Turning Off The Phone System? What Do You Mean We’re Turning Off The Phone System?

A few weeks ago I went to a fascinating gathering of a few dozen academics, policy wonks, and others from the U.S.  and elsewhere to talk about the end of the phone system. While by no means a unanimous consensus, a very solid majority considered the phone system obsolete and ready for the scrap heap. This will come as a surprise to those of you who called home on Mother’s Day or who thanked God for a call center number when your broadband connection went down. But in fact, most of you are probably not using a phone service but a “phone service,” so we are half-way to shutting down the actual phone system anyway.


For about a year now, folks in the nerdiest, geekiest, obscurest reaches of Policyland and Wonkdom have been talking about how to turn off the phone service and replace it with “phone service.” For those of you enjoying “phone service” from the likes of cable companies or cell phone providers, you may wonder why this matters. Sure, Grandma may finally need to replace that princess phone, but other than that, who cares? As is so often the case, however, these technical issues matter quite a bit in the real world – but you won’t notice until waaaay too late to make a difference. (Unless you keep abreast of these things by reading this blog.)


In the best case scenario, we shift over to an all digital network free from antiquated laws and policies that stifle innovation and needlessly increase cost to consumers. In the worst case scenario, your phone becomes an utterly unreliable overpriced service that doesn’t guarantee that you can communicate with someone on another phone network because the two networks are having a “peering dispute” and won’t exchange traffic. What actually happens is anyone’s guess at this point, but the recent effort to totally deregulate “phone service” in California gives us something of a preview.


More below . . . .

What is the PSTN and Why Should Anyone Care if We End It?


To unpack for those of you not full time telecom geeks, this revolves around the highly politicized question of the FCC’s authority over packet-switched services, especially those using Internet protocol (IP) packet switching, rather than some other technology. Right now, the FCC (and therefore most state-level authorities) distinguish between the “Public Switched Telephone Network” (PSTN) , the old technology that the FCC recognizes as a “telecommunications service,” and “voice over IP.”  The FCC has very clear and explicit authority over the PSTN, and all the rules governing phone services apply to the PSTN. That thing your phone company provided over copper is the PSTN and is an actual phone.


The other category of service looks like a phone and gets sold like a phone, but is actually voice over IP (VOIP) and therefore a “phone service” rather than a phone service. The thing you get from Comcast or Time Warner Cable as their digital voice service uses VOIP. My FIOS digital voice is VOIP. The FCC refuses to say whether these services are actually phone services, but wants to give them the privileges of phone service (like getting a phone number) and perhaps some of the responsibilities (like 911). But all the basic consumer protection stuff that has traditionally gone along with being an actual phone service doesn’t apply to VOIP “phone service.”


To the extent the FCC regulates VOIP services (primarily to give them goodies), the FCC does so through its authority over the PSTN. For example, when we wanted to make it possible for cable operators to compete with traditional phone companies, we said phone companies had to “port” numbers and give interconnection to VOIP providers that wanted it even though VOP providers aren’t actual phone services. OTOH, because nothing in the current Communications Act says that VOIP is not a phone service (and some of the language would seem to indicate it really ought to be a phone service), the FCC has not declared that VOIP is an “information service” like your cable modem or DSL line. In particular, VOIP that can reach real PSTN phones or receive calls from PSTN calls (what we call “interconnected VOIP”) exists in a no-man’s land as neither a regulated Title II telecommunications service or a Title I unregulated information services. It is a “phone service,” and the FCC and industry like it like that.


All Very Interesting, But I Still Don’t Understand Why I Should Care If The PSTN Goes Away.


Since all FCC authority over anything vaguely IP related depends on it being “ancillary” to or “interconnected with” the PSTN. what happens when we no longer have a PSTN and the only (or primary) phone services are IP-based “phone services?” Can I still port phone numbers from Verizon to Comcast? Does AT&T have to complete my calls to another network? Am I still protected by the various rules that protect my privacy or prevent “slamming” or “cramming” (or keep me on the “Do Not Call Registry”)? No one knows.


Under the existing law as set forth in the Communications Act of 1934, one of two things appears most likely when we shut off the PSTN and “End The Phone System..” Either “phone services” become actual phone services (because, in the absence of the protocol conversion between the PSTN and IP networks, these services meet the statutory definition of telecommunications service (47 U.S.C. 153(53)), or nothing is a phone service and the underlying basis for existing FCC regulation of these services disappears – along with the FCC’s authority over “phone service” (such as it is). For those of you applauding the possible end of any FCC jurisdiction over phone service and the death of all that old nasty bad-bad monopoly era regulation with no place in uber competitive modern telecommunications market, that also means good bye to things most people in the industry basically like, such as interconnection requirements, number portability, and Universal Service Fund money, to name a few. It also gets rid of various consumer protection rules (which you may or may not consider a plus). In particular, if you live in a rural area, you are likely to have serious problem getting folks to serve you because the current rules that require them to serve you will go away and — I know you don’t realize this — you are actually an expensive pain in the rear-end to serve.


As an aside, the same issue applies to wireless. Mobile phones are common carriers only so long as they interconnect with the PSTN (or at least, that is how the FCC currently interprets 47 U.S.C. 332). What happens when we no longer have a PSTN, or when the primary exchanges of traffic between wireless providers like AT&T and Verizon are between VOIP providers like Comcast and Vonage? What happens when the wireless providers get in on the act and do voice over LTE/mobile VOIP? No one knows.


You Have My Attention, But What Makes You Think This Will Happen?


Two things make this more than an academic thought experiment. First, the natural trend of the market is away from the old circuit-switched PSTN network and embracing digital networks. The FCC’s Technological Advisory Council (TAC) estimated last year that by 2018, over 90% of networks would switch from PSTN to digital VOIP technologies because these technologies offer significant cost savings and enable service enhancements.  As a result, the FCC’s TAC recommended that the FCC should develop a plan for an “orderly transition” that would focus on minimizing disruptions and ensuring that the remaining networks that don’t migrate on their own are not left behind/do not impose significant cost on the IP networks to maintain compatibility. While the TAC recommendation has no legal implications (and the FCC has done nothing to embrace the recommendation for a hard date to “sunset” the PSTN), the facts that drove the TAC recommendation are not in dispute. Networks are shifting from older circuit-switched technology to digital packet-switched technologies, and this trend will continue over time.


The second important element is that AT&T and other major players in the field have embraced the concept of turning off the PSTN. Indeed, AT&T proposed shutting off the PSTN during the formulation of the National Broadband Plan. Not only do these network operators hope to realize huge cost savings and other enhancements from shifting the network to digital, they view it as a way to get out from under what remains of state and federal telecom regulation. Whether this is a good thing or a bad thing depends on whether you think state and federal jurisdiction over critical infrastructure is an evil that destroys innovation and drives up cost, an occasional necessary evil, or an important safeguard against anticompetitive behavior and protects consumers.


Not one to stand idle, AT&T and its buddies buddies at ALEC are leading the way to total deregulation with bills like California’s S.B. 1161.  This bill eliminates any state jurisdiction over IP-based “phone services” on the theory that all IP-based services are somehow “the Internet.”  S.B. 1161 – currently speeding through the CA Legislature on the strength of heavy lobbying by AT&T and Verizon – prohibits the California Public Utility Commission (CPUC) or any other “department, agency, commission, or political subdivision of the state” from regulating VOIP in any way (with the exception of things industry likes, like playing referee on interconnection fights).  In a nice ironic touch, the legislation was just amended to permit the CPUC to continue to “monitor and discuss VOIP services” and “respond informally to customer complaints.” I call this ironic because the only thing CPUC is going to be able to say to consumers with complaints is “sucks to be you.” (Those interested can read the current text of the bill here.)


So Where Are We Now? Do I Start Filing Comments Or Something?


From a policy perspective, the conversation is just starting and we are unlikely to come to any kind of consensus on rules at the federal level anytime soon.  So if you need an FCC rulemaking to get excited, relax. OTOH, the shape of the policies we will ultimately adopt will be formed well before we ever get to the rulemaking stage. Rulemakings on major issues like this don’t just magically appear one day. They come about from the accumulated conversations and consensus of the stakeholders who are plugged in enough to participate in the initial conversations. So all these discussions and conferences and academic papers are pretty important. Meanwhile, policy continues to get pushed through on the state level, based on all kinds of assumptions that are convenient to some participants but which ignore the broader federal debate. For example, ask the legislators in Sacramento if the legislation to protect “new/competitive” IP-based voice services takes into account that in five years, these may be the only voice services. I’ll lay pretty good odds you get a blank look.


So continue to watch this space and I will continue to explore the ramifications of “shutting down the phone system.” When the time comes to make your feelings known, you’ll be ready (and if you’re in California, that time is now for SB 1161).


Stay tuned . . . .


  1. Seems to me the Wonks have forgotten one fundamental consideration. ‘The network’ is not their property. That the Telco’s don’t want to use it anymore either is only secondary.

    The core issue is who pays for turning it off? In light of the fact that the PSTN have MACRS depreciation schedules 20 years into the future the Telco’s will be loathe to shut off the systems even if they wanted to. In most states they are granted a guaranteed % ROI off the assets. (the labor to support it, eating their lunch, is a different matter.) So unless Congress is going to get off the duff and permit an accelerated write off the whole exercise is moot.

  2. Nobody has forgotten it. Heck, the carriers have their wonk squads in the room.

    “Telcos” is a fairly diverse lot. The largest residential carriers are all for shutting down the PSTN. It is not clear where the rate-of-return carriers or even the Super RLECs stand. Certainly the larger companies are converting to digital, its the cost savings. The question of “who pays to get the last 6%-7% of tiny carriers” was what prompted the TAC to call for a hard date in the first place.

    But figuring that out does little to answer the questions most people who subscribe to phone service care about. We’ve done technical transitions of the network before. That’s a pain in the neck, but manageable. But we’ve never had a shift in technology/upgrade that *also* potentially triggered a total sea change in the regulatory underpinnings on which the telecom markets operate. It makes for interesting times.

  3. I live in California, but I don’t understand this stuff well enough to know what to say to my state legislators. Can you point me to something that would help?

  4. RichardBennett

    One of the benefits of new technologies such as VoIP is that they allow us to zero out regulatory history and start over with a clean slate. On a technical basis, there’s very little to be gained from keeping the PSTN on life support, and on a policy basis it’s wise to consider the obligations that VoIP providers should have in the new era of packet switching. The old regs are there for reference, but I’d prefer that we not simply copy-and-paste the old regs onto the new tools.

  5. Alan: You can find out more from Free Press: http://act2.freepress.net/sign/defeat_sb1161/?source=twitter

    Also TURN, which is California based:

  6. Thanks, Harold. I have contacted my state legislator. For all the good it will do.

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