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Speaking With...
...Earl Comstock


2005 was certainly a year in which regulatory topics remained at the forefront of many of the discussions involving our industry. Issues such as 911, lawful intercept (CALEA), taxation, and more were at the core offerings of many conferences and keynote speeches throughout last year. And yet, as 2006 dawns, many questions remain unanswered. I had the chance to ask Earl Comstock several questions regarding his thoughts on the state of VoIP regulation. Earl Comstock is President and CEO of COMPTEL, an association formed in March 2005 by the merger of COMPTEL/ASCENT and the Association for Local Telecommunications Services (ALTS). With more than 350 members, COMPTEL is a leading industry association representing competitive facilities-based telecommunications service providers, emerging VoIP providers, integrated communications companies, and their supplier partners. The association is based in Washington, D.C.

Greg Galitzine

GG: What is the state of VoIP Regulation today? Where does our industry stand in relation to one year ago?

EC: This year has been a busy one for VoIP providers and regulation. The FCC preempted State regulation late last year and the Senate took affirmative steps this fall to provide access to 911 facilities and to provide VoIP providers with the same liability coverage as is available to other voice service providers. At the same time, the FCC has required VoIP providers to offer 911 service in a much shorter time frame than the agency has required of any other industry segment.

Over the past year, VoIP has increasingly come into the mainstream, with an ever growing number of providers offering it to businesses and consumers. COMPTEL members have been at the forefront of those offering VoIP, and VoIP issues will continue to be a key component of COMPTELs legislative and regulatory efforts. We are continuing to work with interested Senators on passage of S. 1063, the Senate VoIP bill, and will work to get the House to pass the bill early next year.

GG: What does it say to the FCC that the U.S. Senate Commerce Committee has taken the stance that it did?

EC: COMPTEL applauds the bipartisan fashion in which the Senate Commerce Committee acted on S. 1063. The amendments in committee improved the bill, and the strong vote coming out of the Committee will help ensure the bills passage. The bill addresses a number of issues that were outside of the FCCs legal authority to address, so the actions of the Committee complement nicely the action taken earlier by the FCC. It is COMPTELs hope that the FCC will embrace the approach taken by the Senate Commerce Committee.

GG: Please explain and expand upon your recent comments, that The House Commerce and Energy Committees revised draft legislation shortchanges consumers by paving the way for the creation of gatekeepers to the Internet.

EC: Both staff drafts released by the House Energy and Commerce Committee would create gatekeepers on the Internet because both versions would abandon common carriage as the underlying framework for communications law in the United States. Instead, both versions of the staff draft would permit the companies that control the transmission facilities used to reach business and residential consumers to deny access by competitors to those facilities. Unlike the situation under common carrier rules today, these network operators would have no obligation to provide service to anyone, no obligation to extend their facilities to anyone, and no obligation to permit anyone to obtain transmission services at just and reasonable rates. The only obligation imposed on packet-switched transmission facility operators under both versions of the bill would be to directly or indirectly interconnect their transmission networks with other transmission network operators on whatever terms the parties arrive at through commercial negotiations.

Both drafts assume that there will be multiple network operators that have facilities that reach all consumers notwithstanding the fact that, today, there is only one network operator with ubiquitous wireline facilities that reach all residential and business customers (the ILEC) and one other operator that reaches the vast majority of residential customers (the cable operator), but few, if any, businesses. While it is true that there are wireless and satellite operators who could potentially reach the vast majority of residential or business users, the reality is that their service offerings are more expensive complements to, rather than substitutes for, the wireline offerings. This truth is illustrated by the fact that less than 10 percent of wireless subscribers have elected to discontinue their wireline service and few, if any, businesses are served entirely by wireless today.

It is the gatekeeper aspect of the proposed drafts that is driving much of the debate on Net neutrality, along with the statements by the CEOs of several ILECs. Unfortunately, the Net neutrality provisions in both drafts have exceptions that basically gut the rule by explicitly allowing the network operator to favor its own services. And even if the Net neutrality provisions were fixed, net neutrality alone is not sufficient to prevent the network operators from becoming gatekeepers if there is no obligation to provide non-discriminatory service and to interconnect with other network operators at just and reasonable rates, then the dominant network operators can and will advance their own financial interests simply by denying competitors access to the network in the first place. The Net neutrality provisions only apply to subscribers whom the network operator agrees to serve if you cant get on the network then the Net neutrality rules cant protect you.

GG: What do you make of the recent comments attributed to SBC Chairman Ed Whitacre, where he takes an aggressive stance towards VoIP providers? Heres the Whitacre quote: Now what they would like to do is use my pipes free, but I aint going to let them do that because we have spent this capital and we have to have a return on it.

EC: I applaud Ed Whitacre for his forthright statement regarding SBCs business interests. Like any good CEO, he is working to maximize the value of his company for his shareholders. What his blunt statement reveals is that, in his assessment, the way to do that is through capturing the additional revenue that comes from the applications that ride over SBCs and other network operators transmission networks. In Mr. Whitacres assessment (an assessment apparently shared by other Bell company CEOs), it is not enough that their companies get paid for the service they actually provide namely, transmission. Rather, they believe that they should get some or all of the value of the content that is transmitted over their networks. That is what Congress should not allow to happen transmission providers, whether incumbents or competitors, should not be able to leverage their ownership or control of transmission networks to dominate, or extract a surcharge from, the complementary markets for goods and services that use those transmission networks to reach business and residential consumers.

Further, the reality is that VoIP subscribers have already paid SBC for the use of its transmission networks through the purchase of DSL service, and the common carrier that delivers the VoIP traffic to SBC has likewise paid SBC for termination of the VoIP traffic on its network under the FCCs current access charge rules, so no one is using SBCs pipes for free. Mr. Whitacres problem is that the FCC has failed, in the nearly 10 years since the passage of the Telecommunications Act of 1996, to address access charge and intercarrier compensation reform. As a result, some data transmissions, including VoIP transmissions, may pay SBC less for using the network than the circuit-switched voice services that VoIP is replacing. Most COMPTEL members would argue the lower rate paid by data transmissions is, in fact, the correct one that all transmissions should pay; most incumbent LECs would argue the higher rate should apply. The truth may lie somewhere in between. What COMPTEL supports is fair compensation for use of transmission networks, regardless of the application that is using the transmission network. There is no reason for video bits to pay more or less than voice or data bits for the use of the same transmission network; all bits that require the same quality of service should pay the same cost-based rate, including a reasonable profit, for use of the networks. Whenever the FCC gets around to establishing a rational intercarrier compensation regime that also addresses access charges, much of the current debate over the free use of any providers network will disappear.

GG: What do you think of the job that Chairman Martin of the FCC is doing?

EC: While COMPTEL does not agree with all of the positions Chairman Martin has adopted or supported in his tenure at the Commission, the Chairman is to be commended for his open door policies and his considerable skill at getting his fellow commissioners to join him in adopting unanimous orders on difficult issues. He is a diligent public servant who is doing what he believes to be in the best interests of the Nation. To the extent that the assumptions made by the Commission in adopting any of its orders do not turn out to be correct, it is COMPTELs hope that the Chairman will exercise his leadership to promptly adopt appropriate modifications to those orders.

GG: Please describe the net effect of the recent FCC order to expand the Wiretap Act (CALEA), which would impose upon carriers the need to revamp their networks to make it easier for the Federal government to monitor online communications.

EC: Although COMPTEL certainly supports the purpose of the Communications Assistance for Law Enforcement Act (CALEA) ensuring that law enforcement has lawful access to telecommunications networks the FCC has bent the CALEA statute beyond the breaking point. Because the FCC chose, in its Wireline Broadband Order, to completely deregulate broadband transmission services by reclassifying them as information services, it then had to quickly make up for the fact that it was cutting off law enforcement access to such services. As a result, the Commission was forced to conclude that broadband transmission services that it had just found to be information services were, nevertheless, covered by CALEA, notwithstanding the explicit exemption for information services that Congress wrote into CALEA.

Further, the FCC immediately set a deadline for full compliance for the information services providers it had swept into CALEA, but deferred to later decisions both the question of what compliance means and the resolution of possible exemptions from coverage. For example, the FCC appears to have swept private networks, including universities and corporations, into the purview of CALEA, as well as other traditional information service providers, such as email providers, despite Congress clear ban on such inclusion. The FCCs CALEA ruling has put many entities in the impossible position of having to begin compliance efforts without knowing what is required and whether they are even covered. If the FCC had not bent over backwards to give the Bell and cable companies the freedom to discriminate in the provision of broadband transmission services, these contortions would not have been necessary.

GG: What is COMPTEL and what role is the organization playing in influencing regulation that affects VoIP and the future of telecommunications?

EC: COMPTEL is the nations largest trade association, representing the competitive communications industry. We represent more than three hundred companies from across all communications sectors, including voice, video, and data service providers, equipment manufacturers, and content companies. Our member companies provide consumers with competitive alternatives to the entrenched incumbents. We advocate open networks that allow consumers to access the providers and content of their choice, rather than being forced to accept the limited choice of services and features the incumbent providers offer. We advocate policies at the FCC, in Congress, and in the courts that protect consumers against Internet gatekeepers. COMPTELs goal is to ensure that all policymakers understand that the widespread benefits of the Internet are available to Americans because of the pro-competitive policies found in title II of the Communications Act. Those policies ensure open networks and efficient use of communications networks built over public rights of way or using public spectrum. The Internet exists today because of those policies, not in spite of those policies, as advocates for closed networks would have the public believe. COMPTEL members are the entrepreneurial innovators who are bringing new services and content at competitive prices to consumers who want them. We developed and deployed DSL broadband, VoIP, and other new technologies and services before the incumbent providers. COMPTEL is the association of choice for entrepreneurial companies; we will continue to work on successful enactment of legislation enabling VoIP providers to offer 911 service and on pro-competitive reforms to the Nations communications laws. IT

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