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Key points in this Outlook:
Some 45 years after design work started on the cellular network and the Internet, the Federal Communications Commission (FCC) issued an Internet Protocol (IP) Technology Transitions Order amounting to a reluctant invitation for trials on the decommissioning of the legacy telephone network. While the telephone network is no longer the centerpiece of telecommunications in the United States or around the world, the FCC is clearly anxious about turning it off, probably because the FCC and telephone network grew up together. This reluctance is apparent in the many obstacles the FCC’s transition order places in the way of the decommissioning trials. These barriers are, to some extent, effects of FCC Chairman Tom Wheeler’s Network Compact, a historical artifact of the US Department of Justice’s 1913 Kingsbury Commitment authorizing the Bell System (AT&T) monopoly in return for some sweeteners.
While it is worthwhile to ensure that no essential capabilities are abandoned in the transition from the telephone network to its replacement (pervasive broadband networks running IP), it is important for the FCC to approach this transition sensibly. Americans are far ahead of the FCC and other government agencies in migrating from the old networks to the new ones, and the gap is growing every day. Rather than slowing down the transition with arcane regulations that require both large and small network operators to maintain compatibility with obsolete systems, the FCC should focus its efforts on encouraging holdout populations—in the public and in the private sector—to adapt to contemporary reality. The social benefits of a more rapid transition are greater than those of a slow one.
Government users have been slowest to adapt to the new technologies, so the FCC needs to make government adoption of new networks a priority. The order is littered with status quo–preserving conditions tailored to the Federal Aviation Administration (FAA), US Department of Defense (DoD), and public safety. Rather than holding back the public’s use of advanced networks while waiting for the government to catch up, the FCC needs to accelerate progress in the government sector. It may not be practical to require full government adoption of IP networks in the first phase of transition trials, but it must be part of the overarching plan.
Government’s struggle with technology is nothing new, but as networking technologies become more powerful and vibrant, government seems to do worse. For example, FirstNet, the national wireless public safety network first recommended by the 9/11 Commission, is floundering because the multiple government stakeholders who must cooperate to make FirstNet a reality cannot agree on a plan. Government’s inability to police itself harms the public interest; such failures should not be allowed to impede the public’s acceptance and use of new networking technologies. The FCC’s order needs to address government-induced transition problems directly and not simply by increasing the burden on the public and on private-sector firms.
Transition from the Telephone Network
The story of the transition from the telephone to the pervasive broadband Internet as the primary means of electronic communication is one of conflict. Americans eagerly explore the horizons that the new technologies offer: they are rapidly cutting the cord on traditional telephone service and buying smartphones and both mobile and fixed-location broadband services. But the FCC is letting us down; instead of facilitating this transition, it does little more than throw obstacles in its path.
The principal means by which the FCC stands in the way of progress is through its insistence that it has discovered a Network Compact consisting of “enduring values” embedded in the corpus of telecom law that magically pertain not just to the particular historical circumstances around the formation of America’s telephone network, but also to all future networks. Effectively, the FCC wants the terms of the Kingsbury Commitment to constrain the growth of the Internet, lest something bad happens. This posture necessarily prevents any number of good things from happening as well, or at least postpones them indefinitely.
For most of the 20th century, Americans communicated with each other instantaneously at a distance by the grace of the telephone network. This network was a technical marvel at its birth, but advances in technology have reduced it to the status of a quaint reminder of how we used to live.
“The expense of maintaining the old networks only delays the construction and use of new ones that are better in every dimension.”
The telephone network has been replaced by a multitude of options: the mobile network, wireline broadband networks, satellite services, and public Wi-Fi networks (mostly provided by private companies) that are often free to use. While the telephone network was a uniform system, the plethora of networks we use today are unified only by IP, a small piece of software code that lacks the ability to move a single bit of information without the help of one or more of the diverse groups of modern communication networks that make up the new IP ecosystem. The telephone call is now nothing more than an application mediated by the Internet, which itself is little more than the public face of the vibrant new IP ecosystem.
While Americans have largely abandoned “plain old telephone service (POTS),” regulators who have invested careers in learning, interpreting, and applying telecommunications law are reluctant to let it go. There are still some holdouts among the citizenry as well—chiefly older people who do not care to learn how to use new technologies they see as intimidating, unreliable, or expensive. Hidebound regulators and holdout citizens are the primary obstacles to the complete phase-out of the telephone network and the reallocation of its operational expense in more worthwhile alternatives.
Similarly, while many Americans embrace the new technologies, many government agencies are stuck on the legacy network. The FAA, for example, insists that it cannot function without time-divison multiplexing (TDM) data links, but this agency has only just admitted that its 20-year ban on personal electronic devices aboard airplanes never had a factual basis. We cannot afford to impose a similar delay on the phase-out of the public switched telephone network (PSTN). To do so would be to retard innovation, squander public interest benefits, and waste money.
While the FCC is clearly doing its best to serve the “public interest,” it must do better. Preserving the technologies of the past has sentimental and bureaucratic appeal, but it is ultimately counterproductive to delay new technologies that are already broadly accepted and widely used. The expense of maintaining the old networks only delays the construction and use of new ones that are better in every dimension.
“Each of the historical networks did one thing and one thing only. IP changed this paradigm.”
The FCC’s approach to telecom regulation comes from the technology silos in the Communications Act of 1934, and the silos in turn reflect 150 years of history. When the telegraph network was built, it was the only game in town—the one and only network that allowed people to communicate nearly instantaneously from coast to coast. One company owned all the facilities needed to send telegrams from border to border, so it was easy to regulate; policymakers defined norms and it was up to the telegraph company to implement them. When the Bell System was formed, policymakers applied similar logic and repeated the process for radio, cable TV, and wireless telephony.
Each of the historical networks did one thing and one thing only; none of them needed an app store because each ran one and only one application. IP changed this paradigm. We no longer need to build a separate network for each application; we simply build networks to reach users in particular circumstances at various ranges of price and service and rely on a common piece of software code, IP, to unite them at a web of Internet exchange points. We have mobile networks that serve us while we are in motion; nomadic networks that serve us during temporary stays in restaurants, hotels, and conference rooms; and stationary networks that serve our television sets, desks, and appliances. Each kind of network serves a range of activities and each supports an overlapping set of applications, some traditional and some emerging. The word “telecom” now describes a shrinking sliver of a robust and burgeoning networking ecosystem, but in the past it described the whole enchilada.
Consequently, thinking about the public interest must return to its roots. The actual interests of the public are distinct from those of regulators, and the levers that effectuate policy in a world of multiple networks with substantially similar capabilities are different from those that applied in the monolithic scenario of the past.
Enduring Values or Expedient Compromises?
In its order authorizing IP transition trials, the FCC lists four principles that it deems “enduring values that have always informed communications law.” In a statement attached to the order, Chairman Wheeler expounds on the Network Compact as the unifying theme behind these “enduring values”:
At this critical juncture, let me be clear about a few things. One, we favor technological innovation. And, two, we affirm the enduring values of the Network Compact: universal service, public safety, competition and consumer protection.
Our challenge is to preserve the values that consumers and businesses have come to expect from their networks, while unleashing new waves of investment and innovation, which will deliver untold benefits for the American people.
Today’s order kickstarts this national dialogue.
These are noble sentiments. The problem is that in practice, “enduring values” easily degenerates to “current regulations,” as the FCC’s order demands that the telephone network not be shut down, even on an experimental basis, unless the replacement network satisfies the full raft of existing telephone network features, functions, and regulations.
In other words, the order translates these seemingly lofty principles into a laundry list of terms and conditions, the effect of which is to complicate the transition to an almost ridiculous degree. The FCC defines 17 set conditions, which it defines as “. . . values-based conditions that any proposed experiment must satisfy.” The commission insists that every experiment “comply with the Commission’s existing rules” drafted for the telephone network for these set conditions. In short, the FCC’s four enduring values become 17 status quo–preserving regulatory demands. The enduring values and their corresponding conditions are detailed in the following section.
Public Safety. These conditions enable the public to easily contact first responders, and they ensure that networks function during emergencies (to the extent that is practical).
Universal Access. This set of conditions ensures that all Americans have access to some sort of communications network.
Competition. These conditions are meant to promote the provision of network services by multiple providers and technologies.
Consumer Protection. This set of conditions addresses traditional notions of full disclosure, truth in billing, and protection against false advertising and deceptive trade practices.
The FCC’s 114-page transitions order contains 33 instances of the verb “to preserve” in its various conjugations. The emphasis within the order is very clearly to prevent the transition from the telephone network to the pervasive IP broadband network from happening too rapidly. The commission would very strongly prefer carriers to maintain the legacy network as long as possible, despite its staggering operational costs. Between 2006 and 2011, telephone companies “spent $81 billion on legacy networks, while just $73 billion was spent on modern broadband infrastructure.”
Complying with the Rules
A month after the FCC issued its status quo–preserving order, AT&T filed a plan for experiments in two locales: Carbon Hill, AL, and Delray Beach in Kings Point, FL. As expected, the AT&T plan has less to do with running an actual experiment than with complying with the FCC’s 17 roadblocks.
The two locations are well chosen. Carbon Hill is a sparsely populated rural area and Delray Beach is a suburban locale with a high population of seniors, the group that has been slowest to adopt mobile phones and broadband IP connections. One of the signal challenges with the latter group is the use of Carterfone devices that were designed to allow digital data transmission over analog POTS. These devices, enabled by the FCC’s 1968 Carterfone rules, include modems; we know them today as health monitors, home alarms, and fax machines.
“As many analysts have shown, open-access mandates suppress investment.”
As noted, the modem is a device that facilitates digital transmission across an analog network; now that networks are fully digital, the modem is clearly obsolete. Just as the transition from analog to digital TV required the development of “converter boxes” for holdouts who refused to purchase digital television sets and did not use cable TV services, devices that transform digital to analog and back to digital again will be a small part of the migration from analog telephone networks to digital broadband, but they already exist.
Public-interest groups have already made a big issue of modems in transition plans; Public Knowledge complained bitterly about the shortcomings of an emergency system deployed by Verizon in Fire Island, NY, after Hurricane Sandy: “users may be unhappily surprised to discover . . . Voice Link is not compatible with fax machines, DVR services, or credit card machines, and may not be compatible with home security services.” To its credit, the FCC does not insist on modem converters for all trials but simply expresses interest in seeing how networks will handle modems. It is a widely known fact that many VoIP analog telephone adapters can accommodate limited uses of fax machines and similar devices. But the goal should be to support the application, not simply the device that supported the application on POTS networks.
As for the rest of the FCC’s rules, AT&T plans to rely on the use of VoIP and mobile telephones that are already widely used rather than experiment with NG911 and similar IP-oriented services that are not currently usable in the trial locales. It has no choice as it cannot force local PSAPs to adopt NG911. In the sense that the trials will utilize existing services, they are simply proving to the FCC what consumers already know: cell phones and VoIP are perfectly functional systems today. AT&T wisely chose locales that do not host DoD and FAA facilities so as not to run afoul of the requirements to continue supporting such centers with current technology.
Consequently, the trials will do more to educate the FCC on the capabilities of existing technologies than to push technical boundaries. The AT&T trials only become truly interesting where financial matters are concerned. The FCC insists on maintaining the universal-service status quo, which is less than coherent in the competitive context. As AT&T notes:
Unless the Commission modifies the [eligible telecommunications carrier (ETC)] requirements applicable to price cap carriers, which it should, any AT&T [incumbent local exchange carrier] that remains a legacy ETC will be saddled with service obligations (to provide Lifeline, to the extent it continues to receive frozen high cost support and stand-alone voice throughout its entire study area) that would not apply to their competitors receiving the same support. Those competitors likely will seek and obtain ETC designations covering only those areas where they actually receive CAF Phase II support. Even if AT&T’s ILECs do not accept any CAF Phase II support, they will be subject to service obligations (to offer voice telephony service and Lifeline supported services throughout the area for which they have been designated as an ETC) that will not apply to such competitors.
Rationally, the FCC needs to convert Lifeline into a voucher program that eligible Americans can use as they wish rather than place the responsibility for universal service on one and only one competitive carrier in competitive markets. This condition and others suggest that the FCC has substantial work to do in terms of modifying its regulations to harmonize them with the IP world; this approach is much more sensible than carrying dysfunctional regulations from the legacy network to pervasive IP broadband. Perhaps this is the greatest lesson of the transition trials.
Maximizing the IP Opportunity
For all its emphasis on preserving the status quo, the FCC does little to learn about the benefits of pervasive IP, perhaps because embracing the new inevitably shrinks the agency. When technology is general purpose, there is no longer a need for siloed regulation. When markets are competitive, there is no longer a need for guaranteed access at fixed prices to competitive networks. And when communications capabilities are rich and varied, there is no longer a need for microscopic regulations such as Carterfone and E911, which are technology specific.
“A better focus would be to take the next step and convene stakeholder groups such as public safety, defense, and aviation to move more quickly to the new networks.”
The FCC has been maddeningly slow to realize that the new technology already surpasses the old and requires more in the way of changes to legacy applications such as 911 and aviation and to legacy funding mechanisms such as universal service than it does in the way of adapting new networks to old applications. The FCC should certainly look for instances in which old applications will not work over IP networks, but its response to any such findings should be to ask how the application might be improved to take advantage of the bandwidth, mobility, and resiliency that pervasive IP offers, not to mindlessly demand backward compatibility for even the most obsolete technologies (like fax machines). There are myriad ways to capture and communicate images with today’s devices, applications, and networks.
A better focus would be to take the next step and convene stakeholder groups such as public safety, defense, and aviation to move more quickly to the new networks. The tactic of making the private sector adapt to stagnant government systems has become all too common in recent years; we need look no further than the President’s Council of Advisors on Science and Technology (PCAST)report in spectrum “sharing” between government and the private sector to see it at work. The PCAST report allows government users of spectrum to continue status quo operations while allowing the private sector to use government spectrum only when government users are idle. This is not a productive adaptation of new technology, but it is a typical government reaction.
The IP transition is not simply the replacement of one technology by another; it is also the creation of a new market structure and a new (and much smaller) system of regulation. The FCC’s IP Technology Transition Trials Order should be substantially revised to reflect the responsibilities of the agency to accelerate the transition that is already far down the road. One important area of emphasis is to accelerate the adoption of IP technologies in the realms of public safety, defense, and aviation, and another relates to funding mechanisms to ensure universal use of pervasive networks by low-income citizens. It is later in the game than the FCC seems to think, so a wake-up call is in order.
1. Bill Schrier, “Is FirstNet Stalled?,” Government Technology, February 25, 2014, www.govtech.com/public-safety/Is-FirstNet-Stalled-GT.html.
2. Kristie Greco, “FAA to Allow Airlines to Expand Use of Personal Electronics,” press release, October 31, 2013, www.faa.gov/news/press_releases/news_story.cfm?newsId=15254.
3. Federal Communications Commission, Order, Report and Order and Further Notice of Proposed Rulemaking, Report and Order, Order and Further Notice of Proposed Rulemaking, Proposal for Ongoing Data Initiative (Washington, DC, January 31, 2014), http://transition.fcc.gov/Daily_Releases/Daily_Business/2014/db0131/FCC-14-5A1.pdf.
4. Ibid., 91.
6. Ibid., 92.
7. Ibid., 17.
8. Ibid., 93.
9. Ibid., 94.
11. Ibid., 95.
13. Ibid., 96.
14. See, for example, Robert Crandall, Jeffrey Eisenach, and Allan Ingraham, “The Long-Run Effects of Copper-Loop Unbundling and the Implications for Fiber,” Telecommunications Policy 37 (2013).
15. Federal Communications Commission, Order, Report and Order and Further Notice of Proposed Rulemaking, 23.
16. Ibid., 97.
17. Ibid., 24.
18. Stacey Higginbotham, “Net Neutrality, Nausea & Political Theater at Its Worst,” GigaOm, February 16, 2011, http://gigaom.com/2011/02/16/net-neutrality-nausea-and-political-theater-at-its-worst/.
19. Federal Communications Commission, Order, Report and Order and Further Notice of Proposed Rulemaking, 97.
21. Ibid., 25.
22. Anna-Maria Kovacs, Telecommunications Competition: The Infrastructure-Investment Race (Internet Innovation Alliance, October 8, 2013), http://internetinnovation.org/images/misc_content/study-telecommunications-competition-09072013.pdf.
23. Ibid., 20.
24. 13 FCC 2d 420 (1968).
25. Jodie Griffin, “Adding Insult to Injury for Sandy Victims: 911 Calls May Not Go through on New Verizon Phone Service,” Public Knowledge, May 13, 2013, www.publicknowledge.org/news-blog/blogs/adding-insult-to-injury-for-sandy-victims-911-calls-may-not-go-through-on-n.
26. AT&T, Wire Center Trial Operating Plan (February 27, 2014), http://apps.fcc.gov/ecfs/document/view?id=7521084111, 40.
27. Lifeline is a subsidy program that provides low-income Americans with basic telephone service.
28. Executive Office of the President, President’s Council of Advisors on Science and Technology, Realizing the Full Potential of Government-Held Spectrum to Spur Economic Growth (Washington, DC, July 20, 2012), www.whitehouse.gov/sites/default/files/microsites/ostp/pcast_spectrum_report_final_july_20_2012.pdf.
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