Shutting Down the Phone System: Five Fundamentals Framework For Managing the PSTN Transition.

As I wrote back in November, AT&T’s decision to upgrade its network from tradition phone technology (called “TDM”) to an all Internet protocol (IP) system has enormous implications for every aspect of our voice communication system in the country. To provide the right framework for the transition, Public Knowledge submitted to the Federal Communications Commission (FCC) our proposed “Five Fundamentals” Framework: Service to All Americans, Interconnection and Competition, Consumer Protection, Network Reliability, and Public Safety.

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A Pocket Guide For The WCIT-12

So here I am in Dubai, attending the World Conference on International Telecommunications (#WCIT or #WCIT12) of the International Telecommunications Union (#ITU). The good folks at the ITU are webcasting the Plenary Sessions (the official part where the countries vote). You can tune in here (archives of live caption transcripts here). As you might expect, the WCIT has its own specialized vocabulary which can make following all this rather difficult. I have therefore prepared an impromptu and very incomplete glossary of the acronyms and peculiar phrases of the WCIT for the benefit of folks trying to follow along.

Disclaimer: I am an advisory member of the U.S. delegation, but nothing in here is an official statement of U.S. Del. I’m offering this for information purposes only.

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Why California Will Sit Out The National Debate On Shutting Off the Phone System — Heckuva Job Governor Brownie!

In the last two months, AT&T’s announcement that it will convert its existing traditional phone system to an Internet Protocol (IP) based network and the aftermath of Hurricane Sandy have galvanized the telecom policy world. One would think the state of California would figure prominently in this discussion, and that people in California would have a huge vested interest in the outcome of these discussion. For example, given our newfound interest in disaster preparedness for IP networks in the wake of Hurricane Sandy, California (which, I’m told, has the occasional wildfire, deluge, mudslide or earthquake which causes power and telecom outages) might want to hold their own hearings and develop their own state plan and state standards. Similarly, with both AT&T and Verizon (both service providers in California) announcing they are replacing rural copper with wireless and converting their old-style phone networks to IP, you would think California would want to have some say in how these companies (and other IP network providers) serve the customers of their state.

Sadly for the people of California, you will not have that opportunity. All decisions on these matters relative to you will be left entirely to the private sector, or will take place in Washington D.C. Why? Because on September 28, Governor Jerry Brown signed into law S.B. 1161. This law, drafted by the fine people at the American Legislative Exchange Council (ALEC) and introduced by Senator Alex Padilla, prohibits any agency of the state of California from regulating “voice over IP” or “Internet enabled service” (text of law here) (More on ALEC and its role in drafting the law here, here, and here). While this primarily focuses on the California Public Utility Commission (CPUC), the law prohibits “any department, agency or political subdivision of the state” from doing anything to regulate VOIP or IP-based services.

How does this relate to Hurricane Sandy, emergency preparedness, and the conversion to all IP networks? I explain below . . .

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Shutting Down The Phone System Gets Serious: The Implications of AT&T Upgrading to An All IP Network

(This is a reprint of a piece I wrote for the Public Knowledge blog)

I believe AT&T’s announcement last week about its plans to upgrade its network and replace its rural copper lines with wireless is the single most important development in telecom since passage of the Telecommunications Act of 1996. It impacts just about every aspect of wireline and wireless policy.

For those who missed it in the morning-after blur of the election results, AT&T announced that it will invest an additional $14 billion to upgrade its wireline and wireless networks, so that it projects investing $22 billion a year for the next several years in capital expenditures (“CAPEX” as they say on “The Street”). At the end of the three year time frame, AT&T expects to have converted its existing “time division multiplexing” (TDM) phone network entirely to an IP-based network which will seamlessly mix its wireless, remaining souped-up copper, and fiber (but not fiber-to-the-home). Since all existing phone regulation governing universal service, consumer protection, and competition rest entirely on the existing TDM/copper network, AT&T simultaneously filed a petition with the FCC to “begin a dialog” on how to address the regulatory issues raised by this shift and proposing some entirely deregulated “pilot programs” to determine what regulations are “really” necessary.

Setting aside my skepticism that these pilot programs offer anything of value, I thank AT&T for beginning with an offer to talk. At the same time, I’m mindful we need to get the key elements of the new framework down over the next year or two – which is practically nothing given the complexity of the issues and the number of stakeholders involved. It puts a premium on communities working quickly to come to internal consensus and on trying to bring as many allies to the table as possible. Ideally, we would set universal rules for all IP networks, but this would meet fierce resistance from existing IP-providers. Nevertheless, AT&T raises a valid point of concern if the rules for the TDM to IP apply only to it and other Local Exchange Carriers (LECs) upgrading their networks. The FCC must balance these concerns about competition and fairness with the broader questions of what happens when our 100-year-old copper safety net gets replaced by an essentially unregulated IP-based networks.

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VZ/SpectrumCo Update: Actually Pretty Good, Except For That ‘Cartel’ Thing.

I have been doing some analysis of Verizon’s latest move in the VZ/SpectrumCo transaction, the announcement VZ will engage in a series of AWS spectrum swaps with T-Mobile. Between this and Verizon’s commitment to sell off its Lower 700 MHz A&B block licenses, I am almost happy — except for that whole cartel thing with the major cable companies. But if we ignored the cartel thing, this deal now becomes the rare bird that actually enhances both Verizon’s position in the market and that of a prospective competitor. This is not quite a triumph for Coasian market efficiency, since it took the threat of agency action to nudge Verizon in the ‘right’ direction. I also need to point out that when we start out with a fairly dismal market structure, it does not take much to improve things. Giving spectrum to T-Mo is good, but it does not address all the competition problems created by our unfortunate means of distributing spectrum, which still ends up concentrating it in the hands of a very small number (i.e. 2) of companies. So ‘happy’ is a relative term.

As a result, the transaction needs a few minor conditions to make it complete: a data roaming condition to keep competition afloat (and in case the data roaming rule does not hold up in court) and accelerated build out/use or share to ensure rural communities see a 4G network before the end of the decade, but otherwise this looks pretty good (even with AT&T likely to snarf all the Lower 700 MHz B block licenses). Mind you, it reenforces the need to get interoperability and special access reform done if we want to see real competition — but we have rulemaking proceedings on those.

Unfortunately, there is that whole “cartel” thing with the major cable operators. And despite all the positive aspects of this transaction as now configured, they cannot outweigh the negative of creating an anti-competitive cartel at the center of our communications infrastructure.  But let me set that aside for the moment to focus on the spectrum side of things.

 

More below . . . .

 

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Time Warner Cable’s New Pricing Plan And The Dr. Strangelove Rule Of Price Signaling

“The whole point of the Doomsday Machine is lost if you keep it a secret! Why didn’t you tell the world, eh?” — Dr. Strangelove, from Dr. Strangelove, or How I Stopped Worrying And Learned To Love The Bomb

Time Warner Cable (TWC) has announced it will expand its existing “Internet Essentials” program to more cities in Texas. Users that elect this pricing plan are limited to 5 GB per month. Go over, and you pay $1/GB until you hit a maximum of $25 extra on your monthly tab. Time Warner also provides  you with meters so you can keep track of your usage. TWC also allows you to switch back and forth between unlimited and “essentials” easily and without any lock-in. If I find I keep going over, I can switch back to unlimited. As an added effort to make sure users know what they are getting in to when they opt for the more restricted plan, TWC gives you a 2 month grace period if you switch to Essentials where they track your overages and don’t charge you for them. This is a good thing, because, as I discuss below, one of the issues for these usage based billing/bandwidth cap things is that many people do not have any clue how much capacity they use.

As I’ve written before, I like the way TWC is experimenting with pricing here.  I don’t know if customers will see this as a good deal, but that is the point of experimenting with different price plans. In fact, I wish other providers would experiment this way, rather than simply impose bandwidth caps or usage based billing (there is a difference between them, although most reports treat bandwidth caps as a form of UBB). Oddly, Time Warner Cable’s experiment may tell us a lot not only about whether customers like a low-bandwidth option (and whether five dollars is the right discount for it), but about whether other operators who are forcing their customers to take more constrained options are able to do so by exercising market power rather than because customers want it.

Which brings me to the Dr. Strangelove Rule of Price Signaling, which I describe below . . . .

 

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USTR Manages To Make The ITU Look Good — Which Will Bite Our Rear Ends In Dubai

Pointing out that the United States Trade Representative (USTR) does not understand the concept of “transparency” hardly qualifies as news. It’s kinda like “Jerusalem Chief Rabbi Places Last In Pulled Pork Cook Off.” But every now and then, USTR’s generalized failure to understand why increasing public participation, sharing more information with the public, and generally bringing the standard of transparency up to what we would actually consider vaguely transparent actually threatens U.S. interests in other areas.

 

Case in point, the International Telecom Union] (ITU) meeting in Dubai for the World Conference on International Telecommunications (WCIT) this December.  I’ve written before on why I worry a number of the proposals at made by various repressive regimes at WCIT may have long-term consequences for freedom of expression online.  Many global civil society organizations, as well as many countries committed to freedom of expression and fundamental human rights, oppose these efforts to leverage WCIT for such ends. At the same time, however, many of these countries and organizations have long standing serious concerns around Internet governance. In particular, they resent what they see as the dominance of U.S. government and U.S. corporate interests in supposedly neutral “multistakeholder” forums like the Internet Corporation for Assigned Names and Numbers (ICANN). ICANN is the current home for much of what people mean by “internet governance.” This makes expanding ITU jurisdiction to include Internet issues attractive to some of these countries and organizations, despite the danger to free expression, as one of the few possible counterweights to the U.S.

Persuading enough of these countries and other stakeholders that the downside of expanding ITU authority outweighs the potential benefit is therefore the chief challenge for the U.S. delegation. Unfortunately, the continued conduct of USTR in reenforcing the view that the U.S. Government is the tool of industry by doing things like pushing ACTA (which continues to be held up in Europe and elsewhere as a symbol of the U.S. shilling for Hollywood at the expense of free expression), and maintaining a cloud of secrecy around the Trans-Pacific Partnership (TPP) negotiations, makes this much harder. While we are kind of stuck with ACTA, the USTR can do a heck of a lot more around transparency in TPP. Given that the ITU has made a number of conciliatory gestures to civil society on the transparency front in the last few weeks, It would be really helpful if USTR would at least stop pissing on its critics and generally making ITU look good.

More below . . . .

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The ITU, WCIT and Internet Freedom

Very few people ever heard of the International Telecommunications Union (ITU) until recently – and with good reason. For more than 100 years, the ITU managed quite nicely serving as the forum for countries and telecom carriers to coordinate insanely-technical-mind-numbingly-boring-but-really-really-important stuff related to making the phone network work internationally, distributing satellite slots, and trying to harmonize what frequencies countries allocate to what services. But now the ITU has suddenly become very interesting. Why? Because the ITU members will hold a rare meeting — the World Conference on International Communications (WCIT) – where the 193 member countries will vote on whether to amend the current ITU rules (“ITRs”) that set the framework for all this extremely important boringness.

Unclear for now – especially in the pre-game – is whether and how the WCIT represents a potential threat to freedom of expression online. I recently had an argument with Professor Milton Mueller (see the comments section of this post on the IGP blog) about this. Milton’s central thesis is that the recent hysteria about the ITU “taking over the Internet” is overblown and that this is just about how carriers negotiate payments. This has been interpreted by some to mean that civil society organizations concerned with free expression online ought to stop fretting about fleets of UN black helicopters seizing the DNS rootservers and relocating them to ITU Headquarters in Geneva.

For a number of reasons, I strongly disagree with this assessment.  Even without the concern that the ITU will somehow “take over the Internet,” certain WCIT proposals advanced by a number of regimes that engage in Internet censorship threaten the future of free expression online. These proposals, from the Russian Federation and several Arab states, would for the first time explicitly embrace the concept that governments have a right to control online communications and disrupt Internet access services. This would reverse the trend of the last few years increasingly finding that such actions violate fundamental human rights – a valuable tool in trying to pressure repressive regimes to stop using such tactics.

More below . . . .

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FCC Special Access Reboot — And AT&T’s Somewhat Disingenuous Response

Good news, the FCC has decides to one again reboot its seven year old proceeding on “special access.” Given that I have been flogging the FCC since 2006 to do something about this, with occasional reminders since then, I am obviously pleased. AT&T, one of the chief beneficiaries of the current deregulated monopoly regime, is less pleased.  AT&T’s chief argument against the FCC denying it yet another rate hike and demanding AT&T and the other telcos fork over data critical to determining if they are charging monopoly rents is: “Why you bringing up old stuff?”

This is not exactly the pinnacle of legal reasoning or persuasive policy. But in AT&T’s defense, when it’s all you got you make the best of it. Bob Quinn does a masterful job of portraying this as being about legacy copper phone bits that don’t matter anymore and that somehow the FCC taking action here is distracting us all collectively from building the super cool uber fast Gigabit networks we need and would build if only the FCC would let us buy T-Mobile. Or something.

As I explain, however, this isn’t some musty old copper no one gives a crap about, but a rather critical bit of infrastructure generating between $18-20 billion annually and impacting pretty much every aspect of mobile communications and broadband access. And with the cable operators about to become total BFFs with Verizon, what little competition that exists in the special access market appears ready to disappear altogether.

I explain below . . . .

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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 . . . .

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