Special access, end of PSTN no secret to wireline marketplace
A recent Huffington Post article by Bruce Kushnick highlighted "special access," a service long provided by companies like Verizon (NYSE: VZ), AT&T (NYSE: T) and CenturyLink (NYSE: CTL) to business customers seeking access to the nation's antiquated telephone system. It inaccurately described special access as a monopoly market that is a "…secret network you should know about"--with "secret wires."
I'm not quite sure what the author was trying to convey; however, I do know that special access is no secret. It's a decades-old service that many Americans (including American businesses) have already abandoned and virtually all don't use exclusively. It's no secret in the marketplace: Far from being some monopoly, today's reality is that the business market served by special access services is robustly competitive.
Don't take my word for it--look at the companies and competitors who use special access services. In 2012, Sprint (NYSE: S) announced that it would look for other alternatives to telephone company special access service by starting an RFP for competitive bids from other companies. Thirty to 40 competitive providers were expected to offer alternative service to telephone company special access high-capacity services. In fact, at the conclusion of the RFP process, Verizon, the nation's second largest phone company, obtained a contract to provide special access services to only 6 percent of Sprint's cell towers in Verizon's service area.
Special access is also no secret to America's cable TV companies. Cable TV providers know all about these "secret" wires and have been competing fiercely against incumbent telephone companies with their own high-capacity Ethernet service to gain significant market share in the lucrative small business market. Cable entry into the telephone business market has been so successful that they are now offering Ethernet 2.0 services to compete with telephone company special access.
But beyond the details of the competitive special access market, there is a broader and more important point. These not-so-secret phone lines are the last vestiges of the old public switched telephone network, which is rapidly yielding to modern high-speed broadband networks that already carry 99 percent of all data traffic in this country. This is not a nefarious plot; rather, it represents getting closer to the goal of replacing the antiquated phone system as set out by the FCC's 2010 National Broadband Plan.
The old telephone network served us well for decades, but its limited service capabilities are well known. Many consumers--including the 38 percent of households that "cut the cord" to wireless service or who receive phone service over cable--have already switched to using a high-speed broadband network from a telco or cable MSO. In fact, only 5 percent of Americans rely exclusively on "plain old telephone service."
Ninety-five percent of Americans use broadband-based communications networks in some form. If affordable and ubiquitous nationwide broadband is our goal, then we need to start sunsetting the PSTN as soon as possible. Here's why.
Regulatory requirements--nowhere mentioned in the blog post--force incumbent telephone operators to subsidize not one but two networks, the old TDM network that the author appears to favor and the new, faster IP-based network consumers want. Their competitors that offer broadband services, however, face no such burden of maintaining two networks, and those that rely on incumbent special access services benefit handsomely from subsidized, regulated access to incumbent telephone facilities. A recent study revealed that of the $154 billion incumbent telephone companies invested in their networks from 2006 to 2011, nearly $81 billion went to maintaining their old networks--ones the author admires--and only $73 billion devoted to new modern broadband networks.
Imagine what could happen if that $81 billion in mandatory regulatory costs were used to finish the buildout on the new networks to serve everyone. In the State of the Union address, President Obama set forth the goal to connect every school and library in the country to high-speed broadband--even 1GB ultra-high-speed broadband--within five years. He did not say: "Let's connect schools with dial-up modems and copper wires." His message was clear; it is not the special access technology of the past he seeks for America's schools and libraries, rather our future will depend on the rapid buildout of modern high-speed broadband lines throughout the nation.
Kushnick was right about one thing when he stated that "there's nothing special about special access lines." Exactly correct: They represent old technology. Businesses as well as individual consumers are all migrating, fast, to the high-speed broadband networks that represent the future of telecommunications. And that's no secret.
Bruce Mehlman, former Assistant Secretary of Commerce for Technology Policy, is founding co-chairman of the Internet Innovation Alliance, a coalition of businesses and nonprofits working to increase Americans' access to broadband Internet.