Wheeler: “We Now Return To Our Transition of the Phone System Already In Progress.”

In the last two days, Federal Communications Commission (FCC) Chairman Tom Wheeler has made back-to-back speeches that on their surface appear as dissimilar as could be. First, he gave this speech at the Fall 2014 COMPTEL Show. The next day, he gave this speech at the 32nd Annual Everett Parker Lecture. Dig a little deeper, however (and keep in mind what I have previously said about Tom Wheeler signaling what he wants to do if anyone actually pays attention) you notice some startling commonalities between these two speeches. Notably, this is the first time Wheeler has brought up the transition of the phone network in a serious way in a long time. And, in both speeches he made it very clear that transition of the phone system to an all IP platform does not end the FCC’s role.

ITo summarize my take aways:

1. Wheeler wants to shift the FCC back into working on the IP Transition despite the fact that AT&T is not going to have its pilot project ready until the second half of 2015. It is, after all, the thing he came to the FCC to do in the first place before net neutrality and Comcast/TWC essentially hijacked 2014.

 

2. While the nature and form of regulation will change, the FCC will continue to play a critical role — during the transition and after the transition — both in promoting competition and protecting consumers.

 

3. That Network Compact Wheeler keeps talking about? He really means it. When he leaves the FCC, he wants to leave an agency that still protects network users under this fundamental set of values.

 

A bit more below . . .

 

First, consider that Wheeler has not spent much time recently talking about the transition of the phone system. Back when Wheeler came in, and AT&T were pushing hard to get approval to conduct trials to convert an entire wire area to all-IP, we spent a lot of time talking about the future of the IP Transition (now called the “Technology Transition” to reflect fact that it is not simply replacing TDM with IP but replacing TDM with a number of technologies — including wireless). Net neutrality, spectrum, and broadband competition have been the dominant themes for some time. We haven’t heard much about the IP Transition since the June Open Meeting— when staff gave the Commission an update on the applications for IP Trials.

 

Now, in back-to-back speeches, Wheeler has chosen to highlight the IP Transition and lay down some markers about how the Commission will conduct itself. In both speeches, Wheeler emphasized that those who argue that the IP Transition should result in a deregulated Nirvana need to understand that ain’t gonna happen. While Wheeler also makes clear that much legacy regulation is likely to change, the goals will remain the same — to actively protect competition where competition exists, to try actively to promote competition where there is insufficient competition, and to protect consumers even in the presence of competition, because competition does not ensure that consumers are always protected.

 

Sounds Nice. Got Any Specifics?

 

Wheeler has learned to be coy with the specifics for several reasons. First, remember that part of the purpose here is to socialize broad ideas, but not surprise people with a fully fleshed policy out of the blue. Wheeler did this with IP interconnection awhile ago, first saying he understood about interconnection and that he considered it part of the FCC’s job, then later saying that “peering is just a $3.50 word in Internet society for interconnection,” so that when, a month or so later, it emerged that the FCC was investigating the Comcast/Netflix deal and other peering arrangements, it got treated like no big deal and not a sudden radical shift in policy portending Great Things.

 

But we can pick out some specifics. First, from the Comptel speech, it’s clear that Wheeler is unhappy with ILECs insisting that CLECs interconnect using the legacy TDM switches and that IP interconnection agreements for competing voice services are proving very hard to negotiate for CLECs. Pretty much the only entity that appears to be able to negotiate IP interconnection agreements with ILECs is Comcast, and Comcast is huge enough to be in a class by itself. So unless some agreements start materializing soon, with some assurance that CLECs can negotiate IP interconnection without regulatory intervention, the FCC is likely to act.

 

Wheeler also clearly sees a connection between this failure to do IP Interconnection and stalling broadband services competition generally. I suspect this is also a signal that as long as ILECs insist on only doing interconnection at legacy TDM points, they are not going to get permission to shut down their legacy TDM systems (ILECs need permission to shut down their TDM systems under 47 U.S.C. 214(a)). That, of course, is the club that the FCC has to get ILECs to cooperate. This is an invitation to ILECs to propose a transition that includes some plan for preserving interconnection in an IP universe rather than simply relying on “market forces” to ensure IP Interconnection for competing voice services.

 

(So far, at least, ILECs are responding by pushing in the opposite direction. The ILEC trade association, US Telecom, filed a massive Petition for Forbearance to relieve ILECs of most of their responsibilities under the existing TDM rules even before they transition to IP. At least the ILECs seem to agree with me that national forbearance for an entire class of carriers is still eminently feasible to grant. Mind you, as I have noted before, the fact that the FCC can forbear does not mean that it should forbear, but set that aside for now. Also, in fairness to the ILECs, this document has clearly been in the works since the Chairman’s “Competition” speech last September, and was not designed as a pushback on the Comptel speech. Still, it does demonstrate that ILECs hope to drive the discussion to deregulation — how quickly and how much — rather than a discussion about what responsibilities ILECs will have post transition.)

 

The Parker Lecture speech while also short on specifics with regard to what initiatives the  FCC may focus on for the consumer side, did call out a few specific things. Notably 911 (which, as this Verge article points out, has developed serious reliability problems), universal access (including serving remote/unprofitable areas and disabilities access), privacy, and truth-in-billing. Odds are good that any action (or set of actions) the FCC undertakes in the next few months on the IP Transition will include at least discussion of these components, and a push for the ILECs to step up and explain how they plan to fulfill these goals going forward.

(I would be utterly remiss if I did not bring up the Public Knowledge #HelpMustCome campaign to fix the problems with wireless 911 geolocation. You can read more about the campaign here, sign the Petition to get the FCC to adopt strong rules here.)

 

Any Bones to the ILECs?

 

Keep in mind Wheeler likes to push parties to move off their opening positions and see if they can come to something more agreeable that meets the goals. Wheeler also signaled in both speeches that where more competition exists (e.g., wireless), the FCC will take a less active role (but will still hover around in the background). In the Comptel speech, Wheeler explicitly said he won’t act (or won’t act as aggressively) if he starts seeing ILECs entering into interconnection agreements with CLECs and has some confidence that the industry can work it out on its own.

 

So the ILECs have an invitation to come up with transition plans that would still be more voluntary than mandatory and rely pretty heavily on market mechanisms. Wheeler would clearly prefer to do this with a rather bare-bones set of rules mandating a few basic responsibilities (e.g., general duty to interconnect) with the FCC as a backstop to adjudicate disputes rather than maintain existing tariffing requirements and so forth. But Wheeler is also making it clear he won’t shy away from deeper regulation if ILECs won’t come to the table.

 

Timing?

 

Hard to say. November is obviously the earliest anything could move, since the October agenda is already set. It’s hard to say how much things like Net Neutrality and Comcast/TWC will continue to suck all the air out of the room. If the FCC tries to get a Net Neutrality Order out in November/December, then it will likely slip until Q1 2015.

 

Keep in mind that Wheeler faces his own clock. If he doesn’t get this done before 2016, then he isn’t gonna get it done. And just about every issue I’ve ticked through — even though many of them have been teed up for years in various proceedings — will take awhile to flesh out and get voted. Remember, Wheeler needs the votes of at least 2 other Commissioners, and would prefer to get the Republicans to come along (which is more possible on some of the consumer protection items, at least). So Wheeler needs to get the ball rolling sooner rather than later.

 

Predicting a precise mechanism for how the FCC would move forward is as impossible as predicting a timeline. Remember, Wheeler is still just socializing ideas. The FCC has a bunch of pending proceedings, such as various Verizon 214(a) requests to shut down traditional phone services destroyed by Hurricane Sandy, that could become the basis for an initial shift in policy. Alternatively, the FCC could act on the letter Public Knowledge and consumer groups submitted last May that ILECs are neglecting their copper to force consumers to shift to wireless or other alternatives (like FIOS or cable). On the competition side, COMPTEL recommended a framework for tackling the IP transition issues back in April. Or the FCC could just launch some new proceedings.

 

So Is This Writing Off Net Neutrality?

 

Hell no. For one thing, I think Wheeler wants to put net neutrality behind him, for better or worse, one way or another. In addition, he made a point of emphasizing the need for openness and a neutral net about a gazillion times in the Parker Lecture Speech. Finally, as if that were not enough, Wheeler said: ‘there are some people who say that net neutrality is the most important issue of our time. I don’t know that they are right. But I am treating it as if they are.

 

So no, shifting to the IP Transition does not mean moving away (or even slowing down) the net neutrality stuff. But the agency needs to do other stuff and, as noted above, Wheeler needs to get this rolling if he is gonna finish (to the extent anyone can finish it) before Obama’s term is up.

 

Conclusion

 

Even if the timeline and the details remain unclear, I read Wheeler to be trying to get back to the IP Transition and expect to see more developments on this percolate over the next month as net neutrality and Comcast/TWC shift out of public comment mode and the FCC starts making internal decisions on what to do. At least I hope so. I continue to believe that the transition of the phone system — on which 96% of Americans still rely — is a pretty big deal, often neglected for what seem flashier and trendier issues. It doesn’t help that because handling the transition involves complicated proceedings and hard decisions, everyone likes to put it off for another day.

 

Finally, I want the Wheeler FCC to make these decision because I believe in the Network Compact. I‘ve pushed the importance for a fundamental framework since we started to get real on the transition almost 2 years ago.  The framework the FCC adopted last January, in a 5-0 bipartisan vote, provides a solid basis for moving the transition forward. Hopefully, after a bunch of false starts and interruptions, we will tackle this issue in a real and sustained way that continues to guarantee to all Americans what the Communication Act requires: a reliable, affordable and ubiquitous way of fulfilling that most basic human need — to talk to each other.

 

Stay tuned . . .

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