Tuesday, November 30, 2010

WCAI Applauds FCC Steps to Encourage Innovation and Promote Efficiency in Spectrum Use

WCAI applauds the steps the FCC took today to encourage wireless broadband deployment and promote innovation and efficiency in spectrum use in the United States.

At an open meeting, the FCC voted on three spectrum items: (1) an NPRM regarding using UHF and VHF TV bands for mobile broadband; (2) an NPRM proposing to make the FCC's experimental licensing rules more flexible to encourage innovation; and (3) a NOI seeking to enable more effective spectrum management through dynamic spectrum use technologies.

WCAI supports the Commission’s efforts to make more spectrum available for wireless broadband by considering rules to enable mobile broadband use within spectrum currently reserved for TV broadcasters. The proposal is a critical step toward the implementation of the National Broadband Plan and underscores the importance of facilitating the most efficient use of this scarce recourse for the benefit of the industry and consumers alike.

WCAI also appreciates the FCC proposals to make the agency’s experimental licensing rules more flexible and accelerate opportunistic use of underdeveloped licensed and unlicensed spectrum through dynamic spectrum use technologies. However, the Commission should remain vigilant in protecting existing spectrum users from harmful interference.

We look forward to working with the FCC to unleash more spectrum for wireless broadband and enable the growth of next-generation wireless technologies for the benefit of consumers.

Monday, November 29, 2010

Unsafe at Any Rate

By Hank Hultquist, Vice President-Federal Regulatory, AT&T

In recent blogs I have explored: (a) the FCC’s absurd practice of regulating the structure of long distance pricing even as long distance is rapidly vanishing as a distinct consumer service; and (b) the foolishness of extending obsolete interconnection rules to IP networks.

Today, I will try to tie these seemingly distinct modes of transportation together and, in so doing, explain how the FCC can finally put this industry on the road to rationality.

It is axiomatic that interconnection on the telephone network (a.k.a., the PSTN) has become an upside-down world of inefficiencies and arbitrage. This entire system is built on a series of arbitrary rules and assumptions that have long been overtaken by reality.

We have a system that entitles service providers to file tariffs pursuant to which they can unilaterally extract payments from other service providers for “terminating” calls from those other service providers’ customers. To make matters worse, and despite the fact that the functions performed in “terminating” all calls are identical, the applicable rates can vary greatly depending on whether a call is “local,” “intrastate long distance,” or “interstate long distance,” or dialed from a mobile smartphone, skyped from a laptop or placed from the dusty home “landline.”

You may be wondering what it means to “terminate” a telephone call? Simply put, it’s opening a circuit between a trunk and a line so that the called party can talk to the calling party. The “theory” behind allowing carriers to unilaterally charge other carriers for this “service” via tariff is that: (a) network costs can accurately be “measured out with coffee spoons” to into individual minutes; and (b) the calling party has “caused” the called party’s service provider to incur “costs” in order to “terminate” the call. What a mound of malarkey!

In reality, both customers benefit from a phone call, until they don’t. Which is why we retain the ability to hang up on or, as my six-year-old says, “turn off” the person at the other end. In reality, network costs are almost entirely fixed and not divisible by regulators into “minutes of use.” In reality, consumers no longer recognize “local,” and “intrastate toll,” and “long distance” as separate services. In fact, many of our customers are more concerned about needing to communicate something in 140 characters or less.

So, why do regulators so willingly suspend their disbelief when it comes to these fictions? They have wanted to maintain, at subsidized rates, the universal availability of “basic local exchange service.” To do so has required this vast apparatus of intercarrier compensation rates, as well as network interconnection on a local market-by-local market basis. Meanwhile, more and more consumers have voted with their wallets for all-distance voice services.

But there is a way out of this mess. If regulators were to take away the regulated intercarrier compensation meter and require providers to recover costs from their own customers (potentially including willing wholesale customers as in the broader IP transit market) or, when appropriate, from explicit subsidy mechanisms, the industry would be free to move to more rational, more competitive, and less confusing for consumers, business practices. This would not be a world without rules (despite the red herring assertions of some).

It would be a world without regulated rates for arbitrary “services.” In such a world, “long distance” would increasingly be a wholesale service purchased by local access providers in order to connect their customers to everyone else. “Local interconnection” would fade away as carriers interconnected at higher capacities and at fewer locations. And rate-driven arbitrage, like traffic pumping, would cease. The single biggest obstacle to getting there is the continued existence of regulated rates for intercarrier compensation.

Reprinted from the AT&T Public Policy Blog.

Tuesday, November 16, 2010

Price Regulation in the Buggy Whip Market

By Hank Hultquist, Vice President-Federal Regulatory, AT&T

Throughout the course of this year’s debate over net neutrality and Title II classification, one thing the FCC consistently disavowed was retail price regulation of broadband. Indeed, price regulation should be the last thing a modern regulator would want to be associated with. It is rightly seen in most respectable regulatory establishments as a throwback to monopoly-era bureaucracy.

That is why the FCC’s continued price regulation of the buggy whip, I mean consumer long distance market, is exceedingly…interesting. Remember long distance? Well, to give you an idea of how “yesterday” long distance service has become, here are a few TV spots from the days of yore, when you couldn’t get past an episode of Seinfeld without seeing a few ads for long distance service.

And, despite the fact that the retail consumer long distance market has all but disappeared as a market distinct from the overall voice services market, the FCC still regulates the price structure for “long distance” with a heavy hand.

To further explain, I will take a brief detour into the world of intercarrier compensation….Basically, the FCC’s rules prohibit carriers from charging higher prices to the consumer for “long distance” calls, even though in some areas they incur significantly higher access charges from the local phone companies that “originate” or “terminate” those calls. Under both the FCC’s rules and the telecom act, retail long distance prices must be averaged. Indeed, the purpose of this price regulation is to prevent carriers from pricing their services in order to reflect more precisely the cost of doing business.

Now, one would think it has to be somewhat embarrassing for the FCC to be in the position of regulating pricing in an all-but non-existent market. Rather like having a detailed set of rules for unicorn owners. Nonetheless, the FCC has soldiered on, and even declined in 2007 to forbear from this absurd regulation.

At this point, any rational person has to ask “why?” The answer is that undoing this absurdity would risk unraveling the entire access charge system.

In other words, we have to keep regulating long distance (even though, technically speaking, it doesn’t really exist anymore) in order to preserve the underlying intercarrier compensation regime.

I don’t know if this is the tail wagging the dog, but it sure isn’t the dog wagging its tail. But, fear not, as I have an idea. Since we don’t really have a distinct long distance market any more, why not prepare for the inevitable end of long distance access charges?

Sounds easy, right? In fact, people have been trying to reform this monstrosity for more than a decade. And, this FCC’s National Broadband Plan has committed to begin its effort to reform this irrational system by the end of this year.

Reform has repeatedly foundered because the FCC has been unable to thread a difficult policy/politics needle. Opponents of reform have always been able to block attempts at progress.

My advice to the FCC is simple – stop trying to figure out first exactly what the reform path should look like. Just pick a date, say January 1, 2016. Adopt a rule that prohibits carriers from filing tariffs for switched access services, at both the federal and state levels, as of that date. Wireless carriers have long been subject to such a rule and as a consequence their business model does not depend on access revenues.

Once a date is set for the elimination of access tariffs, the FCC and the industry will be in a much better position to work out the details of how to move from this dilapidated system of implicit subsidies for POTS, to a system that provides only explicit subsidies, and only when needed, for broadband.

Establishment of a date certain for the elimination of access tariffs will give all parties the necessary incentive to finally figure out how to stop regulating prices in the buggy whip market.

Reprinted from the AT&T Public Policy Blog.

Thursday, November 4, 2010

LTE Inadequate to Address Capacity Crunch

4G, femtocells and offload are all partial solutions, say European carriers

By Caroline Gabriel, Research Director, Rethink Technology Research

Although LTE upgrades are generally touted as the magic bullet that will save wireless carriers from the overload on their networks, they will not be enough on their own to solve the problem. This was the conclusion of a panel discussion at the Broadband World Forum in strike-ridden Paris.

The main factor limiting the impact of LTE on operators' data plans will be shortage of spectrum, argued Denis Gautheret, an executive at Deutsche Telekom. "Spectrum is just like gas. You don't have enough," he said, as Paris struggled with fuel shortages amid a wave of strikes over spending cuts. In particular, the lower frequencies support more cost effective coverage, but the desirable digital dividend band around 800MHz has very limited capacity, he said.

As reported by TotalTelecom, fellow European cellcos are taking different approaches to making up for the limitations of 3G or LTE. Jaime Lluch Ladron, technology executive at Telefonica, said the Spanish group is mainly focused on smaller cells for capacity, and femtocells to improve the indoor penetration of 2.6GHz, a key LTE band. "Telefonica is moving towards street level picocells and femtocells... based on this 2.6GHz frequency," he said.

Femto Forum chairman Simon Saunders, on the same panel, said it costs about $7-$9 per gigabyte to carry data on a wireless network, but by using femtocells in key areas, operators can bring about "a reduction in the cost per bit in the order of a factor of four".

Other tactics to address the data crisis were outlined too - Vodafone Spain and Elisa in Finland are going the damage limitation route, offering premium packages to enterprise or high value customers to prioritize their traffic, and offloading the rest. However Ladron spoke against the conventional wisdom that Wi-Fi offload is a key solution as the user experience is not under the carrier's control, and if customers have a poor experience "they will call us. They will get upset with us."