New Mexico Experts Loudly Caution Against CenturyLink’s Deregulation Petition

CenturyLink shouldn’t avoid New Mexico regulations, said multiple speakers on behalf of the New Mexico attorney general and the U.S. Department of Defense. They submitted extensive testimony released this week on CenturyLink’s September 2011 petition before the New Mexico Public Regulation Commission. “The Commission should no longer handicap CenturyLink QC as a competitor in the marketplace,” company Regulatory Operations Director Robert Brigham said in May (http://xrl.us/bnnihz). The petition argues that CenturyLink faces effective competition and should be deregulated.

CenturyLink “is still far larger than all of its wireline competitors put together,” Ionary Consulting Principal Fred Goldstein said on the attorney general’s behalf (http://xrl.us/bnnh4w). “New Mexico’s competitive standing, as ranked by FCC statistics, is last in the nation."

The CenturyLink petition “should be rejected because it has not demonstrated that there is effective competition” throughout the state, said QSI Consulting Chief Financial Officer Warren Fischer (http://xrl.us/bnnigq), also on the attorney general’s behalf. QSI Chief Economist August Ankum slammed the CenturyLink petition as “devoid of analytical rigor and economic underpinnings” and said it “represents a sea change in regulation of telecommunications services in New Mexico” (http://xrl.us/bnnigy). He testified on behalf of the U.S. Department of Defense and other federal agencies operating in New Mexico and addressed CenturyLink’s business customers. New Mexico has a “substantial presence” of federal workers, a workforce that’s “one of the largest users of telecommunications services in New Mexico,” he explained. The petition is “like pointing to a river that is on average one foot deep and claiming that all passers-by can easily cross it at all points along the bank, all the while ignoring that there are parts of the river that are 10 feet deep with hazardous whitewater that can drown man and horse,” he said. An approved petition ruling and any subsequent deregulation are liable to cause what he called “significant adverse impacts on New Mexico telecommunications consumers.”

"CenturyLink appreciates the diligence of the commission and its staff during their review of our request for competitive classification of our services,” a CenturyLink spokeswoman told us in response to recent comments. The commission’s approval would “be a big step in the right direction for New Mexico consumers” and “won’t deregulate CenturyLink, but will move CenturyLink closer to being able to compete on a level playing field with our competitors, which include cable, wireless and VoIP providers,” she said.

On Monday, the New Mexico PRC hearing examiner encouraged CenturyLink and the state attorney general’s office to comment by Sept. 7 on whether a “Pew Research Center study [on mobile phone problems, released Aug. 2] provides relevant evidence as to whether wireless is a functionally equivalent or substitute service for wireline” (http://xrl.us/bnnh75). CenturyLink’s Brigham has argued “that wireless is a functionally equivalent substitute for many if not most customers,” the examiner noted.

CenturyLink sees wireless, cable and VoIP as competition, a disputed position. “These competitors continue to enjoy greater pricing freedom and less regulation than those borne by CenturyLink,” the spokeswoman said. “A ruling in our favor would increase competition, and allow us to build on our recent commitment to invest $20 million in New Mexico and to be more responsive to consumer demand for broadband and telecom services.” Fischer attacked CenturyLink’s belief that its competitors offer “functionally equivalent” services “without any analysis to demonstrate that on a service by service basis.” The company’s market share exceeds 50 percent and it’s “by far the largest” wireline provider, Goldstein said. “It is thus far from clear that the market has achieved the level of competition needed to justify full deregulation.” A certain degree of confusion has come to dominate VoIP regulation debates, he added: “It is important, then, to watch for the ‘bright shiny object’ of IP being waved around to confuse regulators.” Fischer noted that it’s “at odds” for CenturyLink to say it competes with wireless and VoIP when its affiliate, Qwest Communications Corporation, offers VoIP. Ankum said the federal entities often receive only one bidder for telecom contracts and are “without the protection of competitive markets and oftentimes at the mercy of the incumbent, CenturyLink."

The company has developed a poor reputation, Goldstein asserts. “Many [Internet service providers] have had difficulty dealing with Qwest [CenturyLink] as a wholesale provider,” he said. “As a result, many have abandoned the DSL business and are concentrating on other opportunities, such as wireless service.” The billing disputes between CenturyLink and wholesale customers, such as CLECs and ISPs, are “not pretty” and “have driven some companies out of the New Mexico market,” he said. Tw telecom on Aug. 23 asked the PRC to dismiss the petition and prevent proceedings until CenturyLink files data establishing minimum pricing and cost studies (http://xrl.us/bnnigd).

CenturyLink ultimately hopes to wipe out the “last vestiges of ILEC-specific retail regulation, primarily price caps on retail service,” according to Goldstein. “The real benefit CenturyLink hopes to gain is relief from the Commission’s minimum pricing rules in NMAC § 17.11.13.17 and the service quality rules that protect New Mexican customers, especially those who do not have an alternative provider that they can switch service to if they are dissatisfied,” Fischer said.

Goldstein worries about consumer protections, he said. Standalone voice service “should remain a core part of the incumbent’s Carrier of Last Resort obligation,” Goldstein said, acknowledging it’s “undesirable” and “a declining product.” “Qwest has not stated explicitly that they will or will not retain their COLR obligation, but because it does not apply to their competitors, it presumably would not apply to them if they were granted the desired relief,” he said. “If Qwest were granted similar relief across its service area in New Mexico, then it could leave some customers with no service at all, or at least no wireline service.”