September 2009 Archives

September 30, 2009 2:01 PM

VoIP and POTS: Regulatory Classifications or Magical Incantations?

It's that time of the year again--when nothing is as it appears.  I know this because my kids started to nag me about Halloween costumes.  You know, what they should be (and what I have to buy).  The first catalogues started coming in the mail last week, and the Internet has been humming with on-line searches since then.  But, witches, goblins, and haunted houses aren't the only artificial distortions decorating the autumn landscape this year.

Last Friday, the 25th, AT&T sent a letter to the FCC complaining that Google asserts the right to offer a service that closely resembles regular phone service, but without terminating calls to high-cost providers, like "traffic pumpers."  To be able to selectively avoid completing calls to carriers that charge excessively high termination rates confers a big cost advantage over ones competitors.  Therefore, AT&T argues, on the one hand, that Google should be treated like every other provider of "phone" service and be required to terminate calls to all parties.  Google, for its part, claims that Google Voice is an application and not subject to "common carrier" obligations.  According to Google's service description, the "common carrier" transport portion of its service (if there is one) is provided by a competitive carrier called Bandwidth.Com.

Alternatively, AT&T explains that even if the "Google Voice" service is an "application" or an "information service" it violates the "fourth principle" of the FCC's existing Broadband Policy Statement principles, which apply to all providers of "telecommunications." para. 4. [Note: the existing Broadband Policy Statement principles apply not just to "telecommunications services" which would only cover "telecommunications" offered for a fee to the public, thus Google's point that its service is "free" does not mean it cannot violate a Broadband Freedom principle.]  The fourth Broadband Policy Principle provides that, "consumers are entitled to competition among network providers, application and service providers, and content providers."  AT&T also argues that, if Google Voice is an application, Google's service would violate the Commission's proposed "fifth" principle of "non-discrimination" which would ensure consumers that a provider could not block access to another provider.

So, what's the big deal?  Where is the magic?  Where are the "illusions"?  Isn't this just a business-as-usual, Hatfield-McCoy, AT&T-sniping-at-Google letter?  Well, I'm not sure.  As I've disclosed before, I do some consulting for AT&T, but I wasn't involved in this letter, and  I'm not privy to AT&T's reasons for sending it, but I would caution against taking  the letter too literally--in the AT&T v. Google sense.  I'm just an educated observer, but I actually think another blog, Telecom Ramblings, got the right answer first in this post from September 27th. 


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September 25, 2009 4:13 PM

Policy Personals: FCC Broadband Planner ISO "the Man in the Mirror"

I have to confess, I haven't been following the Commission's major initiative: the development of the National Broadband Plan.  Why?  I guess I'm just skeptical about the ability of the regulator (or any other central planner) to anticipate innovation, much less promote it.  From what I've seen, the best the government can do is to try to enforce the rules that exist, on the one hand, and, on the other, to eliminate rules that hinder healthy growth in commerce.  The idea of the government "creating" a "broadband plan" and then seriously expecting private firms to cooperate is just something I don't think I've ever witnessed--outside of an economy with much deeper government participation in the marketplace than we have here in the U.S. 

So, I haven't been following along mostly because I can't figure out why this regulator-driven plan would be any more successful than any other "plan" from any other central planner.  In fact, one thing about the "fact gathering" for the Plan makes me wonder whether this is even what Congress had in mind when they asked the FCC to come up with a "Plan."  Specifically, the methodology for "creating" the "plan" seems--from the panels the Commission is holding--exclusively, and excessively, focused on factors beyond the Commission's ability to influence. 

But, given the Agenda for the next FCC meeting on September 29th (progress on "the Plan"), I decided to take a gander at what the FCC has been looking at to develop the National Broadband Plan.  A cursory glance at the Broadband.gov web site displays a profound lack of introspection into how the Commission's current policies are influencing--for better or worse--broadband deployment.  In the previous post, I noted the IUB decision earlier this week, finding "traffic pumping" to be a violation of the traffic pumpers' tariffs. 

Given that access charge revenue is only available for originating or terminating circuit-switched calls, any regulatory scheme that allows access charges to artificially expand is tantamount to paying carriers not to deploy broadband and not to switch to an all-IP format. Yet the Commission sees no sense of urgency to reform intercarrier compensation, and is even entertaining a Petition to Preempt the IUB decision.

Similarly, higher USF "taxes" limit the amount of funds available to carriers who have yet to deploy broadband, and the "squeeze" gets tighter every quarter, as the contribution factor inexorably increases.  Expanding the contribution factor, or more closely scrutinizing subsidized services are issues that have simply faded from the Commission's screen--and I mean this literally.  Under "strategic goals" at the FCC web site (on the left hand side of the screen), Universal Service and Intercarrier Compensation are two issues that are nowhere to be found.

Is it me, or would a good look in the mirror, help the Commission better assess the influences of its current policies, so that--if necessary--the FCC could change the things that are easiest to change?  It's kind of like looking at a "muscle magazine" and designing an exercise/diet/fitness program, dreaming about how big and buff you're going to get . . . all the while, conveniently ignoring that you're smoking two packs a day and drinking a six-pack every night.  Wouldn't you want to know if you could reach your goals faster, just by getting out of your own way?

September 24, 2009 3:31 PM

The Tao of Intercarrier Compensation

[Note: I want to clarify from the outset what I mean by "intercarrier compensation."  Used generically, the term "intercarrier compensation" can refer to any charges between carriers for handling traffic. Accepting another carrier's traffic can (but doesn't need to) involve two functions: 1) the charge to transport traffic from the point of interconnection to the last aggregation/switching point in the terminating carrier's network, and 2) the cost to "terminate" (switch and deliver) that traffic to its destination.  In the world of exchange access, there are many carriers and carrier combinations that can usually transport traffic to the terminating carrier's last point of aggregation.  Said differently, there is a vibrant and competitive market for wholesale transport, so in our context "intercarrier compensation" will only be used to refer to the "pure" terminating function--from the last point of switching on the terminating carrier's network."]

Intercarrier compensation is, perhaps, the most un-understood (not mis-understood), and urgent, telecom policy issue requiring the Commission's attention.  But, I've kind of done it to death, so I'll try to make this my last "pure" post on this subject. Nonetheless, the Commission's persistent refusal to solve the obvious problems with the design of the intercarrier compensation system make this an issue that pervades, pollutes, and corrupts almost every subsequent telecommunications policy initiative; and, unless corrected, the National Broadband Plan will be no exception. 

The subject of intercarrier compensation is devilishly complicated to understand, but the correct policy--the answer, the "way", the "tao"--is beautiful in its intellectual simplicity.  The "tao"--as always--is comprised of the "yin" and the "yang." So, rather than skipping (or Skype-ing) to the tao, it is more enlightening to work backwards, and introduce the yin and the yang of intercarrier compensation, why they must exist in proportion, what can happen when they go out of proportion, and then come to the policy solution that will best promote harmony.  In the last post, we discussed the internal tension between certain "free" services.  These "free" services are all the result of attempts to exploit quirks in the intercarrier compensation system--a system that places different prices on the same function (traffic termination) based entirely on how that traffic is classified.  What was not discussed was how these internal tensions can coexist within one carrier.


Continue reading The Tao of Intercarrier Compensation
September 18, 2009 12:13 PM

When Irresistible Force Meets Immovable Object . . . In the Land of the Free

While the deep thinkers in government and in the general "world of the deep thinker" are thinking about lofty issues affecting broadband (remember, I said "lofty" issues), commerce proceeds apace, the domestication of the dog continues unabated, and . . . the "little", pragmatic issues surrounding broadband get bigger . . . but not "lofty."  In a time where lofty gets most of the focus from the broadband plan, "free" is not as insignificant as it sounds. 
"Free" is an afterthought, a cheesy giveaway, or, even worse, a gimmick.  Yet, it is "free" that will force the Commission's head out of the clouds, and force the FCC to deal with the little, pragmatic issues that drive the little, pragmatic services that cause the little, pragmatic people . . . to buy broadband.  Some would say it already is.

Everywhere you look, "free" is "in."  Recently, Wired! Magazine published an article by Chris Anderson, called "Free! Why $0.00 Is the Future of Business."  The article, which is essentially the thesis of a book by Mr. Anderson (available for free), notes that frequently what looks like "free" might just be a different cost-recovery system.  For example, the "buy one, get on free" is a staple of sales promotions, similarly, Gillette makes profits off of repeated blade sales and not from selling razors, and Google makes money from advertisers, and obtaining "free" information about the value that consumers' place on certain search terms helps Google sell a better product to its advertisers.  Most kinds of "free" aren't "free" at all (to consumers)--though they still may be good deals.  Other kinds of "free" services are, in fact, "free" to consumers, because they involve transferring costs to another company in the supply chain, i.e., Mr. Traffic Pumper Guy

Dow Jones today pointed out--in a very observant article--that at least part of the FCC cares a lot about the public's perception that it is standing up for consumers to have access to "free" applications. This, Dow Jones explains, may be one reason why the Commission cared enough to initiate an inquiry into why Apple didn't give "free" placement to Google Voice, a "free" call management/VoIP application, in its iPhone Apps Store.  In other words, preserving "free" might be a good way to ingratiate yourself to certain "public interest" advocates.  Dow Jones quoted a Senior Counselor to the FCC as saying, "We're moving to a broadband world and we want to maximize innovation and investment in the space."


Continue reading When Irresistible Force Meets Immovable Object . . . In the Land of the Free