FCC VoIP Ruling Bound to Disappoint Someone

Tom Wheeler is showing willingness to wade right into things as the new FCC chair, but there's one pot he doesn't have to stir. The telecom industry is already in hot debate over the Federal Communications Commission (FCC) 's plans to consider changing how voice services should be regulated in the IP era, an action that could have far reaching impact.

The discussion is part of the broader debate over the IP transition and the ongoing role of regulation. Not surprisingly, incumbents are arguing for less regulation in the new all-IP world, while competitors say they still need some rules and requirements to ensure they still have access to customers and the right to interconnect to the "new" public network.

Big division
On one side of the argument are some over-the-top VoIP providers and incumbents, notably AT&T Inc. (NYSE: T), who are arguing that FCC should continue treating VoIP as it has since the days when Michael Powell chaired the commission, and deemed this new-fangled way of delivering voice to be an information service, not needing regulation, as opposed to a Title II voice service. On the other side are other incumbents, such as rural telcos, and competitive exchange carriers (CLECs), who say AT&T, Verizon Communications Inc. (NYSE: VZ), and others are looking for a way around rules that require interconnection for competitive reasons, as well as other regulation.

The rural carriers, led by the NTCA - The Rural Broadband Association , want the FCC to make sure they continue to be reimbursed for carrying VoIP traffic on their networks, as they are today for terminating TDM voice calls.

Mixed into this debate is an FCC trial, being conducted with Vonage Holdings Corp. (NYSE: VG), which would give OTT VoIP providers access to phone numbers, without being registered as a CLEC.

Taken as a whole, the FCC ruling on VoIP has the potential to reshape the competitive services landscape, and set a future course for the FCC as a regulator of Internet-based services. One concern for the anti-regulatory folks is that the current FCC, controlled by Democrats, is more likely to try to carve out a regulatory position for the commission going forward than previous commissions. But any attempt to create new powers will immediately be challenged in court, and take some time to be put into effect.

If the FCC requires the same kinds of interconnection required now, it will be bringing TDM inefficiencies to the IP world, argues AT&T, which first filed a petition with the FCC a year ago, asking that the agency review how regulations should change in the move away from TDM and toward all-IP networks.

AT&T has 5,000 different interconnection agreements in the TDM world, Bob Quinn, SVP, Federal Regulatory, said at the TIA Future of the Network Conference in October, and under existing voice rules, competitors can require AT&T to provide interconnection in any LATA, or local access and transport area, a designation that doesn't exist in the IP world.

Those rules don't apply to wireless carriers, to cable companies or to VoIP providers, Quinn argued.

CLECs cry foul
For their part, CLECs point out that most of them grew up in the all-IP world, or got there well ahead of their incumbent telco counterparts. Instead of looking for TDM-era regulations, they want a "backstop" against the continuing market power of big incumbents such as AT&T and Verizon, to keep from being frozen out of the markets to which they currently have access.

Two CLEC executives -- Kristie Ince, VP of regulatory affairs for tw telecom inc. (Nasdaq: TWTC), and Lisa Youngers, VP of federal affairs for XO Communications Inc. , -- engaged in the same debate with Quinn at the TIA conference, and view AT&T and Verizon as companies who still wield considerable market power. They want the FCC to require good-faith negotiations over interconnection in the IP world and not a regulatory clean slate.

The problem with the "backstop" approach, said David Young, VP of public policy at Verizon, is that any retention of old rules also involves 50 different state regulators, since they can control voice services, and that will impede moving to IP efficiencies.

What AT&T and Verizon are pushing for are trials of an all-IP voice network, and that may be where the FCC lands to try to resolve the dispute. The trials would implement an all-IP solution without traditional voice regulations.

But whichever way this one goes, a big part of the telecom industry is likely to be unhappy.

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

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sceptre00 2/18/2014 | 11:55:25 AM
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spc_isdnip 11/19/2013 | 10:29:42 PM
Re: Post TDM World Liz, if my grandfather had wheels, I'd be a trolley car.  Skype and the millions of other OTTs (all web sites, including LR, are OTT, after all) all depend on underlying networks.  The question is not what someone not in the wire-owning business would hypothetically do if they were monopoly wire owners, but what responsibilities apply to whom.

Wires should certainly be open. That predates MFJ, in fact -- MFJ just changed the stock ownership.  Computer II, in 1980, was the really crucial ruling that opened the networks.  But there is a bright line distinction between carriage and content. LR is not required to let others post their videos on it, or host their own blogs here. It's Internet.  ISPs should be given that flexibility -- but the underlying telecom, the carriage, should be separate and open. That way it's not just limited to "Internet", with its crappy "best efforts" (which means worst efforts), either.  Somebody could use the telecom to carry voice, video, music, etc., using optimized protocols.  But not when the only choice is best efforts IP or best efforts IP.
Liz Greenberg 11/19/2013 | 10:19:13 PM
Re: Post TDM World @spc_isdnip you make good points but my point is that IF the shoe was on the other foot and Skype and other OTTs controlled the physical plant they would argue exactly the same way as AT&T and Verizon.  Comcast sits squarely between the two and could argue either way.  Physical plant - whether coaxial, copper, or fiber - simply carries traffic period.  It doesn't care what kind of traffic - voice, data, video, whatever. Therefore it is up to regulation to keep it available to all period - independent of the type of traffic. The FCC can make that happen to keep the channels open, profitable, and competitive as they have since the first MFJ in 1984.
spc_isdnip 11/19/2013 | 7:23:21 PM
Re: Post TDM World Liz, I think you're mixing apples and orange juice here.

Vonage and Skype are over-the-top providers.  They own no transmission facilities.  They depend on other ISPs to haul their bits.  So they can't block traffic per se, though in the case of Skype they don't interconnect with anyone except PSTN gateways from SkypeIn, and whoever they choose to allow SkypeOut to.

Comcast XFINITY Voice is just a PSTN provider, equivalent to Verizon and ATT. They own the wire and provide full-quality service.  It doesn't touch the Internet at all.  The user interface is an RJ-11 POTS jack.  So why is that more like Skype than like 1FR service?  Because they use an internal muxing header?

Internet is not PSTN.  It's information service, content of telecom.  It could never have happened as a regulated public network; it happened because Computer II required the LECs to let ISPs rent their lines, even though the LECs hated the Internet with a purple passion (what, no TOLL charges?! EVASION!)  Thus there was competition, no market power, and a flexible voluntary economic model developed.

Conflate PSTN with Interent and they both die.
Liz Greenberg 11/19/2013 | 7:01:59 PM
Re: Post TDM World Sorry spc_isdnip but I think that you are splitting hairs on this.  If Vonage, Skype, Comcast or any other provider could block IP voice traffic for a monopoly they would do exactly the same thing.  PSTN becomes a term for all packet switched traffic as it is now so what is really needed is regulation that guarantees all packet switched traffic and interconnect, regardless of what type of traffic it is. 
spc_isdnip 11/19/2013 | 5:41:34 PM
Re: Post TDM World Liz, you have it backwards.  IP is merely a mulitplexing header.  It can be used for many things.  If it is used for the Internet or anohter information service, that's one thing.  If it's used to replace TDM on the PSTN, it's still the PSTN!  The PSTN has evolved from manual cord boards to rotary pulse to tone signaling to SS6 to SS7 without dropping its fundamental regulatory obligations, so why does IP become magic pixie dust that does away with protections against market dominance?

A good way to think of it is to separate what Vonage and Skype do over the Internet -- call that Voice Over IP (VoIP), from what PacketCable and the LECs do on managed (not Internet) bandwidth, offering full-quality PSTN service that just happens to use IP -- Call that Voice Using IP (VuIP).  They're utterly different.  Just because radios and computers both contain transistors, they aren't the same thing either.  The Bells are claiming otherwise as part of a relentless campaign to stuff out competition.
paulej 11/19/2013 | 10:57:17 AM
Re: Post TDM World It's a well-established fact that the TDM networks are going away. Heck, the carriers cannot even buy a new switch anymore, as far as I know.  Nortel is closed and I do not think Alcatel-Lucent still makes them.  What I hear is that telcos are moving equipment around when things break.

Service providers are now moving entirely to VoIP, though in some cases customers do not even know as it all happens in the back end.

Another important consideration that CLECs need to consider is that carriers no longer get the same level of revenue they used to get.  Who mays 10c/min for a phone call these days? I don't even have a landline and my mobile phone has unlimited calling.

I also use alternative services from around the web, including Skype, Spranto, Google Hangounts, etc.  So, while poeple are talking more, they are spending more of their time and minutes on alternative services.

I do not have the recpie for what rules should be made, but the fact is that consumer use and technologies are changing.  A change in rules is necessary.  If I had my hand in this, I would require the mobile phone carriers to interconnect and provide 911, but I would not require any other VoIP provider to do the same.  That sounds radical, but what would be the logic in requring Google Hangouts to interconnect or provide 911 service?  There is none.

And applications I install on my mobile phone (e.g., Skype and Spranto) should not be required to provide 911 service.  If I need that, that goes through the mobile operator.

For the traditional carriers, though, the whole voice business is evaporating.  Not only do they not earn much revenue on voice/video calls, it will continue to decline.  I think that's why there is a push toward the "unlimited" plans: they know there is no revenue in voice.  But that's OK.  The carriers are making up for that in data traffic.

One day, I might not even use my mobile phone carrier's voice service at all.  My use now is only a small fraction of the time I spend on "the phone."  For carriers to be forced into providing voice servce, versus just a pure data service, would be unfortunate, too.  I think they still view mobile voice service as valuable, but give it another 10 or 20 years and it might not be.  (And how many years have we been debating over these rules now? :-) )
DOShea 11/18/2013 | 10:45:43 PM
All-IP trials Seems about time that the FCC would allow AT&T and Verizon to go ahead with their trials. It's at least an incremental step to gain more information, and continuing to do nothing won't do.
Liz Greenberg 11/18/2013 | 8:48:30 PM
Re: Post TDM World Maybe ignorance is bliss but it seems to me that IP traffic is IP traffic and whatever rules apply should apply across the board independent of the content which in this case is real-time two-way voice/audio.  Maybe the rules need to make sure that carriers will interconnect period.
Carol Wilson 11/18/2013 | 5:40:43 PM
Re: Post TDM World Verizon and AT&T constantly remind folks that wireline voice is a diminishing business. What the CLECs are concerned about, however, is that in an unregulated worled, their managed voice services will be impacted if there is no regulatory authority to force the bigger carriers to interconnect. 

For a lot of reasons, TDM voice networks need to be phased out but I don't know which way the FCC will go or should go on whether there is any regulatory "incentive" to protect interconnection in the IP world. 
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