Five Maine local telephone companies just won what attorneys dubbed “a nationally significant ruling” from the Maine Public Utilities Commission (PUC) that will protect them from “undue competition from Time Warner Cable.”

Four of the rural telcos – Lincolnville Networks, Tidewater Telecom, Oxford Telephone Company and Oxford West Telephone Company – were represented by the Augusta office of Preti Flaherty; Unitel had its own representation. Time Warner Cable (with offices in Portland, Maine) and its partner Country Roads Communications (CRC) were represented by four law firms, including Latham & Watkins, and its own in-house corporate lawyers.

Time Warner Cable told Communications Technology it had no comment on this decision.

PUC commissioners were unanimous in voting to uphold the exemption for the Unitel, Oxford, and Oxford West telephone companies, while a majority of the three commissioners voted to maintain the exemption for the Lincolnville and Tidewater telephone companies. As a result, these five rural telephone companies will remain – in their geographic service territories – the sole providers of wireline service.

Commission Chair Sharon Reishus stated, “Our decision…is taking place in a changing landscape for telephone regulation at the federal level with pending congressional and FCC actions, in the marketplace and in wireless technology. Our decision came down to an analysis of the current financial ability of the rural companies to withstand market competition if the exemption were lifted.”

She continued, “Customers in these rural areas must be assured a telephone service provider of last resort and access to lifeline services. Although the commission has a long history of recognizing the value of competition in the telecommunications market, in this instance, where Time Warner is not proposing to expand the availability of its service throughout the entire service territory of the rural companies, selective competition would undercut the ability of the rural companies to fulfill their ‘provider of last resort’ obligations.”

The Commission’s charge was to weigh several factors for each rural phone company: the technical feasibility of the proposed interconnection, whether lifting the exemption would create an undue economic burden on the rural telephone company, and whether lifting the exemption would be consistent with the universal service goals of ensuring quality phone service at just, reasonable, and affordable rates for all Maine residents and access to advanced telecommunications and information services.

In a nutshell, the Maine PUC voted to deny a request on behalf of Time Warner Cable to terminate the “Rural Exemption” under Section 251(f) of the federal Telecommunications Act of 1996 as it applies to five rural telephone companies in Maine.

According to the plaintiffs, Time Warner Cable sought to terminate the exemption in order to facilitate its digital phone service in portions of the service areas of the local companies. Preti Flaherty attorneys said the decision of the Maine PUC “may signal a change to a history of the Rural Exemption being seldom upheld by state regulators.”??

In 2008, Time Warner Cable, through CMS, initiated litigation before the Maine PUC to terminate the rural exemption of five Maine telcos. Later that year, the Maine PUC granted a preliminary motion filed on behalf of four of the telcos to dismiss Time Warner Cable’s case for insufficient testimony, stating the cable operator had to meet a substantial burden of proof in order to justify the termination of the rural exemptions. In early 2009, Time Warner Cable refiled its request.

In denying the operator’s second request last week, telco attorneys said the Maine PUC found the request “created an undue economic burden on the Maine telcos.”

“The Maine Commission followed a standard similar to that recently approved by the U.S. District Court in North Dakota, focusing on the potential impact of competitive entry on the rural carriers’ ability to maintain service quality and attract capital on reasonable terms,” they added. “The PUC rejected Time Warner Cable’s positions that the Commission should adopt an ‘economic viability’ standard, should consider revenues from the carriers’ affiliated companies and should apply a presumption favoring competition in such cases.”

There also were some universal-service issues addressed in the decision.

In addition, Preti Flaherty lawyers believe the Maine decision “may signal a change in the paucity of cases nationally which have denied similar requests to terminate the rural carrier exemption.”

Drew Landry, part of the team that represented the rural telcos, explained, "The reversal of the trend would give renewed recognition to the critical role that rural carriers play in ensuring access to universal telephone and broadband service that would otherwise be threatened by the weakening of these companies.”

The final Maine PUC order has yet to be released.

-Debra Baker

The Daily

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