Phone Companies Gird for Battle on Potential IP Network Regulation

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By Bryce Baschuk  

Jan. 6 -- Telecommunications companies like Verizon Communications Inc. and AT&T Inc. are preparing for a long, drawn-out fight to resist efforts aimed at applying 20th century regulations to the Internet Protocol-based networks of the future.

Executives from those companies said during a Jan. 6 panel discussion at the 2014 international CES conference in Las Vegas that the Federal Communications Commission must encourage wireline telephone companies to voluntarily migrate to IP networks in the coming years rather than enforcing new mandates.

The FCC still regulates copper wireline telephone networks based on interconnection rules and public safety mandates established when the marketplace was a virtual monopoly. Telecommunications companies say it is becoming increasingly expensive to maintain their traditional networks when IP-based networks are both cheaper and more efficient. However, some public interest groups say telecommunications companies are seeking to evade the FCC's regulatory reach by shutting off their old copper networks completely.

The current regulatory structure regarding communications networks is “creating artificial distortions in the market that have more to do with the past” than with now, said Robert McDowell, a former Republican FCC commissioner and current visiting fellow at the Hudson Institute. Companies like AT&T and Verizon have said that the FCC is forcing them to spend millions of dollars reinvesting in less efficient technologies like copper landline phone networks.

Burdensome Regulatory Structure

“One of the big battles we will have is people will say, 'If these IP services are going to replace [plain old telephone service] then we need to put these regulations on them,' ” said Robert Quinn, AT&T's senior vice president of federal regulatory issues. “I personally believe that is really the undergirding of the fight we are headed into.” AT&T has petitioned the FCC to allow the company to replace their traditional analog telephone equipment based on time division multiplexing (TDM) with IP networks that efficiently transmit a broad array of digital information.

“This IP transition is well under way,” said Verizon Vice President for Public Policy David Young. More than 33 million Americans dropped their traditional copper landlines over the past four years, 42 million people now subscribe to voice over IP (VoIP) services, and nearly two in five U.S. households use wireless phones instead of landlines, according to FCC officials.

“The challenge is what do we do about this last few percent to migrate them” to IP networks “and how do we move away from the regulatory structure designed for a monopoly environment,” Young said. “The old regulatory model doesn't make sense anymore.”

At the FCC's Jan. 30 meeting, the commission's technology transitions policy task force plans to present an order to consider industry experiments that focus on the impact of dedicated IP network deployment on consumers and create a timeline to address the legal and policy questions that result from those tests. The experiments aim to help consumers, carriers, and the commission to understand what happens when copper telephone networks transition to IP-enabled networks.

FCC Order Pending

FCC Chairman Tom Wheeler previously said the forthcoming IP transition order should include recommendations to the commission on how best to:

• obtain comment on and begin a diverse set of experiments that will allow the commission and the public to observe the impact on consumers and businesses of such transitions;

• collect data that will supplement the lessons learned from the experiments; and

• initiate a process for commission consideration of legal, policy, and technical issues that would not neatly fit within the experiments, with a game plan for efficiently managing the various adjudications and rulemakings that, together, will constitute the commission's IP transition agenda.

 

The FCC is the right venue to craft the debate over how companies can end their analog copper wireline networks in a way that minimizes harm to consumers, Quinn said. “They have the moral authority in telecommunications policy to convene the consumer groups, the competitive industry, and the incumbent industry to figure out what this new world will look like,” he said.

The commission “wants telephone companies who are interested in conducting these tests,” Quinn said. “In the end you may have to migrate some people but I think from everything we have heard from the commission they get the need for flexibility.”

As the commission looks at revising its statutes, policy makers “need to look at our laws through the lens of consumers,” McDowell said. They should ask, “Is there a market failure that is resulting in consumer harm? And if so how can a law cure that and can it be sun-setted?” he said.

To contact the reporter on this story: Bryce Baschuk in Las Vegas at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com