The Jeff Pulver Blog: The Emerging sides in Communications Policy War, Round II:

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November 04, 2005

The Emerging sides in Communications Policy War, Round II:

The release of the second iteration of the House Energy and Commerce Committee Discussion Draft Telecom Bill, combined with the Senate Commerce Committee Markup on the VoIP E-911 Bill were pretty revealing. These events were revealing not just for the substance of the issues or the quality of the discourse, but more so for hinting at the evolving political process that will ultimately shape communications and Internet policy.

There is no doubt that, substantively, the Senate Commerce Committee Markup revealed an overwhelming sentiment that the FCC might not have adequately considered the benefits of letting the IP industry proceed without excessive government intrusion to create a better next-generation emergency response network. Frankly, this was probably the most significant victory for the IP-based communications industry in recent memory. But, I don't know that this is, necessarily, a presage of things to come. It certainly is not a sign that we can now rest on our laurels.

The Commerce Committee discussion revealed, more importantly, that the old battle lines that had applied through debate over the passage of the 96 Telecom Act and through the years of implementation of the 96 Act are now subject to being redrawn. Members of the House and Senate are trodding down uncharted terrain and are looking for new constituencies, new policy rationales, new visions of how to achieve the broadest public good. No, IP technology, Moore's Law and Metcalf's Law have obliterated that, now quaint, debate. As a result, it is no longer as simple as choosing one of two teams (one team believing that immediate deregulation is best means to encourage the deepest pockets to build the most robust networks; the other team believing that regulatorily-guaranteed competition is the best method to advance communications where unfair market power otherwise precludes competition). New sides and new alliance will emerge as we move further into the debate over the proper legislative and regulatory structure to advance communications and the public good. The IP-based communications industry cannot sit by idly while the teams are drawn up for the coming battle. If we do not participate now during this formative period leading up to next year's likely rewrite of the Telecom Act, we might be left out of the debate.

Some brief background on the recent history of the Telecom Wars:

Since passage of the 1996 Telecom Act, the sides in the telecommunications policy debate had become pretty well laid out. Most obviously, the sides were ILEC vs. CLEC. Cable was a somewhat tenuous ally to the CLECs -- largely under the philosophy that my "enemy's enemy is my friend." CLECs and cable were also allied to some extent because of AT&T's (the largest CLEC and most powerful adversary of the Bells) acquisitions of MediaOne and TCI. Also, cable companies, to some extent, were attempting to use the CLEC unbundling rights to compete against the ILECs for local voice customers. The precarious alliance between CLECs and cable was particularly difficult for the CLECs - primarily because of the parity/symmetry argument that ILECs should be subject to more onerous regulatory obligations than cable companies. The CLECs were largely silenced on the cable open access debate, which was often construed as inconsistent or even hypocritical (but now is not the time to delve into the intricacies of the historic, tangling alliances).

Through Moore's Law and improvements in IP technology, VoIP became ready for prime-time. Many have come to view VoIP as the vehicle to inject competition in a less onerous, less contentious manner, and in a manner that would simultaneously promote broadband deployment, broad-based competition, and service differentiation. The Bells have certainly used the existence of VoIP competition as the means to do away with their historic wholesale obligations towards CLECs.

Today:

Members of Congress are now sizing up the players and choosing sides. It is no longer as simple as choosing to be on the side of the ILECs or the CLECs. The wholesale model, frankly, is largely disfavored on the Hill. I, personally, do believe that the CLEC model injected necessary competition and spurred investment and innovation, but that does not appear to be the popular view of the CLEC experiment.

In any event. IP technology, as I have said repeatedly, dramatically changes the competitive paradigm. Now that voice, data, video really are just bits and applications agnostically riding on any transmission media, competitive providers no longer need to be carriers with their own pipes or wholesale access to someone else's pipes. Because the voice, video and data applications can be "disintermediated" from the pipes on which they ride, providers now may provide services by obtaining services simply as broadband users, like any other Internet access retail customer.

Emerging Battle Lines and the Retail Dilemma:

The ability to disintermediate the service from the facility changes the competitive model because competitive providers can now compete while being merely retail, not wholesale, customers of their communication provider rivals. This should be a much more palatable model for those that control end-user access facilities - no longer do the ILECs, in particular, have to provide cost-based access to their rivals (as long as they provide unfettered access to the Internet, do not choke capacity upstream or down, and do not discriminate against end-user customers).

One current dilemma appears to me to be that no one in Congress is truly acknowledging this possibility that a retail customer could be a service provider rival or, at least, its own service provider. Nor are the teams currently lining up as I believe they should line up.

As I mentioned, the House Energy and Commerce Committee put out a Staff Working Draft Bill, and released a second iteration yesterday. The Draft would revise the Communications Act, ostensibly to account for the revolution brought on by IP technology. Unfortunately, the draft legislation is still stuck in many of the old lines of argument. Most notably, the legislation is still committed to recognizing the "service silo" regulatory model. Most particularly, different regulations apply to voice, as if voice were somehow still so superior, so necessary, so sacrosanct, that it deserved heightened regulatory treatment. What ever happened to all those wonderful speeches from Congress to the effect that "a bit is a bit is a bit?" During the Tauzin-Dingell Battle several years ago, advocates of competition argued that an ILEC could not get out of its unbundling obligation, simply because the pipe is now broadband and capable of delivering other services beyond voice. While Tauzin-Dingell passed the House, the argument had resonance. I do not hear that argument today, even though "a bit is a bit is a bit" is truer than ever.

Today, an end-user can take control of her own communications experience, become her own service provider, or the service provider for her friends, colleagues, or own customers. Similarly, an enterprise can take control of its own communications, both internally and externally, unless legislation or regulation stymies that ability. This is obviously a scary proposition for those who have relied upon the per-minute service model revenue stream. But it is a promising proposition for those who acknowledge the value of providing robust pipes to more and more end users.

The Problem:

So, here is the problem. The current debate largely sidesteps the concept of end-user empowerment and ignores the perspective of retail customers, including retail customers capable of self-provisioning communications services for themselves and their own communities of interest. No one seems to be talking about precluding discrimination between various end users. Now that an end user can download an open source IP-PBX and become their own service provider, no one is talking about how to ensure that the end user may control their own communications experience. Everyone is giving lip service to the concept of "Net Freedoms", but unless there is a fair price associated with unfettered access to the Internet, Net Freedom might not amount to much. Without a non-discrimination principle attached to end user access, nothing will keep a control of a last-mile facility from charging one rate to a pizza parlor (an end-user who does not threatened the last-mile access provider's core business - voice, video, data delivery), and a much higher, debilitating rate to a VoIP application provider (an end-user vying to offer services that might compete directly with the last-mile access providers core business).

In all fairness to the legislators grappling with these evolving issues, the emerging VoIP industry, itself, doesn't seem to fully recognize that it often is simply a user of broadband like every other enterprise or end-user. To the extent that we can revolutionize communications while serving as retail customers for those that provide Internet access, that should be a good thing all the way around - promoting broadband deployment, competition and differentiation. But we have to work to ensure nondiscriminatory retail access.

The obvious allies appear to be the edge device vendors, the application providers, the end-users, and the consumer advocates. I would like to see us come together and become a meaningful force as we enter Communications Policy War, Round II. Unless we work together, I fear no one will speak for the end-users and for those that want to harness and maximize the power to the Internet to revolutionize the communications experience.

Tags: voip, fcc, public policy

Posted by jeff on November 4, 2005 07:21 AM | Permalink

Additional resources: #140conf events | Watch the Jeff Pulver Show | Jeff's Qik Videos

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In this age of Globalization I wish EU, Japan, India, China, or Russia could launch broadband satillites giving the US cheap broadband access. Many sites could even go offshore to avoid the duopolys.
Communities could link up with wifi locally and then connect via larger antenna, or perhaps there could be a XM radio like antenna.
If trade is to be 'Free' then competion should be allowed from other countries. I would rather do that than be exploited by the US duopolys. It would through competion make our own companies
'shape-up'. ;>) That's what Adam Smith was all about. Without competion the so called 'Free Market' collapses.
Your thoughts? Certainly an intreaging idea. (please forgive my spelling, Macs don't have as good of spell checkers as PCs)

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the problem for most of the US is that there really is no open market for most boradband users.

if you are lucky, you will have two choices for internet access:

1) the phone company (after you have agreed to buy a voice line)

2) the cable company (after you have agreed to buy television service)

there is no open competition for high speed internet access because internet access cannot be obtained on it's own in most american markets.

there will not be real competition for internet access until you can obtain internet access on it's own in your local market.

this is why municipal wifi, broadband over powerlines, and EVDO, and "naked DSL" are so important.

the other issue is that the telcos fear competition somewhat irrationally. there are more ways to compete than by price alone. additional services, superior quality, or customization are all great ways to compete with, and differntiate your products from, your competitors.

Posted by: chris at June 19, 2006 01:21 PM

You are concerned that there might be differential pricing applied to different customers by ISPs based on what they do. News flash: there already is.

The price that a large ISP like Sprint charges a smaller ISP is very different than the price that it charges me as an end user. Similarly, my ISP sorts me into a higher price class of end user because I use IPSEC VPNs and generate traffic 8-10 hours a day rather than just for a few hours in the evening. So there is already distinction among classes of users based on what they do - I am considered a SOHO, where my neighbor is simply a residential user.

By the way, ISPs that talk with me about their business strategies tend to suggest that they will similarly sort users that generate large volumes of peer-to-peer traffic (which could be file transfers, Skype voice, or whatever) into contractual relationships that similarly pay for volume use.

I am at something of a loss to say why that is bad. If the cost differential made buying Internet access prohibitive, that would be bad. However, a cost differential corresponding to the generated traffic load and differing SLA expectations seems in keeping with open market principles. In the end, isn’t maintenance of an open market (as opposed to a regulated market) the objective?

Posted by: Fred Baker at December 2, 2005 11:50 AM

November 04, 2005

The Emerging sides in Communications Policy War, Round II:

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