Monday, November 02, 2015

FCC Must Transition Away From Roadblocks to All-IP Networks

The point of the FCC's Technology Transitions proceeding supposedly is to speed up migrations from legacy narrowband services to Internet Protocol-based broadband services. But the Commission's proposed Tech Transitions regulations miss that point completely. If adopted, they would erect new roadblocks to broadband deployment. Truly, the Commission needs to transition itself away from such a counterproductive proposal.
The Commission is taking public comments on proposed rules that would make it harder for transitioning providers to discontinue operating copper-based legacy voice networks. In essence, the Commission plans to put the burden on providers to justify discontinuation of legacy networks and replacing them with services using new advanced technologies.
Prolonging operations for increasingly costly and outdated networks diverts resources better allocated to all-IP networks. Bureaucratic costs and delays in broadband upgrades will be consequences of the Commission’s proposed transition rules. Further, competitive conditions in the voice services market make burdensome Tech Transitions rules unnecessary. As discussed below, consumers overwhelmingly have access to wireless and IP-based alternatives to copper-based switched access lines. And the Commission's Section 214 authority concerning discontinuation of voice services doesn’t authorize detailed regulation of broadband network capabilities.
If the Commission really wants to streamline and speed up tech transitions, it should settle on a simpler approach that is keyed to existing market realities. The Commission should adopt deregulatory presumptions in the Tech Transitions proceeding. Given the widespread consumer adoption of VoIP and wireless services, the Commission should presume that VoIP and wireless are adequate substitutes for legacy networks. Upon filing an application, the Commission should allow voice providers to discontinue old copper-based voice services unless there is clear and convincing evidence that no adequate substitute is available in a given area.
As indicated, there are at least three serious problems with the Commission's proposed Tech Transitions regulations.
First, the Commission's proposed rules will slow broadband deployments and upgrades. If adopted, its restrictive procedural hurdles on discontinuing copper-based services will impose unnecessary costs and delays on tech transitions. The Commission already has a process for discontinuing voice services under Section 214. When voice providers request discontinuation of services, the Commission weighs five factors: (1) financial impact on the provider of continuing to offer services; (2) need for the service in general; (3) need for the particular facilities in question; (4) existence, availability, and adequacy of alternatives; and (5) increased charges for alternative services. Section 214 applications are nearly always granted as a routine matter.
The Commission now proposes to bog down the existing Section 214 process. Under the Commission's proposal, providers seeking to discontinue retail voice services and replace them with services "based on a newer technology" must show that its new service – or services available from other providers – satisfy additional requirements. The proposed requirements involve: (1) network capacity and reliability; (2) service quality; (3) device and service interoperability; (4) service for individuals with disabilities; (5) PSAP and 9-1-1 service; (6) cybersecurity; (7) service functionality; and (8) coverage. These requirement are directed specifically to incumbent local exchange carriers (ILECs).
Of course, if anyone objects to the transitioning provider’s application, the Commission's proposal states: "[T]he carrier would be required to submit information demonstrating the degree to which it meets or does not meet each factor." In other words, the Commission proposes putting the burden on providers transitioning to all-IP network services.
Assembling detailed information and organizing the paperwork involved will doubtless drag out the transition to all-IP networks. It will certainly impose regulatory compliance costs on providers, tying up resources better spent deploying broadband networks. Moreover, the Commission's proposal will result in unnecessary duplication. Voice providers will continue to be required to maintain two separate networks to perform the same end-user services. And increasingly expensive replacement parts are needed to maintain legacy network operations. Here also, pouring financial resources into outdated networks to satisfy regulatory requirements means reducing investment in next-generation services.

Second, competitive marketplace conditions make burdensome new regulatory requirements on tech transitions unnecessary. Consumers today have real choices among service providers, undermining the need for stringent regulations. Earlier in the Tech Transitions proceeding, the Commission expressly observed that three-fourths of voice subscribers use Voice-over-the-Internet Protocol (VoIP) and wireless. Continuing steep declines in switched access lines have been widely recognized. According to the Local Telephone Competition Report (2014), “[i]n December 2013, there were 85 million end-user switched access lines in service, 48 million interconnected VoIP subscriptions, and 311 million mobile subscriptions.” Between 2010 and 2013, VoIP subscriptions increased at a compound annual growth rate of 15% while switched access lines declined 10% annually. Cable operators are now nationwide providers of VoIP services. And over 45% of households rely exclusively on wireless for voice services.
These trends in technological migration and consumer adoption presumably are a critical part of the Tech Transitions proceeding's reason for being. They also render the Commission's proposal for Tech Transitions regulations needless. If imposed, the result would be burdensome requirements on a single ILEC, when consumers would likely have access to competing wireless and cable providers of voice services.
Third, there is a serious rule of law problem with the Commission's proposed rules. The Commission doesn't appear to have the authority to impose them. The purpose of Section 214 is to make sure communities have access to voice services. Section 214 is not a source of power for regulating the details of broadband service deployments or upgrades. But the Commission's proposed requirements for replacing legacy voice services with "a newer technology" delve into technical capabilities of all-IP networks. That goes far beyond basic Section 214 requirements for discontinuing voice services.
Instead of imposing regulations that will slow tech transitions, the Commission should take a simpler approach that is tied to the realities of today’s marketplace. There is widespread consumer adoption of VoIP and wireless services. There is also competition to ILECs from wireless and cable VoIP providers, offering real choices to consumers. The Commission should therefore adopt a deregulatory presumption to govern the Tech Transitions process. In particular, it should presume that VoIP and wireless are adequate substitutes for old copper networks. Upon filing and application, the Commission should allow voice providers to discontinue copper-based voice services within a short timeframe absent actual compelling evidence that no adequate substitute is available in a given area.
A pro-market approach in the Tech Transitions proceeding based on deregulatory presumptions will reflect existing competitive choices. It will actually facilitate such deployment of all-IP networks rather than impede them. And, finally, it will conform to rule of law norms by not over-stretching the common understanding of the Commission's authority under the Communications Act.