Is "Carrier of Last Resort" History? Give it A Few Years

Is it is possible AT&T and Verizon might be allowed by the Federal Communications Commission to stop serving customers in some rural areas, essentially abandoning their role as “carriers of last resort?”

The thought isn’t crazy. “Over the next five years, AT&T and Verizon will abandon some areas,” says Kent Larsen, CHR Solutions SVP. The reason is simply that executives no longer see a path to providing service that can earn a profit in some of their rural serving areas.

Neither do many investment analysts who study telco, cable or mobile industries. “The smart money left in 2006,” analysts say, according to Larsen.

It is likely AT&T and Verizon would only be allowed to do so if Long Term Evolution mobile service is available, and both firms could sell a fixed version of that service to customers in areas where landline service is terminated.

Still, the notion that the original bargain--”we give you a monopoly and in return you provide universal voice service”--no longer makes sense in a world of IP networks has merit. 

In most areas, even rural areas, there are two to five potential providers of broadband (A telco, a cable company, one or two satellite providers and often a fixed broadband provider.
And these days, if you can get broadband, you have voice.

Under those conditions, some will make the argument that a “carrier of last resort” obligation, particularly an obligation that applies only to one of the multiple providers, is just silly.

For clues as to what might happen, we all have to follow what the FCC is doing and saying about a transition to an all-IP network, with a shutdown of the legacy time division multiplex network. And there is a good reason the FCC is looking at such a change.

The IP transition for the whole U.S. communications business is getting new attention as the Federal Communications Commission launches a new effort to plan for an end to the time division multiplex “public switched telephone network.”

"The Technology Transitions Policy Task Force will play a critical role in answering the fundamental policy question for communications in the 21st century: In a broadband world, how can we best ensure that our nation's communications policies continue to drive a virtuous cycle of innovation and investment, promote competition, and protect consumers?" said FCC Chairman Julius Genachowski.

Dwindling use of the PSTN is driving the new attention.

The Federal Communications Commission Technology Advisory Council thinks U.S. time division multiplex fixed consumer access lines could dip to perhaps 20 million units by about 2018. At one time there were about 175 million access lines in service.

Others, such as Larsen, think lines overall could dip to about 50 million over the next five years, then to about 40 million on a long term and somewhat stable basis.

The TAC forecast might be tempered by its omission of business lines or perhaps voice lines provided over broadband connections. But the general direction, if not magnitude, are hard to argue with.

Access lines in use are declining. A peak seems to have occurred sometime between 1999 and 2001, in the U.S. market. Mobile lines leapt into leadership shortly thereafter.

Lots of potential changes could come with the IP transition. An end to traditional thinking about “carriers of last resort” and universal service obligations are just two of those changes.