Minnesota Opts to Deregulate Large Incumbent Wireline Carrier

Deeming competitive most of the areas served by a major incumbent local exchange carrier (LEC), the Minnesota Public Utilities Commission has assented to the carrier’s request that it be treated for ratemaking purposes like any other competitive LEC within those particular areas. The subject carrier, Qwest Corporation d/b/a CenturyLink QC, had submitted its application for a more relaxed form of regulation pursuant to a recently enacted state law, passed in May of 2016, which authorizes incumbent LECs to seek commission approval to operate under a new regulatory construct known as “competitive market regulation.”

The commission said that the law requires it to accredit such a petition if the LEC can prove the following:

1. It serves fewer than 50% of the households in an exchange service area, with a minimum of 60% of households in the exchange service area being able to choose voice service from at least one additional unaffiliated competitive service provider; or

2. It serves more than 50% of the households in an exchange service area, but

(i) a minimum of 60% of households in the exchange service area can choose voice service from at least one additional unaffiliated competitive service provider;

(ii) no significant economic, technological, or other barriers to market entry and exit exist;

(iii) no single provider has the ability to maintain prices above competitive levels for a significant period of time or otherwise deter competition; and

(iv) the applicant LEC will continue to offer basic local service consistent with its tariffs in effect at the time of its petition.

In arriving at its decision that CenturyLink met the criteria for more flexible regulation, the commission reviewed numerous technical issues regarding how competition is measured in accordance with the new law, including (1) whether small business lines must be counted as part of total lines served; (2) census adjustments for seasonal homes; (3) measures of the availability of both indoor and outdoor wireless services; (4) the treatment of statistics regarding cable voice services; and (5) the exclusion of lines that receive service from another competitive carrier via network platform tariffs or resale lines.

The commission found that the governing statute has as its primary focus the residential telephone market, such that CenturyLink is not required to include either vacation home or small business lines in its line counts. In that same vein, the commission rejected claims that the LEC had unreasonably excluded certain business lines, such as those serving farms and child care centers, from its residential line counts. The commission cited LEC testimony that farmers and day care operators often subscribe to both residential and business lines, such that they are already included in any count of households served. The commission similarly determined that the carrier had properly accounted for the presence of cable companies as another measure of effective competition. The commission said it was reasonable for the LEC to assume that it is more likely than not that cable companies serve an entire census block if they serve one household within that block. Re CenturyLink QC, Docket Nos. P-421/AM-16- 496, P-421/AM-16-547, May 22, 2017 (Minn.P.U.C.).