Industry at Odds on FCC Role in PSTN-to-IP Network Transition

The public switched telephone network (PSTN) and plain-old telephone service (POTS) are “relics of a by-gone era,” said AT&T. Incumbent local exchange carriers’ revenue from POTS sank 27 percent to $130.8 billion in 2007 from $178.6 billion in 2000, and the trend is “irreversible,” the carrier said. “With an outdated product, falling revenues, and rising costs, the POTS business is unsustainable for the long run.” The government won’t achieve universal broadband quickly or efficiently if companies “are forced to continue to invest in and to maintain two networks,” AT&T said. The FCC should set a firm, ambitious deadline, like the one for the DTV transition, to move the industry completely to IP, AT&T said. The commission should seek comment on the exact date, it said. Before the deadline passes, the FCC should issue decisions on the scope of federal authority over broadband and IP services and overhaul the Universal Service Fund and intercarrier compensation, the company said.

The transition “should be managed carefully and gradually,” said the National Telecommunications Cooperative Association. “A transition period will avoid rate shock, prevent service disruptions, and provide stability and certainty during the transition.” The association warned the FCC against any action that might “jeopardize the service that has been successfully deployed today.” During the transition, the commission should keep current rate-of-return regulation for rural ILECs, high-cost USF, intercarrier compensation and NECA pooling, it said.

USTelecom recommended against assuming that IP technology will “completely replace” the PSTN “anytime soon.” The group said, “Especially in lower-density, higher-cost areas of the country, the reliance on the existing PSTN network will continue to be the most economical wireline network technology for delivering both voice and broadband services to consumers.” A transition “should be neither rushed nor relaxed,” said the Independent Telephone & Telecommunications Alliance. “Myriad issues that demand attention from experts, including engineers, financial specialists, and legal authorities will arise.”

Several groups said the FCC doesn’t need to release an NOI, because it opened the issue for discussion five years ago in its IP-enabled services proceeding. “The Commission already has a mature, well-developed record in regard to the transition to an all-IP network which is actually ripe for an imminent ruling, or was ripe under the prior Commission administration,” said Qwest. The FCC shouldn’t “tether” decisions on IP-enabled services issues to the national plan, the company said. “The Commission should finalize and implement its NBP and address the IP-enabled services issues on a separate track.”

Level 3 agreed that an NOI isn’t needed. It asked the FCC instead to finish its overhauls of intercarrier compensation and the Universal Service Fund. “Once the economies of the public switched telephone network have been rationalized and implicit subsidies removed, the transition to an all IP-network will gather steam.” If the commission issues an NOI anyway, it should seek to resolve regulatory disparities among industries, because in an IP world, content and voice are just applications that may run on “any number of platforms before reaching the end user,” the company said.

CLECs and cable companies encouraged the FCC to enforce pro-competitive telecom laws regardless of network technology. “For companies to continue investing in facilities to provide competitive voice services, interconnection with incumbent LEC networks must remain available on reasonable, cost-based terms,” said NCTA. The Communications Act doesn’t distinguish between circuit-switched and IP-based networks, said joint comments from CompTel, Cbeyond, Covad, Intrado, Nuvox and TW Telecom. “For instance, section 251(c)(2) specifically provides requesting carriers the right to interconnect” with an incumbent’s network at “any technically feasible point,” they said. “The Act has already answered the fundamental question as to what regulatory structure should govern interconnection and traffic exchange between IP-networks, and the Commission should limit its focus to whether additional rules are needed to provide greater definition and effect.”

But Verizon asked the FCC to “reject proposals to extend legacy interconnection regulations to IP networks.” It said carriers already have interconnection arrangements for handling circuit-switched and IP traffic. Industry standards for exchanging VoIP traffic don’t exist, Verizon said. “The efficient way to allow these standards to develop would be to follow the tremendously successful example of the Internet, which relies upon voluntarily negotiated commercial agreements developed over time and fueled by providers’ strong incentives to interconnect their networks.”

The CLECs replied, “The Internet did not have as its starting point a market dominated by incumbent local exchange carriers that are the product of decades of statutorily-protected monopolies.” ILECs have more than 80 percent of the local market, and the rest is divided among several competitors, they said. “The mere fact that an incumbent has changed its network architecture from a circuit-based to IP-format does not change its market position, and the important interconnection and non-discrimination protections of the Act do not disappear just because Verizon says they should.”

Rural carriers and VoIP providers skirmished over intercarrier compensation. NTCA urged the FCC to require interconnected VoIP to pay access charges during the transition. “AT&T, Verizon, Qwest and other IXCs and wireless carriers will eventually take advantage of this loophole in the rules in the near future to classify all of their voice traffic as interconnected VoIP and refuse to pay access charges,” the association said. But the VON Coalition said applying access fees to VoIP would be “moving backward.” It sought a bill-and-keep system for all traffic, under which carriers recover costs from end users rather than from connecting carriers.

The National Association of State Utility Consumer Advocates said the FCC should release an NOI seeking further comment on many of the issues raised in the public notice. “While the Internet has wrought great and wonderful new services, from a technological and functional perspective, the distinction between Plain Old Telephone Service and the VoIP service offered by carriers such as AT&T (including but not limited to U-Verse), Verizon (FiOS), Comcast, Cox and Time Warner is practically non-existent,” NASUCA said. The group said that “there are reasons to conclude that many VoIP services and broadband services are, in fact, ’telecommunications services’ within the template and definitions of the 1996 Telecommunications Act,” and telecom regulation should apply. The big advantage of IP-enabled traffic is that it is a substantially more efficient mode of transferring data, the group said. “Any proposed NOI should address how the FCC could best frame a regulatory approach to capture the savings inherent in these efficiencies for the consumer of telephone services.”

Wireless Concerns

CTIA said the FCC could guarantee that the wireless industry switch to an IP world by setting up “regulatory parity” between wireless and wireline carriers. A big concern is that the FCC imposes only “obligations traditionally imposed on telecommunications carriers,” such as payment into the USF and compliance with CALEA on interconnected VoIP providers that both originate and terminate voice calls on the PSTN, the association said. “There are VoIP offerings that arguably are set up so as to avoid these FCC requirements. CTIA believes that the Commission must review the regulatory requirements of these services.” And questions remain about “how the current intercarrier compensation rules apply to traffic that originates or terminates on IP-based networks,” CTIA said. Another road block could result from the current proceeding about imposing new net neutrality requirements on wireless carriers, the group said. The FCC “should be wary of the unintended consequences that can result from the imposition of network management restrictions on wireless networks,” CTIA said.

Sprint Nextel said FCC rules could complicate the transition from a time domain multiplexed (TDM) to an IP world. “At the end of the day, it’s all about money,” Sprint said. “How can a company keep the revenue stream it currently has? How can a company increase its revenue in the future? How can a company make the most profit? How can the government encourage an economically competitive America?” The current intercarrier compensation system, for example, “provides the wrong incentives to carriers, encourages foot dragging in regard to TDM/IP transition, and results in significant economic waste and inefficiency,” the carrier said. Sprint said “bloated special access prices” also “depress broadband deployment and adoption and slow the transition from TDM to IP.”

The National Emergency Number Association also supported a further NOI on the topics raised in the public notice. But it said public safety issues must be taken up. “The Commission should ask specific questions and seek information on the 911 system implications of such a transition from the perspective of consumers, public safety governing authorities, and providers of communications services, devices, and applications,” NENA said. “A highly standardized 911 system in an open, all-IP environment is extremely important.”