A Year in Review: The FCC and the U.S. Phone Transition

Introduction

Federal Communications Commission Chairman Tom Wheeler has been on the job for just over a year. And with 2014 coming to a close, we look back at the accomplishments of the FCC in his first year.

One of the great challenges the FCC faces in coming months and years -- and which Wheeler recognized during his confirmation -- is guiding the transformation of the U.S. telephone system. This is no small task. The U.S. system is, perhaps, the best in the world, encompasses 1.5 billion miles of wire and some 120 million phones. And despite its great complexity, it has operated with near-perfect reliability for some 125 years through snow and rain and heat and gloom of night. The challenge now is to ensure the phone system can work just as well as it moves from an analog, circuit-switched network to a digital, packet-switched network.

Although the phone transition is broader than this, many see it as a change from traditional copper telephone lines to fiber-based Internet connections. But not everyone wants fiber, because, when it comes to voice calls, the newer technology doesn’t have all the benefits of the old copper phone network. In particular, fiber doesn’t conduct electricity, where copper does. That means when your power goes out, copper landlines might keep working for days or weeks by drawing electricity over the lines, while a phone that relies on fiber will only last as long as its battery. (As an example, Verizon’s most widely available backup system only lasts up to eight hours.) This concerns many policymakers.

I. Fast Out of the Gate

Before his nomination to chair the FCC, Wheeler was the chairman of the FCC's Technological Advisory Council, which has been wrestling with that phone transition (known to wonks as the “IP transition” for Internet protocol). Just days after his confirmation as FCC chair, Wheeler announced boldly The IP Transition: Starting Now and began to redirect the wonky “IP” language to move people to start thinking about the transition as “a series of transitions”; “a multi-faceted revolution that advances as the packets of Internet Protocol (IP)-based communication replace the digital stream of bits and analog frequency waves.” A history buff, Wheeler thinks of this transition as the Fourth Network Revolution and believes full adoption of the Internet will be good for innovation and investment -- and could transform society.

“The way forward is to encourage technological change while preserving the attributes of network services that customers have come to expect,” Chairman Wheeler wrote, “that set of values we have begun to call the Network Compact.” In December 2013, we wrote about this Network Compact, the basic rights of consumers and the basic responsibilities of network operators, and the three key elements of it Wheeler identified:

• Accessibility: Ensuring every American has access to our wired and wireless networks. He highlighted a number of related challenges here:
  • Getting the 20% of U.S. households who don’t currently subscribe to broadband to adopt it;
  • Delivering high-capacity broadband to every school;
  • Protecting the right of broadband users to access all lawful content on a network; and
  • Ensuring persons with disabilities can get online.
• Interconnection: Ensuring the Internet exists as a collection of open, interconnected facilities.
• Public safety and security: Ensuring 911 calls go through and that our networks are secure from cyber threats.

[Of special note here are shout-outs from both Chairman Wheeler and Public Knowledge’s Harold Feld on the role FCC Commissioner Jessica Rosenworcel played in identifying these principles. See her December 2012 speech and September 2013 testimony.]

In mid-December 2013, the FCC’s Technology Transitions Policy Task Force presented a status update on the transition with an eye towards full commission action in early 2014. Wheeler wanted recommendations on how the FCC could best:

• Obtain comment on and begin a diverse set of experiments to allow the FCC and the public to observe the impact on consumers and businesses of the technology transitions (including consideration of an AT&T proposal for trials);
• Collect data to supplement the lessons learned from the experiments; and
• Initiate a process for FCC consideration of legal, policy, and technical issues that would not neatly fit within the experiments, with a plan for efficiently managing the various adjudications and rulemakings that, together, will constitute the IP transition agenda.

Wheeler asked for recommendations on how best to speed the initiation of experiments and assess, monitor, measure, and analyze their outcomes. How consumers are informed and protected should be a major component. In addition, to know how the FCC could best obtain accurate and useful information about the technology transition from multiple resources that could include collaboration with other federal, state, and tribal agencies, public input through crowdsourcing, and leveraging outside expertise and advisors should be considered. And he wanted the best process the FCC could initiate so that, in parallel, it could decide the legal and policy questions raised by the network revolution.

At the FCC’s December 2013 meeting, staff outlined a draft order that would:

• Invite service-based experiments with short timelines for submission, establishing criteria for experiments and creating a speedy process for public comment and Commission evaluation with a focus on consumer impact;
• Recommend actions the Commission should take to support targeted experiments and research;
• Describe structured observations and data collection initiatives; and
• Establish a timeline for the adoption of a managerial framework to resolve important legal and policy questions raised by the transition.

Staff also reiterated that a key role for the FCC was to protect public safety, universal access, competition and consumers. [See more on that presentation The Big Phone News from the FCC.]

On January 30, 2014, the FCC invited voluntary experiments meant to ensure that the nation’s communications networks continue to provide the services consumers want and need. The trials would be voluntary and ensure that no consumer loses access to current services in the process. Chairman Wheeler pointed out that these are not technical trials -- "We know how to build an IP network," he said. Instead the FCC was framing the experiments as a way to ensure that the traditional values embedded in telecommunications policy continued through these transitions. Chairman Wheeler said consumers have come to expect certain things, and a right to expect those things, from their networks.

The FCC hoped to address:

• The level of interest in deploying high-speed scalable infrastructure;
• The characteristics of areas where service providers would offer wireless data services at prices comparable to urban wireline carriers;
• How anchor institutions would be impacted; and
• How working with other organizations can advance shared objectives of deploying next-generation networks.

In reviewing applications, the FCC promised to consider the quality of data that proposals would deliver and to consult with state and tribal agencies in making its decisions. The data gathered in these experiments would inform the ongoing public dialogue about technology transitions.

The experiments would gather information in three broad areas:

• Service-based experiments: Providers were invited to submit proposals to initiate tests of providing IP-based alternatives to existing services in discrete geographic areas or situations. Proposals were due by Feb. 20, followed by a public comment and reply period ending on March 31, and final decision on the proposals were made at the FCC’s May meeting.
• Targeted experiments and cooperative research: These experiments to explore the impact on specific values, including universal access and competition.
• Rural America: Experiments to focus on ways to deliver robust broadband to rural areas.
• People with disabilities: Development and funding of interagency research on IP-based technologies for people with disabilities.
• Telephone numbering in an all-IP world: A numbering test-bed to address concerns raised about number assignment and databases in an all-IP world, without disrupting current systems.
• Data improvement:
• Reform of the FCC’s consumer complaint and inquiry process to collect better data on how technological change is impacting consumer values
• Intergovernmental collaboration (state, local and Tribal governments) to better understand consumer impact
• Collection and analysis of data on next-generation 911 systems in coordination with the U.S. Department of Transportation’s National 911 office and public safety associations

The FCC also initiated two new proceedings to collect more input from the public on numbering research and the rural broadband experiments.

II. Interest in Experiments

It did not take long for the FCC to receive interest in the transition experiments. Iowa Network Services submitted a service-experiment proposal in February and Chairman Wheeler highlighted it as part of the industry’s interest to participate in the FCC’s experiments. AT&T proposed experiments in Carbon Hill, Alabama, and Delray Beach, Florida.(1)(2) New customers in those cities would not be allowed to sign up for traditional, landline-based service. AT&T wants new and existing customers to eventually use broadband service, mobile phones or a conventional phone that connects to a router-like box. The box plugs into an electrical outlet and zaps signals to a cellphone tower. But in Carbon Hill about 4 percent of residential customers live too far away from the center of the sparsely populated area to receive broadband service. And, in Delray Beach, about half of the people are at least 65 years old, the age group slowest to embrace new phones. It also isn't clear how AT&T plans to work around the reliance on old-fashioned telecom technology by 911 emergency-response systems, burglar alarms, pacemakers and even systems used by air-traffic controllers. In addition, in both locales, the AT&T experiments raised issues of:

• How to deliver a street address to 911 using the wireless-based service;
• Making replacement offerings compatible with alarm systems, medical alerts, fax machines and devices used to validate credit cards; and
• Making replacement products text telephone (TTY) accessible. (TTY is a special device that lets people who are deaf, hard of hearing, or speech-impaired use the telephone to communicate, by allowing them to type messages back and forth to one another instead of talking and listening.)

The FCC received hundreds of comments about AT&T’s proposals. AARP said AT&T's plan has "numerous problems." The technology might not be reliable enough or fail when calling 911 in an emergency. Public Knowledge, along with the New America Foundation’s Open Technology Institute and the Benton Foundation, told the FCC that AT&T’s plans to test its new services on consumers must include more thorough data collection plans and more robust consumer protections. Windstream wasn’t satisfied with how AT&T has proposed to handle wholesale customers and asked the FCC to require AT&T to continue to offer high-capacity circuits to wholesale customers. Sprint and T-Mobile said AT&T’s initiative is holding back the rest of the industry's move to develop cross-carrier IP interconnections, arguing that many of the benefits of AT&T's transition to an all-IP infrastructure will be lost if carriers do not first migrate their wholesale and inter-carrier interconnections to IP. Calling AT&T's experiment "isolated" and "complicated", Sprint argued that "carriers should not have to wait for this experiment to finish before migrating their networks from Time Division Multiplex (TDM) to IP or to interconnect in IP format with other carriers. T-Mobile expressed similar reservations urging the Commission not to let trials such as AT&T’s distract it from ensuring interconnection amongst all carriers.

The Chief of the FCC's Wireline Competition Bureau, Julie Veach, wrote about three ways the public can be informed about, and have a voice in, technology transitions that affect them -- including in transitions away from copper networks:

• First, as carriers make changes to their networks that affect other providers or the ability of their customers to use previously-supported equipment, they are required to file network change notices with the Federal Communications Commission.
• Second, federal law also requires carriers and interconnected VoIP providers to notify the public and obtain the FCC's permission before they “discontinue, reduce, or impair service to a community, or part of a community.”
• Third, consumers who have concerns about any particular situation can contact the FCC's Consumer & Governmental Affairs Bureau to file complaints—either by calling 1-800-CALL-FCC or by filing a complaint online.

III. Not Just Policy, Money, Too

I've noted before that Benton Foundation Chairman Charles Benton often reminds us here in the home office that “Money is policy.” On July 11, the FCC made up to $100 million available for rural broadband experiments: (3)

• $75 million to test competitive interest in building networks that are capable of delivering 100 Mbps downloads and 25 Mbps uploads – far in excess of the current Connect America Fund (CAF) standard of 4 Mbps /1 Mbps -- for the same or lower amounts of support than will be offered to incumbent carriers in Phase II of Connect America;
• $15 million to test interest in delivering service at 10/1 speeds in high cost areas; and
• $10 million for 10/1 service in areas that are extremely costly to serve

Chairman Wheeler said this move built on “what we authorized in January by establishing a budget for the rural broadband experiments, criteria for what we expect from applicants, and an objective, clear-cut methodology for selecting winning applications.”

On November 12, the FCC announced that these experiments had attracted almost 600 project bids from 181 applicants, representing nearly $885 million worth of projects. In total, the 181 applicants proposed to serve over 76,000 census blocks in all 50 states and Puerto Rico. FCC staff will identify the provisionally winning bidders, who then will be required to submit information demonstrating their financial and technical ability to participate in the experiment. Finalists that are able to meet financial, technical and other regulatory requirements could launch their experiments as early as spring 2015.

On December 5, the FCC announced the bidders that have been provisionally selected subject to the post-selection review process. These bidders are seeking support to serve diverse geographic areas with different cost characteristics. Collectively, they have bid on support to cover 26,867 census blocks in 25 states and Puerto Rico:

• 19 entities seeking support to build networks that are capable of delivering 100 Mbps downstream and 25 Mbps upstream to all locations in the project census blocks in Arkansas, California, Colorado, Delaware, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Nebraska, Nevada, New Mexico, North Dakota, Oklahoma, Puerto Rico, and Texas.
• 12 entities seeking support to build networks capable of delivering 10 Mbps downstream and 1 Mbps upstream to all locations in the project census blocks in Colorado, Idaho, Iowa, Kansas, Kentucky, Michigan, North Carolina, Ohio, Tennessee, Texas, Virginia, and Washington.
• 9 entities seeking support to build networks capable of delivering 10 Mbps downstream and 1 Mbps upstream to all locations in project census blocks that are extremely costly to serve in California, Illinois, Maryland, Michigan, North Dakota, Kansas, South Dakota, and Texas.

The FCC is currently determining whether each selected applicant has demonstrated that it has the technical and financial qualifications to successfully complete the proposed project within the required timeframes and is in compliance with all statutory and regulatory requirements for the universal service support that the applicant seeks.

IV. The Full Plate

As we noted above, Tom Wheeler had a sense of the huge agenda the FCC faced even before his confirmation. In addition to the telephone transition, the FCC was charged with fashioning an auction that would incentivize television broadcasters to sell spectrum -- the first regulatory body to attempt that. The FCC would also have to continue work to promote universal access to broadband and diversify media ownership.

A funny thing happened on the way to the (telecommunications) forum, however. On January 14, the United States Court of Appeals for the District of Columbia Circuit struck down key elements of the FCC’s Open Internet rules (commonly known as net or network neutrality) which required broadband providers to treat all Internet traffic equally. During his confirmation process, Wheeler had also vowed to protect the open Internet. So he now had a new, major undertaking. Then, on February 13, Comcast announced it had entered into an agreement to buy Time Warner Cable for approximately $45 billion. The FCC would have to determine if the transaction is in the public interest. That announcement was followed by AT&T's agreement to buy DirecTV for about $48 billion. That transaction would also require FCC review.

The momentum on the telephone transition, to say the least, was interrupted.

Look for Part II of this story on December 9.

Notes:

1. Find more on AT&T's proposal: AT&T Picks Two Areas for Advanced-Services Test and Going all-IP in Alabama, Florida
2. Of note, Chairman Wheeler recused himself from the AT&T trials decision because he is a former board member at EarthLink, which has petitioned the FCC to participate in the AT&T trials.
3. In August, the FCC’s Wireline Competition Bureau outlined the process used to award up to $100 million in rural broadband experiment support to bring next-generation voice and broadband service to high-cost areas of the country. Specifically, the FCC summarized the procedures, terms, and conditions governing the submission of rural broadband experiments applications, the post-selection review of winning bidders and other important information for parties seeking rural broadband experiment funding. Formal applications for participation in the rural broadband experiments were due this past Fall. The FCC also addressed frequently asked questions. On September 26, the FCC released the application form for the rural broadband experiments, FCC Form 5610, and provided additional information to assist potential applicants in completing the application form.

Further Reading:
The New Network Compact: Making the IP Transition Work for Vulnerable Communities (Benton Foundation)

A Brief Assessment of Engineering Issues Related to Trial Testing for IP Transition (Public Knowledge)

Consumers and the IP Transition: Communications patterns in the midst of technological change (Public Knowledge)

Disconnected: What the Phone System’s Digital Transition Will Mean for Consumers (The Greenlining Institute)