There’s nothing wrong with a state regulatory agency setting service standards for connectivity, such as time to repair an outage — as long as the regulators adopt a reasonable and workable approach.
Unfortunately, staff at the California Public Utility Commission (CPUC) have jumped the shark. The regulators are proposing to impose draconian outage repair requirements and penalties on carriers, that would require all VOIP (Voice over IP) and wireless outages to be fixed within 24 hours, with costly fines escalating over time. The standard would effectively impose fines on carriers for not fixing outages right away, even when that outage is well beyond the provider’s control.
These fines — which would be automatically credited back to customer accounts — could add up quickly in the case of widespread outages, well in excess of what a customer pays for monthly voice service.
Why is this a problem? Significantly, the proposed action would impose a completely unrealistic perfection standard that provides no flexibility for factors well beyond the control of the carrier. Reasonable exemptions should be included that at a minimum provide an accommodation when there is a lack of commercial power, wildfires, snowstorms, earthquakes, floods, or falling trees, on the one hand, and lack of access to customer premises on the other. However, the staff proposal does not include sufficient flexibility. It is not hard to imagine the absurd results that this will create. For example, imagine a planned commercial power shutoff (e.g., a PSPS or “public safety power shut off”) put in place by Southern California Edison due to a wildfire that results in a loss of power to a community that stretches into two days and impacts all homes and businesses. Under the standard proposed, VOIP providers would be fined for the loss of their service even though the loss of power (and its restoration) is well beyond their control and core business.
In addition, there is nothing a provider can do to correct or prevent an outage when the cause is outside of the provider’s control, whether they are fined for the outage or not. While the proposed CPUC standard exempts outages during governor-declared states of emergency, factors outside of the voice provider’s control arise at other times, including snowstorms, floods, or downed trees, on the one hand, and lack of access to the consumer on the other.
Indeed, it’s a fact of life that some outages take longer to fix than others. A tree falling on a broadband cable in a remote area will take more time to repair than the typical suburban line problem. A lot of trees falling because of a storm will stress repair capabilities. The staff’s proposed standard does not account for these modern-day realities.
If the CPUC staff’s proposal is adopted, this could result in less build-out of new lines to vulnerable rural areas. Suppose that a carrier is deciding whether to build out new facilities in an area that is prone to outages due to natural causes (e.g., fire, earthquakes, floods, etc.). Punishing the carriers too heavily for unavoidable outages will make some proportion of the new lines uneconomical to build and maintain. Similarly, on a statewide level, given different and competing regulatory environments throughout the nation, excessively strict outage penalties could discourage telecom investment in California more generally — an unnecessary loss for the state and its consumers.
At the same time, the new standards will give customers an incentive to game the system, since they benefit directly from the fines. If a carrier can’t get access to a customer’s home or property to fix a problem, then the fines—and customer credits—can mount up quickly, even if the carrier can’t do anything.
Finally, excessively onerous service quality standards will require additional repair equipment and personnel, artificially boosting the price of voice services for California residents. Requiring an unrealistic 100% 24-hour repair standard, particularly if it includes causes beyond the provider’s control, is a luxury that poor and middle-class consumers cannot afford.
Nobody likes communication outages, and nobody disagrees that they need to be fixed as soon as possible. But customers also like low prices, greater innovation, and more telecom investment in rural areas. Excessively tight outage repair standards and punitive penalties undercut both of these.
It does not have to be this way. A more effective framework to protect consumers would calibrate penalties and fines to better focus on outcomes that are squarely within the control of the provider. For example, in New York, rather than punishing VOIP providers for loss of service due to a power outage that is beyond their control, automatic consumer credits do not kick in until commercial power has been restored for 24 hours. And the credit is directly proportionate to the length of the outage and the price of the service the customer pays. This still protects consumers while establishing more realistic expectations for providers.
It is time for California regulators to recognize that more and more regulation is not the key to success and effective consumer protection, especially when such regulation punishes conduct well outside of the control of the regulated company.
Regulations and penalties should be targeted and measured to protect consumers and encourage businesses to continue to invest and operate in the state.
