Telecom Industry Struggles to Define ‘Point’ of Voice Regulations in New World

A circulating order would grant the unopposed items in USTelecom’s year-old petition (CD Feb 6 p6), but the Wireline Bureau gave itself a 90-day extension to tackle the more “significant” requests (CD Feb 11 p9). The association of ILECs is anxious to see an end to the rules, because as the costs of complying with old regulations are spread across fewer consumers, it increases the burden on those who remain on the copper network, said USTelecom President Walter McCormick. Continued regulation impedes the ability of companies to invest in new IP networks, he said.

AT&T Senior Vice President-Federal Regulatory Bob Quinn criticized the FCC for taking so long to act. “Regulations have a tendency to persist long after they outlived any usefulness,” Quinn wrote in a blog post Thursday (http://bit.ly/Wr6cPm). “It takes real focus and effort to ultimately remove them from the books even when everyone agrees that it is the common sense thing to do.” Free Press Research Director Derek Turner responded in a statement that the FCC should ignore AT&T’s intimidation tactics. “AT&T’s latest missive against the FCC shows once again that its penchant for bullying is as boundless as its hubris,” he said. “The FCC is correct to take additional time to fully consider the petition brought by AT&T’s mouthpiece, the U.S. Telecom Association. If granted in full, the changes AT&T and USTA seek could have severe impacts on consumers, businesses, competition and jobs."

Agreement was similarly hard to come by at the USTelecom event, as panelists struggled with exactly how much legacy regulation to carry into the 21st century. It’s true that new technologies have given consumers several ways to communicate, and they can choose among text messages, Skype, or the reliable telephone that runs on a “bedrock set of infrastructure,” said Public Knowledge Senior Vice President Harold Feld. “One of my key concerns is these things are not separate from each other. When we say Skype works just fine and rides over the top, yeah: in an existing environment where you have a particular set of expectations for different elements of the network.” As the industry moves forward the “temptation is to look at the surfaces” and say “'I see a world around me that looks cool, so why do I need this old regulation?'” But that viewpoint doesn’t recognize that a lot of these relationships are complicated and the “cool stuff” relies upon a certain amount of oversight, he said.

When how the network functions starts to change, unexpected results can occur, Feld said, citing the call completion problems that have plagued rural carriers and customers. “When we started to change how the network worked, something unexpected came up, and we need to address that.” As the industry undergoes fundamental transitions, the government needs to be prepared to address problems as they emerge, he said. Otherwise, the “visual cool world that we're in” could “suddenly collapse because we were developing problems in the underlying structures, of which we were unaware."

But what underlies most of the “cool stuff” is the Internet, and ISPs have interconnected without regulation, said Jonathan Nuechterlein, chair of the communications practice group at WilmerHale. “The Internet -- the physical platform on which voice is converging -- is working efficiently without any interconnection obligations at all,” he said. Over the long-term, with “radical convergence,” voice will just be a higher layer voice app riding on top of IP networks that interconnected in an unregulated Internet space, he said. A “legitimate” question is whether there needs to be a regulatory backstop to prevent Internet fragmentation, he said.

The key question is how to ensure reliability, said John Mayo, director of the Georgetown University Center for Business & Public Policy. In some markets, reliability is due to government-mandated standards, he said, but market forces are sometimes sufficient to provide service reliability that satisfies consumers. Wireless infrastructure buildout over the last decade, and the concomitant increase in quality and reliability, “has not been driven by regulatory dictate and fiat,” he said. There may be some situations, like 911, which need specific targeted regulatory fixes, he said. “The question at this particular juncture is do we need 20th-century regulation in this world of 21st-century providers?"

"There is a role for the government to play in posing certain types of social welfare priorities,” Nuechterlein said, citing Enhanced 911 initiatives as a good example. “It is, to me, legitimate for the government to play a role as a backstop in ensuring basic public safety through the phone system.” The problem comes when trying to define what the phone system is and who is subject to those requirements, he said. Certain public safety obligations do apply to some over-the-top VoIP providers, like Vonage, he said. “Should they extend to Skype? Should they extend to Xbox? These are all hard questions I think are legitimately asked."

For some kinds of calls, consumers might be OK with services like Skype -- a best-efforts service that sometimes stutters and doesn’t connect, Feld said. “That’s not the case for a 911 call. That’s not even the case for me calling my mother on Mother’s Day.” The government will potentially loosen up voice rules in some areas to recognize it’s part of an IP network, but there needs to be a level of reliability, consumer protection, accessibility, affordability and competition that have been fundamental principles in the phone world, he said. Feld said he has “a certain sympathy” for incumbent phone companies who face certain obligations that other competitors don’t have, and feel they are now at a competitive disadvantage. “But at the same time,” he said, “you had a good hundred-year run.”