ICLE Comments to FCC on Preemption of California COLR Rules
I. Introduction and Overview
The International Center for Law & Economics (ICLE) submits these comments in response to the Federal Communications Commission’s (FCC) Public Notice seeking comment on AT&T’s Petition for Declaratory Ruling.[1] ICLE is a nonprofit, nonpartisan research center that applies law & economics methodologies to public-policy questions. Its work promotes sound economic analysis and consumer welfare, especially in fast-changing, technology-driven markets such as telecommunications.
The market has already moved from copper to fiber and wireless. Consumers have left legacy voice service in overwhelming numbers. Yet carriers must still maintain costly, aging copper networks for a small and shrinking group of subscribers.[2] The FCC recognized this problem in the Network Modernization Order, where it acted unanimously and on a bipartisan basis to clear away rules that keep obsolete copper in service.[3]
This proceeding presents a narrower question with real consequences. Can one state’s legacy rules block a transition that federal law authorizes and federal policy favors?
These comments make three points. First, California’s carrier-of-last-resort (COLR) and related universal-service requirements may once have served a useful purpose, but they now function as a prohibition on copper retirement. They require AT&T to keep its legacy network running even where the FCC has authorized discontinuance. Second, capital is finite and AT&T allocates it nationally. The costs of California’s mandate therefore do not stop at the state line. They fall on AT&T’s customers across its footprint through modern infrastructure that goes unbuilt. Third, if the FCC relies on the impossibility exception to Section 2 of the Communications Act, it need not find that AT&T must physically separate the interstate and intrastate components of plain old telephone service (POTS) before preempting California law.
II. California Rules Block Copper Retirement
Federal law requires only FCC authorization for AT&T to discontinue POTS and retire the copper facilities that support it. California’s rules independently prevent AT&T from doing so.
The obstacle begins with the network itself. AT&T California provides interstate exchange access and intrastate telephone-exchange service over the same local loops, Class 4 and Class 5 switches, trunks, and supporting systems.[4] AT&T therefore cannot retire the facilities that carry interstate service while preserving the facilities that carry intrastate service. The network either remains in operation, or it does not.
California’s COLR rules create the main barrier. As the sole COLR in its service territory, AT&T must provide “basic service” to every residential household and serve every business customer on request throughout that territory. The California Public Utilities Commission (CPUC) describes “basic service” as technologically neutral, but its required elements are not. Directory assistance, white-pages listings, free operator services, and the ability to place and receive voice-grade calls “over all distances” are POTS-specific features that wireless, cable, and Voice over Internet Protocol (VoIP) providers do not include in modern offerings.[5]
The CPUC also has refused to allow any COLR to satisfy its obligation with nonwireline technology unless the CPUC first adopts service-quality standards for the substitute service. It has not adopted those standards for mobile wireless.[6] As a practical matter, AT&T can satisfy its COLR obligation only by continuing to operate the same legacy copper network the FCC has authorized it to retire.
AT&T also cannot escape the obligation by relinquishing its COLR designation. CPUC rules allow relinquishment only if another carrier first agrees to assume the obligation. No carrier will.[7] When more than 200 carriers had the chance to take on AT&T’s COLR duties, every one declined to accept these outdated and unfunded requirements.[8]
AT&T’s 2023 relinquishment application confirms the futility of California’s process. After more than a year of contested proceedings, extensive discovery, and statewide public hearings, the CPUC dismissed the application on a threshold motion and barred AT&T from reapplying for at least a year.[9]
California also layers procedural barriers on top of the substantive COLR requirement. State law requires basic service to be tariffed and bars detariffing of basic-exchange service. Any change to, or withdrawal of, that tariff requires advance notice and a formal CPUC proceeding that the CPUC may reject.[10] To discontinue POTS, AT&T also would need CPUC approval of customer-notice plans and would have to file a 19-point “exit plan” under the Mass Migration Guidelines. AT&T must continue providing existing service until the CPUC approves each submission.[11]
Each step requires separate CPUC approval. None carries an enforceable deadline that the CPUC honors. Any one can be denied outright. Together, these rules give California a practical veto over copper retirement. Even after the FCC authorizes discontinuance, California requires AT&T to keep powering, maintaining, and selling POTS over a copper network that serves roughly 3% of households and costs about $1 billion a year to operate. Those resources cannot then fund the fiber and wireless networks consumers actually use.[12]
III. California’s Copper Mandate Harms Customers Nationwide
The case for copper retirement is, at bottom, an argument about waste. California’s COLR regime requires AT&T to pour finite capital into infrastructure whose costs are large and rising, even as its benefits approach zero.[13]
The customer base for legacy copper has collapsed. Nationwide, copper last-mile subscribers fell roughly 81% between 2014 and 2024, from about 66 million to 12.5 million. By 2024, about 79% of U.S. adults lived in wireless-only households, while fewer than 1% lived in landline-only households.[14] In AT&T’s California territory, the numbers are starker. The company spends about $1 billion a year to operate a copper network that serves only about 3% of households, and that share continues to fall as customers move to wireless and Internet Protocol (IP)-based alternatives.[15] Nationally, AT&T spends roughly $6 billion a year—close to 5% of revenue—on a shrinking legacy footprint.[16]
The savings from copper retirement are large and well-documented. Verizon’s migration of 4.5 million circuits to fiber generated roughly $180 million a year in savings and reduced maintenance dispatches by about 60%. All-fiber networks cost roughly $91 less per home each year to operate than copper-based digital subscriber line (DSL) networks.[17]
Energy savings account for much of the difference. One carrier’s copper service consumed roughly 172 kilowatt-hours per subscriber each year, compared with just 6 kilowatt-hours for fiber, a 97% reduction.[18] AT&T’s copper-to-fiber conversions saved an estimated 340,000 megawatt-hours of electricity in 2024 alone.[19] Completing the transition for remaining copper subscribers could save roughly $398 million to $830 million in annual energy costs.[20] A forced-maintenance mandate turns those recurring costs into a permanent drag on communications providers.
Forced maintenance also imposes public-safety costs that California’s COLR rules largely ignore. As copper prices climbed from about $2.29 per pound in 2020 to roughly $6 by early 2026, copper theft surged.[21] AT&T alone reported about 8,700 theft incidents in 2025 at a cost of nearly $76 million. Across the industry, roughly 15,540 theft-and-sabotage incidents between mid-2024 and mid-2025 disrupted service for an estimated 9.5 million customers, with collateral effects on 911 systems, hospitals, and military installations.[22]
By requiring carriers to keep valuable, deteriorating copper in the ground long after customers have left it, California’s rules make copper theft more attractive. The obsolescence problem compounds the risk. The core Class 5 switches that anchor the network—the Lucent 5ESS, Nortel DMS-100, and Siemens EWSD—have not been manufactured in decades, forcing carriers to scavenge replacement parts on secondary markets.[23] In one widely cited example, Tinker Air Force Base sourced 5ESS components on eBay.[24] A mandate to maintain service over equipment that carriers can no longer reliably repair is a mandate to manage slow, expensive failure.
The decisive point for customers is opportunity cost. Capital is scarce, and providers allocate investment from national budgets.[25] Every dollar locked into maintaining a copper office in California is a dollar unavailable for fiber and 5G deployment elsewhere in AT&T’s footprint. The roughly $1 billion a year that California’s COLR rules freeze reduces the resources available for next-generation deployment nationwide.
The economic stakes are significant. Completing nationwide fiber deployment would generate roughly $3.24 trillion in net present value and about 380,000 jobs.[26] International experience points in the same direction. WIK-Consult’s 2020 study found that lengthy regulatory notice periods delayed copper switch-off in Europe even where fiber was already available. That experience counsels shorter timelines once adequate alternatives exist.[27]
California’s regime therefore imposes costs in two directions. Within California, customers bear the costs of a less reliable, less energy-efficient, and theft-prone network maintained for their nominal benefit, even though nearly all of them have chosen newer alternatives. Across AT&T’s broader footprint, customers bear the cost of modern infrastructure that goes unbuilt because capital remains trapped in legacy copper.
The FCC’s modernization proceedings are designed to prevent that result. A state rule that stalls the transition after the FCC has authorized discontinuance does not preserve a meaningful benefit for Californians. It imposes a diffuse, recurring loss on everyone AT&T serves.
IV. The FCC May Preempt State Copper Mandates
Express preemption under Section 214(c) offers the cleanest path to the relief AT&T seeks, but that path depends on whether AT&T’s California POTS is interstate or jurisdictionally mixed service subject to the FCC’s Section 214 authority.[28] Section 214(c) provides that, once the FCC authorizes discontinuance, a carrier may proceed “without securing approval other than such certificate.” California’s COLR and related requirements demand exactly those additional approvals. Section 214(c) therefore displaces them if the service falls within the FCC’s Section 214 authority.
Section 214 does not reach wholly intrastate services. If the FCC determines that AT&T’s California network is not jurisdictionally mixed, preemption would likely rest on the impossibility exception to Section 2(b) of the Communications Act, which preserves state authority over intrastate lines. Courts have applied that exception where it is impossible or impracticable to separate the interstate and intrastate components for the regulation at issue, and where state regulation would frustrate a valid federal objective.
A. Impossibility Includes Practical Impossibility
Even if the FCC concludes that AT&T could physically separate some interstate and intrastate components,[29] the impossibility exception does not require such a rigid inquiry. The governing standard, as the 8th U.S. Circuit Court of Appeals framed it, asks whether “it is not possible to separate the interstate and intrastate aspects of the service.”[30] Courts and the FCC have long understood “not possible” to include arrangements that may be imaginable in theory but unworkable in practice because of economic or operational burdens.[31]
The relevant question is therefore not whether an engineer could draw a jurisdictional line on a network diagram. It is whether forcing a carrier to separate the facilities would impose costs and operational burdens that defeat the federal interest the FCC seeks to protect.
The North Carolina decisions provide the basic illustration. The state argued that its regulation of customer-premises equipment could coexist with the FCC’s contrary federal rule because customers could, in theory, maintain one set of equipment for intrastate calls and another for interstate calls.[32] The 4th U.S. Circuit Court of Appeals upheld preemption, finding reasonable the FCC’s determination that duplicate equipment was “a practical and economic impossibility.”[33] The point is straightforward. The impossibility exception turns on real-world feasibility, not theoretical divisibility. A separation that exists only on paper, that consumers would not adopt, and that the market would not support does not defeat preemption.
The FCC’s analysis therefore need not focus only on whether physical separation is technically possible. It should also consider whether a provider could practically separate existing infrastructure to retire interstate services while maintaining copper networks for wholly intrastate calls. The Fahmy Declaration describes AT&T’s network in detail and explains why separation may be both physically and practically impossible. As the declaration explains:
AT&T California cannot cease offering long distance service and decommission its facilities provisioning long distance service without also decommissioning its facilities that provide intrastate service—these facilities are one and the same. Thus, either AT&T California continues to spend around $1 billion a year keeping its POTS network in California running or AT&T California does not. There is no option for a partial retirement of just the interstate long-distance part of the POTS network.[34]
Even if the FCC disagrees that separation is technically impossible, the record shows that separation would impose significant costs. The Fahmy Declaration also explains that such separation would leave California POTS customers able to place only in-state calls.[35] The existing rules also force providers to maintain copper connections to interstate networks, even where providers already have supplied customers with IP-based connectivity.
B. California’s Rules Frustrate Federal Policy
The second prong of the impossibility exception asks whether federal regulation is necessary to advance a valid federal regulatory objective.[36] The first prong concerns the technical and economic relationship between interstate and intrastate service. The second prong confirms that preemption serves a genuine federal aim rather than displacing state authority for its own sake.
That requirement is met here. The FCC has identified a clear federal objective: accelerating the retirement of legacy copper networks and the transition to next-generation IP-based infrastructure. California’s COLR regime works directly against that objective.
In the Network Modernization Order, the FCC found that legacy mandates “have been unduly prolonging the use of legacy networks and actually preventing providers from building modern ones.”[37] It adopted reforms designed to cut “the red tape that has both required providers to keep aging copper lines in place and effectively prevented them from investing in the modern infrastructure that Americans want and deserve.”[38] The FCC expressly identified the transition to next-generation networks as a federal regulatory objective and used its Section 214 authority to advance that objective. That is the kind of valid federal objective the impossibility exception protects.
California’s COLR regime conflicts with that objective at its core. It requires AT&T to continue offering “basic service” that, in practice, only POTS can satisfy. That requirement forces AT&T to keep its copper network powered, maintained, and in service indefinitely, regardless of the FCC’s authorization to discontinue service.
The FCC has already explained the problem. Where “state and local requirements prevent a provider from discontinuing the interstate portion of a legacy voice service for which the Commission has already granted discontinuance authorization,” those requirements “negate a valid federal regulatory objective.”[39] California’s rules hold federal authorization hostage to a state obligation that can be satisfied only by maintaining the very network the FCC sought to retire. Resources the FCC intended to free for broadband deployment remain trapped in obsolete copper, defeating federal policy when implementation matters most.
That conflict remains even if the CPUC claims its rules are “technologically neutral” and could be satisfied over a modern network.[40] As explained above, the practical operation of the COLR regime forecloses the copper-free compliance the CPUC describes. The FCC’s policy is not that carriers may modernize after completing another round of state proceedings. It is that carriers authorized to discontinue legacy service may “proceed with the . . . discontinuance” without further approval.[41] A state regime that substitutes its own timeline and conditions for the FCC’s judgment directly frustrates that objective.
V. Conclusion
California’s carrier-of-last-resort regime belongs to a monopoly era that no longer exists. It singles out one provider, imposes a largely unfunded obligation that only obsolete copper can satisfy, and delivers shrinking benefits to customers who have overwhelmingly chosen fiber, wireless, and IP-based alternatives. It also strands roughly $1 billion a year that could otherwise support the networks consumers actually use.
The costs do not stop in California. Because AT&T allocates capital nationally, every dollar locked into maintaining legacy copper reduces the resources available for fiber and 5G deployment across the company’s footprint. California’s rules therefore impose a recurring opportunity cost on customers nationwide, while preserving a less reliable, less energy-efficient, and theft-prone network for a small and declining group of subscribers.
That regime cannot be reconciled with federal law or federal policy. Once the FCC authorizes discontinuance under Section 214, federal law permits the carrier to proceed without securing additional approval. A state requirement that conditions, delays, or second-guesses that authorization conflicts with the FCC’s decision to accelerate the transition away from legacy copper and toward next-generation networks.
The FCC should declare that California’s carrier-of-last-resort rules, tariffing requirements, and related obligations are preempted to the extent they impede AT&T from discontinuing plain old telephone service once the FCC has authorized discontinuance.
[1] AT&T Servs., Inc., Petition for Preemption and Declaratory Ruling, WC Docket No. 26-125 (filed May 20, 2026), https://www.fcc.gov/ecfs/document/1052056507747/1 [hereinafter AT&T Petition]; Wireline Competition Bureau Seeks Comment on AT&T’s Petition for Preemption and Declaratory Ruling, Public Notice, DA 26-520, WC Docket No. 26-125 (rel. May 22, 2026), https://docs.fcc.gov/public/attachments/DA-26-520A1.pdf.
[2] Eric Fruits & Brian Albrecht, Paying to Stand Still: Legacy Copper Mandates in a Fiber World, Int’l Ctr. for L. & Econ. (Feb. 27, 2026), https://laweconcenter.org/resources/paying-to-stand-still-legacy-copper-mandates-in-a-fiber-world.
[3] Reducing Barriers to Network Improvements and Service Changes; Accelerating Network Modernization, Report and Order, WC Docket Nos. 25-209, 25-208, ¶ 4 (rel. Mar. 27, 2026), https://docs.fcc.gov/public/attachments/DOC-419252A1.pdf [hereinafter Network Modernization Order].
[4] AT&T Petition, supra note 1, at 29.
[5] Id. at 12.
[6] Id.
[7] Id. at 4.
[8] Id. at 35.
[9] Id. at 16–18.
[10] Id. at 13–15.
[11] Id. at 46.
[12] Id. at 3, 10
[13] See Comments of the Int’l Ctr. for L. & Econ., Reducing Barriers to Network Improvements and Service Changes; Accelerating Network Modernization, WC Docket Nos. 25-208 & 25-209 (filed Aug. 22, 2025), https://laweconcenter.org/resources/icle-comments-to-the-fcc-on-the-copper-retirement-nprm [hereinafter ICLE Copper Retirement Comments].
[14] Fruits & Albrecht, supra note 2.
[15] Fruits & Albrecht, supra note 2; AT&T Petition, supra note 1, at 3, 9–10.
[16] AT&T Petition, supra note 1, at 3, 9–10.
[17] Fruits & Albrecht, supra note 2, at 9.
[18] Id. at 2.
[19] Id. at 1.
[20] Id. at 2.
[21] Id. at 10–11.
[22] Id.
[23] Id. at 12–13.
[24] Id. at 13.
[25] ICLE Copper Retirement Comments, supra note 13, at 9.
[26] Brattle Grp., Fiber Deployment Has Significant Incremental Economic Benefits (2024), https://www.brattle.com/insightsevents/publications/fiber-deployment-has-significant-incremental-economic-benefits-according-to-a-recent-brattle-report.
[27] WIK-Consult, Copper Switch-Off: European Experience and Practical Considerations (White Paper, Q3 2020), https://www.wik.org/fileadmin/Studien/2020/Copper_switch-off_whitepaper.pdf.
[28] 47 U.S.C. § 214(c).
[29] Declaration of Dr. Hany Fahmy ¶ 9 at 6, Petition of AT&T for Preemption and Declaratory Ruling, WC Docket No. 26-125 (filed May 20, 2026) (Ex. 1) [hereinafter Fahmy Declaration].
[30] Minn. Pub. Utils. Comm’n v. FCC, 483 F.3d 570, 578 (8th Cir. 2007).
[31] See id. (“It was proper for the FCC to consider the economic burden of identifying the geographic endpoints of VoIP communications in determining whether it was impractical or impossible to separate the service into its interstate and intrastate components.”).
[32] Id. at 578–79.
[33] Id.
[34] Fahmy Declaration, supra note 29, at 6.
[35] Id.
[36] Minn. Pub. Utils. Comm’n, 483 F.3d at 578.
[37] Network Modernization Order, supra note 3, ¶ 4.
[38] Id. ¶ 1.
[39] Id. ¶ 106
[40] AT&T Petition, supra note 1, at 35.
[41] Network Modernization Order, supra note 3, ¶ 106.