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US Carriers Should Fix Own Regulatory Crisis

Carol Wilson
3/19/2014
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LAS VEGAS -- COMPTEL Plus Spring 2014 -- Can US service providers cooperate on their own solution to figure out how to interconnect competing networks in an all-IP world? Sam Kline, SVP-corporate strategy for Granite Telecommunications thinks so, and he warns that the telecom carriers' failure to agree on a solution that supports competition going forward will force Washington to step in with a plan likely to burden everyone. (See Windstream CEO: Protect Interconnection and FCC VoIP Ruling Bound to Disappoint Someone.)

Kline, whose firm Granite Telecommunications LLC is a national competitive carrier, laid out what he sees as obvious realities in a panel discussion on the future of the copper network in the US. While conceding that it doesn't make sense for an incumbent telco to maintain outdated or inefficient network elements such as aging copper loops and under-used circuit switches, Kline pointed out that it also doesn't make economic sense for every operator to build out its own local distribution network, rather than share the local loops through the wholesale arrangements that exist today.

"We are better off working together here to find a solution," Kline said. "It doesn't make economic sense for us to force government regulation by refusing to find a reasonable business process that enables us to work together. "

The challenge is how competitive carriers will gain access to incumbent networks as incumbents upgrade their networks, both to eliminate aging TDM switches with IP gear, and to replace copper distribution plant with fiber. (See FCC Tests Copper Obsolescence in an IP World.)

Kline's comments came after execs from two incumbents -- AT&T Inc. (NYSE: T) and CenturyLink Inc. (NYSE: CTL) -- said their companies are not planning sweeping retirement of copper networks but nor are they interested in maintaining two networks -- copper and fiber -- or keeping aging switches in operation when they are under-utilized.

Both Gary Ludgood, SVP, global network field operations, AT&T, and Bill Cheek, president, wholesale markets group, CenturyLink, said their firms are tracking their network investments to consumer demand -- and that's tilting toward wireless connections and VoIP services, not traditional wireline voice.

CenturyLink, which has lost 70% of traditional voice lines in its 37-state region, "doesn't see the day when we will retire copper but we don't want to be mandated to maintain two networks either," Cheek said. The carrier favors interconnection at state level, he added.

AT&T is looking for the most efficient way to handle interconnection of networks in the IP realm, Ludgood added, and he appealed to a large crowd of mostly competitive operators to share their ideas. Ludgood also said he believes the period for all-IP trials will be a long one. AT&T has proposed two initial trials to the FCC. (See AT&T's All-IP Tests Won't Answer Key Questions.)

The fourth panelist, Daniel McCarthy, president and COO, Frontier Communications Corp. (NYSE: FTR), a smaller ILEC, pointed out that while consumers are shedding their wireline phones, businesses are not, and maintaining choice and competition in the business community remains a key economic driver in many parts of the US. That will require maintaining copper connections.

Incompas , the organization sponsoring the event and the political lobbying force for the competitive carrier industry, is the likely fulcrum point for any industry discussion, since all of the major carrier players that buy and sell wholesale interconnections attend its twice-annual events and keep its deal center hopping. Chip Pickering, the new CEO of Comptel, moderated the copper panel and kicked off the panel by saying the new transition to IP needs to carry forward the "enduring values" of the current system.

— Carol Wilson, Editor-at-Large, Light Reading

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Phil_Britt
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Phil_Britt,
User Rank: Light Sabre
3/20/2014 | 3:53:26 PM
Re: Keep the gov out....
I think if they start getting wind of the government stepping in, it will be  enough for them to try to work together. They've seen how the government has "helped" the industry before, so they have to know that working together may not come up with a solution than everyone likes, but is very likely to be better than anything imposed from on high.
Carol Wilson
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Carol Wilson,
User Rank: Blogger
3/20/2014 | 3:12:28 PM
Re: Keep the gov out....
Sam,

I'm sure that's why the Granite exec was making this appeal. The folks who gather at Comptel -- and all the carriers do -- are the ones making the deals with each other, and they know the give-and-take. The guys at the executive level, not so much.

And if they string this out long enough and the next administration winds up setting the rules, it could be a very different ballgame. 
sam masud
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sam masud,
User Rank: Light Sabre
3/20/2014 | 2:35:43 PM
Re: Keep the gov out....
Agree with you that it would be nice for the industry to sort these things out on their own, but it seems the big guys, whether vendors or service providers, don't every want to "give" anything away. So would not at all be surprised to see this dumped into the lap of regulators--and it's not as if the big guys don't have a lot of weight there. So with them, it's heads I win, tails you lose, and forget win-win.
thebulk
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thebulk,
User Rank: Light Sabre
3/19/2014 | 6:17:53 PM
Re: Keep the gov out....
Peering is what I take it as. But I could be wrong. 
Mitch Wagner
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Mitch Wagner,
User Rank: Lightning
3/19/2014 | 6:14:49 PM
Re: Keep the gov out....
If I'm reading this right, Kline says that established businesses should work together to ensure that new competitors can enter the field.

That's not how business works. What happens is that established businesses work together to BLOCK new competitors. Why should they do otherwise?

On the other hand, peering arrangements between networks have historically worked brilliantly well, and we're talking about peering (or something like it) here, correct? Or am I missing something?

And when business and government work together, what happens is they cooperate to drive out new competitors. 

I seem to be excessively gloomy today. I need more tea. 
thebulk
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thebulk,
User Rank: Light Sabre
3/19/2014 | 3:07:53 PM
Re: Keep the gov out....
Of course they don't want to keep pumping money into copper when they have shinny new fiber on hand. 
mendyk
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mendyk,
User Rank: Light Sabre
3/19/2014 | 2:19:25 PM
Re: Keep the gov out....
It's a little more complex than that. Verizon, for instance, is essentially letting its copper network deteriorate in markets where it also offers FiOS. But as of now, it's also saying that it will not be expanding its FiOS footprint. Applying logic, this suggests that Verizon at minimum wants to operate only one network (FiOS or copper) in each market it serves, but it can't force copper customers off their service in the FiOS territories for regulatory reasons. As for the markets that don't have FiOS, it's entirely possible that VZ may just want to sell those off, but that hasn't been stated publicly to my knowledge.
thebulk
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thebulk,
User Rank: Light Sabre
3/19/2014 | 2:05:27 PM
Re: Keep the gov out....
They will keep copper for as long as they can... and squeze as much cash out of it as they can.
kq4ym
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kq4ym,
User Rank: Light Sabre
3/19/2014 | 1:59:33 PM
Re: Keep the gov out....
As the telcos say they aren't going to get rid of copper, but on the other hand don't want to continue two systems, one wonders which is true. Residential customers have abandoned the landlines bit time, but business, presumably because of much larger investestments in equipment will slog on for a bit more, but eventually they'll switch as well. To avoid regulatory oversight all will have to get togther before they are forced.
thebulk
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thebulk,
User Rank: Light Sabre
3/19/2014 | 1:55:49 PM
Re: Keep the gov out....
@Carol, 

Yes, Openness is what I was getting at, I think there needs to be some regulation on that front, no matter how much the providers fight it. And speaking from my experience as a network engineer at a service provider I know that the companies can easily come up with a workable solution and probably have it implemented in record time if there was money to be made. I just think the government needs to help put a framework of openness in place to help everyone play nice. 
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