Legislative counsel outlines ‘carrier of last resort’ obligations and tax/fee issues for telecom providers

On April 3 Maria Royal of the Legislative Council briefed the House Energy and Digital Infrastructure Committee on the concept of a carrier of last resort (COLR) and related regulatory and fiscal issues for telecommunications providers. Royal explained that COLR obligations historically require incumbent local exchange carriers to provide voice service to customers within their service territory and that states determine how and when those obligations change.

Royal told the committee that Vermont’s incumbent local exchange carriers (the state’s consolidated and eight independent carriers) are treated as carriers of last resort and thus must provide voice service to new builds and customers in their service territories unless and until they receive Public Utility Commission approval to discontinue service. She described how technological change—particularly the move from copper networks to fiber and voice‑over‑IP services—has created policy tensions about what obligations should remain and how to define required service today.

Royal described federal funding and regulatory context: universal‑service programs administered through the Universal Service Administrative Company (USAC) and overseen by the Federal Communications Commission have evolved (Connect America Fund and related programs were cited) to support build‑out in high‑cost areas. Royal said some small incumbent carriers rely on that support; she told the committee a Franklin Telephone representative reported roughly 30% of the company’s revenue comes from federal subsidies.

The briefing also covered state fiscal and right‑of‑way issues. Royal noted Vermont has a historic (1947) law taxing telephone personal property (poles, wires and related equipment) and that the Legislature acted last year to change how communications property is treated for local property taxation; the change will move certain communications property onto the town grand list at the non‑homestead rate when the implementing valuation rules take effect. She also described a state right‑of‑way fee waiver authority that has permitted providers to operate without paying state right‑of‑way fees since about 2007; the statute authorizes the transportation secretary to waive fees if comparable public benefit is shown. Royal said the Agency of Transportation was directed to study right‑of‑way fee valuation and report back to the Legislature, with a study due in October.

Committee members asked about the designation eligible telecommunications carrier (ETC) and how it overlaps with COLR obligations. Royal explained the designations and obligations vary by program and state: ETC status may be tied to eligibility for federal subsidies such as Lifeline or high‑cost support and can carry service obligations; COLR obligations are typically state‑level duties requiring incumbents to serve all customers in a franchise area.

Royal recommended the committee consider state‑level policy choices in the context of federal funding streams and the changing marketplace, noting decisions about taxing and fee treatment, franchise rules and right‑of‑way charges affect whether smaller carriers can sustain legacy networks or invest in fiber upgrades.

Ending: Royal concluded by pointing committee members to an earlier report (2016) titled Carrier of Last Resort: Anachronism or Necessity and said state policy makers must weigh how to preserve affordable, universal voice and broadband service in high‑cost rural areas without creating unmanageable obligations for providers.