Lawmakers brace for broadband battle

The Colorado Statesman

After a 20-month process to reform the state’s telecommunications laws resulted in the dramatic death of a 71-page comprehensive legislative package last year, lawmakers and the industry are bracing for yet another fight at the Capitol.

The question is whether legislators will introduce piecemeal portions of the legislation from last year that aimed to modernize the state’s telecom laws, or once again go for a larger package. That issue could be left in the hands of newly elected Senate President John Morse, D-Colorado Springs.

Many of the same lawmakers from last year are working on proposals for this year, including Sen. Mark Scheffel, R-Parker, and Reps. Angela Williams, D-Denver, and Carole Murray, R-Castle Rock. Sen. Andy Kerr, D-Lakewood, is taking over as the lead for Sen. Lois Tochtrop, D-Thornton, though she remains active in conversations.

The biggest fight could come in the form of a broadband proposal. How to fund broadband investments in rural parts of the state essentially derailed the bill last year. The measure would have phased-out a 2.9 percent surcharge on ratepayers’ bills by 2025, using 50 percent of the savings for reimbursing ratepayers, while placing the other 50 percent of savings for broadband investments.

But Morse — as Senate majority leader last year — had issues with how much money the broadband fund would receive. He was accused of allowing the telecom bill to languish on the calendar. It took over a month for the bill to make it from the Senate Business, Labor and Technology Committee to Appropriations, when sponsors finally asked to kill the measure.

Morse maintains that there were no political games played last year. He said he is working on a proposal this year, but that he is currently preoccupied with other issues facing the legislature, including gun control.

“I am otherwise occupied right at this minute, but I am hoping that we can put together something that works for everybody,” he said. “I don’t know exactly what that looks like, and I haven’t been able to spend time figuring it out, but once I can get free of this stuff, then I will try to get everybody together.

“But I do think that it ought to be one big comprehensive thing,” Morse continued. “There are individual people who want individual things, but once you get your individual thing, then you’re not on board to get the whole thing.”

Williams agreed that the big fight could come if broadband funding is tied to a larger legislative package. Her new position as the chair of the House Business, Labor, Economic and Workforce Development committee offers her a powerful role in the discussions. But she said there is much uncertainty until the Colorado Public Utilities Commission develops rules around broadband support.

“What we’re going to have to do is the big question. How do we fund it?” remarked Williams. “If we’re looking at that through the rules that are being promulgated by the PUC, we still have to wait to see where those rules fall to determine if there will be any savings from that.”

Scheffel said he is open to a comprehensive package that includes broadband, but he is afraid that could once again lead to the demise of the bill. There were fears expressed last year by unions that the larger package could have led to job loss, and CenturyLink had lobbied hard against the proposal because it would have lost as much as $54 million in subsidies for providing rural telecom service.

“In light of last session, we picked out smaller bite size pieces that we could take on…” explained Scheffel. “I’m very concerned that we will end up in exactly the same spot we were last session, and the clock is ticking.”
The assistant minority leader is also worried about what Morse might do with telecom legislation if it gets to the Senate.

“The unknown is what happens when that comes to the Senate,” declared Scheffel. “We all know then-Sen. Morse’s position last session was that he wanted to set up the monolithic investment in broadband, so much so that it really caused the demise of that bill.”

Defining competition

Complicating matters is also the fact that the PUC is working on adopting rules that would set a policy framework for looking at competitive areas where rate deregulations could take place. The PUC is taking on the issue after the legislature failed last year. In those competitive areas, the state would also take steps to eliminate the High Cost Support Mechanism subsidy.

CenturyLink — which receives the bulk of the subsidy — and the Colorado Telecommunications Association are opposing the PUC’s rulemaking, concerned with how it will create an effective competition test. The legislation last year would have defined competition where there are five or more competitors. An exemption would have been made for providers with less than 75,000 access lines. The PUC has just begun a review to determine where effective competition exists.

Pete Kirchhof, executive vice president of the Colorado Telecommunications Association, said his organization has only two options: to ask the legislature to intervene, or to file a lawsuit.

“They’re using a competitive test to determine high cost. We think that they’re two separate issues,” opined Kirchhof. “You can use competition to determine the regulatory scheme, but high cost is high cost. It’s driven by cost. So, you have to look at that differently.”

Jim Campbell, regional vice president for legislative affairs for CenturyLink, believes that if the PUC ties competition to high cost subsidies, then rural customers could be negatively affected.

“The concern we have with where the PUC is going, is the unintended consequences of their actions could be if they continue to tie competition to support, the support for the most rural areas will be eliminated,” said Campbell.

Lawmakers said they have not heard of any interest to tackle the competition issue at the legislature this year. But Scheffel believes it is a component that should be addressed by the legislature, rather than regulators.

“That’s the whole reason I ran the comprehensive bill last year,” exclaimed Scheffel. “So, now we’re back to where we started. The idea was to not leave this to the PUC, which we talked about a lot last session. That result could be seen as extreme. It was unpredictable. We felt that this reform effort was something that the legislature should tackle.”

Future of telecom

AT&T Colorado, which does not receive the subsidy, is backing the PUC’s effort. The company has pointed to a need to reform the state’s decades-old telecommunications laws. Rather than focusing on competition and subsidies, AT&T Colorado is asking regulators and the legislature to focus on the future of telecommunications in Colorado.

Several proposals have already been raised, including tax exemptions for telecom providers, protecting Internet traffic (Voice over Internet Protocol) from state regulation, and defining public-private partnerships to advance telecom development.

The focus, however, is on the Voice over Internet Protocol (VoIP) legislation, which had not been introduced as of Feb. 7. The measure is expected to start in the House, with more than 60 co-sponsors. Williams said she would serve as the prime sponsor.

“Currently the PUC does not regulate Voice over IP services…” explained Williams. “We’re moving it to the right part of the statute… so that you continue to not regulate it.”

Scheffel said there could be some issues with protecting emergency calls, such as for 9-1-1, but he does not expect much of a fight.

“That bill has a lot of momentum; it has a lot of support,” he said, pointing out that it will be only a few pages, compared to last year’s gigantic undertaking. “It’s kind of the alternative. If last year was a huge 71-page bill, this is a rifle shot.”

The only telecom reform bill to have been introduced so far this year is House Bill 1059, sponsored by Rep. Cheri Gerou, R-Evergreen. It would create a statewide sales and use tax exemption for a telecom provider’s equipment.

Many local governments already authorize the exemption, so the measure is not expected to be controversial. The goal is to encourage development in rural parts of the state.