-Fairbanks, testified at the hearing Dec. 12 and said afterward that he opposes deregulation in part because it could allow phone companies to drop landline service in remote areas of the state while preserving their ability to take state money intended to subsidize other services.
“I would call it draconian, because basically it deregulates them but they get to keep the money," he said.
No action was taken Dec. 12, and commissioners are still considering their options, but the meeting included draft ideas that commissioners might recommend to the Legislature. The February deadline was set earlier this year when lawmakers ordered the commission to “deliver recommendations on how best to modernize outdated statutes.”
“I hope (telephone) carriers would understand the extreme nature of what is being proposed,” commissioner Stephen McAlpine said after hearing a presentation from Alaska Telecom Association executive director Christine O’Connor.
[Regulators slash fee for landline phones and end state subsidy for low-income Alaskans]
In Alaska, landline telephone service — but not wireless or internet — is regulated by the state to prevent monopolies from gouging consumers.
O’Connor told commissioners that Alaska’s telecommunications laws were last updated in the 1990s, and some components were last touched by the Legislature in the 1980s or 1970s. Technologies have changed and so have consumer habits. While some places may be under a monopoly when it comes to landline service, they now have wireless options.
“Landline service is still essential. People still rely on it, especially in emergencies,” O’Connor said, but “by 2017, only 48 percent of Alaskans had a landline phone, and only 4 percent were landline-only.”
According to figures from its latest filing with the Securities and Exchange Commission, GCI has 82,400 wired telephone customers and 219,800 cellphone customers. Alaska Communications has 96,607 wired telephone customers. It sold its cellphone business to GCI in 2015.
Though Alaska is one of the smallest states in the U.S. by population, its telecom industry is still a billion-dollar operation.
“Management estimates the Alaska wireline telecom and IT services market to be approximately $1.6 billion,” Alaska Communications declared in its latest filings with the Securities and Exchange Commission.
As competition from Outside cellphone companies like AT&T and Verizon has grown, Alaska-based landline telephone companies have increased their requests to loosen state regulation, particularly when it comes to what’s known as “carrier of last resort” status.
According to state regulations, carriers of last resort are required to keep serving a specific area, even if it isn’t profitable. That ensures Alaskans have at least some phone service. In exchange, those carriers have received a state subsidy. Everyone who has a landline telephone in Alaska pays a surcharge that goes to a state fund. Between 2011 and 2017, that fund paid $47 million in subsidies to last-resort carriers, according to a presentation given to lawmakers by commission staff earlier this year. That subsidy ends Jan. 1.
With the subsidy disappearing, the telecom industry has questioned the necessity for the regulations, given that cellphones are successfully competing with landline telephones, and a monopoly on landline phone service no longer means a monopoly on phone service overall.
Guttenberg fears that if “carrier of last resort” regulations disappear, Alaskans in remote areas could be left with no landline telephone access as companies stop serving them because of the cost.
O’Connor said by phone that will not happen. Companies want deregulation to cut costs, not end service, O’Connor said. Under the Telecom Association’s plan, the commission would still retain the power of licensure — if a company acts out of bounds, the commission could revoke its license to operate. A company would also need federal permission to stop serving an area, “which is a pretty high bar,” O’Connor said.
For that reason, O’Connor said it’s better to think of the proposal as less regulation, not deregulation.
“Our remedy in the event of a withdrawal of service is to jerk the certificate? That seems to me ... pretty heavy-handed,” McAlpine said during the meeting. “It’s like using the guillotine to take care of misdemeanants.”
The Telecom Association proposal also would revoke much of the commission’s ability to set rates. Under state rules, if two or more companies offer landline phone service in an area, that area’s rates aren’t under regulation. In addition, telephone cooperatives can vote to take themselves out of regulation.
Because of those two exemptions, most phone companies in Alaska are already unregulated when it comes to rates, and the association’s plan would expand that idea to cover all phone customers.
Guttenberg has different ideas for updating state law. As a sitting legislator — he leaves office in January — he has urged the RCA to use its authority to encourage the spread of broadband internet. While O’Connor’s proposal does not mention internet service, modernization proposals by RCA staff do mention it.
Federal preemption means the national government has primacy over regulating both the internet and cellphone service. Nevertheless, nothing prevents the state from encouraging broadband internet access, and RCA staff are proposing methods to do that.
Among the staff proposals are strategies to help communities or neighborhoods set up their own broadband internet networks if they are bypassed by larger companies.
Those have been driven to a large degree by Guttenberg and his constituents on the edge of Fairbanks, commission staff said.
Regardless of what the commission decides, the Legislature is likely to take up deregulation as a serious matter in the next legislative session. The Telecom Association’s deregulation plan was introduced by Sen. Kevin Meyer, R-Anchorage and now lieutenant governor, last year, but it failed to advance through the House after passing the Senate.
Guttenberg said he fears that Alaskans won’t be paying attention.
“It was me in that room and about 50 lawyers whose business accounts who are probably larger than my salary,” he said about this week’s meeting. “You go to Juneau, and there isn’t another voice who represents the public.”