AT&T, others say new submarine reporting rules 'flawed,' lack real analysis

The FCC approved rules that require submarine cable operators to report significant outages to the regulator, an initiative that could hold operators more accountable. But AT&T (NYSE: T) and others say the measure is flawed.

Along party lines, the measure was passed with a 3-2 vote. Led by Chairman Tom Wheeler, Democratic commissioners Jessica Rosenworcel and Mignon Clyburn voted to approve the proposal. Commissioners Ajit Pai and Michael O'Rielly dissented.

According to the FCC, there about 60 submarine cables that provide voice, data and video services between the mainland U.S. and Alaska, Hawaii, Guam, American Samoa, the Northern Mariana Islands, Puerto Rico, and the U.S. Virgin Islands, as well as connectivity between the U.S. and the rest of the world.

While submarine cables are a large contributor to the nation's economy and as a national security asset, the problem has been that submarine cable operators only report the status of their cables to the FCC on "a voluntary and inconsistent basis." Often, when the commission gets outage information "it has been too limited to be of use."

By adopting these new rules, the FCC says it will be able to monitor the operational status of submarine cables and providers can assist the regulator in ensuring system reliability.

Under the new structure, submarine cable operators will be required to report major outages to the agency's Network Outage Reporting System (NORS). Other communications providers -- including wireline, wireless, and satellite -- already report outages to NORS. The FCC says this allows the regulator to analyze outage trends, spot systemic issues, and work with providers to develop solutions to make communications more resilient and reliable. 

Wheeler said that it's important in having submarine cable reporting system in place: he cited the cable break that took place on IT&E's submarine cable in the Commonwealth of the Northern Mariana Islands in July 2015, leaving residents and businesses without the ability to make credit card transactions or withdraw money from ATMs. IT&E, a subsidiary of PTI, invested $14 million in 1997 to lay an undersea fiber-optic cable that links the CNMI and Guam, and from Guam across the Pacific.

"For the last seven or eight years we had a voluntary process for undersea cables to report, and 75 percent of those operators of those cables failed that voluntary obligation to provide the same kind of information we expect for terrestrial connections," Wheeler said.

Commissioner Clyburn agreed, adding that the new rules will improve awareness of outages and reduce reporting time burdens.

"The cables carry 95 percent of U.S. voice and data traffic and ensuring the reliability of resiliency of this critical piece of our communications infrastructure is crucial to our nation's security and economic well being, so paramount to that task will be putting in place rules that will improve the commission's situational awareness [of] the operational status of submarine cables by requiring service outages," Clyburn said. "The reporting structure codified by today's order will enable the commission to identify trouble system trends and facilitate potential harmful activity early."

Clyburn added that the order "is mindful of the unique attributes of the submarine cable industry and endeavored to provide more flexibility and reduce reporting burdens."

However, the proposal drew fire from Republican Commissioner Ajit Pai, who said it does not focus on "outages that actually affect consumers" and does not "request targeted outage information that would help us identify trends and threats."

"It demands a haystack of paperwork that will only make it more difficult for us to find any needles," Pai said in a statement. "Once again, the Commission decides not to encourage providers to construct facilities with automatic and built-in redundancies. Instead, it penalizes those investments by requiring providers to file multiple reports every time they use a redundant pathway."

Pai also called out the actual costs, claiming that costs the FCC laid out for the industry will be much greater a year than what it proposed.

"The Order asserts that its new regulatory regime will cost the industry $146,000 per year," Pai said. "But as the record and a rudimentary fact check show, the FCC gets both the math and the analysis wrong. The actual costs are going to be orders of magnitude higher."

The order also drew fire from AT&T, which operates multiple submarine cables with various partners.

Bob Quinn, SVP for Federal Regulatory at AT&T, said that the FCC's new "framework will impose substantial costs and burdens on providers without identifying corresponding benefits."

"Today's order, however, perpetuates flawed assumptions from the recent Part 4 Order on terrestrial facilities -- such as requiring outage reports for events that simply affect redundancy of service -- and woefully underestimates the costs and burdens of compliance," Quinn said. "These new regulatory requirements and deadlines will do little to enhance the resiliency of submarine cable facilities."

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