Did We Crash Your Phone System Today?

The failures of HealthCare.gov are gaining lots of headlines this week, but we’d like to highlight a House hearing that’s not getting much attention. On Wednesday, October 23, the House Commerce Committee’s Communications and Technology Subcommittee held a hearing on The Evolution of Wired Communications Networks, in essence a discussion on how the communications networks of the United States are evolving from twisted pairs of copper telephone wires to coaxial cable and fiber -- and whether the laws that were enacted to govern traditional telephone services are appropriate in an Internet Protocol (IP)-enabled world. The evolution of wired communications networks is taking place in two different, but related ways: the transition to Internet Protocol and the replacement of older copper lines with fiber optics. Much of the hearing focused on how and whether regulation of traditional networks should be applied to IP delivery.

Broadcasting & Cable’s John Eggerton reported general consensus at the hearing that the switch from traditional circuit-switched networks to IP delivery was well underway, that the goal was consumer-friendly competitive networks, and even that there should be some IP transition trials. But there were also the traditional divides between those arguing that incumbent network operators were trying to get out of interconnection and other mandates in the IP switch, and that regulations continued to be necessary to require interconnection to the last mile controlled by those incumbents.

As the Subcommittee’s majority staff’s briefing describes, traditional circuit-switched wireline telephone service was comprised of circuits of wires connecting the calling phones to the receiving phones. This service initially was provided by AT&T, under a government-sanctioned monopoly. This structure was intended to achieve ubiquitous connectivity for the entire country through a nationwide network, rather than the patchwork of proprietary telephone networks that had begun to develop. Given the costs of such a colossal undertaking, the use of a single provider also was thought to provide an economic way to drive deployment across the country by allowing the monopoly to subsidize expensive buildout in rural areas with the relatively inexpensive buildout of densely populated areas. The Federal Communications Commission regulated how and at what cost AT&T, known as “Ma Bell,” delivered service. Title II of the Communications Act of 1934 sets forth the legal framework for the regulations that governed AT&T’s provision of wireline telephony, categorizing providers as “common carriers.” However, changes to the competitive landscape led the U.S. Department of Justice to bring an antitrust case against AT&T, and in 1984 AT&T’s monopoly control of local telephone service effectively ended with the breakup of AT&T into smaller, regional providers (the so-called “Baby Bells”). Congress, through the Telecommunications Act of 1996, imposed new regulatory obligations on providers that were formerly a part of AT&T (known as incumbent local exchange carriers (ILECs)) in an effort to promote competition for local telephone service. These new entrants -- known as competitive local exchange carriers (CLECs) -- were entitled to certain services from the ILECs, including interconnection with the ILEC network, access to the ILECs' facilities for co-location of equipment, and a guaranteed ability to resell the ILECs' last mile services, in order to promote competition by giving consumers choice in the retail telephony market.

Shortly after the Telecommunications Act of 1996 became law, the FCC auctioned off 120 MHz of spectrum that became known as the Personal Communications Service band -- and the rush of Americans to distance-agnostic mobile wireless service began. Americans began to sign-up for Internet access services. The Republican staff notes that the companies embracing these new technologies, unburdened by Title II, were able to innovate and invest at a faster pace and have continued to supplant the legacy telephone network.

Now major local telephone companies (ILECs) are seeking relief at the FCC from a number of requirements that were enacted to ensure the legacy telephone operator and competitors operated together to create a seamless, nationwide consumer telephone experience. The ILECs argue that the “IP transition” – which consists of the retirement of legacy systems that use a protocol called time division multiplexing (TDM) and replaces it with IP-based, packet-switched networks – depends on the retirement of legacy regulations as well. ILECs want their IP and fiber deployments to be free from regulatory obligations that are generally applied to copper and TDM-based systems. They also want to be relieved of the obligation to maintain those copper and TDM-based systems. Both of these ILEC-only obligations stem from Title II, which are remnants of government attempts to undo the advantages of having been a regulated monopoly.

Competitors, state regulators and public interest advocates argue that transition to IP and current market conditions “do not vitiate the need for Title II regulation of ILEC networks, but rather validate them.” Their concerns fall into at least four categories:

1. Many contend that the transition to IP must include the existing interconnection requirements;
2. Competitors are concerned that the transition to IP facilities and accompanying relief from portions of Title II would adversely impact their ability to gain access to ILEC facilities -- both in the last mile and in the central office;
3. Competitors and some in the government contracting community are concerned that the transition from TDM to IP will render some end-user equipment obsolete; and
4. Public interest groups and state Public Utility Commissions (PUCs) are concerned with how consumer issues will be impacted by the IP transition.

The FCC recognizes the benefits IP-based services offer to the economy and consumers and is seeking to facilitate the transition to all-IP networks. Citing the ongoing evolution from TDM to IP, from copper to fiber, and from wireline to wireless, the FCC formed a cross-agency internal working group, the Technology Transitions Policy Task Force. While working to develop policy recommendations, the Task Force has reiterated the agency’s core mission of protecting consumers, ensuring public safety, enhancing universal service, and preserving competition. One of the first actions the Task Force took was to seek comment on two petitions requesting FCC action related to the IP transition.

AT&T, one of the nation’s largest incumbent telephone companies, submitted one of the petitions asking the FCC to conduct trials to replace TDM facilities with IP-based alternatives in specific wire centers over limited geographic areas. In those trial areas, AT&T asked the FCC to waive certain regulatory obligations specific to incumbent telephone companies regarding the maintenance of the TDM-based networks and the provisioning of services over such networks. The obligations identified by AT&T include FCC notice and approval prior to discontinuing existing services, 24 service obligations imposed by states, and competitive access to TDM-based last mile facilities. The submission was made on the same day as AT&T’s announcement to invest approximately $6 billion between 2013 and 2015 to expand and enhance its wired IP broadband network to 75% of its wireline customers and to deploy fiber to 1 million additional business customer locations.

In May 2013, the Task Force released its own proposal for several real-world trials to gather data and assist the FCC in determining appropriate policies to incentivize innovation and investment in IP networks while protecting consumers, competition, and public safety. The Task Force sought comment on trials that would examine VoIP interconnection, public safety and next generation 911, wireless substitution for wireline services, and invited further details on geographic trials using specific wire centers. As part of the VoIP interconnection trial, the FCC proposed to examine whether any technical issues are impeding the exchange of voice traffic in IP. With respect to public safety, the proposed trial would consider the differences in the way emergency calls are routed in IP networks and how to continue to convey accurate caller location data when consumers place 911 calls from a wireless or IP service. Finally, the proposed wireless trial would help analyze issues including price, quality of service, product capabilities, and network reliability for consumers replacing traditional wireline service with wireless alternatives.

At the hearing, Subcommittee Chairman Greg Walden (R-OR) said the question is this: “what is the appropriate role for the federal government in this transition?” He argued that “ILECs looking to invest in future technologies should be able to do so without the specter of maintaining legacy networks; those in the competitive community should be able to look to the future with the certainty that they have the opportunity to serve their customers; and consumers should be able to embrace this transition without an interruption in the services they already enjoy. We must strike the appropriate balance between protecting consumers, promoting competition, and not slowing the pace of needed innovation.”

Fred Upton (R-MI), the chairman of the full House Commerce Committee, said, “[O]ur laws were written piecemeal to reflect the prevailing conditions of their time. Whether it was to break up a monopoly or in an attempt to legislate competition in existence, we should be taking a hard look at where technology is going and ensure that these strictures of the past do not hinder our future.”

The committee’s ranking Democrat, Rep. Henry Waxman (D-CA), noted the technical backdrop for the hearing, but pointed out that the “phone network is more than a system of wires, switches, and technical protocols. It is an essential part of the social and economic fabric of the United States. As we consider this next network evolution, we must continue to protect the core values that have guided our communications policy for nearly a century.” The values he identified are universally-available service, competition, and consumer protection. “This is the mandate Congress has entrusted to the FCC, and it does not change with new generations of technology.” He identified the question before policymakers as how to manage the transition in a way that does not disrupt the businesses and consumers that rely on traditional phone services.

Rep. John Dingell (D- MI) said the billions of dollars supporting legacy network architecture would be better used to support the IP backbone of the future and encouraged the FCC to get together and conduct the IP trials AT&T has proposed.

Rep. Anna Eshoo (D-CA) asked, "shouldn't the rules to preserve competition be technology neutral?" AT&T Senior VP James Cicconi answered that common carriage rules already don't apply to wireless and cable services. "They're uniquely imposed on this part of the business, and it's a declining part of the business," Cicconi said. Cicconi said AT&T believes that it's "a legitimate function of government to ensure that everyone is connected and has the ability to communicate. Our company has always stood behind the principles of universal service." However, wireless has become a viable alternative to wireline phone networks, he said. "AT&T is no longer a monopoly telephone service provider. We provide broadband and communications services in a robustly competitive marketplace where consumers have many choices among various providers of networks, services, and devices. Consumers and businesses have abandoned and will continue to abandon the [plain old telephone service (POTS)] network in droves for broadband and mobile services offered by those alternative providers."

Cicconi testified that one of the reasons AT&T had proposed the geographic tests was to help determine what government role would be necessary to insure access in an already competitive IP delivery marketplace. He argued that old regulations should not simply be grafted onto that new model. He said AT&T did not view it as a flash cut to IP, that it would take until the end of the decade to retire copper lines, and that the company agreed that in an IP world services like 911 had to work. That was another reason for conducting the IP trials, he suggested.

Public Knowledge’s Harold Feld said his organization and AT&T want the same thing: competitive networks and IP trials. But, in his testimony, Feld often returned to the values embedded in the history of regulating communications dating back to the founding of the country. Public Knowledge has identified Five Fundamental Values that have defined our communications network and created the communications network on which we all rely: 1) Service To All Americans, 2) Interconnection and Competition, 3) Consumer Protection, 4) Reliability, and 5) Public Safety. Cicconi complimented Feld for identifying the "key consumer protections needed for a successful IP transition." AT&T's Cicconi called the framework sound, but he noted that AT&T and Public Knowledge differ on the details.

Mark Iannuzzi, president of TelNet Worldwide, spoke for competitive carriers when he said that he needs the government to continue to insure he could connect to the last mile controlled by the 800 pound gorilla incumbents and at a fair price. He said he had built his company up from the "dirt" and would not have done so if he didn't think he would continue to have that guarantee of interconnection.

Feld also identified some flaws in AT&T’s proposed trials:

• Failure by AT&T to describe adequate safety precautions -- or any safety precautions whatsoever -- in the event the trial jeopardizes 9-1-1 access, disrupts critical services, or otherwise places the well-being of subscribers at risk;
• Failure by AT&T to provide any metrics for the study, by which to gauge success or failure or provide any useful information to the general public;
• Failure by AT&T to provide any transparency or accountability mechanisms; and
• Failure to specify any end point to the trial.
• By contrast, AT&T had no difficulty specifying things it did want: largely preemption of any inconvenient rules, and the right to permanently transfer customers regardless of any failure of the new network or cost to the customer in the form of lost or degraded service or legacy equipment rendered inoperative.

Feld said, “While we should expect healthy debate around specific proposals, efforts to make the transition about industry wish lists for deregulation or preservation of this or that specific regulation do more than miss the point, they actively interfere with what needs to happen to keep this transition running smoothly.” The measure of success for the transition, Feld said, “is not ‘How many regulations did you kill?’, but ‘Did you avoid crashing the phone system and/or enraging your customers?’”

As noted above, the IP transition is happening and will continue for many years. This week’s hearing is just one more lamp post on this path. The Benton Foundation is tracking developments along the way and there’s many more to come. As always, we’ll expect to see you in the Headlines.