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Optical/IP

California PUC Pinches Packets

LAS VEGAS – TELECOM '04 – Think regulatory issues aren't having a large direct impact on telecom investment? Witness a recent decision by the California Public Utilities Commission on a Verizon Communications Inc. (NYSE: VZ) packet network, say experts.

In September, Verizon decided to yank development of a packet voice network after a ruling by the California PUC said it would have to share the network. Verizon issued a press release on the subject on September 22. It read in part:
    "We deeply regret that California consumers will be denied Internet-based packet-switching technology," said Tim McCallion, Verizon's Pacific region president. "Verizon has no choice but to halt this program because of a regulatory ruling that imposes conditions we cannot meet and that undermine the economics of this investment."


So why are folks still talking about this, three weeks later? What's striking about the decision, industry experts say, is that it flies in the face of the Triennial Review of the Federal Communications Commission (FCC), which aimed to give carriers more ownership of their own packet networks without forcing them to share resources. In addition, today more federal decisions appear to go in favor of the RBOCs (see RBOCs Clear (Another) Regulatory Hurdle). But those in favor of deregulation point to the fact that a state can contradict the federal government on telecom line-sharing, leaving service providers with a cloudy regulatory outlook.

Several equipment vendor sources said the California PUC decision is still being talked about as a disincentive for service providers to build packet VOIP networks.

The issue was raised this week when Alliance for Telecommunications Industry Solutions (ATIS) president Susan Miller expressed concern over the California PUC decision in a Q&A session.

Sources say that softswitches from Nortel Networks Ltd. (NYSE/Toronto: NT) were at stake in the Verizon network.

Nortel declined to comment for this story.

One executive with multiple systems operator (MSO) Cox Communications Inc. (NYSE: COX) said the ruling brings to light the reality that service providers are still battling regulation on two levels, the federal and the state. And in many cases, the two jurisdictions aren't on the same page.

"As an MSO, this is something we are faced with all the time," said James Renken, vice president of operations support with Cox. "The FCC has a jurisdiction and the state has a jurisdiction, so you just have to do your work with both of them..." — R. Scott Raynovich, US Editor, Light Reading

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fgoldstein 12/5/2012 | 1:11:03 AM
re: California PUC Pinches Packets I don't think the article gets it right. If this is the situation I think it is (VZ's trying this is a few states), what VZ's doing is updating its DMS CO switches to have VoIP capability, strictly internal to their own network, then claiming that because they're packet switches, they should be treated like DSLAMs and other non-unbundleable packet switching gear. In other words, whisper "vermouth" over a glass of vodka and call it a dry Martini, subject to mixed-drink pricing.

That's the trouble with this "deregulate VoIP" push. If you provide regulatory favoritism to one technology or another, especially if the technology's deployment is both invisible to the end user and offers no benefits, then you'll see vendors jump on the bandwagon merely to get the regulagtory edge. We see that already with VoIP long distance, especially AT&T's own "dry Martini" attempt to get around Switched Access. When AT&T did it, the pro-ILEC FCC had a hissy fit and knocked them down hard. Now, the CPUC is doing the same to VZ. It's a telephone switch comma dammit, not a packet switch, and doing gratuitous packetization inside the network is not a valid resaon to cut off CLECs from ordering a required UNE.

There are plenty of VoIP applications that should not be regulated as telephony. Skype is nothing like POTS! But VZ is doing "phone to phone" telephony, and if they want to use VoIP internally, then that's their business, but it should not be equated to the provision of Internet Access or other datacomm, which is what the "packet switching is not unbundled" rule is about.
paolo.franzoi 12/5/2012 | 1:11:02 AM
re: California PUC Pinches Packets
Verizon was not updating its DMS switches but buying brand new packet switches. In fact Verizon has created a service that competes with CallVantage and Vonage. That is what they are talking about. Are you so blinded by your utter hatred that you can be rational for even 1 nanosecond.

I am waiting for Vonage to unbundle their switching.

seven


fgoldstein 12/5/2012 | 1:11:01 AM
re: California PUC Pinches Packets Verizon was not updating its DMS switches but buying brand new packet switches. In fact Verizon has created a service that competes with CallVantage and Vonage. That is what they are talking about. Are you so blinded by your utter hatred that you can be rational for even 1 nanosecond.

Sorry, brookseven, but I think you're so blinded by your fealty to the Mighty Monopolies that you didn't bother to look up what they were doing. We are not talking about Voicewing; we're talking about ordinary local telephone service, and the switching component thereto. Let's go to this CLEC Industry Letter http://www22.verizon.com/regul... put out by VZ on June 15:


Replacement of DMS 100s with Nortel's Succession Packet Switches in California

This notice is to inform you of a Verizon end office replacement project in the state of California for the
following central offices:

Redhawk, CA: TMCLCAXHDS0
Elsinore Grand: CA: ELSNCAXG67K
Homeland, CA: HMLDCAXF92H
Baldwin Park, CA: BLPKCAXF33K
Azusa, CA: AZUSCAXF33K

...
Under the rules adopted in the Triennial Review Order, as under prior FCC rules, Verizon is not required
to provide unbundled packet switching. Verizon also is not required to provide unbundled shared
transport for use with unbundled packet switching. The FCCGÇÖs rules and regulations pertaining to
nbundled packet switching, and the related provisions of the Triennial Review Order, were affirmed by the
U.S. Court of Appeals for the D.C. Circuit on March 2, 2004.
...
If you have unbundled local circuit switching arrangements at these California central office locations or
the other impacted sites identified in Attachment 1, you must submit LSRs to establish alternative service,
such as one of the many available resale arrangements offered commercially by Verizon...


In other words, they ordered the DISCONNECT of any existing UNE-P in five central offices, claiming that it would otherwise be unbundled packet switching. Even though it was really just functionally-identical local exchange service POTS delivered through a "Succession" rather than a "DMS-100".

I am waiting for Vonage to unbundle their switching
Vonage is not an ILEC, and as such has no unbundling obligations. It's not even a LEC. Try again.
laserbrain2 12/5/2012 | 1:10:57 AM
re: California PUC Pinches Packets That's the trouble with this "deregulate VoIP" push. If you provide regulatory favoritism to one technology or another, especially if the technology's deployment is both invisible to the end user and offers no benefits, then you'll see vendors jump on the bandwagon merely to get the regulagtory edge.

F -

You seem to have a decent grasp of this particular situation. However, conluding that "regulatory favoritism" should be avoided is wrongheaded. Any chance we get to undermine the onerous telecom laws should be cherished and nutured for the ray of hope that it is.

What we should be up in arms about is that the government has any damn opinion whatsoever about my phone service and how it gets delivered or at what price. The trend of ILECs faking their way around a regulation is not a symptom of ILEC shysterism, it is a symptom of regulatory insanity. The ILEC has a responsibility to its customers to do everything it can to avoid the silly government restrictions on its business. I'd pull out of California too.

Go VZ. (never thought I'd say that!)
fgoldstein 12/5/2012 | 1:10:54 AM
re: California PUC Pinches Packets What we should be up in arms about is that the government has any damn opinion whatsoever about my phone service and how it gets delivered or at what price.

While that is the Newt Gingrich position, most people agree that monopolies should be regulated. An unregulated monopoly can gouge its involuntary customers. ILECs are monopolies. They are no longer the strictly protected de jure monopolies that they once were, but they still have natural monopolies as a result of their historical market share. Most countries use "significant market power" as a test of whether monopoly regulation is needed. I think that makes sense.
paolo.franzoi 12/5/2012 | 1:10:54 AM
re: California PUC Pinches Packets
And if somebody wanted to be a CLEC in the Verizon territory, they could BUY A SWITCH and use UNE-L.

But gee sir, that would require us to spend money, invest in the network, for the customers. Well that is the point.

UNE-L at least requires them to put at least 1 piece of equipment into the network. Hire at least 1 human being. Do something, anything to improve the network.

UNE-P means you do not invest, you do not hire, you do not bring a single new service to the customer (you can't because you are not putting any equipment in).

In my mind, UNE-P is a great way for people to lay back and collect money while others actually work. I am always STUNNED that people support it in order to kill network investment.

If you build a new network, why can't I rent it out below cost???? Awww....its expensive to take 0.5% market share. Thats the point, you don't have a business you have a piece of regulatory arbitrage. Go make a business. Do something of actual value. Then people might actually buy some of your products and services.

Tell me how UNE-P stimulates investment?

Tell me how UNE-P adds any (name 1) new service?

I am listening for the crickets.

seven
paolo.franzoi 12/5/2012 | 1:10:54 AM
re: California PUC Pinches Packets
I guess you can't realize that 2 products from 1 company are different.

Packet switches are not circuit switches.

No matter who they belong to.

fgoldstein 12/5/2012 | 1:10:53 AM
re: California PUC Pinches Packets I guess you can't realize that 2 products from 1 company are different.

Packet switches are not circuit switches.

The product is POTS. Whether it's delivered with a GTD-5, a DMS-100, a Succession, or a Strowger is of secondary importance. Whether the switch has TDM, ATM, IP, or high-speed modulated smoke signals on its bus is of no external importance whatsoever.

The good news is that because VZ has cancelled this turkey, local users will get the good performance of a DMS, without the slightly degraded performance that even a tiny bit of digitization adds.

And if somebody wanted to be a CLEC in the Verizon territory, they could BUY A SWITCH and use UNE-L.

I agree but only in a general sense, and have recently posted (in a different thread) some rather exhaustive information about the costs and barriers to entering UNE-L. You can choose to ignore them and live in your ignorant bliss, but the plain fact is that it's not possible for every CLEC to turn every UNE-P line into UNE-L just like that. I'm currently migrating a large CLEC (tens of thousands of lines) from UNE-P to UNE-L, but only some of its lines are accessible to UNE-L, due to scale issues. The Telecom Act explicitly called for the unbundling of switches, and that was the deal that got the RBOCs back into LD.

I am aware of third-rate CLEC consultants who sell wannabe CLECs a bill of goods about how they can become a UNE-P CLEC for next to nothing and just collect checks. I don't do that kind of thing, and I don't expect that kind of thing to last. But getting out of existing obligations merely by whispering "eye pee" over the fabric of a POTS switch does not make sense.

Besides, as I noted in a different thread (Frank engaged me into a third one, the BellSouth IP DSL one), IP sucks, and it shouldn't be encouraged.
wilsonlance 12/5/2012 | 1:10:52 AM
re: California PUC Pinches Packets In fact a catch phrase for

Even though it was really just functionally-identical local exchange service POTS delivered through a "Succession" rather than a "DMS-100".

is "packet-in-the-middle."
wilsonlance 12/5/2012 | 1:10:51 AM
re: California PUC Pinches Packets A somewhat hypothetical answer to the question

"Tell me how UNE-P stimulates investment?"

is given below.

To the extent that ILEC retail prices reflect an implicit transfer from the business to the consumer segment, while UNE-P's TELRIC-based cost does not have such a transfer, then UNE-P could be a means to stimulate rationalizing retail prices. Rationalized retail prices would then provide the proper stimulus to investment and facility-based competition.

The connection/stimulation is indirect.
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