Taking care of consumers in an IP world

Anna-Maria Kovacs


For much of the 20th Century, consumers communicated via letters, rare telegrams in emergencies and carefully rationed voice calls over the circuit-switched network fondly known as plain-old-telephone-service (POTS). While most Americans still receive some snail-mail, telegrams have vanished, and only about a third of Americans still have a POTS line.

Based on data from the Federal Communications Commission (FCC) and Center for Disease Control, by the end of 2011 37 percent of households used POTS, 24 percent used Voice-over-Internet-Protocol (VoIP), almost invariably over a cable-broadband network, and 87 percent used wireless. Most used mixed wired and wireless connections, but if a household used only one mode, it was much more likely to be wireless. While 34 percent cut the cord altogether, only 7 percent used POTS exclusively and only 2 percent used VoIP exclusively. We can also expect more cord-cutting. Of the 37 percent who still used POTS, about a third mostly used their wireless connection. Given trends in the recent past, it is likely that only about a quarter of households will still have a POTS line by the end of 2013.

While the use of POTS is shrinking, the use of the Internet is growing. Pew Research tells us that 82 percent of American adults use the Internet. Today, a communication is as likely to consist of an email, text, tweet, Skype, social media post or video clip as a voice call. Often it is a mixture of all three--text, video and speech--united in a single exchange delivered over networks that transmit in Internet Protocol (IP). IP is the language of the Internet--a protocol that allows the seamless interleaving of voice, data and video within any single communication.

Despite the overwhelming prevalence of IP traffic, phone companies still operate an increasingly obsolete but costly circuit-switched POTS infrastructure alongside their IP networks. Because of various state and federal requirements, they have to operate it in readiness to supply anyone who might possibly request service. That means they not only have to keep the network ready to serve all actual U.S. households, but also empty housing units, which constituted 13.1 percent of all housing units at the end of 2011, according to the U.S. Census Bureau. In other words, the POTS network had to be equipped to serve 100 percent of all housing units, although only 32 percent of the housing units had a POTS line (37 percent of the 87 percent of housing units that were occupied). 

(Image courtesy of Anna-Maria Kovacs)

The FCC's National Broadband Plan recognized that a phase-out of the POTS network would become necessary. On Dec. 14, 2012, the FCC issued a Public Notice in which it asked for comments on two petitions by AT&T and NTCA that suggested the Commission open a proceeding to examine the issues involved in a full transition to IP. Roughly a hundred parties have responded, starting a fruitful dialogue. 

The comments reveal both the hopes and fears that surround the IP transition. Some of these deal very specifically and pragmatically with practical questions about the impact of an all-IP world on consumers. Some wrestle at a much more theoretical level with the question of regulation.

Several consumer advocates call on the FCC to expedite the transition, citing the myriad benefits a broadband all-IP world would bring to Americans, especially to the most vulnerable. They highlight the need for online education to improve the job prospects of the poor, better healthcare via remote diagnosis and treatment for the homebound or those living in remote areas and connectivity to replace the loneliness and depression of elders with a sense of community and purpose. 

At the same time, the transition requires care to ensure that reliable service will be available to and affordable by all consumers. Questions asked include: How can we make sure service the poor can afford is available? That all Americans, regardless of location or disability, have access? That all networks are reliable and resilient enough to stand up to emergencies and disasters? That public safety needs are satisfied? That consumers can resolve problems when they arise? 

Although fewer than 10 percent of households now rely on POTS exclusively, the questions about consumer access, protection and safety must be answered. Many of the same needs that were satisfied under POTS must still be satisfied under IP, but the solutions must be optimized for the capabilities of IP.

Hence the many comments in this preliminary round on the appropriate regulation--or non-regulation--of IP networks. There is general agreement that regulation should be technology neutral. That is, IP should not be treated differently on networks based in copper, coax, fiber, wireless or satellite. The current statute, however, does not facilitate such neutrality. 

The most extreme suggested solution is to simply forbid the phone companies from phasing out POTS networks altogether. Others favor allowing the network transition, but not a regulatory transition. They would haul all U.S. IP-networks into the regulatory regime that has ruled the POTS networks. To further complicate the picture, some of those who argue for POTS-style regulation of IP networks inside the United States have argued just as vehemently against such regulation globally. 

At the other end are those who argue that IP networks are fundamentally different from POTS (or other prior) networks. Since all services are simply applications transmitted in IP, any attempt to regulate some services is likely to result in regulating all. Similarly, once all IP-infrastructures (wireline, cable, wireless, broadcast, satellite) carry the same services, the basis for regulating them differentially disappears. Given the desire to keep the Internet free of regulation, this group would regulate minimally, if at all.

The proper framework for the regulatory treatment of IP-networks would ideally come from new legislation. As the comments already received show, contorting the current statue to fit a technology it never envisioned can lead to unrealistic and self-contradictory positions. However, if the FCC must oversee the IP transition under the current statute, it becomes all the more important that it be able to do so holistically rather than disjointedly.

Two things are clear from the comments the FCC has elicited so far: This is a conversation worth having, and it has only just begun.

Anna-Maria Kovacs is a Visiting Senior Policy Scholar at Georgetown University's Center for Business and Public Policy. She has covered the communications industry for more than three decades as a financial analyst and consultant.