“It’s the end of the world as we know it”

With all of the breaking news about Google (News - Alert) (News - Alert)+ vs. Facebook, hacker mischief around the world, Microsoft (News - Alert) putting Office in the Cloud, etc., you probably missed what should have been and hopefully will be a very huge story. I will catch you up.

The Technical Advisory Council (TAC) to the Federal Communication Commission (FCC (News - Alert) (News - Alert)) recommended in a June 29 presentation to the FCC commissioners that they set a “date certain” for the sunset of the Public Switch Telephone Network (PSTN). As TAC member (industry innovator and commentator) Tom Evslin pointed out in his recent blog on the matter, “There needs to be a planned transition to avoid stranding people without voice communications.” He passionately continued that regardless of your views on regulation vs. competition, “Government needs to be part of that plan at the very least because the transition will be driven by when government subsidies to the PSTN end.”

When will the PSTN die? TAC cited a recent study by the National Center for Health Statistics that says it all:

• As of May 2010, 23% of respondents lived in a mobile-only household
• 37% of adults in the 18-24 and 30-34 age groups lived in a mobile-only household
• Only 6% of the US population will still be served by the public switched telephone network (which is defined as TDM access line service) by the end of 2018

Evslin points out that, “Without continued government support, the PSTN would probably disappear before 2018 since the carriers' cost to maintain the many miles of copper and the rest of the system doesn't go down nearly as quickly as revenue from subscribers declines. “

Historical perspective

Before jumping into the discussion about setting a date and whether there should or should not be a “date certain” and an orderly planned transition, it is useful to look back at Title 47, Chapter 5, § 151 of the U.S. Code, which is the language from the Communications Act of 1934, which established the FCC. Entitled, “Purposes of chapter; Federal Communications Commission created,” it states:

 For the purpose of regulating interstate and foreign commerce in communication by wire and radio so as to make available, so far as possible, to all the people of the United States, without discrimination on the basis of race, color, religion, national origin, or sex, a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges, for the purpose of the national defense, for the purpose of promoting safety of life and property through the use of wire and radio communications, and for the purpose of securing a more effective execution of this policy by centralizing authority heretofore granted by law to several agencies and by granting additional authority with respect to interstate and foreign commerce in wire and radio communication, there is created a commission to be known as the “Federal Communications Commission”, which shall be constituted as hereinafter provided, and which shall execute and enforce the provisions of this chapter.

It is worth repeating: “a cto all people of the United States… a rapid, efficient, Nation-wide, and world-wide wire and radio communication service with adequate facilities at reasonable charges.” This language is the foundation of universal service. It still seems to be a valuable mission. The subsequent battles over the FCC’s role and jurisdiction as to what constituted “basic services” in a universal service definition, whether things other than those defined as “basic” should be regulated or deemed competitive seemingly forever, and the subsidy mechanism for assuring that what was defined as constituting basic universal service became the source of billions of annuity dollars for lawyers and lobbyists.

Today

Fast forward. The question about whether the PSTN should die seems almost irrelevant. If you define it as landline TDM technology with things like copper plant, switches and SS#7, it is dying. RIP PSTN. I say “almost,” because the regulatory question -- as opposed to the technological one -- of leaving citizens of this country (mostly rural, elderly and poor people) without access to voice communications and the Internet via dial-up (assuming they could afford it) while we transition to something else is in nobody’s best interest.

I am firmly in the camp of letting competition flourish. However, the conundrum of how to allow a government sanctioned monopolist to compete in adjacent and emerging markets means artful balancing acts are constantly needed to meet realistic objectives. In our industry, for instance, history says that without the creation of the FCC, its universal service fund, the Rural Telephone Bank, and the separations and settlements regime that was followed by the access charge regime, we never would have gotten the geographic coverage of the PSTN and probably not with affordable rates. It also says that without competition in information services, there is no telling where we would be on such things as the Internet and broadband applications development and deployment. As the late New York Yankee manager Casey Stengel used to say, “You can look it up.”

• What is the right question? The right question is: when will Congress decide?
• It is in the country’s best interest that everyone have access to at least one broadband service
• Such access should be defined as “basic service”

Given the importance of this to public safety and economic vitality, the FCC should have dominant jurisdiction, since the Internet age has made state and local regulation (with the possible exception of issues involving rights-of-way, pole attachments and radio facilities sites) more hurtful and helpful  

Hold your fire for a moment.  Yes, I know that defining “broadband” is a moving target. I know from personal experience that mandating regulated entities to meet government imposed deadlines for serving everyone is a nightmare that will bring howls — always an interesting subject given grants of monopoly franchises and all sorts of associated tax and other advantages.  As a former lobbyist in the industry for competitors to AT&T (News - Alert) (News - Alert), I am also painfully aware that asking Congress to tackle something like this is a big non-starter until after 2012. In fact, since this is not a cutting issue for those outside of the industry and a handful of consumer watchdogs, it is typically not in Congress’ interest to make policy in this area. Why would they? The mere floating of a bill causes a huge fuss, which means collecting big campaign contributions from all sides and decades of stalemate. That said, the talk needs to start now.

Surely we can do better than wait 77 years for change we critically need.

The reality is that what we need is to craft a national communications policy that gets us where we need to be as opposed to where we may get if we are lucky. Look no further than the broadband coverage and penetration rates of developed countries, and the plans in places like China (which installs the access equivalent of a Verizon (News - Alert) every year).

Tomorrow

Do I have an answer as to a fix to make broadband universal?  The short answer is yes. It is worthy of a book and not a brief mention, but here it is as food for thought. It starts with the following.

Value in communications is not explosively created in ownership of the pipes —which can and I would say should be a nice, profitable standalone utility business — but rather in the services and applications that use them and interact with the devices attached to them. Hence, operators of communications companies should divest their physical access and transport networks enabling creation of true communications utilities. It would be in the national interests. I would argue in the company interests as well. The stock market would love it. 

I contributed to a book The End of the RBOCs many years ago where we presented the sanity of this approach, and even predicted one of the then Baby Bell’s would take the plunge. We underestimated the disruptive force of industry consolidation -- the explosive growth of wireless and the Internet being big ones --that altered the calculus. However, in terms of us getting our broadband house in order and allowing accelerated and focused attention of universal broadband service to everyone, it seems appropriate to raise the issue again. This would include sorting out the challenges associated with landline and wireless network ownership and responsibilities. Billions of dollars poured into construction of duplicative physical connections, particularly local plant, seems counter-productive given the country’s wish list and limited resources.

In fact, I will go out on a limb and predict that one or more service providers -- telecom or cable -- will do precisely what I have suggested (in the landline part of their business in the telecom sphere) in the next two years. Maybe that will be the trigger for a true transformation, and get us out of the PSTN kerfuffle which is an artifact of a regulatory model whose time is long gone.

Peter Bernstein is a technology industry veteran, having worked in multiple capacities with several of the industry's biggest brands, including Avaya, Alcatel-Lucent, Telcordia, HP, Siemens, Nortel, France Telecom (News - Alert), and others, and having served on the Advisory Boards of 15 technology startups. To read more of Peter's work, please visit his columnist page.