States push back on ISP copper retirement plans

• Operators like AT&T and Lumen want to end carrier of last resort obligations in states where they wish to retire copper networks
• California and Utah have rejected requests from those carriers
• New Street says BEAD deployments will likely enable easier copper retirement, but it’s still unclear when those deployments will kick off

Telcos may want to ditch copper and focus on the next best thing (i.e., fiber). But states aren’t about to let them off the hook.

According to New Street Research, ILECs seeking to end their carrier of last resort (COLR) obligations are getting pushback from states because consumers might not have another option for internet access – including wireless.

A COLR is a telecommunications service provider that’s required to serve upon request all customers within its designated service areas. It must provide basic telephone service, such as free access to 9-1-1 and directory and operator services.

“While the U.S. has largely eliminated areas with a heavy wireline dependency, these remaining areas are largely rural,” said New Street’s Blair Levin in a note to investors.

“That means such areas are also likely to lack cell service or have poor quality cell service.”

In March 2023, AT&T petitioned California’s Public Utility Commission (PUC) asking to be relieved of its COLR obligation. The operator, which is the largest COLR in California, has said “less than 7%” of households it serves in the state use copper.

Last month, the California PUC issued a proposal rejecting AT&T’s request to withdraw as a COLR.

According to the PUC, AT&T “failed to demonstrate the availability of replacement providers willing and able to serve as COLR, nor did AT&T prove that alternative providers met the COLR definition.”

Lumen’s another telco that’s sought COLR relief for its CenturyLink service. Utah’s Public Service Commission (PSC) in March denied Lumen’s request, stating there’s not enough evidence showing its copper customers in Utah will have an adequate replacement for voice services.

In its petition, Lumen said just 1.9% of Utah households rely on a landline as their only voice service and that since 2005, the operator has lost 87% of its fixed voice subscription service base.

Plans for copper retirement appear to be at a standstill – for now. New Street thinks once subsidized broadband deployments get going (namely, via the Rural Digital Opportunity Fund and Broadband Equity, Access and Deployment Program), it’ll “largely resolve the issue.”

“Government subsidized deployments, such as with the RDOF and BEAD programs, will eventually connect nearly all locations to either a cable or fiber line, which logically should enable easier copper retirement,” Levin said.

However, the BEAD process is taking longer than expected, with the federal officials still in the process of approving initial proposals and many states undertaking their challenge processes. It’s unclear when BEAD deployments will kick off.

Delays in BEAD funding mean it’ll likely take longer for states to release ILECs from their COLR obligations, said Levin.

“Further, the most expensive areas for COLR are the most expensive areas for BEAD, and it is not clear BEAD is going to cover these areas entirely, a problem made worse by the end of ACP,” he warned.