IP Transition Looming with Questions, Fears, Industry Enthusiasm, NARUC Meeting Shows

"Our public policies must change” to accommodate “the Internet ecosystem,” said Verizon Executive Vice President Tom Tauke in a Monday keynote. He slammed “obsolete” federal statutes and encouraged a model that fostered investment in “the IP ecosystem,” focuses on the consumer experience and includes a policy process that protects against privacy infringement, fraud and other problems. He emphasized the benefits of broadband, telehealth and how new communications technology can save lives and improve education.

AT&T emphasizes the transition away from the public switched telephone network in its filings and $14 billion Project Velocity. “Our vision” isn’t “a regulation-free zone” but rather “21st-century regulation,” applied neutrally on a competitive and technological basis, said Senior Executive Vice President-External and Legislative Affairs James Cicconi in a Tuesday keynote. The old network is “going away,” and AT&T wants to “turn it off,” he said, citing its billions in maintenance costs and diminishing customers: “We have to move completely away from POTS and TDM to IP.” The company “wanted to “start a dialogue within the industry” on the technical and policy issues in “getting to an all-IP world” with its recent filings, said Executive Director-Public Policy Philip Bowie. The goal is to make “sure investment dollars are going in the forward direction,” he said. He contrasted today’s “multi-purpose networks” with pre-1996 “single-purpose networks” and fears “extending [1996 Telecom Act Section] 251-style regulation to IP,” he said, referring to interconection-agreement regulation. The telecom industry would “end up with a tail-wagging-the-dog kind of situation,” he said. He recommended commercial negotiations.

One Verizon executive denied the company’s migration away from copper sought to change regulation. “We're not looking to charge them any more, we're not looking to change the regulatory landscape,” said Senior Vice President-Consumer and Mass Business Markets Thomas Maguire of its strategy. Verizon has migrated 170,000 people from copper to fiber since the beginning of the year, who all seem “very happy,” according to Maguire. The telco has sent about half a million letters asking customers to migrate. Devices are changing the telecom landscape far more quickly, he added, noting Verizon bandwidth usage grew 157 percent since 2010 when the iPad was introduced. “A system built around state interconnection agreements doesn’t really fit a model where you only need three points of interconnection,” said Verizon Vice President-Federal Regulatory Affairs David Young of IP agreements. These three points would “adequately” serve the country in a nationwide network but are an “extreme” case now, given many companies may opt for more than three now, he said.

The AT&T petition deserves attention, and the coming shift to IP “probably does require some different, lesser regulation in the retail market space,” said economist Joe Gillan of Gillan Associates. But he leveled strong scrutiny against multiple telcos. Verizon’s Young used “buzzwords that strike fear into the hearts of all carriers save one or two,” he added. The size of companies is a major factor in the different strategies at work, according to Gillan, who has worked for CLECs and other competitive providers. AT&T and Verizon are “two basketball players” and Cox a “one-year-old,” he said of their comparative size: Fracture lines here are “not between CLEC and ILEC” but “between the very largest corporations and basically everyone else.” The regulation of Section 251 should still apply, he said. An all-IP network puts people at risk in a number of ways, National Association of State Utility Consumer Advocates Counsel David Bergmann told us, saying it’s ultimately all one network. Is the recent AT&T petition simply “a way of getting rid of your carrier-of-last-resort [obligations] at the end of the day?” asked Pennsylvania Public Utility Commission Telecom Analyst Labros Pilias. That’s the company’s goal, he said in questions during a Saturday panel. AT&T has tried to do so before, he said, citing the company’s ABC Plan. “I would suggest to you that carrier-of-last-resort is on life support,” said Balhoff and Williams Managing Partner Michael Balhoff at a Tuesday panel.

Cox would only want to change over from TDM to IP in an “economically optimized fashion,” said Strategic Service Delivery Architecture Executive Director Bruce McLeod. The cable company’s interconnection agreements rely on traditional TDM and he wants any change to be a business decision, he said. “The whole discussion of removing copper doesn’t really apply to our company,” said Cox Executive Director-Regulatory Policy and Industry Relations Jose Jimenez.

Verizon’s migration strategy baffles customers, state officials said. “Consumers are confused about what they're getting and what they're losing,” said Karlen Reed, competition division director of the Massachusetts Department of Telecommunications and Cable. The Pennsylvania Public Utilities Commission receives reports from residents who don’t grasp the changes, said Assistant Counsel Shaun Sparks, citing Verizon letters customers had received. Maguire insisted customers can still receive TDM over fiber, which is simply a vehicle for the service. Customers’ accounts don’t change, he said. The PUC wasn’t initially able to tell the jurisdiction of a particular call when complaints appeared, Sparks said.

Voice also faced scrutiny. It’s “not the service that it used to be,” argued AT&T’s Bowie. Thirty percent of AT&T customers don’t apply to wireline, he said, with customers leaving in favor of wireless and VoIP in an “ongoing trend.” “The ILECs are not the dominant players in this space, and voice lines are continuing to decline,” he added. But voice is “different” and “not immaterial,” argued Gillan. It’s the “gold standard” in revenue per bit stream and will help pay for multiservice platforms, he said. Voice is one among many applications now, said Verizon’s Young, who talked about the growing significance of Twitter and Instagram.

The Broadband Coalition calls AT&T’s move to IP “a bit late" but expects “significant benefits,” said spokesman Chip Pickering, a former Republican congressman from Mississippi, Tuesday in a statement. “Now, more than ever, the FCC needs to act to reaffirm requirements under the ‘96 Act that enable last-mile access and interconnection, regardless of the underlying technology,” he said. Pickering “seems committed to a last ditch fight to preserve rules designed for another era ... rules nearly everyone agrees no longer make sense,” an AT&T spokesman said. “If he and his members are as advanced in their IP investments as his statement seems to claim, one should perhaps be forgiven for wondering why they feel it so essential to preserve antiquated non-IP infrastructure rather than rely on his members’ own IP infrastructure investments.” The IP transition may benefit consumers and calls for ending “monopoly-era legacy standards,” Free State Foundation President Randolph May said in a Tuesday blog post (http://xrl.us/bnzgzs).

IP interconnections don’t regulate the Internet -- an idea that’s “hogwash,” said ETC Group President David Malfara. “We're not talking about regulating the Internet, we're talking about providing an extension of the PSTN into a new generation of technology.” An ETC analysis said when voice traffic is originated using VoIP technology, IP interconnection can reduce the cost of interconnection for the exchange of voice traffic by about 97 percent. He outlined its differences from TDM interconnection as well as the “transitional” cases of IP-to-TDM interconnections. The “end state we're all looking for” is IP-to-IP interconnection, with two IP end points, he said.

If companies don’t want regulation, the U.S. government should also kill the subsidies and high-cost support, said District of Columbia Public Service Chairman Betty Anne Kane: “They want to go market-based, then let them go all the way market-based.” AT&T views the change as inevitable: “We all know that we need to move in this direction,” said Cicconi of what he called a transition already in progress and “an IP-only platform for the future.”